The Classical Economists’ Theory of Value Was More Sophisticated than You Think

Updated: November 19, 2024

misesmedia


Summary

The Human Action podcast featuring Dr. BobMurphy explores the transition from classical economists' labor theory of value to the modern subjectivist marginal approach, debunking economic myths along the way. They discuss the importance of subjective value theory in determining market values and exchange ratios, emphasizing the superiority of the modern approach over the classical theories. Key insights include the significance of the marginal revolution, imputation theory, and understanding market prices through individual preferences and values.


Introduction to the Human Action Podcast

Introducing the Human Action podcast where economic, political, and cultural myths are debunked by Dr. BobMurphy.

Promotion of Free Economics Book by Mises Institute

Mentioning the free giveaway of Dr. Perin's primer on economics by the Mises Institute for economic literacy.

Discussion on Classical Economists' Labor or Cost Theory

Explaining the classical economists' views on labor or cost theory and the transition to the marginal revolution and subjectivist approach to utility theory.

Clarification on Labor Theory of Value

Addressing the misconception related to JBC and Frederick Bastiat's labor theory of value and providing insights on the classical economists' understanding of value.

Quotes from David Ricardo's Work

Presenting quotes from David Ricardo's work on the labor theory of value and discussions on utility and exchange value.

Utility and Exchangeable Value

Explaining the connection between utility and exchangeable value as discussed by classical economists like David Ricardo.

Explanation of Market Prices

Discussing the factors influencing market prices and the distinction between use value and exchange value in economic theories.

Value of Commodity and Scarcity

Explaining how the value of a commodity is determined by scarcity and the quantity available in the market, referencing David Ricardo's principles.

Application of Value Theory

Applying value theory to reproducible and non-reproducible commodities and the influence of scarcity and human desires on their market prices.

Critique of Labor Theory of Value

Analyzing the limitations of the labor theory of value and the transition to the modern subjectivist marginal approach to value theory.

Comparison of Economic Theories

Comparing the classical economic theories with the modern subjectivist marginal approach and emphasizing the superiority of the latter.

Conclusion and Summary

Summarizing the discussion on economic theories, value theory, and the evolution of economic thought from classical to modern approaches.

Introduction to Marginal Revolution

Discussion on the concept of marginal revolution and its significance in explaining market prices from scratch.

Market Value and Marginal Utility

Explanation of market value in terms of exchange value and the importance of marginal utility in regulating market value.

Subjective Value Theory

Explanation of subjective value theory and its qualitative, ordinal, and subjective nature in determining market values.

Principles of Marginal Subjectivism

Discussion on the principles of determining market exchange ratios based on subjective valuations and preferences of individuals.

Imputation Theory

Explanation of imputation theory and how it helps in understanding the exchange ratios of final goods based on consumer preferences and values.

Intertemporal Context and Value Theory

Discussion on applying the new subjectivist marginal approach to value theory in an intertemporal context to explain interest rates and market values.

Methodological Considerations

Explanation of the importance of forward-looking explanations based on the usefulness of items to individuals in influencing future actions and market prices.

Time Element in Value Theory

Discussion on the time element in value theory and its impact on explaining day-to-day fluctuations in market prices and consumer preferences.

Cost or Labor Theory of Value

Comparison of the shortcomings of the cost or labor theory of value in explaining market prices compared to the marginal subjectivist theory.

Conclusion and Summary

Summary of the key insights discussed, including the significance of marginal revolution, subjective value theory, and imputation theory in understanding market prices and exchange ratios.


FAQ

Q: What are some key concepts discussed in the file regarding economic theories and value theory?

A: Key concepts discussed include classical economists' views on labor or cost theory, the transition to the marginal revolution and subjectivist approach to utility theory, misconceptions related to labor theory of value, factors influencing market prices, distinction between use value and exchange value, determination of a commodity's value by scarcity, application of value theory to reproducible and non-reproducible commodities, limitations of labor theory of value, comparison of classical economic theories with modern subjectivist marginal approach, significance of marginal revolution, subjective value theory, imputation theory, and the evolution of economic thought from classical to modern approaches.

Q: How do classical economists explain the connection between utility and exchangeable value?

A: Classical economists like David Ricardo explained the connection between utility and exchangeable value by discussing the factors influencing market prices, the distinction between use value and exchange value, and how the value of a commodity is determined by its scarcity and quantity available in the market.

Q: What is the significance of the marginal revolution in explaining market prices?

A: The marginal revolution is significant in explaining market prices as it highlights the importance of marginal utility in regulating market value, explains market value in terms of exchange value, and emphasizes the subjective nature of determining market values based on individual preferences and valuations.

Q: How does the subjective value theory differ from the labor theory of value?

A: Subjective value theory differs from the labor theory of value by focusing on the qualitative, ordinal, and subjective nature in determining market values based on individual preferences and values, as opposed to the labor theory which emphasizes the labor input as the primary determinant of value.

Q: What is imputation theory, and how does it help in understanding exchange ratios of final goods?

A: Imputation theory is the theory that helps in understanding the exchange ratios of final goods based on consumer preferences and values. It explains how the values of factors of production are imputed to final goods based on consumer demands and valuations.

Q: How does the new subjectivist marginal approach to value theory explain interest rates and market values?

A: The new subjectivist marginal approach to value theory explains interest rates and market values by applying forward-looking explanations based on the usefulness of items to individuals in influencing future actions and market prices, considering the time element in value theory to explain day-to-day fluctuations in market prices and consumer preferences.

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