What is a Thing Worth? Determining the Values of Things

Other animals do not value the great majority of things to which we humans attach so much importance, and to acquire which some people expend considerable effort – things like gold, silver, jewels, paintings, antiques, famous wines, expensive cigars, artworks, culinary delicacies, houses, planes, boats, cars, and so on. Their estimation of the value of things is entirely practical, for they do not value things that do not in some way contribute to their survival, comfort, or their ability to reproduce. Although we often see other animals fighting over food, territory, or a mate, we never see them fighting over money, a piece of metal or jewellery, a painted canvas, an article of clothing, a valuable antique, or a stock certificate. How can we account for this important difference between humans and all other living creatures?

The answer is that these artificial human valuations are due entirely to our imitative nature. This fact becomes obvious when we consider that a thing that is desired or esteemed by many people becomes more valuable, which accounts for the otherwise inexplicable phenomenon that the same thing can have different monetary values at different times, even though it has not undergone any appreciable change, meaning that there has been no change in its intrinsic or practical value.[1] Rising stock or real estate prices illustrate this phenomenon, since the greater the number of people that want to own these things, then generally the higher is their monetary value.[2] This then becomes an established model of behaviour, which assumes that the most recent price paid for something is an accurate estimation of its monetary value. In other words, both the buyer and seller implicitly agree to imitate the most recent buyers and sellers, even though they usually don’t know who these people are. This is what is called an object’s “market value.”

This is another of the many examples of how the Theory of Imitation underlies or determines basic economic phenomena like supply and demand or an object’s price. Economists have been unaware of these mechanisms because they have been completely ignorant of this important theory, which ignorance has led them mistakenly to assume that there is something impersonal about market mechanisms like the determinants of supply and demand, the prices that result from their interactions, or the highly misleading term “market forces,” which makes it sound as if these forces were entirely impersonal, just like physical forces like gravity and the electromagnetic force, but which market forces most assuredly are not.

Economists have mistakenly assumed that things have a monetary value which is independent of human values. In other words, contrary to what they believe, things do not have a monetary value in and of themselves. What is mistakenly called a thing’s “market value” should really be called its “imitative value,” for the latter term, unlike the first, clearly indicates the importance of imitation in determining the monetary value of all things. For example, before humans began drinking coffee, coffee beans had no imitative value, and hence, no market value, since people back then had never observed someone drinking coffee, and therefore they neither desired to perform this activity nor would they have enjoyed performing it. Had someone offered to sell or exchange roasted coffee beans to people in those times, many of whose descendants today know and appreciate their value, they would have stared at you uncomprehendingly. Another example is that, today, in parts of the world where people are accustomed to buying all their food at the supermarket, most people do not value the many wild fruits and vegetables that can be found even in cities. For them, these “weeds” or purely decorative plants have no value because they have never seen anyone gathering and eating them, as people were wont to do in the past, and as people still do in many parts of the world today.

Using the term “imitative value” rather than the seemingly objective but misleading term “market value” makes clear the ever-present possibility of a sudden rise or fall in the price of things like stocks, real estate, futures contracts, and other widely-traded commodities and financial instruments. It is a common occurrence for a commodity’s price to rise or fall for no detectable reason, that is, when there has been no change in what economists and others call “market fundamentals,” which, according to them, are the true and only determinants of a commodity’s price. Such inexplicable events are due entirely to the imitative nature of human beings. There are occasions when the mere fact that a commodity’s price is rising or falling is sufficient to make it rise or fall even more, as more and more people either buy or sell it, whether they are motivated by greed – that is, the desire to make more money – or by the fear of losing money, which tends to magnify its rise or fall in price. Contrary to the economists’ mistaken assumption that human beings are rational creatures,[3] these price changes are wholly irrational because they are due to our imitative nature.

An example of how economists’ mistaken assumptions of human rationality and the impersonal nature of market forces can cause real-world failures is the demise of Long Term Capital Management, a hedge fund that was managed, or rather mismanaged, based primarily on complex mathematical models of how, according to their creators, financial markets supposedly function. By completely overlooking the essentially human, and therefore the occasionally irrational, nature of markets, they greatly underestimated the possibility of a sudden decline in securities prices, which unanticipated real-world event led to its failure. At the time, it was the largest hedge-fund failure in history.

But [Jeff] Shankman warned that relying on [mathematical] models, even with massive research, wasn’t enough. The guys at Long Term Capital Management (LTCM) had “let math be their trading god,” he cautioned colleagues when that hedge fund collapsed in 1998. Founded by John Meriwether, the man behind Salomon’s [Salomon Brothers’] first trading floor, LTCM was the epitome of a quant  shop [a securities company employing complex quantitative mathematical models to make its decisions]. Nobel [Economics] Prize winners Robert Merton and Myron Scholes, who developed the option pricing formula, had worked there.[4]

Just as we imitate other people in other respects, such as in the way we pronounce the words of our native language, the things we desire to do, the foods we like to eat, the age at which we marry, the number of children we have, and the kinds of clothes we wear, we also imitate them in the monetary value we attribute to certain objects. When we are unsure of what a thing is worth, we check to see what other people are willing to pay for it. Experts in these matters are merely those who know, better than most people, what some people are willing to pay for something. In the case of common or relatively valueless objects that become more valuable with the passage of time, what happens is that the great majority of these objects are thrown away or destroyed, or their condition deteriorates, and so the absolute number of them diminishes, especially those that are still in good condition. Some examples of this phenomenon are coins, stamps, vintage cars, and other collectibles. Something that is rare becomes more valuable only because it is desired by many people. But there are many rare things, such as certain plant or animal species, or certain minerals and elements, that are not valuable because they are not desired by anyone.

In the case of land, its price only goes up if more and more people want to live there, or if they are able to use the land to produce something of value, which means something that other people want and are willing to pay money for. In places where this is not true, that is, places where fewer and fewer people want to live, land values go down rather than up. Although, seen in retrospect, it may seem inevitable that the land values in certain crowded cities like New York, London, or Toyko would have gone up over time, it is not always possible to predict such price increases before they occur, because such developments are not inevitable.[5]

To know the value of something is to know by how many people it is desired and esteemed. Contrarily, in the case of things to which we attach a high personal value, when we discover that others do not value them in the same way, or they deprecate or ridicule them, it often lessens their value in our estimation. This explains why those who are unfamiliar with a culture, such as immigrants and foreigners, may not value things in the same way as those who have grown up immersed in that culture. In the following excerpt, the speaker recounted her arrival in New York by ship at the age of seven at a time before people watched television:

I remember seeing the Statue of Liberty [for the first time]. It didn’t mean much to me, but seeing the other people [on the ship] getting excited, it meant a lot to me.[6]

To an indigenous person living in the Amazon forest, completely outside of Western culture, an artwork like the Mona Lisa has absolutely no value whatsoever. Similarly, many people make the mistake of supposing that, had they lived in the past, they would have known the value of certain objects which presently have a high monetary value. An example is the paintings of Vincent van Gogh, which were worth very little during his lifetime because very few people then appreciated and wanted them. But if they had lived in the past, they would almost certainly have behaved like most people did then, by not attributing a high monetary value to these objects. In many ways, the past is similar to foreign cultures in the present day, for people living in either of them were or are unfamiliar with the models of behaviour, including the valuations that people attribute to various things, that exist in the culture in which one happens to live.

It is hard for the majority of people, who are so thoroughly immersed and entangled in the human world of values, to realize that famous things like the Mona Lisa or the Eiffel Tower have absolutely no value to other creatures; in other words, that, outside our very peculiar and, in many ways, completely artificial world of human valuations, these things are completely worthless. Artworks and buildings like the Mona Lisa by da Vinci, the statue of David by Michelangelo, the armless Venus of Milo, the Parthenon in Athens, the Egyptian pyramids, or Angkor Wat in Cambodia, which are all said to be priceless, that is, they possess more than a mere monetary value, are in fact useless and completely worthless to all other organisms. What is true of other organisms is also true of foreigners, for most people, who live completely immersed in the values that are peculiar to the culture in which they have grown up, fail to understand that the things which they value may have little or no value to many, and perhaps the majority of, other people in the world.

Another fact about other animals is that their valuation of things does not change with time, as it often does in the case of humans. To a carnivorous animal like a tiger, a piece of meat is a piece of meat, and it does not matter whether it is an expensive cut like tenderloin or a cheap cut like rump roast. Moreover, you will never be able to convince the carnivorous animal that a quantity of meat which formerly was worth X now is worth X+Y, where Y is an added cost that is due to inflation, increased demand, or decreased supply. Even in the case of human beings, those who have never observed the model of people eating or wanting to eat certain culinary delicacies like beef tenderloin, caviar, or truffles, or drink expensive wines like champagne, burgundy, or vintage port, will have no desire to eat or drink these things, and they would probably not enjoy consuming them. Moreover, they would be bewildered to learn of the large amounts of money that some people are willing to pay in order to consume them. Again, these things are due to our imitative nature, for things that are desired by many people become more valuable monetarily. But this is not intrinsic or practical value, which has not changed, since the thing itself has not changed; it is entirely imitative value, or the value that is due to a thing’s being desired by many people. Monetary or market value is determined wholly or primarily by imitative value rather than by intrinsic or practical value. This explains why certain very valuable and essential things like oxygen, sunlight, and water are not worth very much when they can be obtained with little or no effort, and why, on the other hand, completely worthless things, at least considered from a strictly biological perspective, such as jewels, so-called precious metals, paintings, and other artworks may have a very high monetary value.

For example, although in agriculture one considers the costs of inputs like seeds, fertilizer, farming equipment, labour, and even water when it has to be paid for, no one includes the cost of sunlight in their calculations, even though, without it, there would be no crops. This is because sunlight can be obtained for free, and it is not possible to acquire more of it, such as on cloudy days or during colder seasons, by paying money for it. Hence, although sunlight is vital for all agricultural operations, it has no imitative value, and hence no monetary value, because we have never observed someone paying money for it, unlike other agricultural inputs.[7] However, artificial light that is used to grow plants can of course be purchased because we have observed the example of others doing so, and so, unlike sunlight, artificial light does have an imitative value, and hence a market value.[8]

Even money has value only because other people want it, in the sense that they are willing to accept it for the things that people want to buy. After all, money is made from materials, namely common metals and paper, which do not have a high monetary value. Whereas in past ages a penny could be exchanged for certain things like a loaf of bread or a chocolate or candy, today, it has practically no exchange value in many countries, and so it has lost whatever imitative value it formerly had, to the point that some countries have eliminated it from their national currency.[9] Young children do not know the value of money because they have not yet observed the model of other people accepting it in exchange for the things they want, and neither do they know how much work they must do in order to obtain it. It is only when they observe these models as they grow up that they come to learn its value. Those who become obsessed with money are those who have grown up admiring people who were financially successful, or they have spent a great deal of time in the company of persons who have a very strong desire to possess money, and, moreover, to possess as much of it as possible.

Just as one cannot make a certain word mean something that it does not presently mean, one cannot make a certain amount of money equal a certain amount of something else. One must take these things as they exist in the society one lives in, at the time one happens to be alive. And yet, just like the meanings of words and other human conventions, the value of money can change with time, in terms of what it can be exchanged for. What this means is that, although the value of money is not arbitrarily determined, in another sense, it is entirely arbitrary, since, like all human behaviours, this value can change with time and, moreover, it could have been completely different from what it is. This protean nature of the value of money is determined by our imitative nature, which important fact has been completely overlooked by economists, in their obstinate but mistaken insistence that we human beings are rational creatures.

What I have said about the valuation of things also applies to people, for their value is also determined by how many people they are desired or esteemed by. A beautiful woman has more value than a plain or ugly woman simply because she is desired by many men and esteemed even by women who do not want to copulate with her. This also explains why a beautiful woman is less valued as she grows older, since an old woman is not desired by as many men as a beautiful young woman.[10] Notions of feminine beauty are determined by the images of women one has been most frequently exposed to, including those one sees in real life, such as one’s mother and other female relatives, since men in different cultures desire different kinds of women.

Celebrities are merely those individuals who, for whatever reason, are admired by many people, and so, at least in the eyes of their admirers, they come to acquire a special or elevated status, which gives them a greater value than ordinary people. The fact that this value or status is due entirely to admiration is shown by the fact that one does not regard in the same way the celebrities of a culture one knows little or nothing about, for the simple reason that one feels no admiration for these individuals.

Just as most people are susceptible to imitating and conforming to the behaviours of others, they are also susceptible to imitating and conforming to their valuations of things and people, and this includes internalizing other people’s valuations of themselves. For example, in societies where fat people are scorned and ridiculed, fat people may imitate these valuations, and hence, many of them feel ashamed of their corpulent bodies and, in some cases, they may even hate themselves.

The same imitative mechanism that determines an object’s value also determines its lack of value. Things that we see lying carelessly abandoned, such as discarded household items, abandoned cars, or empty food containers or wrappers and beverage cans or bottles, clearly had no value to, and hence were not desired by, those who discarded them, and so they also come to lack value in our eyes. Another important factor is that many people see numerous images of these objects in new or pristine condition, which explains why many people throw things away or replace them long before they have become worn out or cease to function properly. In the past, before the ubiquity of modern mediums of communication such as photography and television, most people continued to use their possessions for longer periods of time than they do today. The aim of advertisers is to establish a certain model of what these things should look like, which includes periodic changes in their appearance or functionality. When they are successful in doing so, they are able to sell more of their products by inducing people to buy a replacement before they need to do so. This phenomenon is evident in the case of clothes, cars, furniture, and electronic devices.

The consideration of how a thing’s value is determined illustrates several important points. Economists have sought to make their so-called “science” as objective as possible by seeking to eliminate all human elements from their discussion, such as in their use of highly misleading impersonal terms like “supply,” “demand,” and “market value.” By doing so, they have obscured, both to themselves, their students, and to non-economists, the essentially human nature of their field of study. This is another of the pernicious effects of the economists’ very foolish desire to imitate true scientists like physicists and chemists, who study non-human phenomena, and thus have attained a degree of mathematical rigour and precision in their sciences which economics, because it is a humanity, will never attain. Economists would have been much more honest, and their many false beliefs and theories would have done much less harm, had they accepted and been content to work within the inherent limitations of their field of study, and not attempted to impose on it a completely artificial and inaccurate model of precision, namely the rigour of mathematics, which has served them very badly. By doing so, economists have behaved like a plain and scrawny person who, desiring to become like the beautiful individuals one admires, conceals one’s scrawniness with expensive clothes, and covers one’s unattractive face with an excessive use of cosmetics, all for the sake of attaining one’s image of perfection. The astonishing fact about this situation is that they have managed to convince both themselves and the rest of the world that they have successfully imitated their idols, even though this is very far from being true.

[1] Of course, the same thing can have different monetary values in different societies, depending on the models of behaviour that are practised in them. For example, oil was not very useful or valuable in the past. It was only with the inventions of modern machines and transportation devices such as cars and planes that its value has increased, to the point that it is one of the most valuable commodities in the world today. The same is true of uranium, which had no value at all before the invention of nuclear power plants and weapons. Similarly, the same thing can have a different value in societies that exist at the same time. In countries where the inhabitants do not chew betel nuts, their value is very low or zero, while in countries where this practice is widespread, these nuts have a higher value.

[2] One also sees this phenomenon at auctions, where the knowledge that another person or other people want the thing we want often strengthens our own desire to own it, thereby resulting in a bidding frenzy that can increase the object’s price, sometimes by a large amount. Even those who do not participate in the bidding sometimes experience a twinge of desire to own the object from seeing two or more people vie with each other to possess it.

[3] Economists have started from the false assumption that human beings are rational creatures, and then have compounded the mistakes they have made based on this original mistake. Similarly, it is related in the Bible that all of humanity’s sufferings, mistakes, misfortunes, and evil actions are due to our ancestors’ having committed the original sin of disobeying God, in which sin all the progeny of Adam and Eve are believed by Christians to be born tainted. In this sense, the economists’ original sin, from which so many other mistakes arise, was believing that human beings are rational creatures.

[4] Hedge Hogs: The Cowboy Traders Behind Wall Street’s Largest Hedge Fund Disaster by Barbara T. Dreyfuss, chapter 3. Random House, New York, 2013.

[5] The assumption that real estate values in large cities like the three aforementioned ones will continue to go up is based on a number of assumptions, such as that their population will continue to increase or at least remain stable, and the societal economy in which these cities participate will continue to grow, meaning that overall production and consumption will also continue to increase. Clearly, a sudden change in any one of these assumptions, such as a deadly plague that wipes out a third of the population, as occurred in Europe during parts of the Middle Ages, or a significant decline in economic production and consumption, as occurred during the Great Depression, would cause a steep decline in real estate prices. Ultimately, the belief that these things will not happen is merely based on the naive and simplistic human belief that, since they have not happened in the recent past, whether measured in years or decades, they also will not happen in the future.

[6] Ellis Island Interviews: In Their Own Words by Peter Morton Coan, p. 391. Checkmark Books, New York, 1997.

[7] One could imagine a society, such as Aztec society, where people worshipped the Sun, in which farmers were to pay money to a priest or other person to intervene on their behalf to propitiate the god or gods to provide more sunlight, just as some people perform a rain dance in order to try to cause the rain to fall during a drought. In this case, sunlight would have a monetary value, namely the sum paid, or the offering made, to the priest.

[8] Another use of artificial light is in tanning salons, where the clients expose their skin to artificial light in order to darken their skin. Clearly, the result of this process, which is usually produced by exposing one’s skin, whether intentionally or not, to the sun’s rays, is only valuable because it has an imitative value that is due to the admiration of, which then begets the desire to imitate, certain models of behaviour that are not at all necessary for survival or the well-being of the individual. In poor countries, the inhabitants would probably be astonished to learn that some people in wealthy countries actually pay money in order to darken their skin artificially in this manner.

[9] What I am saying is that, in the past, people had observed the model of someone obtaining something of value in exchange for a penny, and so they were willing to do so themselves. But today, if you were to go into a store and offer a penny for something, the owner or employee would look at you as if you were daft. Hence, although the size and metal content of a penny may not have changed, its imitative value, and hence, its monetary value, has certainly diminished.

[10] I suspect that some readers will be offended by this discussion of the valuation of human beings. Of course, I am not talking about the legal, moral, or ethical value which we attribute to humans, which assumes that every human being has the same value, no more nor less, as any other human being. But in everyday life, it is obvious that such value hierarchies do exist. To give a few examples, we do not mourn the death of an anonymous person whom we don’t know in the same way as the death of a celebrity, even though we don’t know the celebrity, in a personal sense, any more than the anonymous person; and most men are not likely to buy things for, and spend money on, an ugly woman, whereas they are much more likely to buy things for a beautiful woman whom they fancy. Similarly, people do not behave in the same way towards ordinary people as they do towards celebrities whom they admire. In other words, how we value other people determines the way we behave towards them. This explains why some people are willing to pay exorbitant sums of money, far more than their ordinary monetary value, for things that were once owned, used, or signed by famous people.