Mechanism of social estimation of value

Abstract

In previous chapters, the notion of price was used as an empirical estimate of value of a product. The price is not an intrinsic characteristic of the product as a thing, but it emerges as a result of a bilateral assessment: a producer estimates efforts and expenses necessary to create a thing and a consumer estimates usefulness of that thing for him. The price emerges as a result of an agreement between the producer and 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 simple schemes that can be described in macroeconomic terms.