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question for wannabe economists...

belle
Posts: 4,113
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9/25/2010 7:11:44 PM
Posted: 6 years ago
the traditional explanation for exchange is that the thing given up is valued less than the thing received for both parties, so they both end up losing something they want less and gaining something they want more. however, this fails to explain the phenomenon of three way exchanges- say i exchange A for B, even though i in fact value A more than B, so i can further exchange B for C with someone else. assuming i would do such a thing, the traditional explanation is apparently falsified- i just exchanged something i value more for something i value less. economists then say that if some good can be easily exchanged for another, it must be valued at least as much as the final good is. so B is valued at least as much as C is because it enables me to get C. fine. that was a close one! however, if thats the case, then then both objects in a traditional two part exchange must be valued equally, since they are essentially interchangable in this situation (like B and C above). so the traditional explanation fails again. for reals this time. what do we do!?
evidently i only come to ddo to avoid doing homework...
Cody_Franklin
Posts: 9,483
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9/25/2010 7:19:39 PM
Posted: 6 years ago
At 9/25/2010 7:11:44 PM, belle wrote:
the traditional explanation for exchange is that the thing given up is valued less than the thing received for both parties, so they both end up losing something they want less and gaining something they want more. however, this fails to explain the phenomenon of three way exchanges- say i exchange A for B, even though i in fact value A more than B, so i can further exchange B for C with someone else. assuming i would do such a thing, the traditional explanation is apparently falsified- i just exchanged something i value more for something i value less. economists then say that if some good can be easily exchanged for another, it must be valued at least as much as the final good is. so B is valued at least as much as C is because it enables me to get C. fine. that was a close one! however, if thats the case, then then both objects in a traditional two part exchange must be valued equally, since they are essentially interchangable in this situation (like B and C above). so the traditional explanation fails again. for reals this time. what do we do!?

I think there's a lot of equivocation going on in terms of the word "value", like instrumental value vs end value (B being the former, C the latter). One does not actually value B as B; it is valued solely as a means to C (which puts B on an inferior scale of value, being instrumental). Additionally, one cannot trade directly from A to C, so one cannot say that B and C are equally valuable, given that, if the choice existed, one would surely trade A for C, rather than for B. You cannot say, then, that both B and C are valuable, since taking C out of the equation destroys the value of B, eliminating any motivation to trade away A.
Cody_Franklin
Posts: 9,483
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9/25/2010 7:23:27 PM
Posted: 6 years ago
Suppose you have three traders, 1, 2, and 3. 1 has A, 2--B, and 3--C. C values B more than C as an end value, 2 values A more than B as an end value, and 1 values B more than A as an instrumental value, and C more than B as an end value. It make clear sense that 1 trades A for B, and 3 trades C for B, presuming, of course, that 2 does not value C (at least, more than A).
belle
Posts: 4,113
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9/25/2010 9:24:50 PM
Posted: 6 years ago
so valuing something for the purpose of trading it for something else is on a different level than valuing something for the purposes of using it yourself? so you'll trade something if its exchange value (to you) is greater than its use value (to you)? in the three part example i originally gave, does C become part of the exchange value of A even though theres an intervening step of possessing B?

i'm not sure about your "intrumental value" vs "end value" though- aren't pretty much all things valued as a means to some desired state for the organism? so the only real "end values" would be physical well being or happiness or something? if you maintain that dichotomy then everything in the original example was an instrumental value, was it not? unless you wanna define end value to mean something along the lines of use value i suppose...
evidently i only come to ddo to avoid doing homework...
Reasoning
Posts: 4,456
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9/25/2010 9:40:16 PM
Posted: 6 years ago
You value C more than A. Acquiring B would enable you to obtain C. Therefore, you value B. You possess A.

You can trade A to obtain B. Since B enables you to obtain C, which you value higher, you perform the trade.

You now possess B. You can trade B to obtain C. You value C more than B. Therefore, you trade.
"What we really ought to ask the liberal, before we even begin addressing his agenda, is this: In what kind of society would he be a conservative?" - Joseph Sobran
djsherin
Posts: 343
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9/25/2010 9:52:01 PM
Posted: 6 years ago
At 9/25/2010 7:11:44 PM, belle wrote:
the traditional explanation for exchange is that the thing given up is valued less than the thing received for both parties, so they both end up losing something they want less and gaining something they want more. however, this fails to explain the phenomenon of three way exchanges- say i exchange A for B, even though i in fact value A more than B, so i can further exchange B for C with someone else. assuming i would do such a thing, the traditional explanation is apparently falsified- i just exchanged something i value more for something i value less. economists then say that if some good can be easily exchanged for another, it must be valued at least as much as the final good is. so B is valued at least as much as C is because it enables me to get C. fine. that was a close one! however, if thats the case, then then both objects in a traditional two part exchange must be valued equally, since they are essentially interchangable in this situation (like B and C above). so the traditional explanation fails again. for reals this time. what do we do!?

You note that you must value B at least as much as C. I don't think this can be true for 2 reasons: 1) if that were the case, you probably wouldn't bother trading B for C because if you value B at least as much as C, that means you possibly value B more than C. Why trade for C when you value it the same or less than B? 2) If your ultimate goal is to obtain C starting with A, that means C is worth more to you than A, however given that you stated you value B less than A, it is impossible to value B at least as much as C because then you would value B more than A; if B=C or B>C and C>A, then B>A, however this contradicts the original assertion that A>B.

So back to your example, let's say you value A more than B when this is the only possible exchange, and you value C more than A when this is the only possible exchange. Now let's say the only way to get C is to first acquire B and that B can be acquired by exchanging A, which you start with. That means B has become more valuable to you (not for the direct satisfaction it renders you, but for its use in exchange... regardless of why it is more valuable to you, it is still more valuable to you). Now B is more valuable to you than A, and C is still more valuable than both.
belle
Posts: 4,113
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9/25/2010 10:46:00 PM
Posted: 6 years ago
At 9/25/2010 9:52:01 PM, djsherin wrote:
So back to your example, let's say you value A more than B when this is the only possible exchange, and you value C more than A when this is the only possible exchange. Now let's say the only way to get C is to first acquire B and that B can be acquired by exchanging A, which you start with. That means B has become more valuable to you (not for the direct satisfaction it renders you, but for its use in exchange... regardless of why it is more valuable to you, it is still more valuable to you). Now B is more valuable to you than A, and C is still more valuable than both.

this actually makes sense. thank you.
evidently i only come to ddo to avoid doing homework...