Posted on 03/08/2026 1:37:48 PM PDT by TBP
Carl Menger destroyed two thousand years of economic fallacy with a single insight in 1871: value is subjective, existing only in the mind of the individual valuer. The classical economists—from Adam Smith to David Ricardo—had spent centuries chasing their tails, convinced that value somehow resided in objects themselves, whether through labor content or production costs. Menger obliterated this nonsense by pointing out the obvious: a glass of water means nothing to a man by a river but everything to one dying of thirst in the desert.
This breakthrough wasn't just academic—it was revolutionary. By grounding value in human choice and preference, Menger laid the foundation for understanding how markets actually work. Prices don't reflect some mystical "intrinsic worth" but emerge from countless individuals making subjective judgments about their personal wants and needs. And this happens spontaneously, without any central planner needed to "coordinate" anything.
The implications were devastating to statist economics before statist economics even fully existed. If value is subjective, then government price controls become acts of pure violence—bureaucrats literally imposing their subjective valuations on millions of others through force. If value emerges from individual choice, then socialism becomes impossible by definition. You cannot centrally plan what exists only in the minds of individuals.
But the establishment couldn't let this stand. The subjective theory of value made government intervention look like what it is: economic barbarism. So they spent the next century constructing elaborate mathematical models to obscure Menger's simple truth. British pedophile John Maynard Keynes and his disciples built entire careers on ignoring subjective value, pretending that wise technocrats could somehow calculate what only individual actors can know.
The Austrian revolution began with Menger recognizing that value lives in human minds, not in objects—and every government economist has been running from this truth ever since.
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eBay did the same thing.
Excellent job. Worth educating people about. Value is inherently subjective.
If a living wage value is subjective, then government imposed minimum wage levels price controls become acts of pure violence—bureaucrats literally imposing their subjective valuations on millions of others through force
I have the feeling that economics is going to be upended again. If machines start really producing goods and services, and if a great many humans have nothing serious to contribute to the national economy, then everything changes.
How do people get money in their pockets? How do corporations make a profit if many people have no jobs, have no income, and cannot buy products? What does money mean then? Where does money come from? What is it for? Money becomes a poor exchange for labor if a lot of people do not labor. If machines do the labor, who gets paid?
I think new economic theories will arise.
I unknowingly employed that principle when challenging my Calculus teacher, who was making the case that playing the lottery was ALWAYS a bad deal. I suggested that if you were in jail forever unless you can get $100,000 to get out that buying a $1 lottery ticket (this was 1985) was a better deal than anything else you could do with the $1.
Good post.
The subjective nature of value is still a mystery to many people.
There are many things people will pay high prices for that have absolutely no value to me.
The best part of your post is that value is partially a function of individual circumstance.
One example would be a Super Bowl ticket.
The value to me is zero. I have been boycotting the NFL for years. In fact I would not go if someone offered to pay me several thousand dollars.
However—I am not a total man of principle.
If someone offered me a million dollars I would go.
Lol.
Your Question:
“How do people get money in their pockets? How do corporations make a profit if many people have no jobs, have no income, and cannot buy products? What does money mean then? Where does money come from? What is it for? Money becomes a poor exchange for labor if a lot of people do not labor. If machines do the labor, who gets paid?”
My Answer:
People “own” shares of a Robot. Divide the robots’ labor into three shifts per day, times seven days a week. The factory owner “Owns” all six shifts of the robots’ labor on Saturday and Sunday. This is their profit. Three individual investors each “Own” five shifts per week of the robots’ labor. This is their “Salary” less operating expenses.
That isn’t perfect, but it is a starting place.
That’s a misrepresentation of how Smith saw value. He never would have denied that short-term value can fluctuate based on circumstances. He has discussing “value” in terms of the worth of something over the long term for trade.
I call that situation “The Star Trek Economy”.
Think about the series particularly the original series. Other then working for Star Fleet (military) and the Federation did it show anyone having a private sector job? Occasionally such jobs are inferred like the miners in the Mudd’s Women, Horta episodes and Spock disguised as a Vulcan trader in the Organia episode. The other ST series same thing. Babylon 5 clearly had private businesses, they were portrayed negatively but they existed.
Ok moving away from fantasy to real life. That can’t be good! Every example where private economic activity is removed or minimized in private life has resulted in societal disaster. From Indian reservations to urban America to rustbelt America, just pouring money in, money from no personal effort makes it worse. You don’t get 25th Century Federation life, you get something more like drugs, gangs, etc. social breakdown.
I don’t know what the solution is or what economic theory fits.
Of course, there’s value in trickery. If you can fake sincerity, you’ve got it made.
The guy in the desert might trade all he had for a glass of white vinegar.
“Menger’s insight destroys the previous theories of value. “
Energy, food, water, shelter, medicine and the land the enables them, all have intrinsic value.
Their value is not abstract, derived by choice.
Their value is real, enduring and universal.
“There are many things people will pay high prices for that have absolutely no value to me.”
BitCoin might be a good example.
My assumption of the Star Trek economy was basically that energy was free and thus the cost of many things dropped to near zero. So it became relatively easy to offer a basic living to any Federation citizen.
But if you wanted something more, you had to find something to do that had value - art, science, exploration. You could do it as part of the Federation bureaucracy for a salary, you could hire out your labor (miners) or you could produce something others wanted (art). Where would the Federation get money for salaries absent taxes though and what would they tax?
I don’t know how limited items such as real estate would be divvied up under that system though. Maybe that’s why they keep expanding with colonization.
It’s an interesting thought experiment to consider how the world would be different if energy was nearly free.
Your wage is simply the agreed-upon value at which you’re willing to sell your labor.
We need to have the 21st century equivalent of the Homestead Act. If you work on land for 10 years, It's yours.
It is by choice. If I don’t value what you’re selling I don’t buy it. If nobody values it at your value, you’re stuck with it.
One item has always had zero value to me: in-line roller skates.
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