Value?

[Acala]

All value is subjective - both for gold and paper dollars.

The fundamental difference between a paper dollar and an ounce of gold is that the component of value in a paper dollar is symbolic (the letters and numbers on the paper) while the component of value in a gold coin is the substance itself. The meaning of the symbols, and hence the value, of a paper dollar can be altered at political whim. The substance of a gold coin cannot be altered and so its value can only be altered by changes in supply and demand for the substance, which is limited by nature.

 

[archangel689]

I was having a debate with someone about returning to the gold standard, and he hit me with something that I had no idea how to counter.

He said that the dollar derives its value from the perception of its value. Gold (and everything else) also derives its value from the perception of its value. What is the difference between the fiat dollar and gold, since both of their values are merely a perception?

I said something along the lines of gold is finite, but I don't feel like it was a very strong answer.

"If we are talking about a centralized monetary authority (like the Federal Reserve), I believe that gold-backed is better than fiat (which is what we currently have). My preference has nothing to do with gold per se, but with the restriction gold places on the quantity of money that can be issued. For that matter, a land-backed or even water-backed currency would probably serve as well as a gold-backed currency. The point is to prevent the monetary authority from debasing the currency.

Now, the best of all worlds is a decentralized monetary system, like we had in this country prior to the Fed. Let banks issue their own currencies and the quantity of money will be determined by market forces rather than by government mandate (as with the Fed) or by arbitrary mathematical restrictions (as with a gold standard)."

 

[llepard]

I was having a debate with someone about returning to the gold standard, and he hit me with something that I had no idea how to counter.

He said that the dollar derives its value from the perception of its value. Gold (and everything else) also derives its value from the perception of its value. What is the difference between the fiat dollar and gold, since both of their values are merely a perception?

I said something along the lines of gold is finite, but I don't feel like it was a very strong answer.

This is an easy one.

Yes, both are based on perception.

But, gold is based on perception in the free market. Mankind chose it as money because it is the best choice. Paper money has value because the government coerced you into accepting it as legal tender.

So what do you want, Money based upon freedom or coerced money?

 

[Steven Douglas]

But, gold is based on perception in the free market. Paper money has value because the government coerced you into accepting it as legal tender.

"value derived from perception" is also an hypothesis that is easily falsifiable, or shown to be absurd or meaningless, depending on how you define value, and by showing that it is a FLAGRANT fallacy of composition, given that 'perception' is but one value determinant. Availability is another, scarcity is another, and the existence of alternatives is yet another.

If I am in a desert dying of thirst, my "perception" of the value of a glass of water might increase to whatever I have, which I would willing trade in that moment ("My kingdom for a horse"), even though that water may be FREE just 20 short/long, impassable, miles away.

Those who claim that gold and irredeemable fiat currency are somehow comparable due to perception of value alone are engaging in massive equivocation, in much the way Jigsaw of Saw movies infamy, causes "value perception" over human life, limb, and liberty by playing God and locking his victims into an arena where choices are limited to nothing but life and limb-threatening lessers of evils. Such value perception is absolutely worthless - completely meaningless. It is not until you allow unlike values to freely compete that value perception becomes meaningful indicator of anything (i.e., unlock Jigsaw's prisons, and watch what happens to that so-called "value derived from perception").

It may be true that a putrid bowl of rice gruel slid through a slit in someone's cell has greater perceived value than a steak dinner with all the trimmings served on the other side of the prison compound - and forever out of reach. After all, it is being eaten. But what does "value derived from perception" really mean?

 

[Seraphim]

nice!

This is an easy one.

Yes, both are based on perception.

But, gold is based on perception in the free market. Mankind chose it as money because it is the best choice. Paper money has value because the government coerced you into accepting it as legal tender.

So what do you want, Money based upon freedom or coerced money?

 

[llepard]

"value derived from perception" is also an hypothesis that is easily falsifiable, or shown to be absurd or meaningless, depending on how you define value, and by showing that it is a FLAGRANT fallacy of composition, given that 'perception' is but one value determinant. Availability is another, scarcity is another, and the existence of alternatives is yet another.

If I am in a desert dying of thirst, my "perception" of the value of a glass of water might increase to whatever I have, which I would willing trade in that moment ("My kingdom for a horse"), even though that water may be FREE just 20 short/long, impassable, miles away.

Those who claim that gold and irredeemable fiat currency are somehow comparable due to perception of value alone are engaging in massive equivocation, in much the way Jigsaw of Saw movies infamy, causes "value perception" over human life, limb, and liberty by playing God and locking his victims into an arena where choices are limited to nothing but life and limb-threatening lessers of evils. Such value perception is absolutely worthless - completely meaningless. It is not until you allow unlike values to freely compete that value perception becomes meaningful indicator of anything (i.e., unlock Jigsaw's prisons, and watch what happens to that so-called "value derived from perception").

It may be true that a putrid bowl of rice gruel slid through a slit in someone's cell has greater perceived value than a steak dinner with all the trimmings served on the other side of the prison compound - and forever out of reach. After all, it is being eaten. But what does "value derived from perception" really mean?

Semantics. Are you a lawyer?

My point stands. Value is based upon perception. Perception takes all of the factors you spent three para talking about into the one thing which is a fact, not an opinion, price.

I could give a rat's ass about the contracts of adhesion argument that lawyers make.

 

[luctor-et-emergo]

1. There is a finite amount of gold.
2. Gold is inert (pretty much).
3. Gold has a high value density.
4. Gold is 'precious' due to it's appearance and traditional use in jewelry.
5. Gold CANNOT be faked, printed or diluted (without noticing).

VS paper money/FIAT

1. There is no finite.
2. You can burn it, rip it, or compost it.
3. It has any value density, very low for dollar bills, very high for bonds.
4. Paper in itself has no apparent value.
5. You can fake it, print it, do all sorts of things with it.

Now it's true that both paper money and gold are worth whatever the buyer is willing to give for it in material goods or services.
However, the value of products, things is derived from it's scarcity and the relative demand to that scarcity.

Very simple, if there's more money available to buy the same amount of produce, prices will rise. So if central banks print up money, scarcity of the money goes down, and so does the perceived value, thus you get inflation.

With gold it's pretty much the opposite thing, there's limited amounts of gold added to the reserves each year, about .5% of existing supply. If a gold standard were in place, and economically nothing would change, you would expect prices to rise slightly. However, with economic growth, the value of money would go UP instead of down, as the scarce gold would change hands more often and be in a higher demand. What this effectively means, is that saving money, will make you value, due to deflation.

The next debate you will have is Inflation VS Deflation.
Should things get more expensive all the time ?
VS
Should things get cheaper all the time ?

It sure brings new problems along.... Anyone ?

 

[Steven Douglas]

Semantics. Are you a lawyer?

Lawyer, that made me smile. No, I am not a lawyer, sir, but I think you just called me a dirty word! No, it is more grounded in maths/logic than legal distinctions.

My point stands. Value is based upon perception. Perception takes all of the factors you spent three para talking about into the one thing which is a fact, not an opinion, price.

Priced in what? Price is nothing but a unit of one thing in exchange for units of another. And what if that price is fixed? What if some part of the purchase itself (supply or demand side) is based on compulsion, a lie, or something you would otherwise perceive as having a different value/price, or no value at any price?

The terms "based on" or "derived" makes it a logical equation, so it is valid to examine both sides of that equation. If value (read=marginal utility?) is based on perception, it is meaningful not only to define which definition of value you are using, but also to explore the fundamentals upon which that perception is based.

Perception can be based on any combination of fact, force, fantasy, outright falsehood and/or opinion. In other words, perceptions can be distorted, so that we have "false" perceptions. And every economic failure in the world can be attributed to value that was based on false perceptions - with examples too numerous to list. Housing market speculators had false perceptions of future perceptions of future buyers, while sub-prime mortgage buyers had false perceptions of "present" perceptions, which were outright deceptions, when they bought junk assets that were repackaged and stamped AAA.

A focus on perceptions alone, without examining what those perceptions are based on, is no focus at all! That makes it a key area of "focus" for confidence men; a way of taking all the factors which determine value, true or false, and combining them all into one nebulous "perception" cloud, as if to imply that everything in that cloud had validity - as if perception was somehow a fundamental in itself, including anything which belies the real fundamentals. That is the fallacy of composition at work - where the whole may be valued, based not on the sum, but rather some, of its perceived parts.

 

[Len Larson]

I was having a debate with someone about returning to the gold standard, and he hit me with something that I had no idea how to counter.

He said that the dollar derives its value from the perception of its value. Gold (and everything else) also derives its value from the perception of its value. What is the difference between the fiat dollar and gold, since both of their values are merely a perception?

I said something along the lines of gold is finite, but I don't feel like it was a very strong answer.

The difference becomes obvious when you trade in the free market. Absent govt. manipulation of perception, the real value of the fiat dollar would be exposed.
Here's a link that might help: Murphy at Mises: The origin of money and its value

 

[Steven Douglas]

The difference becomes obvious when you trade in the free market. Absent govt. manipulation of perception, the real value of the fiat dollar would be exposed.
Here's a link that might help: Murphy at Mises: The origin of money and its value

+rep, excellent reference.

 

[llepard]

Lawyer, that made me smile. No, I am not a lawyer, sir, but I think you just called me a dirty word! No, it is more grounded in maths/logic than legal distinctions.



Priced in what? Price is nothing but a unit of one thing in exchange for units of another. And what if that price is fixed? What if some part of the purchase itself (supply or demand side) is based on compulsion, a lie, or something you would otherwise perceive as having a different value/price, or no value at any price?

The terms "based on" or "derived" makes it a logical equation, so it is valid to examine both sides of that equation. If value (read=marginal utility?) is based on perception, it is meaningful not only to define which definition of value you are using, but also to explore the fundamentals upon which that perception is based.

Perception can be based on any combination of fact, force, fantasy, outright falsehood and/or opinion. In other words, perceptions can be distorted, so that we have "false" perceptions. And every economic failure in the world can be attributed to value that was based on false perceptions - with examples too numerous to list. Housing market speculators had false perceptions of future perceptions of future buyers, while sub-prime mortgage buyers had false perceptions of "present" perceptions, which were outright deceptions, when they bought junk assets that were repackaged and stamped AAA.

A focus on perceptions alone, without examining what those perceptions are based on, is no focus at all! That makes it a key area of "focus" for confidence men; a way of taking all the factors which determine value, true or false, and combining them all into one nebulous "perception" cloud, as if to imply that everything in that cloud had validity - as if perception was somehow a fundamental in itself, including anything which belies the real fundamentals. That is the fallacy of composition at work - where the whole may be valued, based not on the sum, but rather some, of its perceived parts.

And your point is?

Perception is not fact? Well duh. Sometimes there are lies that drive perception. Duh again.

What are you trying to say here, I have committed a falacy of composition in my argument?

Think again Einstein.

Fallacy of composition (wikipedia definition).

The fallacy of composition arises when one infers that something is true of the whole from the fact that it is true of some part of the whole (or even of every proper part). For example: "This fragment of metal cannot be broken with a hammer, therefore the machine of which it is a part cannot be broken with a hammer." This is clearly fallacious, because many machines can be broken into their constituent parts without any of those parts being breakable.

So tell me again where I committed a fallacy of composition?

Also please tell me where I claimed that perception was a fact?

Can there be a difference between perception and factual value, or course. Look at the dollar.

Our differences are semantic and therefore this discussion is a waste of yours and my valuable time.

 

[Steven Douglas]

And your point is?

All my points relate to the OP's original question; essentially, what is the difference between a fiat dollar and gold, and how do you reconcile an apparent equivalency, based on the unqualified assumption that both derive their value from perception?

Your initial answer, the spirit of which I agree with in principle:

Yes, both are based on perception. But, gold is based on perception in the free market. Mankind chose it as money because it is the best choice. Paper money has value because the government coerced you into accepting it as legal tender.

I agreed, but elaborated, as I question the unqualified premise that value is based solely on perception. Government coercion is a separate value determinant, if not a complete distortion. My point speaks not to a fallacy of composition on your part, but rather to the one given to the OP from the one he was debating: (emphasis mine)

He said that the dollar derives its value from the perception of its value. Gold (and everything else) also derives its value from the perception of its value. What is the difference between the fiat dollar and gold, since both of their values are merely a perception?

The fallacy of composition arises when one infers that something is true of the whole from the fact that it is true of some part of the whole (or even of every proper part).

Fiat money defenders commit a fallacy of composition error by considering one value determinant, while ignoring all others. Value is derived from many determinants, like:

• Quality, or perception of utility ("These apples looks healthier than the others")
• Demand ("I need some fruit!")
• Scarcity, or supply ("Gee, hardly any apples are available this time of year")
• Marginal utility ("I need exactly two apples for my recipe. A third apple is of no value to me.")
• Marginal substitution ("I love apples, but wow, look at those amazing oranges, and they're on sale!")
• Coercion ("I hate apples, but if I don't get some for Baby Cakes, I can't get no lovin')

The above list is by no means exhaustive, but not all of these are based on perception - unless we want to play super-loose with semantics and say that everything that involves the human mind is derived by perception: math, physics, anything at all. It is true, but also meaningless.

To place value into the nebulous "derived from perception" cloud is a fallacy of composition, because it is possible for an individual to perceive ZERO value to a thing, but still be forced to pay a price. Value or perception may still be involved, but it may be for something else entirely. Thus, such "value" cannot be imputed to whatever is being considered as having value.

For example, I put a gun to your head, and say, "Buy my kid's girl scout cookies." So you buy a box, but later throw the cookies away - for whatever reason - out of sheer disgust, you're a diabetic, you hate cookies, etc., - for whatever reason, the cookies are NOT VALUED. Never were. What you valued when you paid for those cookies was not the cookies, but your life. As a compulsory medium of exchange, the cookies were incidental - so it cannot be stated that the cookies themselves derived value from your perception. And even if you ate the cookies, the lack of marginal substitution (alternative choice) made the perception of value absolutely meaningless.

I don't consider it a waste of time to attack the entire premise of the simplistic assumption of fiat dollar defenders ("value derived solely from perception"), which I do believe is a fallacy of composition at work.

 

[llepard]

Good points. I agree. Just did not follow your line of reasoning at first.