There is some confusion and misunderstanding among Objectivists interested in Austrian economic theory and vice versa about the phrase “subjective theory of value” used by Austrians to describe their view of economic value. It is a common mistake by both to take the “subjective” aspect of the theory too far, and misapply an essentially correct economic theory to reach erroneous ethical and epistemological conclusion. This is not a trivial error since Ludwig von Mises himself never recovered from it. Understanding why requires a grasp of what the terms “objective” and “subjective” actually mean.

My argument is that the “subjective theory of value” is essentially correct, but incorrectly named, and should be distinguished from two contrasting erroneous views of economic value by calling it the objective theory of value, since market prices are in fact objective.

Broadly speaking, there are three theories of economic value: intrinsic, subjective, and objective. By “economic value” I refer to a measure of the relative worth of an end relative to the value of some other good or end. The question is – what is the standard by which to measure value – and who is to do the measuring.
More >