Earlier this year, I attended a meeting where a professor discussed her recently-published book about visual arts management in China. In spite of (perhaps thanks to) my lack of knowledge in visual arts, I ended up learning a lot about the fascinating world of artists, galleries, auction houses and museums in contemporary China as well as their interactions with their peers in the United States and Europe. I also came away with an appreciation for the often crucial role government policies play in shaping production, distribution and consumption of arts in both countries.
One side discussion dealt with the rapid increase in the price of Chinese art over the past few years and whether such an increase was warranted. "The auction
value of Chinese contemporary art has skyrocketed, not necessarily because they are excellent and therefore
deserve high prices, but because some hedge fund managers are
willing to pay high prices for even some mediocre pieces," went one casual comment. [I am paraphrasing here and not quoting verbatim.]
Which begs this age-old and one of my favorite questions:
what do we mean by the word "value"? Why? Doesn't everyone know what value means? No! I have seen many instances of public policy discussions where the meaning of this (sometimes emotional and ideological) word is unclear at best and confused at worst.
Personally, I am a big fan of the following definition which comes from a rather dated but emphatically not outdated source.
The word value, it is to be observed, has two different meanings, and sometimes expresses the utility of some particular object, and sometimes the power of purchasing other goods which the possession of that object conveys. The one may be called "value in use"; the other, "value in exchange." The things which have the greatest value in use have frequently little or no value in exchange; and, on the contrary, those which have the greatest value in exchange have frequently little or no value in use. Nothing is more useful than water: but it will purchase scarce anything; scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use; but a very great quantity of other goods may frequently be had in exchange for it. [emphasis added] (Book 1, Chapter 4)
Adam Smith published these words during that revolutionary year of
1776 in his monumental book,
An Inquiry into the Nature And Causes of the Wealth of Nations, which singlehandedly laid the foundation for the economics as an academic discipline.
One criticism of "value in exchange" is that it often appears to be capricious and not grounded in fundamental factors. This concern is implicit in the quote above about the current auction value of Chinese contemporary art and is known as
paradox of value.
While I am highly sympathetic to this criticism (who would not be given well-known speculative episodes such as
tulip mania), I also believe strongly that we should be careful in delineating normative (say, moral) concerns from positive (say, technical) questions, lest good intentions introduce unintended malfunction or distortions to the marketplace. Of course, we, as members of a capitalistic
and democratic nation, should continue to debate fiercely about questions such as whether the difference between "value in use" (intrinsic value) and "value in exchange" (extrinsic value) is warranted and, if so, whether it should be tolerated. But, in my view, our political debates (necessary under the democracy) about economic issues will not improve unless we become clearer and more precise about the basic concept of this important word, value.
What do you think?
I have come to dislike the widespread use of "blue-red" state maps. Take a look at this interesting set of maps at Professor Robert Vanderbei's website at Princeton University (shown above) and one can appreciate how misleading those two-color maps can be. It uses shades of purple to reflect percentages of voters for each candidate. Professor Vanderbei explains:
