[quote=harvey]Economists have answered the question long ago: The market determines value.
The value of something is, by definition, what people pay for it.
(Economists actually call this metric “utility” because it does not always precisely translate to monetary value but it’s pretty-much the same thing.)
The point is that any one individual’s assessment of value is subjective and impossible to prove. The only possible objective measure of value is the collective price determined by market forces.
The economic argument against the idea that something has “less” value than the cost is that the cost in a free market is the value.
Although I’m also not a fan of the mutual fund industry, or many CEOs, or many professional athletes, or realtors, we cannot claim that they are over priced. Their prices are set in free markets and the value of these things is exactly what they cost. If people didn’t think the services were “worth it,” they would pay less.
CAR’s arguments in this thread (and in others) are founded upon the fallacy that there is some higher wisdom that can determine “value” better than markets. There no such wisdom, and most every attempt to implement a system where “value” is set by fiat has resulted in disaster.
Although there is good reason for regulation that helps markets work better (e.g. by improving transparency and eliminating textbook market failures), there is never a good reason to believe that government should be the sole judge of economic value.[/quote]
Pri,
The world’s current economic crisis (and it’s a hell of a crisis) was caused by your precious “market.” It is because of the erroneous price signals sent by speculators that caused everyone and their mother to pile into certain assets at the very time when prices were topping out. “The market” doesn’t function in a vacuum, and when you introduce speculation into the market, it causes the dangerous booms and busts that are behind the economic crisis (and the resulting “pension crisis”).
