| | Ed, it's good that you're going to start reading about this stuff. The Mises Institute has made a copy of Human Action available for free download. http://mises.org/books/humanactionscholars.pdf
Regarding your post 45, you're still missing points and making mistakes that could be corrected if you explored the literature. Continuing on like this doesn't seem like it can end well. I can either ignore you, or point out all of the places you're wrong. But what will the corrections do? If you think that you can derive your own economic theory, deriving it from what you know about Objectivism, it's not going to work. This isn't like the Austrians sat down over lunch one day and scribbled some notes on a napkin and that's it. People spent lifetimes. Mises was an intellectual giant, and there was a huge history and breadth of knowledge before he even got there. And others have continued the work since. The only point I can see to offering corrections is to get you to understand how far off you are, and how much rigorous thinking has already been put into the subject. Maybe you'll then get interested in pursuing it all further. But if you think of this as a debate, that's a problem. That treats it as if the two sides are equal, and that your vague thoughts about economics are just as rigorous and clear as the Austrian school. That's insulting to all of those people that put the work into making it a science, detailing not only the conclusions but the arguments, the foundations, and the methodology. It treats their life work as something trivially done, and trivially rejected.
So I offer these points in the spirit of showing that there's much more to this and that they have put far more thought into this than you have, so you should treat them with a little more respect.
First, let's talk about this statement of yours:
Okay, but even this reasoning assumes that profits are desirable to humans. It is, itself, a statement about human nature. Now, I'm not arguing that profits are not desirable or 'incentivizing' -- I admit that they are -- but I'm saying that there are objective philosophical and biological facts that make profits desirable to humans. The first problem I have is that you're trying to smuggle in objective value into the discussion again. But why bother? Even if some values are objective, economics works with non-objective values. It only matters if someone is willing to pay for something, regardless of their reasons for it. A focus on objective values negates the whole of economic theory by suggesting that prices somehow can't deal with irrational values.
You keep going back to it to show that values aren't 'subjective', which to you means that they are irrational or arbitrary or something. But the point of the subjective value theory isn't to define the origin of values, but to abstract that detail away and only point to the fact that it is valued. The fact that someone wants something and is willing to act on it is all that's important for their to be an economic consequence. The morality of his choice is irrelevant.
You also bring it up in order to open the door towards speculating what people want. But that speculation is not rigorous, scientific, predictable, or accurate.
So why bring it up again? What point didn't you get the first time? I can think of one possible motivation, which motivates some Objectivists. If people pursued morally objective values, they think that economics could then be thought of as a derivative of Objectivism. If they master one topic, they then have a head start on the other. Some kind of natural advantage that will let them see further and deeper than other economists. But this is all wrong. It's factually wrong, because people don't act perfectly, objectively moral. And it's methodologically wrong, because even if they did, this wouldn't tell you anything new or interesting about economics.
Aside from the objective value motivation, there's another problem with your comment. Economics does not assume that profit is an objective value or a biological fact or anything. Profit isn't understand as a new value, separate from your others. It is an extension of the small set of assumptions already made. In this case, the subjective value approach ignores the causes of values, but points out that at any particular time, a person has a "hierarchy" of values in the form of preferences. The preferences is how the values relate to one another. You might value a cheeseburger and a taco, but there's more to it than that. Which do you prefer? Maybe you want a cheeseburger more. But would you take two tacos instead? Sure. So there's a set of relationships between a person's values.
Money acts (in this case) as a method of comparison. You can compare the costs. If the burger cost $5, and the tacos were $2, you know you can get two tacos and still have money left over. But when you're deciding between options, you decide between all uses of your money. If both tacos and burgers went up in price, you might decide to skip them and pick some alternative so that you can use that money for something else. Then, we could say that you prefer the third alternative and what the savings will buy more than either the tacos or the burger. So money is a means that can be used for multiple values, and your preferences between those values determines your use of the money.
Now what about profit? Profit, like money, is generally not valued for its own sake. It is valued because of what it provides. If you have to put in an 8 hour day of work, but one job pays more than the other, you will likely go with the one that pays more because your preferences are maximized. One one side you have 8 hours of work and X dollars of wages/profit, and on the other you have 8 hours of work and Y dollars. It doesn't matter what you plan to spend your money on, you will prefer the job that pays more because it is the job that provides you with the highest value.
Not that how you plan to spend that money can be completely irrational and morally objectionable. It doesn't matter. Whatever your values/preferences, you'll prefer the one that provides you the largest benefit.
So profit isn't some objective value that exists independent of your other values/preferences. Even if you assume only a monetary profit, it still is merely a means to your other values, and is only valuable to that extent. Economics does not need to appeal to objective value or biological needs or whatever. This is all an outcome of the idea that people have values and they are related to one another through preferences. The source of those values doesn't matter.
Your dog example is terrible. That's how a communist dictatorship works, not a market. The serf takes whatever is handed to him, and so the producer does rule in that case.
But that depends on your time-scale. At any instantaneous moment in time -- a snapshot in time -- it is true that demand by consumers determines the relative value of goods or services. Actually, this is wrong. If we are to look at a snapshot in time, the prices are controlled by the supplier. It's the store owner that sets the price. He controls it in this narrow sense. It's only when you take the longer view that you realize the consumers are controlling things and the supplier has to adjust to their preferences if he is to be profitable.
Your factor 2 seems to be trying to suggest that people will, over the long haul, become perfectly rational in their choices. You provide no evidence for it, and there's plenty of counter-evidence in the world, and there's no point to even making such an argument even if it weren't false! And your example of profit is false, on top of which you only hinted that somehow magically people would become more objective over time without providing an actual mechanism.
Your factor three has already been pointed out and established. Yes, someone can build a product nobody knew they needed and suddenly a new market is created. Is it that easy? No. Even if you build something that is an objective value, there is always the question of how it relates to people's other values. How does it fit into their preferences. It might be that they'd love to have it, but the price is too high. Start a business sending people to the moon for moon walks and you'll get lots of people who like the idea, but can't afford it. Even if a product is "objectively valuable" (meaning it would benefit their lives), they might not buy it because there are more important values. And everyone is different.
And in this factor three, the supplier still isn't in control. His wishes are not enough. The consumers are still sovereign. If they don't want it (or not at that price anyway), they won't buy it. If they do, he can make money. Demand doesn't conform to the whims of the suppliers. Supply conforms to demand.
But what's your point? I had already pointed out that people can introduce new products and that people can speculate on what consumers will want. I even pointed out that suppliers can have some (minor) influence on the preferences of the consumers (no guarantees, of course). You can make your product "cool", and people will want it more. But it doesn't put the supplier in the driver's seat.
I do agree, with the qualifications noted above. I guess I would especially agree if it is made clear that every consumer is also a producer. In that way, factor 3 from above gets collapsed into factor 1. It sounds like you're still trying to pretend producers run the show. But that's the most basic economic fallacy. Just because the store owner puts the price tags on the product doesn't mean that it an unconstrained choice. He has to price things correctly or he'll lose business/profit. You're trying to take a leap back hundreds of years into ignorance.
The consumer qua consumer is sovereign. It is the consumers preferences that organize the economy. The consumer may also be a producer, but his preferences qua producer are not the organizing force of the economy.
But when people talk about consumer sovereignty, they seem to refer more to whim-worshipping wants and esthetic desires -- rather than to the objective methods of gaining value which producers have got to learn in order to be able to be productive.
First, there's nothing about the consumer sovereignty idea that implies whim-worshipping or whatever. But this is a point that you can't get your head wrapped around. The classical school of economics tried to ground their theories of value in some objective source. The subjective revolution is a step forward, not backwards. It points out that the values don't have to be ethically or practically objective. Even irrational values have economic effect. If people watch stupid reality shows, those shows can become profitable, the factors of production used by them will be bid up, resources will be diverted from other economic activities, and it will attract more suppliers seeking higher profits. The price system will reflect the aggregate preferences of the consumers. The value does not have to be objective to have all of these effects. They come from any preferences. Trying to ground economic theory in objective values just blinds you to this truth and introduces a fundamental flaw. But what's the point? To try to prove that the free market always leads to morally desirable results? To try to make economics an extension of moral theory?
This speaks directly to my point. Just as profits can be assumed to be an incentive for humans, so too can a whole slew of other things. What?!?! You can assume anything. It doesn't make it true! And sure lots of things can be valued by a person, but that includes irrational things? Do you even know what your point is?
I would say that it is the immediate demand of those goods that determines the current price, and that an eventual demand -- something which can be predicted, albeit imperfectly -- is what ultimately controls the price system.
Even your first part is wrong. Ignoring the fact that the seller determines the current price, it is his expectation of the future that determines what he sells it for. There's no way to know what the "current" demand is. You can only speculate on what price will maximize your profits.
As for whether it can be predicted, once you throw in the caveat that it is imperfect, I can only offer this: Of course! That being said, your method is almost certainly wrong. The mere fact that a product might have an objectively valuable use does not tell you at all what people's preferences will be! The relationship matters! Not only that, but the market it changing.
Pretend that everything else is fixed. The prices of everything are fixed. People's preferences are fixed. No changes in the market. Even under these perfect circumstances, you won't be able to predict perfectly. You don't have enough information. The preferences you can see in the market are just those that are exposed. You don't know how a new product will be valued relative to other values. If it's identical to another product, perhaps you can make a reasonable guess. If it is brand new, you can only guess. Sure you have some data. You know that you think the product is cool and you'd buy it at a particular price. But nobody shares your exact context. Even if people were perfectly objective about there values and preferences, you'd still not be able to predict the overall market because you just don't know everyone's particular context. And even if you polled them, there is a difference between people's stated values/preferences, and their actual values/preferences.
And that assumes a world without any change or irrationality! Once you realize that prices are shifting, new products are entering the market all the time, information doesn't spread immediately, that the mere act of creating your product will require bidding up resources that affect other goods and services, and a whole lot more, you start to see how impossible the task is. And then there's the whole free will thing.
It's clear that people make predictions about the future all the time. The best predictions are that things don't change much, and that works well for a lot of things. Of course, it fails completely on big events. But pretending that economic forecasting can, even in theory, become an exact science is absolutely wrong. And it is another area where people have tried to take economics and have ultimately created a house of cards that repeatedly collapses. The Austrians explicitly reject this approach for good reason. That doesn't mean that people's values and choices are random and nonsensical. It just says not to fool yourself into thinking that predicting people's choices is any kind of foundation for a science.
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