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Prices without markets
Do prices reflect value — and if they don’t, should they?
Cynics, Oscar Wilde said, know the price of everything, and the value of nothing. That’s as may be, but do you know the difference? The price of something is easy: it is the amount of money one party pays to another party in return for a good or a service. It is clear-cut, unambiguous and quantified.
The price for the same item may differ from one transaction to the next: a beer in a swanky bar may well cost somewhat more than the same beer from a beach shack, and printer paper bought by the box is most likely cheaper per page in a single ream. But after a completed transaction, there is no discussion about the actual price.
Capturing value
Value is a different affair. We can try to express it in money as well, using economists’ concepts of willingness to pay (WTP) and willingness to accept (WTA) as proxies for the value in the eyes of the prospective buyer and seller respectively. The long-running television show Wheeler Dealers (perfect fodder during idle lockdown moments) illustrates how this works.
In each programme, car trader Mike Brewer seeks out an old car to renovate, which his wizard mechanic companion (formerly Edd China, currently Ant Anstead) then fixes. The hope (and aim) is to sell…
