The Incompatibility of Objective Economic Value and Human Conscience

The idea that economic value is objective is fundamentally incompatible with the concept of human conscience and subjective preferences. This notion is often at odds with empirical observations, particularly when considering the varying reservation prices people have for the same items under similar circumstances.

Objective Value vs. Subjective Preferences

The term 'objective' is used in the context of being free from personal bias or interpretation. However, economic value often reflects human preferences and subjective judgments. For instance, the same item can have different prices to different buyers, even if they are under the same circumstances.

Many would argue that the idea of an objective value independent of human conscience is flawed. A sensible and informed individual would recognize that economic value is inherently subjective. This subjectivity arises from the unique preferences and circumstances of each individual.

Theoretical Consistency vs. Practical Application

Theoretical concepts, such as the agreement of rational individuals in a Bayesian framework, are not always consistent with real-world scenarios. For example, Scott Aaronson's paper on the complexity of agreement between rational agents highlights the challenges in achieving theoretical consistency in practice.

Aumann's celebrated theorem states that honest rational Bayesian agents with common priors will not disagree on the state of the world. However, in real-world scenarios, such as economic transactions, individuals may not meet the conditions assumed by the theorem. These conditions include:

1. Different Information Sources

Buyer A may read the Wall Street Journal, while Buyer B may watch Fox News. These diverse information sources can lead to vastly different perceptions and ultimately different reservation prices.

2. Different Interpretations

For example, Seller A might believe the economy will recover once everyone is vaccinated, while Seller B might think the market is already pricing in future inflation due to the cost of the Covid Bailout.

3. Different Investment Objectives

Buyer A might need quick cash to cover a serious exposure incurred by selling Tesla Motors short, while Buyer B might seek a safe security to balance his portfolio.

4. Fundamental Value Systems

Emotional attachments can also play a significant role. Seller A might have an emotional attachment to an object and not want to sell, while Buyer B might have a strong desire for the same object.

The Challenge of Efficient Market Hypothesis (EMH)

The Efficient Market Hypothesis (EMH) suggests that financial markets incorporate all available information, and that prices reflect the true value of an asset. However, in practice, not all participants are rational, informed, or honest. Disappointed by the reality that others may be dishonest, irrational, uninformed, or gullible, one might question the validity of any economic value that is objective.

In conclusion, while the concept of objective economic value may seem appealing, it is often at odds with empirical observations and real-world behavior. The subjective nature of human preferences and the impact of various biases and emotions make it challenging to argue for an objective economic value.