Screeeeeeed
Aug. 18th, 2005 05:49 pm![[personal profile]](https://www.dreamwidth.org/img/silk/identity/user.png){kind=small}
terrycloth1. The worth of something is not defined by how much someone is willing to pay for it.
There are two components that relate to 'worth' -- the cost of something, and its value.
The cost of a thing is how hard it is to make, and what resources are used up in the process.
The value of a thing is the maximum amount of utility that any person could get from acquiring it.
Often, people try to measure value by looking at how much the people who know that something is for sale and have the money to spend on it are willing to pay, but there are seveal points of failure in that simplifying assumption.
2. Every transaction in a marketplace has a significant zero-sum component.
If an item is exchanged at any price between its cost and its value (or, if it's being sold to a sub-optimal customer, the amount of utility that person could get from it), then both parties gain from the transaction -- but where in that range do they make the trade? Once you've found a place where a transaction will generate a win-win, you have to play a zero-sum game to determine the precise amount of wealth to transfer in exchange for the item.
Usually, one side or the other has essentially no negotiating power, and is forced to accept the worst possible price from their point of view, moderated only by the dominant partner's lack of information and thus their need to set a standard price to offer to an entire group at a time OR their lack of information and thus their willingness to accept what seems like a 'good enough' price because they don't realize what the cost actually was.
Therefore,
3. In order to ensure the fairness of market activity, coercion from outside the system is necessary.
In order for a market to be fair, the ultimate power in each negotiation needs to be held by someone with no stake in its outcome and who is motivated to divide the benefits of the transaction fairly between the negotiating parties.
Unfortunately, no such party exists and every attempt to construct one has failed miserably. The government could, in theory, qualify, but in practice does not.
Therefore, DOOOOOOOOOM!
There are two components that relate to 'worth' -- the cost of something, and its value.
The cost of a thing is how hard it is to make, and what resources are used up in the process.
The value of a thing is the maximum amount of utility that any person could get from acquiring it.
Often, people try to measure value by looking at how much the people who know that something is for sale and have the money to spend on it are willing to pay, but there are seveal points of failure in that simplifying assumption.
2. Every transaction in a marketplace has a significant zero-sum component.
If an item is exchanged at any price between its cost and its value (or, if it's being sold to a sub-optimal customer, the amount of utility that person could get from it), then both parties gain from the transaction -- but where in that range do they make the trade? Once you've found a place where a transaction will generate a win-win, you have to play a zero-sum game to determine the precise amount of wealth to transfer in exchange for the item.
Usually, one side or the other has essentially no negotiating power, and is forced to accept the worst possible price from their point of view, moderated only by the dominant partner's lack of information and thus their need to set a standard price to offer to an entire group at a time OR their lack of information and thus their willingness to accept what seems like a 'good enough' price because they don't realize what the cost actually was.
Therefore,
3. In order to ensure the fairness of market activity, coercion from outside the system is necessary.
In order for a market to be fair, the ultimate power in each negotiation needs to be held by someone with no stake in its outcome and who is motivated to divide the benefits of the transaction fairly between the negotiating parties.
Unfortunately, no such party exists and every attempt to construct one has failed miserably. The government could, in theory, qualify, but in practice does not.
Therefore, DOOOOOOOOOM!
