A Van Gogh!

A Van Gogh!
From the artists at ArtWorks945

Friday, October 15, 2010

Kent's Thesis

I must admit – I love my students. I try not to let people know that. But it’s true. How could you not love them when they send you messages like this?

Subject: Van Gogh...

Wait, the apparent jump in value from an initial item to another in 'trading up' does not require irrationality. I feel like it's evidence for a great deal of relativistic weight to valuing, and that it's sort of just another example of supply and demand. For example, being able to trade from a paperclip to a house does not show that people do not act in the most economically rational ways. Rather it shows that at some time a chain of circumstances has existed such that over that span of time a particular paperclip was equal in value to a particular house. This can work in perfectly rational ways. If we attach relativized values to each item through the trade, we can show how each item is truly equal in value, so that no net (relativized) value is lost from beginning to end.

And, it seems that the decision-making processes that resulted in everyone's evaluation of each item could itself involve totally rational concerns and decisions - (i.e., I have a second house I don't need/want, it will take a lot of work and energy to sell it under normal circumstances, I don't want to pay taxes or for upkeep another year, and I want a used car...you have a used car that you don't need, and you don't want to deal with selling it and paying the taxes, you want a house in the country, etc...we are in an interesting position, where the ideal market value for our possessions is quite different from their actual, real-time value. Basically, in trading we both can end up in a better position than we were beforehand. Even though my cool house seems worth more than your dumb old car, when we take in all the real-world costs and benefits at the time (take in more data), we can trade and both trade up). So the incredible thing is just how disparate people's evaluations of various things (concrete or not) can be.

That is from Kent Ford, a former student who is now…hmmm…Kent, what the hell are you doing? Last I heard you were in New Orleans with plans to sail somewhere exotic. Whatever it is, I hope you are using that mind of yours.

I will call the following Kent’s Thesis:

The process of trading up from a red paperclip to a house need not involve any irrationality.

I think Kent is right -- it need not involve irrationality. But I also think that it in fact did. I will try to explain why in my next post.

Until then, let me tell my former students – I know some of you are reading this – if you want to trade a painting for Ode To Life, god damn it, let me know!