Paul Mattick wrote:
"It was not long until the entire theory of marginal utility was abandoned, since it obviously rested on circular reasoning. Although it tried to explain prices, prices were necessary to explain marginal utility."
And Law of Value: the series says:
"When you are in the supermarket calculating your preference scales [...] you aren’t just considering your preferences for fish and coconuts in the abstract, as if on a desert island. You are also considering the market prices of these commodities. This market price already exists before you make your subjective value judgements. But this is problematic. Subjective valuations were supposed to explain price, but now we have to assume the prior existence of prices in order to explain subjective value judgements."
I don't fully understand the reasoning. Why would I need to have already existing prices to make subjective value judgements?
I am under the impression that me making my "subjective value judgements" means that I'm sitting in a chair thinking things like "1 car = 154 dollars", "1 bicycle = 10 dollars" etc. I.e. that I'm ranking commodities in my mind. I wouldn't have to know the market prices to be able to do this.
I would then go to a market and buy the bicycle that I wanted as long as the market price was not higher than my subjective value judgement of a bicycle. (I guess there are other factors aswell; if I really, really needed a bicycle really bad I would buy it even though the price would be higher than my subjective value judgement, assuming that I could afford it of course. But these factors are perhaps not very relevant for the discussion.)
Have I misunderstood the term "subjective value judgement"? Or is there something else that I'm not seeing?
Try giving this a chew over:
https://fixingtheeconomists.wordpress.com/2014/02/17/joan-robinsons-crit...
"Marginalist doctrine claims that we cannot measure utility directly. We know of a person’s utility only due to the fact that they buy something — this is called ‘revealed preferences‘ in the literature. So, we only know the cause — i.e. the utility of a purchase — by the effect it produces — i.e. the actual purchase that is made by the consumer. If we consider preferences as being fixed then this makes some sense. But if we allow that preferences fluctuate the whole edifice falls apart because now we cannot be sure to what extent consumer decisions have changed due to price changes and to what extent they have changed due to a change in preferences."