Free market and value

I’ve been thinking more about the weird aspects of the free market economy and the concept of valuation in general.

There are two basic ideas about value; first is that everything has some sort of “intrinsic value” and the point of free market is to discover it. The second idea is that there is no intrinsic value, that things are dynamically valued according to utility and scarcity and the market value is the only value there is.

I had a problem with this, you see. The concept that there is no objective value is contrary to my belief system, where certain things are valuable as such, not just because someone put a market price on them. I’m not talking about gold or bitcoin, I’m talking about more fundamental principles, such as virtue or spirituality. Some things can be infinitely valuable even if there isn’t a market value. So, basically, I am opposed to the free market fundamentalist idea that there is no value outside the market. However, I don’t think there is an inherent value to anything material, outside human needs, utility, desire and fear, which create a balance of desirability and scarcity, eventually resulting in market valuation. For instance, water and air are extremely desirable, but if they are not scarce, their market valuation is low. However, if they for some reason become scarce, their market valuation could climb to extremes. Also, some things can be extremely rare, but if they have no utility and nobody needs them for anything, their market valuation can be extremely low, so scarcity is no guarantee of value either. An example are exotic elements found in piles of radioactive waste – all quite rare, but nobody so far found any use for them, and as a rule you have to pay people to take them, not the other way around.

And then it dawned to me: market doesn’t discover the value of things. It reveals a quantified representation of human needs, desires, greed and fear. Market is a mirror in which humanity sees itself through value it puts on things. If probabilistic statistics quantifies human ignorance, marketplace quantifies human values: shelter, food, energy, hygiene and cosmetics, greed, status symbols, sex, guilt, fear. Basically, if Ponzi schemes are popular, what does that reveal? It reveals that people are greedy and stupid, not that the schemes themselves are actually useful, valuable or scarce. They stop being popular only when enough people lose enough money that it becomes common knowledge that they are the opposite of useful.

This is also my answer to the question of inherently worthless assets that trade on the market for often insane amounts of money – why are they popular, why are they valuable, and what does it mean. It’s not the worthless asset that is made valuable, it’s the human greed and madness that became revealed and quantified. You can actually convert greed, madness, stupidity and sin into money, and it’s not only easy, it’s the foundation of the most profitable business models; for instance cosmetics and luxury items are ways of monetizing human vanity.

The more “normal” assets are very easy to evaluate in this manner – for instance, the fact that you buy food gives you the obvious answer that you need to eat in order to survive. The fact that you buy fuel for your car says you need mobility in order to function. However, luxury clothes, watches and cosmetics, they are more difficult, because their function is to create an outward appearance of yourself, and the underlying motive can be dignity, vanity, or in fact anything. It can be samyama on some aspect of God, or it can be deception, of both self and others. In any case, it’s a wonderful opportunity for introspection.