Re: Postage stamp bubbles; WAS: Closed - End Fund Puzzle

["Roger Koppl" <KOPPL@xxxxxxxxxxxxxxx>]

I think James Galbraith made the post reproduced below.  James seems
to reason that if utility is subjective then values must differ from
person to person; no "fundamental" value can be based on subjective
utilities.

James, perhaps you meant to step outside the neoclassical logic.  If
so, I'm not sure what you meant.  But from within the neoclassical
framework I think you can say an "objective" and "fundamental" value
exist for any good.

Subjective utilties determine willingness to pay, you know, demand.
The law of one price ensures that our differing inclinations to pay
will meet identical necessities to pay, the same price per unit.  We
adjust until our chosen bundles give us the familiar tangencies.  In
equilibrium we all have the same subjective values *in the relative
sense of identical ratios of marginal utilities.*  Our subjective
utilities are identical "at the margin."  A cancelled postage stamp
has a "fundamental" value given by the discounted *values* of the
services provided each period.

I supppose this value is "objective" in several senses.  Among other
senses, it is "objective" because the value does not depend greatly
or at all upon the utility of any one person.  It is also "objective"
in the sense that it is a money value and not itself a utility.

Is that sensible?

Roger



> OK, I'll bite on this one. (About time I posted on something substantive!)
> The word 'fundamental' troubles me here, since it would appear to imply
> something deeper than subjective utility or preference. If not, then
> 'fundamental' value differs from person to person, and what kind of value is
> that? I suppose this is Paul's point, and if so, I concur.
>
> But do we need the word 'fundamental'? If we leave it aside, then there is a
> fairly well-specified 'value' of a collectible in Keynes, namely the
> expected yield (any rise in price expected to occur, discounted by the
> interest rate), minus the carrying cost, and plus the liquidity premium.
> The expected yield (at the margin, anyway) and the liquidity premium are
> both social, not individual constructs, since they depend intrinsically on
> the interaction of agents. JG.