We are slowly but steadily moving towards current economic thought. The landscape is slowly changing. More and more, the consumer and not labour comes into the spotlight.
Like William Jevons, Carl Menger has a theory of value too. How does a good get a value attributed to it? The classic answer among many 18th and 19th-century economists was: by the hours of labor invested in its production.
But we have learned that this explanation isn't generally tenable. In his "Principles of Economics (1871) Carl Menger devotes chapter 3 to "The Theory of Value".
The first section is titled: "The Nature and Origin of Value" and it begins with this statement:
"If the requirements for a good, in a time period over which the provident activity of men is to extend, are greater than the quantity of it available to them for that time period,
and if they endeavor to satisfy their needs for it as completely as possible in the given circumstances, men feel impelled to engage in the activity described earlier and designated economizing (zuinigheid / frugality).
But their perception of this relationship gives rise to another phenomenon, the deeper understanding of which is of decisive importance for our science. I refer to the value of goods."
It is a complex way of describing how scarcity relative to needs creates value, the underlying logic of what we now call supply and demand, but he continues:
"If economizing men become aware of this circumstance (i.e., if they perceive that the satisfaction of one of their needs, or the greater or less completeness of its satisfaction,
is dependent on their command of each portion of a quantity of goods or on each individual good subject to the above quantitative relationship) these goods attain for them the significance we call value.
Value is thus the importance that individual goods or quantities of goods attain for us because we are conscious of being dependent on command of them for the satisfaction of our needs."
Let me translate: When you realize there isn't enough of something to satisfy all your wants, and you have to choose, that's when that thing gets 'value' for you. Not because of what went into making it, but because of what it does for you, given your needs.
Here is an interesting picture emerging. In Carl Menger’s usage, "economizing" refers to the deliberate human activity of allocating scarce goods or means among competing uses to satisfy needs as fully as possible.
Not all goods are available in quantities sufficient to meet all possible human wants. Because needs exceed available means, people must choose which wants to satisfy and to what degree.
Economizing means arranging the use of goods so that the total satisfaction achieved is greater than it would be under any other arrangement given the available stock.
In short: "economizing " is the purposeful stewardship of limited resources to best meet human needs.
Now, is this the birth of homo economicus, that purely rational calculator of costs and benefits? Not quite.
Menger's person is purposeful and careful, but not the hyper-rational robot of later textbooks. Still, we see the seed here.
Main Sources:
MacMillan The Encyclopedia of Philosophy, 2nd edition
of Economic Thought (2012)
TABLE OF CONTENTS -----------------------------------------------------------------
1 - 100 Philosophers 9 May 2009 Start of
2 - 25+ Women Philosophers 10 May 2009 this blog
3 - 25 Adventures in Thinking 10 May 2009
4 - Modern Theories of Ethics 29 Oct 2009
5 - The Ideal State 24 Febr 2010 / 234
6 - The Mystery of the Brain 3 Sept 2010 / 266
7 - The Utopia of the Free Market 16 Febr 2012 / 383
8. - The Aftermath of Neo-liberalism 5 Sept 2012 / 413
9. - The Art Not to Be an Egoist 6 Nov 2012 / 426
10 - Non-Western Philosophy 29 May 2013 / 477
11 - Why Science is Right 2 Sept 2014 / 534
12 - A Philosopher looks at Atheism 1 Jan 2015 / 557
13 - EVIL, a philosophical investigation 17 Apr 2015 / 580
14 - Existentialism and Free Will 2 Sept 2015 / 586
15 - Spinoza 2 Sept 2016 / 615
16 - The Meaning of Life 13 Febr 2017 / 637
17 - In Search of my Self 6 Sept 2017 / 670
18 - The 20th Century Revisited 3 Apr 2018 / 706
19 - The Pessimist 11 Jan 2020 / 819
20 - The Optimist 9 Febr 2020 / 824
21 - Awakening from a Neoliberal Dream 8 Oct 2020 / 872
22 - A World Full of Patterns 1 Apr 2021 / 912
23 - The Concept of Freedom 8 Jan 2022 / 965
24 - Materialism 7 Sept 2022 / 1011
25 - Historical Materialism 5 Oct 2023 / 1088
26 - The Bonobo and the Atheist 9 Jan 2024 / 1102
27 - Artificial Intelligence 9 Feb 2024 / 1108
28 - Why Am I Here 6 Sept 2024 / 1139
The Discussion
[13:30] Max Chatnoir: Arranging...sounds like he is talking about sharing.
[13:31] herman Bergson: What do you mean, Max?
[13:31] Max Chatnoir: arranging the use of goods so that the total satisfaction achieved is greater....
[13:32] herman Bergson: Ahh ...I see...misread your words
[13:33] herman Bergson: In essence, he actually is talking about the relation between supply and demand, but around 1870 they hadn't adopted that way of talking about economics
[13:34] herman Bergson: And the economizing is indeed the behavior of setting your priorities if the supply is limited
[13:35] herman Bergson: Suppose you live on an island with thousands of trees...
[13:35] Max Chatnoir: Is that limitation of supply or limitation of purchasing power?
[13:35] herman Bergson: You only need 20 trees a year for your house....
[13:36] herman Bergson: Supply. Max
[13:36] herman Bergson: Suppose there is a fire and a lot of trees are burned....doesn't matter, there still are enough....
[13:37] herman Bergson: This means that the trees have no value
[13:37] herman Bergson: there is an abundance...
[13:38] herman Bergson: But suppose there are only ten fruit trees for the man.....if they burn down he might starve....and in that way those trees become a value for the man
[13:39] herman Bergson: Like air has no value at all......unless there is a problem with the supply....
[13:40] Max Chatnoir: Does he already own the trees?
[13:40] herman Bergson: How to purchase things is a different matter....
[13:41] herman Bergson: Well, as he is alone on the island, nobody owns the trees....he just uses them
[13:41] herman Bergson: If there was another person too, things would become more complicated....
[13:42] herman Bergson: Although nobody owns the trees they both NEED the trees for their housing
[13:42] herman Bergson: And there begins the story of mankind :-)
[13:42] Particle Physicist Bejiita (bejiita.imako): aah
[13:43] Particle Physicist Bejiita (bejiita.imako): interesting
[13:44] bergfrau Apfelbaum: :-)
[13:44] herman Bergson: Yes, there is a logic in it....wonder what the pope says about how private property comes into being
[13:45] Particle Physicist Bejiita (bejiita.imako): aaah
[13:45] herman Bergson: There are theories....
[13:45] herman Bergson: What you create with your own labour and hand, you might call yours
[13:46] herman Bergson: John Locke defined landownership by referring to how much land you can cultivate in a day...
[13:47] herman Bergson: But here is the catch.... when the machines to make a product are owned by someone else and you do all the work....what then is your private property in this process?
[13:47] Max Chatnoir: by yourself?
[13:48] herman Bergson: It is the situation of all factory workers for instance
[13:49] herman Bergson: They assemble a car, but at the end of the line, it is not their property
[13:49] herman Bergson: So, they get paid..... and again here begins the history of mankind :-)
[13:50] bergfrau Apfelbaum: They receive their salary and are (mostly) insured
[13:50] bergfrau Apfelbaum: t
[13:51] bergfrau Apfelbaum: and with their saved salary, they can buy private property.
[13:51] herman Bergson: And here again comes the pope. We all know that the wealth is in the hands of only a very small percentage of people on this earth....How come?
[13:51] Particle Physicist Bejiita (bejiita.imako): Even if like me I run the entire production chain from start to finish, Like im asigned a project, handed a CAD drawing and then go from machine to machine until the product is done
[13:51] Particle Physicist Bejiita (bejiita.imako): but also I work at a smaller factory
[13:52] Particle Physicist Bejiita (bejiita.imako): it's me and one more mostly who together do most of the manufacturing part
[13:53] Particle Physicist Bejiita (bejiita.imako): then we have some at the packaging department and in the office, most of the workforce, as us is actually the irrigation installation team
[13:54] Particle Physicist Bejiita (bejiita.imako): so we rarely see them, always out in the field
[13:54] Particle Physicist Bejiita (bejiita.imako): but again, thats our niche company
[13:55] herman Bergson: @Bergie...with their saved salary, they can buy private property.
[13:55] herman Bergson: True, but who decides about the height of the wages and based on what principles?
[13:56] herman Bergson: THAT IS WHERE UNIONS COME IN :-)
[13:56] herman Bergson: It really has become a complex situation
[13:56] bergfrau Apfelbaum: if they save for a long time.... which is difficult at the moment because everything is so expensive
[13:56] Particle Physicist Bejiita (bejiita.imako): hmm
[13:57] Particle Physicist Bejiita (bejiita.imako): The billionaires gobble it all up, Trump included
[13:57] Particle Physicist Bejiita (bejiita.imako): while war rages
[13:57] herman Bergson: You can say indeed all is so expensive, but 1. who MAKES it expensive and 2. Aren't the wages simply to low?
[13:57] Particle Physicist Bejiita (bejiita.imako): sa times now in the world
[13:57] Particle Physicist Bejiita (bejiita.imako): sad
[13:57] Particle Physicist Bejiita (bejiita.imako): i hope it will soon turn
[13:57] Particle Physicist Bejiita (bejiita.imako): an get better
[13:58] herman Bergson: In my village are 5 supermarkets...they all sell the same drink....and one added 20 cents to the price....
[13:59] herman Bergson: Why? It is the same stuff for all 5
[13:59] Particle Physicist Bejiita (bejiita.imako): hmm ok
[14:00] Max Chatnoir: Because whoever is shopping there would find it difficult to go elsewhere?
[14:00] Max Chatnoir: elsewhere?
[14:00] herman Bergson: Can't believe they did it because they increased the wages of the workers :-)
[14:00] Particle Physicist Bejiita (bejiita.imako): probably not
[14:00] bergfrau Apfelbaum: yes Max:-)
[14:00] herman Bergson: No Max the stores are in a 500 m radius from my home
[14:01] herman Bergson: we only have 22.000 inhabitants here
[14:01] Max Chatnoir: So why does one store charge more?
[14:02] herman Bergson: It is not like the American Mall system, where you have to drive miles to get there
[14:02] Particle Physicist Bejiita (bejiita.imako): owner is more greedy?
[14:02] herman Bergson: My question too, Max ㋡
[14:02] Particle Physicist Bejiita (bejiita.imako): Or never compared the price with the other stores?
[14:02] Particle Physicist Bejiita (bejiita.imako): no iddea
[14:02] herman Bergson: Even if it is only 20 cents :-)
[14:02] Max Chatnoir: Has anybody asked them?
[14:03] Max Chatnoir: And is it just that drink? Is everything more expensive at that store?
[14:03] herman Bergson: I made a remark, but the young fellow at the counter had no idea :-)
[14:03] herman Bergson: Haven't checked that Max :-)
[14:03] Particle Physicist Bejiita (bejiita.imako): ok
[14:04] Max Chatnoir: Well, you're probably not going to go to another store for just one item.
[14:04] herman Bergson laughs
[14:04] herman Bergson: my life is not determined by a price difference of 20 cents
[14:05] Max Chatnoir: Do the other stores charge extra for something else?
[14:06] herman Bergson: Difficult to assess you know...5 supermarkets, thousands of articles, would be a full-time job to figure that out
[14:06] Max Chatnoir: AI
[14:06] herman Bergson: Isn't worth the effort
[14:07] Max Chatnoir: So it's a sneaky little strategy to make a few more dollars.
[14:07] herman Bergson: I think so ㋡
[14:07] Max Chatnoir: Without driving your customers away.
[14:07] herman Bergson: Sneaky it is!
[14:08] herman Bergson: At least it amuses me :-)
[14:09] herman Bergson: A little fun for 20 cents ㋡
[14:09] Particle Physicist Bejiita (bejiita.imako): ㋡
[14:10] Max Chatnoir: Might be an interesting research project if they are all that close to you.
[14:11] herman Bergson: You know, Max, it is the motivation....if I don't care about these 20 cents, then what is the drive to start such a project, a lot of work and no gain.... :-)
[14:11] Max Chatnoir: You noticed it.
[14:12] herman Bergson: I did
[14:12] herman Bergson: But it didn't enrage me ㋡
[14:12] Max Chatnoir: Because you have 20 extra cents.
[14:13] herman Bergson: and you can add another extra zeros to that number :-))
[14:14] Max Chatnoir: Or maybe something else at that store has gone down 20c and you just don't buy that thing.
[14:14] herman Bergson: Good idea....check for discount product!
[14:15] Particle Physicist Bejiita (bejiita.imako): ㋡
[14:15] Particle Physicist Bejiita (bejiita.imako): aaa
[14:15] Max Chatnoir: Or maybe that's how they fund the discounts?
[14:16] herman Bergson: Well to be honest... some years ago me an my wife made it a hobby to buy only the usual stuff when it was offered with a discount...
[14:16] herman Bergson: We were able to save 100 to 150 euro a months
[14:17] Particle Physicist Bejiita (bejiita.imako): That is good
[14:17] herman Bergson: It was actually just for fun, but it paid well :-)
[14:18] herman Bergson: Economics ㋡
[14:18] Max Chatnoir: And there was enough variety in the offers?
[14:18] herman Bergson: let's see what Thursday will bring us :-)))
[14:18] bergfrau Apfelbaum: Perhaps the supermarket where the drink costs 20 cents more only bought one pallet.... The other supermarkets, however, bought 20 pallets.... The more you buy, the cheaper the purchase price becomes
[14:19] herman Bergson: It will stay a mystery, Bergie :-))
[14:19] Particle Physicist Bejiita (bejiita.imako): aaa yes, same as the example with my ICA stores here, the larger one can have a bit lower price because they buy larger bulks of everything,
[14:19] herman Bergson: YEs MAx, with 5 supermarkets in a small village you have plenty of options
[14:20] bergfrau Apfelbaum: mhm Bejiita
[14:21] Max Chatnoir: And you have the satisfaction of funding somebody else's bargains.
[14:21] herman Bergson: Well, let's move on...
[14:21] herman Bergson: Thank you all again
[14:21] herman Bergson: Class dismissed....
[14:21] Particle Physicist Bejiita (bejiita.imako): ㋡
No comments:
Post a Comment