Mises Daily Articles
Clarifying Subjective Valuation
Seated in a third-year law course discussing sales and the Uniform Commercial Code, the topic of subjective valuation was miraculously brought up by another student. Slow your pulse and don't hyperventilate; the room did not fill with white light as an angel touched down. His point, though well-intentioned, was slightly off.
The hypothetical went like this: A company has all the requisite licensing and is operating lawfully but is selling merchandise out of a van on the street. It leads its customers to believe they are getting deals because the merchandise they are buying is stolen. In reality, the company's goods are not stolen, and its prices are grossly inflated against the backdrop of the actual market.
As we debate the legality of this hypothetical transaction, a student notes that the purchaser subjectively valued his "stolen" goods at the bloated price when he purchased them, so even though he recognizes his error as soon as he enters Walmart, it is too late and he is stuck with his goods.
No, no, no. I am rolling up my newspaper to smack you on the nose right now. This argument will simply never fly in the mainstream and it will never convince a leftist, socialist, or statist of the realities of capitalism and Austrian economics.
Austro-libertarianism, in practice, is not an endless battlefield of caveat emptor, where the bodies of the uninformed masses are stacked ten high, walletless and decapitated.
A libertarian society is first and foremost against aggression. Lying, deceiving, and defrauding someone into purchasing your goods — or, more accurately, the idea of the goods you have portrayed — is akin to using outright force to take his or her property.
In the above hypothetical, the purchaser purchased the goods under the auspice of illegality and perhaps found joy in the spectacle. His or her subjective valuation of the entire scenario is what he or she paid for. This is conceded. More importantly though, the seller, is lying about his or her products, and this is never tolerated in a libertarian society — not by its citizens and not by its laws.
Whether discussing our Austro-libertarian views in the classroom, boardroom, or the break room, it is imperative that we maintain a realistic and large-scale perspective of society. The above hypothetical scenario is
- unbelievably unlikely to actually exist;
- not going to last more than one or two days with the modern spread of information, if it were to actually exist; and
- incentivizes lying to customers.
To get bogged down into this kind of frivolous debate is a pitfall that we must avoid.
Mises was the master of keeping the whole picture in focus. He had the uncanny ability to develop comprehensive, grand-scale ideas and interweave isolated examples that flowed so logically, nearly all arguments to the contrary are deflated. If we are going to dance the left-liberal dance, and engage in seemingly trivial argument of unlikely realities, we must be clear on the actual Austrian concepts, of which subjective valuation is just one of the many. No Austrian or libertarian concept promotes or endorses lying to customers to create a fallacious idea of what a good or service is.
This should not be taken to discredit the value of salesmanship in an Austro-libertarian society. Informing consumers of what they are missing out on when they do not have a product or service is an honorable undertaking. Salesmen perform an important function within the scope of subjective valuation but cannot and do not use outright lies to achieve their goals. Under the American common law and the Uniform Commercial Code, for example, the words and actions of salesmen often create binding, though unintentional, warranties. Consumers are protected through a development of private law systems much the same as they would be in an Austrian-type society.
Additionally, consider referencing the Uniform Commercial Code as an argument for the practicality of a private law system, or at least an antifederalist republic of the United States. The UCC is a privately composed amalgamation of legal sources drafted to promote commerce. The code has been adopted by all 50 states and 4 major territories in whole or at least in part. Each state can and does retain its own aspects of the common law that conflict with the UCC and its adoption was not forced by the federal government.
Why have all states adopted such private law? It works. It does what it was designed to do. It promotes efficiency, streamlines transactions, and provides stability that encourages capital investment in what might otherwise be considered too risky a venture.
If an antifederalist step toward decentralization of our government were taken, and states' rights were to be increased — a step in the direction of liberty, I propose — these types of comprehensive systems would be far more frequently employed. For example, once the citizens of Alabama recognize that Florida's approach of anti-interventionist tactics in economic affairs result in a boon in Florida residents' standards of living, other states and communities will follow suit. The citizens will demand it.
This is a simple way we can shape a discussion to focus on what Austro-libertarianism really does teach. Although the concept of subjective valuation, when taken in the abstract, explains why a person bought what he or she bought, even if he or she got taken for a bath, on a broad scale, Austro-libertarianism does not promote fraud, reward lying, or forgive deceit. The opposite is true. Honesty is rewarded, and efficiency and the constant improvement in people's standards of living are the lifeblood of the producer and distributors.