Re: Objective vs Subjective: Two approaches to money value.

["Jack O'Donnell" <jackodonnell@xxxxxxxx>]

Harry Veeder wrote:
>
> ----------
> >From: "Jack O'Donnell" <jackodonnell@xxxxxxxx>
> >To: POST-KEYNESIAN THOUGHT <pkt@xxxxxxxxxxxxxxxx>
> >Subject: Re: Saving and economic development
> >Date: Thu, Mar 18, 1999, 4:46 pm
>
> >Money only affects the ability of people to exchange what the[y]
> >own/control and its effectiveness in accomplishing that purpose is
> >substantially affected by the confidence people have it will hold its
> >value in the future.
>
> This is what I call the objective theory of money value which says the value
> of money is affected by individual expectations or perceptions of a value
> that is objectively "given". Instead of actively measuring and defending (or
> attacking) value, they passively percieve and react to value. This objective
> value is commonly called the purchasing power of money. However, if
> producers and consumers  can impress their will on prices to favour their
> respective positions,  what is to stop them from similarly making and
> defending their *own* measurements and calculations of money value?
> (Such measurements are based on an individuals own standards and criteria
> and can never be evaluated by economists).  I call this the subjective
> theory of money value.

You're mixing the subjective nature of all individual economic
valuations [i.e. -- The price at which each individual is willing and
able to buy/sell whatever it is they are evaluating.] and the market
determined value of things [Money, stuff, services etc.] that is the
weighted average of all the actualized [i.e.  -- Actual measurable
trades.] subjective evaluations. These are not different theories, they
are just different applications of the same thing.

> As Keynes and Davidson have shown expectations can have no rational basis
> whatsoever since the future is fundamentally uncertain.

Without concurring or denying the sources you assert, the difference
between the uncertainty of the future and the reliability of maintaining
money to a standard by positive actions of the monetary authority in
response to whatever occurs affecting that value is just as rational as
adjusting the controls that affect the speed and direction of your car
whenever the unpredictable environment alters the desirability of the
outcome of the settings you initially make.

> However, unlike a
> state of expectation,  a state of appraising involves *setting* a price.
> When idividuals appraise the value of money, they are not worried about its
> future value, they are setting its present value as a means of exerting
> their will on the world to conform to their judgements of their past
> experience. Rationality is preseved and animal spirits and/or bounded
> rationality are transcended when we exert our will-to-power on the value of
> money.

No. The value of money involves measuring the actual outcomes relative
to an established standard. It is the voluntary choices made by
individuals in selecting that which they accept or reject as to the
relative desirability of keeping what they have or trading what they
have for something they don't that determines the value of money.

<<SNIP>>

--
			-- jbod

		Tax Privilege, Not People
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