Interesting post. I have not before seen the claim made that prices can change individual subjective values.
With regards to your example, let me see if I can state it another way.
According to Austrian economics, man acts in order to achieve his own subjective ends. He finds himself in the world with his environment in a particular state of affairs and takes action to change this state into one that is more subjectively preferable to him. To do so, he must combine his labor with material objects. As such, the value of any particular object depends on the ends that the object can be employed towards.
Prices are simply part of the state of man’s environment.
If we take the example of Crusoe alone on the island, we can imagine that he may be in a situation where he has the following subjective rankings of actions:
1) build a fire for the night (at his current location)
2) gather berries for food
3) hunt a wild boar
4) move to a different part of the island, then build a fire for the night
5) build a fishing net
.
.
.
Suppose that at the very moment Crusoe is about to start gathering materials to build a fire at his current location, a severe storm comes in and soaks the general area. Dry tinder is no longer available to start the fire. This change in the environment is, I think, analogous to a change in price. If Crusoe wants to build a fire where he is currently located, he must gather dry tinder from remote parts of the island that were unaffected by the storm and carry it back to his current location. The “price” of building a fire at his current location dramatically increased.
Alternatively, he could move to a different part of the island, and build a fire there, instead of carrying dry tinder back to his original location. As a result, his subjective valuations after the storm may be ranked as:
1) move to a different part of the island, then build a fire for the night
2) build a fire for the night (at his current location)
3) gather berries for food
4) hunt a wild boar
5) build a fishing net
.
.
.
A change in his environment, resulted in a change in “price,” and this resulted in a change in his subjective valuations. Although in this case, nature caused the change in price, in the “real world,” the subjective valuations of millions of consumers would cause the change in price. |
