David Throsby’s theory of value, part 1

This week’s blogging project is a close reading of David Throsby’s commendable Economics and Culture.

Today, Chapter 2, which deals with Throsby’s theory of value. My detailed notes are over the fold.

Throsby begins the chapter by saying “in a fundamental sense the notion of ‘value’ is the origin and motivation of all economic behaviour,” [p. 19] and while at first blush this may seem quite arguable, he goes on to mount a comprehensive argument that backs this up.

[All quotes here will be from Throsby, 2001, Economics and Culture, paperback edition, Cambridge: Cambridge University Press.]

What is he getting at here? Obviously, economic valuations, for instance those established by the Willing to pay literature. We all understand the competing notions of value behind say, an art auction (competing notions thoroughly and thoughtfully explored by Sarah Thornton in her book Seven Days in the Art World).  It’s worth remembering, of course, that Throsby has titled this chapter “Theories of value” in the plural, which gives us a hint of the line he is going to take.

But let’s read on. Throsby gives us a whirlwind tour of the economic theory of value, which for many in  the modern discipline is something very close to the theory of prices:

At the end of the nineteenth century, however, came the marginalist revolution which replaced cost-of-production theories of value with a model of economic behaviour built on individual utilities. Jevons, menger and Walras saw individuals and their preferences as the ‘ultimate atoms’ of the exchange process and of market behaviour […]

From these origins has sprung the utility theory which underlies the theory of consumer behaviour in modern economics. Individuals are assumed to possess well behaved preference orderings over commodities such that they can state unambiguously that they prefer a given quantity of this good over a given quantity of that (or are indifferent between the two). Under plausible assumptions as to the nature of these preference orderings, including an assumption that the marginal utility diminishes as consumption of a good increases, a theory of demand can be derived which is empirically testable in its own right and which can be placed alongside a theory of supply to provide a model for price determination in competitive markets. No questions need to be asked of people as to the reasons for their preference orderings. The origins of desire, whether they be biological, psychological, cultural, spiritual or whatever, are of no consequence; all that is required is that preference rankings can be specified in an orderly way. [Throsby, 2001, Economics and Culture, paperback edition, Cambridge: Cambridge University Press, p. 21-22]

This is both a fine summation of marginal utility theories of value – often simply called marginalism – and has a lot of interest for the student of culture. For, as Throsby continues down the page:

The invention of marginal utility may have resolved the so-called ‘paradox of value’, but it scarcely did away with the need for a theory of value. It is true that neoclassical marginal analysis provided an explanation of price formation in competitive markets which is still accepted today, and that within this model prices can be seen as the means by which market economies coordinate the multiple valuations of the individual actors in the system, imposing an orderly pattern on the chaos of diverse human wants and desires. As a result, for many contemporary economists a theory of price is a theory of value, and nothing more need be said. Nevertheless, it can be argued that market prices are at best only an imperfect indicator of underlying value. […] Thus it can be suggested that at best prices are an indicator of value but not necessarily a direct measure of value, and that price theory elaborates on, but is not a replacement for, a theory of value in economics. [p.22-23]

And for students of culture, whether artists or sociologists, this is of course far from difficult to accept. After all, does anyone really believe the sky-high prices temporarily bestowed on certain artworks by art speculators in 2007 actually reflected the true value of those works? Even in economic terms, it seems clear that contemporary  artworks, just like Florida condominiums, suffered from a bubble in their prices.

Obviously more could be said her, and Throsby does: particularly in regards to distinguishing the private and public consumption of cultural goods and services. In regards to the latter, Throsby has been a leader in pioneering the use of contingent valuation methods and “willingness to pay” studies which try to fix a dollar value (however fuzzy) to the collective public benefit provided by arts and culture. There’s a rich literature her which Jeanette Snowball has been active in pursuing, which I’m not going to adumbrate here.

Cutting to the cahse, Throsby then goes on to delineate at least six differnt types of cultural value:

1) Aesthetic value:  “Without attempting to deconstruct the elusive notion of aesthetic quality further, we can at least look to properties of beauty, harmony, form and other aesthetic characteristics of the work as an ackowledged component of the work’s cultural value” [p.28]

2) Spiritual value: “This value might be interpreted in a formal religious context … or it may be secularly based, referring to inner qualities shared by all human beings.” [p.29]

3) Social value:  “The work may convey a sense of connection with others, and it may contribute to a comprehension of the nature of the society in which we live and to a sense of identity and place.”

4) Historical value: “… how [the work] reflects the conditions of life t the time it was created, and how it illuminates the present by providing a sense of continuity with the past.”

5) Symbolic value: “Artworks and other cultural objects exist as repositories and conveyors of meaning. If the individual’s reading of an artwork involves the extraction of meaning, then the work’s symbolic value embraces the nature of the meaning coveyed by the work and its value to the consumer.”

6) Authenticity value: “This value refers to the fact that the work is the real, original and unique artwork which it is represented to be.”

Tomorrow: Throsby’s case study of cultural value: an art museum.

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One thought on “David Throsby’s theory of value, part 1

  1. Pingback: Two important new research reports from the Australia Council « A Cultural Policy Blog

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