Tuesday, February 3, 2015

How much is worth a couch advertised $500 in a store and $800 in another one?

A couch is advertised for $500 in a store and for $800 in another one. How much is it worth?

In case you can't find the answer to that question, let me reassure you: it is perfectly normal. That question is actually incomplete, and some context is lacking. You might find that surprising but nothing has a value per se. A value only has meaning if it is referring to someone. And everyone is different, meaning that an object's value is different for each person.

This is easy to demonstrate. Let's take a few examples.

I bought a couch a week ago. How much is that advertised couch mentioned earlier to me? I would say close to 0€. Why would I spend any money on a couch when I already have a new one in my leaving room? No matter how low of a price a store would sell, I wouldn't buy it because I don't need a second couch.

Other example: I don't have a couch, or an old one that needs replaced. But I don't like that specific new couch that is sold in these stores. Once again, this new couch is worth close to nothing to me. Maybe I would settle to buying it for $50 but no more, as a temporary one until I find one that I actually like.

On the opposite, let's say I need a new couch. The one we have been talking about is my dream couch. Of course, I am going to go buy it (in the store that sells it for $500 if I am aware of it). But I would have bought it even for $1,500.

The same exact couch is worth nothing for one, $50 at most for the other and up to $1,500 for the last one. It doesn't matter what a store price tag means. If I buy a book for $20, what it means is I'd rather have the book than the $20. At the same time, when the bookstore sells that book for $20, it means that the seller would rather have the $20 than the book.

In fact, money is not necessary to determine the value of something. Money is just a tool to facilitate exchanges. Without money, how would a baker buy meat at the butcher? Bread, his product, might not be what the butcher wants in exchange for the meat he provides. Money answers that problem. That's all it does, that's all it is.