Wednesday, April 18, 2018

Nature — How to retool our concept of value – Mariana Mazzucato

Must-read in full. It's short and to the point.

The meaning of "value" is one of the most pertinent questions in economics and political economy. Michael Hudson has been emphasizing this for some time, as have Marxists and Marxian. Consideration of value of other than as price revealed in competitive markets is ruled out in conventional economics by methodological assumptions.
What we value and how we value it is one of the most contested, misunderstood and important ideas in economics. Economist Mariana Mazzucato’s comprehensive The Value of Everything explores how ideas about what value is, where it comes from and how it should be distributed have changed in the past 400 years, and why value matters now more than ever. Mazzucato emphasizes the need to reopen debate to make economies more productive, equitable and sustainable. The 2008 financial crisis was just a taste of looming problems — climate disruption, massive biodiversity and ecosystem-services decline, even the possible collapse of Western civilization — unless we learn to value what really matters.
Early economists focused on the production of value from land (François Quesnay and the ‘physiocrats’), labour (Adam Smith to Karl Marx) and capital. In this view, value determines price (Four decades ago, I described this in terms of embodied energy: see R. Costanza Science 210, 1219–1224; 1980). By contrast, the current mainstream ‘marginalist’ concept bases value on market exchanges: price, as revealed by the interaction of supply and demand in markets, determines value, and the only things that have value are those that fetch a price.
This has major implications for ideas about the distinction between value creation and value extraction, the nature of unearned income (‘rent’) and how value should be distributed....
How to retool our concept of value — Mariana Mazzucato
Robert Costanza


Noah Way said...

Very good, although I would take it further and say that the only thing money is a good measure of is itself.

Tom Hickey said...

One could say that money is a measure of relative preferences ("utility") and opportunity cost. Quite evidently, it is possible to prefer things of less value than greater value — for different reasons, e.g., ignorance, skewed priorities and expectation of gain. This gets revealed in terms of relationship in prices.

Noah Way said...

Time is a real and measurable quantity. Measuring time with money is entirely relative to the quantity of money.

The very best things are by definition the most expensive. The great irony is how they are even better when you get them below wholesale.

The badge of wealth is no longer conspicuous consumption, it is the conspicuous miserliness of entitlement.

Konrad said...

Regarding the concept of value, the human species is crippled by a fatal flaw, in that the human understanding of value (or “wealth”) is socially relative. If everyone has a million dollars, then no one is special. But if I have a million, and everyone around me has nothing, then I am a god.

Hence, for the rich, it is not enough that they have money. Rich people’s drive is to widen the gap between themselves and the lower classes. The more they can grind the lower classes into poverty and misery, the more rich people feel “wealthy.”

Congress exists to enhance this “wealth” by continually widening the gap between the rich and the rest, such that rich people become richer, and poor people become poorer.

Put another way, in a society where money equals wealth and power, it behooves to rich to keep the “inferior” classes forever starved of money.

And it isn’t just the rich. Most people at all socioeconomic levels play this same game. No matter how poor people become, they feel reassured as long as they can point to some group “beneath” them that is even poorer.

Unless the human species can somehow evolve some degree of empathy, the human species is doomed to slither in the mud, and perhaps go extinct.

For the spiritually wise person, something has “value” to the extent that it promotes empathy. That is, to the extent that it enhances and edifies the people around him or her.

jrbarch said...

For me there is a ‘store of value, a measure of value, a medium of exchange’ deep inside of every human. The more you spend the richer you get. It is the source of all peace a human can feel, all intelligence, all creativity, all vision, all inclusion ..... – and WILL | not ever-trammelled desire. It is the source of human strength. It will wipe the C21st clear out of your eyes and show you what timeless and value are really all about. There has nothing achieved by war on this planet, that could not have been much much much better achieved, by Peace. Redefine intelligence ..... or else you are going to think stupidity has four dimensions.

Ralph Musgrave said...

What’s she saying that’s new? Nothing far as I can see. (Quotes below are from the Nature article.)

“Climate disruption”? Yes we all know climate change is a serious matter. That’s why the world is spending billions on wind and solar power generation. Doh!

As for the idea that market price is a dodgy measure of the real value of something, we all worked that out a century ago: that’s why every country has a very large PUBLIC sector – i.e. we deliberately over-rule market forces when we grab tax off people and spend the money on education etc.

Next, the market “stokes inequality”. Well of course: the market price for someone with a low IQ and a drink or drugs problem is often around zero. But we don’t let them starve (though of course there’s always the odd few who fall thru the social security safety net, even in Europe).

Re measuring GDP, apparently “..only goods and services sold in markets are counted”. Rubbish: public sector output is counted as well.