What is value: the need to separate 'use case' from 'desperation'

in economics •  last year

The value of any given thing is measured by the amount of something else someone is willing to give up to obtain it. That measurement is commonly called the things price, and is very often denominated in a common medium of exchange- such as the US Dollar. While this concept of value may seem straightforward enough at first, it can easily be seen that an item's price can be affected by at least two factors. 


For example, a person may suddenly realize that she has a use for the thing, and her willingness to give up some of her time to obtain it will necessarily increase after having made the realization. It can also be said that the more useful something becomes, the more value it gains. 

And yet, this is only true if the ease of obtaining the item remains constant. This ease of availability is commonly called _supply_. Clearly, changes in supply of a thing have no effect whatsoever on the thing's usefulness. Changes in supply do, however, have an effect on the end-user's desperation to obtain the thing. The more difficult the thing is to obtain, the higher its price, assuming its usefulness remains constant. 

When inquiring into an object's value, it is currently impossible to break a measure of value into its components. We do not know if a boost in price reflects increased usefulness or increased scarcity, or some combination of both. This fact of our treatment of value results in a rather vexing paradox for those who would engage in market behavior. On the one hand, one is incentivized to make useful things to sell- useful things that make the lives of others easier. On the other hand, one is also incentivized to keep those useful things scarce, and retain some of the difficulty in their lives. Often, the most profitable economic behavior is for us to tease the each other with satisfaction rather than to make each others' lives genuinely abundant.
For example, the power company makes your life a bit easier by providing you with electric current. But it does not build a decentralized system for its customers to generate and share power locally, which would eventually reduce the cost of power to a fraction of what is currently charged. This decentralized approach is being tackled by players other than the power companies, much to their dismay. Such action reduces the value of electric power as reflected in its reduced market price, even while electric power becomes ever more useful. Clearly, it is nonsensical to say the power is worth less to its users just because it becomes more abundant, even while the price they pay falls. 

If we are to enjoy a healthy economy, I see it as imperative that we find a way to separate our measure of value into its components, so that we know what we really mean when we talk of rising and falling 'value'. We don't want to continue living in an economy that incentivizes the artificial creation of scarcity in the name of boosting 'value'. And yet the problem seems intractable: we cannot know why someone pays a higher price for something. We do not know if they find the thing more useful than before or they have been made more desperate for it by supply manipulation. We can only know that they are paying a higher price . 

Failing to separate the components of value into measurements of usefulness and desperation, I see different solution to aligning economic incentives as possible for the benefit of society: _Benefit Accounting_.

If the benefits obtained from the marketplace were accounted for in their own right, desperation would not be factored into and mistaken for increases in use-case value. An presentation of a possible approach to benefit accounting is to follow in my next posts.  

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