In a previous post (Brief Summary of Subjective Value), I introduced the topic of the Subjective Theory of Value. Because economic value consists of a crisscross matrix of concepts, you may find some repetition related to value theory in future posts.

In the text below, I will define some important characteristics and qualifications of subjective value.

Individual Judgment

The word subjective has several varying definitions. Webster's dictionary uses phrases like: peculiar to a particular individual; modified or affected by personal views, experience, or background; arising out of or identified using one's perception. These definitions help with an understanding of the concept of subjective value. Economic value always consists of a judgment by a human mind. Because of that characteristic, a person cannot quantify economic value. It has no unit of measure. The measure of value consists of the relative preferences of the individual judging the value.

Reason for Judgment

The theory of economic value places no concern on the reason, or source, for any judgment of value. To understand a theory of value, the economist only has to know that the judgment comes solely from the individual, demonstrated by his action. The economist does not concern himself with the influence of psychology, religious beliefs, or other internal or external influences.

Ethical Values

The fact that ethical values do not play a role in economic value has particular importance. To argue that one economic choice has more or less economic value than another based on moral judgments has no bearing on subjective value. Whether the economic actor has moral or immoral intent based on the judgment of an outside observer makes no difference. For economic discussion, we must consider economic value as amoral — as opposed to immoral or moral. A person's ethical standards may influence his judgments about value. But, from the standpoint of economic analysis, it does not matter. The economist must accept that the individual values what he values for whatever reason. This point will become important when we discuss the various rationale for intervention. In brief, government cannot make people moral by dictating their economic behavior.

Rational Decision

People always make rational decisions based on value, whether you agree with those decisions or not. In general, people always act rationally. The only times irrational behavior occurs consists of cases of Tourette's syndrome, reflexive responses to stimuli, involuntary responses to environmental changes, and similar actions. Your disagreement — or anyone else's — with a person's value judgment does not make it irrational. We must consider it rational if they have any reason for their actions.

Separate Individuals

I must reiterate that only single individuals — or separate individuals — can make judgments about economic value. Groups cannot make such judgments. Voting on an action does not make it a group judgment. It only means that the individual members of the group place a sufficiently close value on the action that they vote in favor of it. The person directed to act based on crowd agreement must value that action. The fact that only separate individuals make judgments of economic value plays such a significant role in economic activity that I will devote an entire blog post to emphasizing this point.

Summary

The following points summarize this blog post:

• Individual Judgment Subjective value occurs only as the result of the judgment of an individual human mind.
• Reason for Judgment Economic analysis has no concern for the reason or source of an economic value judgment.
• Ethical Values Other people's ethical values do not justify attempting to intervene in the economic value judgments of other individuals.
• Rational Decision People always make rational judgments about value, whether you agree with them or not.
• Separate Individuals The individual nature of subjective value has far-reaching implications on economic systems.