I claimed that using numbers (i.e. dollars and cents) to "measure" the value of goods is fundamentally wrong. I have always believed this statement to be obvious, although I have had a hard time convincing people. Often those with the economics education that I lack will introduce complicated words like "utility", "fluidity", "non-linearity", etc. But let's not get bogged down by these distractions. I have a simple situation: In front of me is a cup of coffee, a cup of tea, and a cake. I prefer the coffee to the tea, the tea to the cake, and the cake to the coffee. Well, then, there is no consistent way of pricing these three objects with numbers! Apart, of course, from giving all of them the same price.
A common way out of this conundrum is to say that the notion of value is subjective. Fine. But I think there is an objective way to value things. Just not with numbers. Here's what I think is wrong with using numbers in pricing objects. Suppose you claim that the cup of coffee is worth 2 dollars. Do you know what you have just done? Based on the premise that there is a meaningful numerical price to any valuable object, you have just simultaneously compared the value of the cup of coffee to everything of value in the universe! You would have made, implicitly, the claim that the cup of coffee is more valuable than anything, anywhere in the world, that you will possibly place a $1 price tag on. Now, is that cup of coffee still worth $2?
The problem, I feel, is not that numbers are inadequate for use in pricing, but that numbers are overly adequate for that purpose. For numbers are not as innocent as they seem. They are extremely well-behaved. They have the property that if Number A < Number B, and Number B < Number C, then necessarily Number A < Number C. For all choices of numbers. Now, at some point in our lives, we must all have faced the paradoxical situation in which you prefer product A to B, B to C, and C to A. For instance, suppose I have a choice of going out on a date with Amy, Betty, and Cindy. I prefer Betty's smile to Amy's. But I like Cindy's legs even more. Yet Amy has this mysterious aura about her that draws my attention. How can I attach numbers/price tags on the value of these three dates? Well, the point is, you simply can't! Unless you have a preference that goes like A<B<C, there is just no way to use numbers consistently in a A<B<C<A situation.
Furthermore, it is completely natural not to have a "most-preferred date". But this is precisely what you have to commit to when you put price tags on, for among any three numbers, there is surely a biggest number! In this sense, the ordering that humans attribute to valuable objects, simply does not have the requisite properties of numbers! Why then, insist on using dollars and cents to label objects? Incidently, in the more primitive system of barter trade, such inconsistencies never arise, because one only ever compared the relative value of goods, and never made the leap of faith of operating on a dollar-and-cents system.
Now, the economists-armed-with-calculus (I'm trademarking this phrase) will come at my throat with all sorts of jargon to explain away this inconsistency. In retaliation, I could present some nasty algebra to expose the inherent divergence in the properties of valuation, and the properties of numbers. I find it a burden to try to look for the correct "price" for everything, and have it all work out consistently. Why not just concede that numbers are not the appropriate mathematical objects to use?
This is not to say that pricing is not useful. It certainly saves us some trouble, especially when we never had any preferences to begin with. It also allows us to feel a sense of satisfaction when we have more of these dollars than our neighbours. But to take the bold move of developing an entire theory based on dollars-and-sense might just be misguided.
*At least two possibilities can arise from my little rant. Quite likely, I am naively commenting on a field that I have little expertise in. Or, maybe, I have made a truly profound observation, for which I stake a proprietary claim to. In any case, this is just my 2 cents worth.
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