“Value is entirely derived from the desire of individuals that make up the market. Look at the cost of some of these designer sneakers.”

There is no reason that in isolated cases an artificially increased price cannot exist for a given commodity for a greater or lesser amount of time because of advertising, trends, moods, and so on.

Smith answered your comment on finding precious metals in one of the earlier chapters I discussed, but, briefly, the value of precious metals is set by the world-wide average labor cost of finding, extracting, and refining the ore. (It is interesting to note that this was world-wide even in Smith’s day; he spends a fair bit of time discussing how the discovery of a new easier vein to mine in one part of the world will change the price of gold everywhere.)

And you have not responded to my observation that (without the sarcasm this time) any time the supposed value created by the market were less than the production cost, the commodity could not be produced.

Thanks for your reply. I’m enjoying our conversation!

You said: “Whence comes the value? The labor necessary for it’s production.”

I still think this is backwards. The value must come from people’s desire for something. You can still have items that you can produce at any cost that people just don’t want, and therefore do they have no value or are they just full of “potential” value that hasn’t been realized.

Value is entirely derived from the desire of individuals that make up the market. Look at the cost of some of these designer sneakers. They sell for way more than they cost to make, yet they are desireable to some who want the image they see associated with them. There may be are more reasonabley priced items that cost the same to make, functions the same (or better,)but they are not desired by the market as much for no reason other than perceived image. If the labor creates the value then how do you account for the disconnect here?

Suppose you are walking along a river out west and you see something shiny in the water. You bend down and discover a large gold nugget weighing several ounces. This has a large value . It cost you no labor to garner it other than bending over and picking it up while enjoying your vacation hike. Where does the value of this come from?

The value, even your comment above seems to show, comes from the “market.” The market being people who want to buy something. What they are and are not willing to buy drives the value as well as availability.

The TNT in your example has potential force, but it is only realized when it is exploded. It will explode with the force of the amount of explosive that reacts. Whether people want it to make a bigger or smaller explosion doesn’t matter. Even if everyone in the world wanted it to make a tiny explosion, it would only explode with the force based on it’s composition.

The value of an object is based on what people are willing to pay for it. It’s the value they perceive it to have. The object has no value no matter how little or how much labor went into it. It only has value to someone. People value things differently. You put enough people together and you have a market with statistics.

Please note the word *necessary* in that definition. Not the labor *used*. If it takes you twice as much labor to produce something as the guy next to you, you cannot, in the market, charge twice as much for it.

In your example, only part of the value of *realized*; that does not mean there is no value. Note my TNT analogy in the original post.

Hmmm, I don’ think that’s right, but I concede that it’s a very common idea. This goes back to what I was saying abot value not being intrinsic. I think a fail to understand value can lead to all sorts of confusing ideas! :-)

Suppose a person is working for a company manufacturing a product that no one wants, or that is over-produced. Lets say only half of the prodcued amount sells. What is the value created? The worker prodcued 20 items, and was paid for his work. The company sold 10 items and had to scrap the rest. Is the value created based on the labor to make 20 or the 10 you could sell? Does the labor create the value or does the desireability of the product drive the value?

Ethan

The value of ground rent comes from the opportunity cost of the land’s owner not selling the land at a value perceived by a potential buyer.

I haven’t read previous postings in great detail so this may have already been discussed and re-butted.