Mechanism of Social Estimation of Value

Abstract

In previous chapters, the notion of price was introduced and understood as an empirical estimate of the value of a product. The price is not an intrinsic characteristic of the product as a thing, but it appears as a result of a bilateral assessment: the producer estimates the efforts and expenses necessary to create a thing, and the consumer estimates the usefulness of that thing for him. The price emerges as a result of the agreement between the producer and the consumer, and it thus appears connected with features of behaviour of economic agents. However, this does not mean that price is a subjective quantity; the price of a product exceeds expenses (cost) of manufacture for an amount which the consumer can pay willingly, so that the attribution of value of a set of products to the production factors is not unreasonable. The relationship between producers and consumers in a process of exchange of products is a market of products. The theory of prices is a theory of the market. In this chapter, the theory of prices is considered for a simple scheme that can be described in macroeconomic terms.