I had this precious antique toaster, a gift to my grandmother on her wedding day. Maybe it came from the 1930s. So charming. It even worked!
I held on to it for many years, dragging it from place to place. Then I decided to cash out and sell it on eBay. To my shock, there were 50-plus versions for sale just like it. The going price was a few bucks.
What’s wrong with the world that it doesn’t see what I see?
Demoralized, I stuck it in a cabinet far away. Sad to say, I’ve lost track of it in the meantime.
Judge me, if you want, for my lack of sentimentality. After this, I just couldn’t muster enough enthusiasm to drag this thing from place to place, knowing that it was worth $5. The discovery was demoralizing at first. But it is better to know the reality, right?
Yes. So we tell ourselves.
A second case: When I was 16 years old, I saved my money and bought the best trombone made in those days. It was a Bach Stradivarius. I was so proud! I worked hard and bought a brilliant thing, an investment for the future. I knew for sure that this thing would grow in value over time.
Like the toaster, I dragged it from place to place. Finally, this week, I decided it was time to cash out.
Now we have Facebook Marketplace. I was ready to list it. To my shock, I saw for sale even in my own neighborhood trombones that are almost as nice selling for $40. Instruments even nicer were $150. Once again, I felt demoralized. But it’s reality, and it’s fascinating.
My treasure is my treasure, but, to everyone else in light of market conditions, I might be better off taking this to the thrift store, where I can at least profit from the sense that I’m doing a good deed.
Here the thing. A quiet but decisive revolution has taken place in merchandise retailing over the last 20 years. Ever more platforms are rolling out to give you an idea of the actual resale value of your stuff, including ever more products, buyers, and sellers in the marketplace. It began with eBay, but now there are so many that it’s hard to keep up. Facebook Marketplace has giant Persian rugs for $200, real pearl necklaces for $10, sterling-silver flatware sets for $100, and so on.
Garage sale prices!
In the old days, we didn’t know. We could go to retail outlets and some ramshackle thrift stores (I still love them), but we still held on to lots of things we thought surely had value. Now we know: the market does not price what we own nearly at the levels we believe they should.
Competition has dramatically increased. Transparency about valuation is one of the great achievements of the internet. It has massively increased consumer surplus. At some point, you realize that there is a huge premium for buying new and paying retail. If you are willing to own used things, you can make out like a bandit.
That’s great for the buyer, but what about the seller? It’s not terrible for everyone. Some people have used these platforms to make a killing. I’m seeing on Amazon and these other venues products for $1 and $2. How much do you have to sell to make that worth it? Quite a lot. For some people, it is a real source of living. It’s remarkable how people can make a market and make money out of the tiniest margins of profitability. It’s a real tribute to the human imagination.
But let’s get back to the value of things.
My father was a romantic. Everywhere he went in life, he believed he was finding treasure. He would find a triangular rock and tell us kids that it was probably an arrow used by the Apache nation. He would buy pocket knives and then say his collection was worth a fortune. He was a dreamy and wonderful man, but he didn’t live to discover that all his treasures had almost no market worth at all.
The key for him wasn’t really what we could resell his stuff for. The point was that he liked his stuff. The rest was just marketing to us kids to account for why he was such a packrat. The truth is that there is no shame in that.
From an economic point of view, we need to distinguish between value and price. Value extends from the human mind and heart. Value is never intrinsic; it cannot be detached from human affection. Price comes from a point of agreement between buyer and seller, and is thus subject to the laws of supply and demand. There is no just, moral, or fair price.
When you discover that your value and the market price are dramatically different, it can be a reality check. It’s not always pleasant.
If all this seems easy to understand, consider that it took even the best economists centuries finally to nail down precisely what is the source of value in this world. There are so many opportunities for confusion here. Is it work? Is it land? Is it all arbitrary phony baloney? The answer was elusive.
If you want a super dramatic story about how it came to be discovered that value is subjective, take a look at this new translation of Friedrich von Weiser’s personal account of what it was like to live in the middle of the Marginal Revolution.
He writes that the classical economists had produced a great deal of confusion over the subject, so his generation set out to fix that. They didn’t know how. Then Carl Menger came along.
In the midst of our distress, we found at hand Menger’s Grundsätze, and suddenly all of our doubts were gone. Here was given to us a fixed Archimedean point, from which we found even more; we were given a full Archimedean plane, on which we were able to have a firm foundation and sufficient information to be reassured that we could proceed with confident steps. He found that the actual basis behind the formation of prices was the valuational judgments of the ultimate consumers of goods. The value that consumers placed on commodities was based on an estimation of the importance of their needs, which was determined by the degree of importance assigned to a particular need that can be satisfied, which, in turn, depends upon the degree of [marginal] satisfaction already attained. With increasing satiety, the intensity of desire decreases. Thus, Menger arrived at the law of the satiation of wants, just as some other economic thinkers had independently discovered it. But his version took on special importance because of the way he connected it in a visibly fruitful way with other insights.
All of which is to say: it could be that everything in your house is infinitely valuable to you but utterly worthless to others. Whether you keep your stuff or not is up to you. But it is not up to you what price your stuff will elicit on the open marketplace. Chances are that you are better off taking your stuff to the dumpster rather than trying to sell it in the hyper-competitive market for used things.
It’s a new world these days. We know things. Some of what we know is not what we want to know. I didn’t want to discover that my toaster and trombone were worth a fraction of what I believed them to be worth. I was not wrong in my judgment; it’s just that others didn’t share it. In a marketplace, it’s others who matter.
The world consists of buyers and sellers, everyone acting based on interior values. In the end, everyone wins from an active, open, competitive marketplace, even if that leads to a day in which you discover that everything you love is worthless on the market.
Even my toaster and trombone. And even my father’s triangular rocks.