Picture yourself at Disney Land.
It's blazing hot. You're chafing. It's about 3:17 in the afternoon and you and the fam have been going hard for hours waiting in lines, riding in teacups, and taking every photo op possible with Mickey Mouse, Donald Duck, and beautiful suburban white people unconvincingly dressed up to look like beautiful Middle Eastern carpet-riding princes and princesses. You are fucking sweaty. The thirst is killing you. Without water, and soon, this kingdom will lose any magic for you it had held, and slowly morph into a dystopian nightmare of salty pretzels, purgatorially long lines, and sweaty throngs of B.O.-reeking, zombified humans being stalked by giant mice and rabbits in a hallucinatory terror that would make even this most seasoned Grateful Dead fan run for cover. Okay, maybe I exaggerate, but you get the point.
Suddenly...Aha! Refreshment! You and the fam race to the bevy of vending machines under the water mist sprinklers and let out tired gasps of relief. Finally. You reach for your wallet and look at the prices....
You WILL buy the water, serf!..MUAHAHAHAHAHAHAHA!!!!!
What in the fuck!? Three dollars for a bottle of water?
You look back at your youngest child's face. She looks like she will murder you if you don't buy that water. You cannot go on without the life giving concoction of hydrogen and oxygen either, so, not even reluctantly, really, you feed the bills to the machine and plunk down the change. Done. The deed is done. You feel almost as if you have just signed away your soul to the devil. Almost.
Now let's go back to your everyday life.
You can get a whole case of those same bottled waters for about the same price you paid for one bottle at Disney Land. Why is this? Well, you may not have fancied yourself an economist, but if you already know why, then you are basically familiar with what is called the Subjective Theory of Value.
The Subjective Theory of Value Explained in Terms of Water at Disney Land.
The subjective theory of value is a theory of value which advances the idea that the value of a good is not determined by any inherent property of the good, nor by the amount of labor necessary to produce the good, but instead value is determined by the importance an acting individual places on a good for the achievement of his desired ends.[1] The modern version of this theory was created independently and nearly simultaneously by William Stanley Jevons, Léon Walras, and Carl Menger in the late 19th century.[2]
(source)
IN SHORT, A BOTTLE OF PLAIN WATER IS MORE VALUABLE TO YOU WHEN YOU ARE TRAPPED IN DISNEYLAND, DYING OF THIRST, THAN WHEN YOU ARE AT HOME, SURROUNDED BY MYRIAD, CHEAPER OPTIONS. THE FOLKS AT DISNEY KNOW THIS, AND SO THEY JACK UP THE PRICES.
The bottle of water does not have a set, ubiquitous value regardless of context, because individual actors may deem the same bottle of water to be more or less valuable to them at different times, and in different situations.
The man coming out of the restaurant, who has just had a big drink with his meal, will probably not be willing at all to pay three dollars for that water, because he doesn't feel he needs it to meet his desired ends. Your tired, hot, chafing, B.O.-emanating husk of a human form, on the other hand, may find it to be--if unfair--a transaction you nevertheless wish to make. Who wants to leave the park and come back??
Mickey wants to know your time preference for purchasing the drink. He thinks it is likely very high! How cute!
(Some may take issue with me here saying that this is just price gouging, and not a true example of the subjective theory of value at work. While I can understand this way of thinking, it nevertheless remains that individuals are free to leave the park at any time to go and buy cheaper water.)
The free market is a beautiful place.
As I said, the folks at Disney know most people do not want to do this. They value staying at the park more than leaving, and buying the ridiculously priced water allows them to meet this desired end. Thus, when viewed this way, the water is "worth it" even it one claims otherwise, saying:
"Three dollars for a bottled water is a rip-off! A bottled water ain't worth no three bucks!"
Well, I hate to say it, but if you bought it, then for you, it was. The ethics behind the decision to raise the prices, in a situation where people are somewhat "trapped" in the park may be questionable, but the transaction is still, for all practical intents and purposes, a voluntary one.
One last example:
Yeah, nah. I'll take the water.
Another example, and one that I think may actually be a more accurate and simple illustration of the theory, is this:
Much more work (labor) goes into making a bottle of Coca-Cola than goes into making a bottle of "plain old water." There are sugars, dyes, additives, etc, etc, and a set recipe and mixture that must be adhered to. The process for "making" water is, perhaps except for a few exceptions, much less complex.
This lady slaved away squeezing lemons, and she is pissed that now you are over there buying water.
To simplify things even more, let's imagine a man who goes up to a fresh mountain spring with a plastic jug to fetch some water. His neighbor is also making a drink, but he has concocted a new beverage in his basement called "cola," which he has created through a painstaking process.
A jogger may find the man who made the cola, and the man who fetched the water, competing to sell their respective drinks to passersby. The cola peddler is shocked when the jogger pays the man with the bottled water for a bottle of her own, when she could have gotten something much more "valuable" for the same price in the cola. After all, more work went into making the bottle of cola!
Here we see the trouble with the Labor Theory of Value, which stands in direct opposition to the Subjective Theory.
The Marxian "Labor Theory of Value" maintains essentially that the amount of labor--and not the individual consumer's evaluation--determine the value of a good.
The labor theory of value (LTV) is a theory of value that argues that the economic value of a good or service is determined by the total amount of socially necessary labor required to produce it, rather than by the use or pleasure its owner gets from it. At present, this concept is usually associated with Marxian economics, although it is also used in the theories of earlier liberal economists such as Adam Smith and David Ricardo and later also in anarchist economics.
HOW ANY HONEST PERSON COULD BUY THIS POOR SILLY THEORY IS BEYOND ME, BUT NEVERTHELESS, THERE IT IS.
Well, time to put the Subjective Theory of Value into action. I know how much time I spent on this post, so all of you should upvote it exactly equally...right?
~KafkA
Graham Smith is a Voluntaryist activist, creator, and peaceful parent residing in Niigata City, Japan. Graham runs the "Voluntary Japan" online initiative with a presence here on Steem, as well as Facebook and Twitter. (Hit me up so I can stop talking about myself in the third person!)