You made several good points.
Ed, regarding your post 16, which part would an "Objectivist economist" disagree with? That large price swings can happen? Or that they're improbable? Or that it isn't valid to say someone is under valuing or over valuing something? I'm not sure what you were getting at.First of all, I agree with most all of your follow-up statements. I wasn't clear enough with my hypothetical 'price sky-rocketing' scenario. I was trying to set up a situation free of economic 'crises' as well as a situation free of government intervention, but that isn't all. I want to be more clear about the economic 'crises' -- i.e., I meant to set it up so as to mean that there was no big shortage of anything, and no big surplus of anything (no change in the supply of anything), and no special, external occasions (e.g., X-mas) to alter the price.
In this way, a change in price would necessarily imply a change in the differential valuation of a good or service (because all other price-affecting factors had been removed from the equation). In other words, supply hadn't changed at all, environment hadn't changed at all, but demand all of a sudden increased by a factor of 25. Gasoline, without external interfering factors (but only internal and subjective factors), became 25 times more valuable to people (in relation to everything else they could buy).
Let's leave aside the improbability of this example and examine it or follow it through to a conclusion. Austrians may tend to say that that's just how things go -- i.e., that people either value and are willing to pay for something, or they don't value it and aren't willing to pay (and it is not up to us to attempt to understand that process). People, on this view, are like wild animals, complete with moment-to-moment unpredictability. There may be some statistical predictability as far as what people are willing to pay for something (based on relative frequency and past behavior), but there is nothing other than this crude, enumerative induction that could ever be used in order to predict their behavior.
The reason for this state of affairs in the above example, is that valuation -- and therefore, with every other external factor equal, market price -- is entirely subjective (even across time). But valuation is more predictable than that. Let's take something you mentioned:
I'm thinking of tickle-me Elmo dolls from several years ago. Every kid wanted one for X-mas, and the gray-market price sky-rocketed. After X-mas, it plunged again. Okay, but this example includes an external factor (X-mas) which can have an external effect on the moment-to-moment valuation of a good or service. Let's take out the X-mas part, for illustration. Let's say that the price just sky-rockets for a month and then plunges, and then we are left trying to explain that. One day, the price is $5 bucks a doll. Then, for a month, the price jumps to $50 a doll. Then, the next day, the price drops back down to $5 bucks a doll and it stays there. Austrians may say that, for a month, folks just all of a sudden really started valuing tickle-me Elmo dolls and then, without explanation, folks just all of a sudden stopped (or returned to the previous valuation of them). They may say that it's an improbable scenario (and they may point to relative frequency or price history charts while stating their case), but there is nothing to prevent it from actually occurring.
The Objectivist theory of market value explains prices differently. On that model, astute entrepreneurs can not only predict, but direct, how prices will eventually pan out (barring confounders such as government-induced currency inflation, etc). This is how they make the big bucks. An astute entrepreneur may say to herself: "People are eventually going to love this product."
Also, because human life has natural constraints, consumers are on a learning curve. The market teaches such people how much they ought to be willing to pay for something (all else equal). There is like an unseen equation which derives from a start-point of socially-objective value (the sum of all societal product valuation), a learning curve wherein folks learn to budget for things they objectively need (whether they originally knew it or not), and a driving curve where producers produce previously non-existent desires for things (e.g., cordless phones with video cameras inside of them).
Entrepreneurs are like professors who know the answers beforehand, and who even create some of the very answers themselves. So, even though all purchases stem from subjective valuation, there is more than just a point-in-time 'snapshot' of subjective valuation (i.e., more than "consumer sovereignty") dictating demand for something -- and therefore, all else equal, the price of something.
(Edited by Ed Thompson on 9/13, 7:58pm)