Tuesday, June 1, 2010

Hayek on non-market derivations of subjective value

This morning, Don Boudreaux cites Hayek:
"Economic changes, in other words, usually affect only the fringe, the “margin,” of our needs. There are many things which are more important than anything which economic gains or losses are likely to affect, which for us stand high above the amenities and even above many of the necessities of life which are affected by the economic ups and downs. Compared to them, the ‘filthy lucre,’ the question whether we are economically somewhat worse or better off, seems of little importance."
This seems relevant to the point I was making about the fact that we do just fine allocating resources and deriving enjoyment without the price mechanism in all sorts of situations.

It reminds me also of something that John Adams wrote to Abigail in the midst of the Revolution:
"I must study politics and war, that our sons may have liberty to study mathematics and philosophy. Our sons ought to study mathematics and philosophy, geography, natural history and naval architecture, navigation, commerce and agriculture in order to give their children a right to study painting, poetry, music, architecture, statuary, tapestry and porcelain."
Perhaps the reason why it reminds me of that isn't obvious. The point for me is that the price mechanism (just like the military and the state) is a way to derive happiness in only very specific circumstances. Some of the most enjoyable pursuits of our lives are pursued with non-market, non-coercive means.


  1. If someone finds happiness out of being an ascetic or if they want to pursue their life's dream of living as a hermit on an island - you are quite right, the price mechanism is a useless and unknown concept to them. What it is useful for is mediating the unlimited wants and desires of the population with the limited supply of goods available. It does this by erecting ratios of value between goods. In some instances, there would be no reason to use this. But then we only ever said that the price mechanism was useful when dealing with market phenomena.

  2. Hayek's position is a common one found in the classical Greek/Roman world. See Cicero, Plutarch, etc. Two of my favorite essays by Plutarch are "On Listening" and "On Contentment"; I read them often.

    Of course, as the classics would note, in the absence of economic security the better things in life are very hard to attain. In some ways it is a necessary/sufficient argument.


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