What is the belief system behind money?

[Feeble Wonk]

A final suggestion, before I hit the sack... If monetary value was objectively defined, no transactions would ever occur. The buyer always places more "value" in the commodity that he is purchasing than the sum that he pays, or he wouldn't make the purchase. The seller always places greater "value" in amount received than the commodity sold, or he wouldn't make the sell.

 

[carllooper]

Well it sure seems that's kinda like the unique point of view that the value of the bike is 10 million. The other option would be that since there are at least 2 persons who might believe that, the seller and the buyer, that makes it objective. That means there's no such thing as mass delusions. And I think that's ludicrous. That makes Xenu the Intergalactic Lord something real because more than one people think there's a Xenu.

Again, that would mean that the money the churches are making is proof of God.

No, the money the churches make just proves that one can sell this idea called God. Ideas are real. It doesn't mean God is proved. Nor the idea for that matter. But there is ample evidence the idea does exist. But there's no evidence that what the idea represents exists.

The value of the bike is just whatever value you put on it. If you put a value of 10 million on a bike then that's the value you have put on it. If nobody buys the bike for that value, then one might very well call that value subjective. "In your dreams" as they say. "You wish" as they say. But the moment anyone does buy it at that value, the value you have put on it has proved itself correct. The value wasn't just subjective at all. Someone bought it for that value. It doesn't matter whether they are mad, or deluded or participating in some mass delusion - the fact is that they bought it at the nominated value. You have the money to prove it.

Keep in mind, that that the buyer has parted with that value. For the buyer (and you for that matter) the bike no longer has the value that you nominated. The buyer has exchanged that value for the bike. It is no longer worth that value. To them, or you. What is it worth? Well in terms of money it is only worth whatever the next buyer will pay for it. If they were to sell the bike, they would have to work out a way of assigning the correct value, by which is meant that which someone else is willing to exchange for the bike.

When we ask a buyer "was it worth 10 million" we're really asking "was it worth parting with 10 million". If they are an investor and go on to sell it for 20 million they might very well say yes. If they just wanted the bike they might also say yes. But if they were just trying to prove that the value they've just parted with was purely subjective then I hazard a guess they might very well find themselves eating their words.

C

 

[phinds]

Well it sure seems that's kinda like the unique point of view that the value of the bike is 10 million. The other option would be that since there are at least 2 persons who might believe that, the seller and the buyer, that makes it objective.

That's ridiculous. Back in 2000 or so MILLIONS of people all believed that internet stocks were valuable even though most of the underlying companies had absolutely no way to make a profit and the ones that did, did not have any way to make the profit that would have substantiated their stock valuations. Did you see how that worked out?

 

[Stephen Tashi]

... because it's previous ten million dollar value was set by my subjective opinion as to what it was.

Well, the seller was also involved so we should say the price was set by the interaction of your opinion and the seller's. Perhaps the interaction between the subjective opinions of several people to establish a price for something is regarded as a process that has an "objective" outcome.

 

[Feeble Wonk]

That's ridiculous. Back in 2000 or so MILLIONS of people all believed that internet stocks were valuable even though most of the underlying companies had absolutely no way to make a profit and the ones that did, did not have any way to make the profit that would have substantiated their stock valuations. Did you see how that worked out?

I think Nick's suggestion that you referenced was largely sarcastic. I'm thinking he would agree with your assessment, which is the point he was trying to make.

 

[Czcibor]

That's ridiculous. Back in 2000 or so MILLIONS of people all believed that internet stocks were valuable even though most of the underlying companies had absolutely no way to make a profit and the ones that did, did not have any way to make the profit that would have substantiated their stock valuations. Did you see how that worked out?

Badly.
The problem is that in economics is a bit tricky determining mythical true value, while we are usually happy with using market value as good enough approximation. (maybe it would be a better term instead of objective) Especially that with when we're dealing with discounted future values, the future cash flows are just more or less informed guess.

What about treating usage of money as Nash equilibrium? You have to choose whether to consider a currency seriously. Rational decision for you is based on others people decision, and when you see that they believe in it, behave as they do.

 

[Stephen Tashi]

A final suggestion, before I hit the sack... If monetary value was objectively defined, no transactions would ever occur. The buyer always places more "value" in the commodity that he is purchasing than the sum that he pays, or he wouldn't make the purchase. The seller always places greater "value" in amount received than the commodity sold, or he wouldn't make the sell.

That illustrates the difference between "value" and "price". A seller who lives in a small apartment may not place much "value" on a huge antique sideboard compared to a buyer who owns a large mansion. The seller sells because he "values" the cash (or whatever good he gets in return) more than the good being sold. The buyer buys because he prefers the good being bought to keeping the cash. However, both the buyer and seller agree on a "price".

 

[Feeble Wonk]

Well, the seller was also involved so we should say the price was set by the interaction of your opinion and the seller's. Perhaps the interaction between the subjective opinions of several people to establish a price for something is regarded as a process that has an "objective" outcome.

I suppose that you could say that the "sale price" of any specific transaction might be "objectively" determined by the confluence of subjective effects at the moment of the individual transaction. However, I would argue that the overall "value" of the commodity would remain "subjective" both before and after the transaction.

That said, I fully concede that this discussion is largely semantic in nature. My initial argument was that monetary value might very well be considered "real" in the sense that it is established by societal convention, and has a causative effect in societal function. But, it is not "ontologically" real.

 

[SardanaS]

What drives the intrinsic value of currencies. I understand that Gold was the basis of currency valuation. But the benchmark value itself is a variable, so what is a constant in the business of money. If it is USD, than why?

 

[write4u]

IMO, money is merely a convenient method of exchange. I remember a presidential candidate suggesting we should pay our dentist with chickens! "Mrs. Jones, this gold cap will cost you 150 chickens. Payment is due on delivery of services."

The difference from past transactions is that we no longer deal with an exchange of necessary items, "I'll trade you a knife for that blanket."

Today we buy a $6000 watch. What should we bring in exchange? 1500 chickens? Unless I am a chicken farmer, where do I obtain 1500 chickens and how do I pay for them when the chicken farmer demands a $6000 watch in exchange for his chickens.

 

[phinds]

I think Nick's suggestion that you referenced was largely sarcastic. I'm thinking he would agree with your assessment, which is the point he was trying to make.

Based on his infantile posts in another thread (all of which were deleted by the mods) I did not make that assumption.

 

[Evo]

Woowoo and response (which tried to stop the woowoo) deleted. Sorry, thread closed.