this post was submitted on 22 Sep 2024
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Sure, but just because someone will pay $1,000 for Taylor Swift’s shit doesn’t mean it’s valuable.
This is a simplistic view of value, and basically provides no useful information about anything. There are a lot of people you can trick into paying more for an item than it’s worth, but that doesn’t increase the value of that item.
Isn't that how value works?
That’s how ripping someone off works.
So how is value determined?
I would say based on consensus. That’s how we determine it in real life (stocks, real estate, market values). If there’s one person in the world who would pay $1,000 for Swift’s shit, then that person just doesn’t know the value of it, because most people wouldn’t pay anything for it. I’d imagine most people would pay not to have it.
If I trick you into paying money for something by telling you it’s super valuable, I’m ripping you off, I’m not increasing the value of the item.
The consensus of who? Everyone? Because how does society determine the value of, for example, an MRI machine when most people have no idea what it could be worth?
The whole concept of the game show The Price is Right is that most people don't know how much anything costs.
The consensus of the market. Prospective buyers. People can still buy things that are overvalued, but when the market is exerting pressure on you to lower its price, you know it’s overvalued.
The market? Weird, because I've seen a lot of complaints that things like houses are priced too high to be affordable. And yet by your metric, their value is the correct one because the market has decided so. Is that really what you think?
That may be a case of something being overvalued. That can especially happen when there is artificially limited supply.
I thought you said the market determined the value.
So who determines if something is overvalued?
If you are trying to sell something in the market, and you are not getting any interest, you have probably overvalued the item. You might be able to sell it at that price if you wait long enough, but not because that item has that value generally. In that case, you’ve probably overvalued that item, and would be able to sell it if you reached the value others perceive it to have.
If I sell a cup of water to a man dying of thirst for $100, I shouldn’t expect that my next cup of water will sell for $100 on the market. The cup of water doesn’t have $100 worth of value, it just fulfilled someone’s needs or desires at the time enough that they were willing to pay more than its value to get it.
Again, the market has priced houses at the level they are now. You claim they are overvalued. You have not explained how that is determined. We're not talking about one house like your one cup of water, we're talking about most houses.
So, again, if the market sets the value, who determines those houses are overvalued?
I didn’t claim they are overvalued, I said that may be a case of overvaluation. Do you disagree that things can be overvalued? What do you think market corrections are in that case? It’s incredibly difficult to determine if a section of the market is overvalued before a market correction, and if I had that ability, I’d probably be rich.
Either the market has decided that houses are unaffordable for most people or they are overvalued. Which is it?
I believe that is a false dichotomy.
No, I'm basing it on what you said.
You said the market decides on value.
The market has decided the value of houses is beyond most people's ability to buy them.
Therefore the value of houses is beyond most people's ability to buy them based on your own reasoning.
And then you claimed they were overvalued despite the market deciding on value.
It can't be both.
Again, I never claimed they were overvalued. I do not know if they are overvalued. There are plenty of reasons the market can sustain things being overvalued though, like false scarcity or price fixing. If your definition of value means markets suffering from these practices are actually increasing value, then our definitions of value differ. So if that’s the case, I don’t think this argument is going to go anywhere.
Right, so, again, you believe that the value of homes is beyond the means of most people's ability to buy them because that is what the market has decided.
Also:
Do you see how I said “That may be a case of something being overvalued. That can especially happen when there is artificially limited supply.”
At no point did I say, “That is a case of something being overvalued.”
Weird how you refuse to respond to this despite me suggesting it over and over. I think we both know why.
And this whole "I didn't say it was overvalued, I said it might be overvalued" stuff is weasely as fuck.
Ok, let me see if I can clear up the confusion. It is incredibly difficult to determine if something like the housing market is overvalued. Professional economists disagree with each other about that, and I am not a professional economist. I’m not even an amateur economist. You can ask me all you want, but I’m not going to take a stand on it, because I simply don’t know. Whether you will accept “maybe” as an answer is really up to you.
I also don’t know why houses are priced where they are. I know of a few of the factors, like how regulations have made it harder to build affordable housing, and, surprisingly, harder to build luxury housing even. Whatever the factors are that are affecting this market seems to have priced out most people. We can agree on that. Why that is (and whether homes are properly valued or overvalued) is what we can’t agree on, because again, I just don’t know.
So the market always decides value except when it doesn't. I see.
I mean, yeah, kind of. The market is an indicator of value, but it can be wrong for a number of reasons (false scarcity, price fixing, monopolistic pricing, speculative investments, etc). Earlier you asked me how I would determine value, and I told you “consensus”. The market is a form of consensus, but not the only form. If I’m unsure whether the market is correctly valuing something, I’d try to get an expert consensus. For example, that’s actually what I do when I’m trying to buy a rare video game, because that market is volatile as fuck, and isn’t a reliable indicator of value.
I see. And what makes someone an expert on the value of a video game? Exactly what metrics do they use to determine this value and how do all the other experts come to this consensus? Do you even know?
If I did know, I wouldn’t need to consult them. Though, I’d imagine they use a similar technique to how I would appraise the value of a gaming PC, not that I’m an expert on consumer hardware pricing, but I’m fairly knowledgeable. But I would use historical data, performance metrics (although this wouldn’t apply to retro games), market conditions, conditions of the parts, and a certain amount of speculation.
The reason I’d look for a consensus is to account for outliers. If one expert is using some metric that causes them to over or under value a game, I’m less likely to get ripped off by having multiple expert opinions forming a consensus than if I relied on just that one expert’s opinion.
So you don't actually know what sets the value of the games you buy, you just assume the value is set in some rational manner.
I'm not sure what is leading you to make such an assumption.
Depends on your metric of value. If someone will pay $1,000 for it, it's worth at least that much to them.
If I walk into a store and pay them $1,000 for a Snickers bar, I’m not a savvy investor, and that Snickers bar isn’t worth $1,000.
That particular Snickers bar was briefly worth $1,000.