You guys may remember that a a week or so ago, I asked for help in sourcing a David Friedman quote, that Bryan Caplan had put at the top of his blog post. That led to…
My latest blog post at the Independent Institute. An excerpt:
As the quotation above indicates, Mises agrees with Friedman that people place all satisfactions on a single scale of value. However, I still maintain that Mises would not agree that these individuals aremeasuring value.
Now at this point, we can imagine Friedman pushing back by asking, “What’s the problem? If we evaluate the potential satisfaction from a work of art, along with the potential satisfaction from a pizza, using the same scale of value, then doesn’t that mean we are implicitly measuring value in pizza-units as well as in art-units? Hence my claim, that economists ‘think everything can be measured in anything’? Use an analogy with length: If you agree that we can place a baseball bat and a pencil on the same scale of length, then can’t I measure baseball bats in terms of pencils?”
But to repeat my original claim, the mere fact that we can place disparate satisfactions on the same value scale is not the same thing as saying we can measure the subjective value of the different satisfactions.
I must confess, it took me a minute to isolate exactly what was wrong (from a Misesian perspective) with Friedman’s discussion, since at first glance it seems like Friedman is just making an obvious “economistic” point. Yet he was smuggling in the concept of measurement, which does not follow from the fact that people put, say, lifespan and chocolate cake on the same scale. (And I grant you, even that term “scale” is probably dangerous–it would be better to use more ordinal language, like “preference ranking.”)
Incidentally, David Friedman and I have had this debate over cardinal vs. ordinal utility before. I am sure he would push back against Mises/me and say modern economics does too rely on cardinal utility.