NetNews Usenet Archive 1993 #3/NN_1993_3.iso/spool/sci/econ/9811

Internet Message Format | 1993-01-24 | 2.0 KB

Path: sparky!uunet!gatech!pitt.edu!wbdst
From: [e-mail] (William B Dwinnell)
Newsgroups: sci.econ
Subject: Re: Inflation
Message-ID: <[e-mail]>
Date: 24 Jan 93 00:54:23 GMT
References: <[e-mail]> <[e-mail]> <[e-mail]>
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Organization: University of Pittsburgh
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   Your pound of butter has no absolute value. If I gave you 500 pounds of
butter, your pound of butter would nolonger  have the value it once had.
(Assuming you have a normal diet!)  The only way to explain the
dianxxx diamond-water paradox is through the market. The only reason
we would say that a bucket of diamonds is more b valuable than a bucket
of water, is because we live in a world where diamonds are scaresxxxx
scarce (low demand schedulexxxx (low supply schedule), and water is
(in many places) plentiful (cheaper supply schedule). If suddenly,
tomorrow diamonds became plentiful, S+D would radically change, and
diamonds would lose their "value".
  Nothing has absolute value, is my point. It is true that some things
have more practical value than others, in the here and now, than others,
but that is NOT the only source of value. Does a pair of shoes have
value? No practical value to me if they don't fit. But they do have
value, in exchange, which is to say the market, the only place
where things do have value. Tangibility is similarly NOT a good
measure of value. When you walk out of the barber shop, what do
you take with you that is tangible? Yet, you have received value, no?

   As for interest-inflation: the only reason I drew the cause-and-
effect relationship from interest to inflation is that interest is
usually a stated value, and inflation occurs in the proceess of losing
money (in real terms). In fact, there probably is no useful way to
discern one or the other as the "cause" or the "effect", bit I know that
people will pay interst for my investment, so I know that there must be
inflation.