Q: I’m having trouble understanding your statement that all value is subjective. I can clearly see how it applies to a diamond, but not to food. Food is necessary for life. Its value seems to be inherent or fundamental to the food itself. But you cannot eat a diamond. Its value is determined by passing fashions. It doesn’t have a fundamental basis as food does. Also, could you elaborate on how this question of value is addressed in your book The Art of Speculation During Civil War — Sun Tzu Meets Jesse Livermore? I don’t understand how this fits into the formulas you present and how it’s as sure as the law of gravity, like you suggest.
A: Those are good questions. I’m fasting today so, for me, food has no value for today’s consumption. Air is a more immediate necessity to sustain life than food. Yet, in most cases, it’s available for free and so has no monetary value. It is not scarce. There is no subjective valuation that results in a monetary price being assigned to air in most situations. The law of gravity is useful because it can be used to predict certain results. The same applies to economic laws. If you understand that all value is subjective, you will not make the mistake of predicting that the market price of a car, or anything else, is determined by how much labor or capital was expended in its production.
Focus on economic law directs the attention to understanding what is true and so opens the possibility to predicting the future. Current events make future trends. If you focus on falsehoods, you can be sure of getting a bad result. The book presents fundamental economic laws and gives concrete examples of how to profit in their application when governments interfere with them.
Economic laws do not change but results may, and sometimes there are extraordinary opportunities to profit.
Market Commentary (above) by Arthur Fixed
[box type=”info” style=”rounded” border=”full”]Commentary from Arthur Fixed the author of the Art of Speculation during Civil War – Sun Tzu Meets Jesse Livermore is a private manuscript copyrighted 2012 by Art Fixed.[/box]
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