 Good morning, ladies and gentlemen. It's my pleasure to be with you here this morning. I would like to say many nice things to compliment you on being here, but they just cut my lecture by 50 minutes. So I've got to do it in 45. Mises once complained, I saw this in his correspondence, that he was being asked to all these silly things, give lectures. And could you please explain the Marxist theory of exploitation in 30 minutes? He found that was exaggerated. It was a different age. Today we are living in the age of the video clip of the 30 second news comment. And if you're an expert, they're giving you three minutes to explain a very complicated subject. So it's not the theory of relativity this morning. It's just the theory of subjective value in 45 minutes. We'll see how far it will go. The theory of subjective value is the fundamental building block of economic theory. At the heart of economic analysis, we have the theory of prices. So we explain the causes of prices, we explain the nature of prices and the consequence of prices, how prices are being used by market participants to coordinate the activities of millions and billions of people. So the division of labor between a great number of human persons. So the theory of prices is the heart of economic analysis, the heart of the theory of the division of labor, of capital theory, of the market economy, of the theory of entrepreneurship and so on. The theory of subjective value in its turn is the element that we use to explain some of the causes of market prices. So that's what we do in all scientific activity. We're interested in causes and in consequences. In economics, that's what we do as well. We spend time analyzing the consequences of any phenomenon, the nature of that phenomenon and the causes of the phenomenon. So here we are concerned with some of the causes of market prices, which brings us to the subject of subjective value. As far as readings are concerned, because, well, 45 minutes is of course a lot by current standards, it's not sufficient if you want to get a firmer grip on the subject. I recommend you take a look at these writings, most notably of course coming as principles of economics, especially the first seven chapters. Then Eugen von Bündbarwerk, the theory of capital, also deals with price theory. The best exposition is actually in Murray Rothbard's main economy and state, the very lengthy chapter one. And there are important elements of the modern theory of subjective value in Ludwig von Mises' writings, most notably in the theory of money and credit, also chapter one, and then in his two books, Epistemological Problems of Economics and Theory and History. So if you want to learn the nuts and bolts of the Austrian theory of price, the best place to start is Murray Rothbard's Bookman Economy and State. And from there on, I suggest you take a look at the other texts if you are so inclined. We start then with a phenomenon that we are interested in, namely exchange, so we can define an exchange as a mutual conditional renunciation to property rights to economic goods. Sometimes we renounce to property rights without any mutual condition that is involved. We make a gift and so on, so that would be a unilateral renunciation of property rights to an economic good. In any case, what is important is that we renounce to property rights. The good that is being exchanged is not always physically transferred to some other person. This is most notably the case if we think of real estate. We do not really unplug a parcel of land and then hand it over to the other person. We exchange the right to that object. If we buy a car, we do not necessarily, as a rule, but not necessarily, we pick up the car right away. We might also buy some other object, I might buy from here a painting in Russia or some other place, and then pick it up later. But still the exchange goes on. I buy this economic good now, so it belongs to me. What belongs to me is the property right to that good. We always have this mutuality condition. I give so that you give. We have this formula that is cherished by lawyers and legal professors. I give so that you give is a characteristic feature of the nature of an exchange. What is being exchanged are economic goods. We can spend already 45 minutes on the theory of goods, but we don't have time to do this. Therefore, I encourage you to have a look at Karl Menger's Principles of Economics, who starts all of his economic analysis from the analysis of economic goods. This was customary in German economics in the 19th century. In the 20th century, it fell out of fashion for various reasons, some of which are good, some are not so good, which would bring us into the history of economic thought. I only have 45 minutes, not on that topic. For example, in Mises and in Rothbard, you would not find, as a starting point, a theory of economic goods. There is this very 19th century style going about these things. Economic good is a good. It is something that is in a causal relationship with human welfare. Economic good is invariably something that is a good and that can be controlled by human beings. The moon is not an economic good according to that definition. The sun is not an economic good according to that condition. A good that is scarce and a good that we know of. We know of the causal connection. If one of these characteristics is missing, we are not in the presence of an economic good. What we exchange is an economic good. An economic good is something that exchange always fulfills these criteria. It is always a good, at least from the subjective point of view of the exchanging parties. It is always scarce. It is always known that there is a causal connection between that good and the welfare of the two parties. And the good can be controlled, otherwise there would be no exchange. Otherwise, this sometimes objectively the condition is lacking that the good can be controlled. For example, the two of us, we could draw a contract and I sell you the sun. We can do this. We are free to do this. In legal terms, this contract would be null and void because the objective condition that the object be controllable is not fulfilled. You see these considerations lead us in all sorts of complications right away. I will step away from this. But I need to highlight as a professor that there are these considerations that already enter the scene here at a quite fundamental level. Property rights, I mentioned this. And then the third condition, so it must be an economic good, it must be property rights. The third condition that needs to be given for an exchange to take place is to have inversely related subjective values. The good must be appreciated by the buyer more than by the seller. To give an example, so if we exchange an apple for an orange, then the person who sells the apple must cherish the orange more than the apple. And the other way around, the person who sells the orange must cherish the apple more than the orange that he sells. That is for each of the two partners to the exchange, the good that he acquires has a higher personal value to him than the good that he gives up. And here we have the phenomenon of subjective value. That means that we prefer something over another thing. And that in exchange these preference relationships are inverse but compatible. So the person buying the apple prefers the apple to the orange that he gives up and the other way around. The person prefers the orange to the apple. So in an exchange we have an agreement on property rights. Both partners agree that each one is the legitimate owner for the purpose of the exchange of the good that is being traded. But we have a disagreement on the personal or subjective value of the goods that are being exchanged. And without such a disagreement, the exchange could not take place. There where people agree on the subjective value of the two objects, an exchange could not take place. So if both persons say, yes, I like apples more than oranges, or this apple I like more than this orange, then the exchange would not take place. And this of course holds true for any exchange that we make if you buy ice cream, you buy a car and so on and so on. And that explains why it's so difficult to give a car back once you have sold it, to give something else back once you have bought it. Because for the seller you actually prefer your money to the object that you have sold to you. If you buy a car from the Peugeot family in France, a big car maker in France, still held by the family. How many cars do they need for their personal needs? None, or a few. Let's say it's a big family meanwhile a few hundred members but so they might need a few hundred cars. And they build hundreds of thousands and even millions of cars per year. So they don't need their cars, just like the baker doesn't need his own bread. He wants to have the money. So we have subjective values. Already the first description of this phenomenon we now need to delve a little bit deeper into this. First by giving a more precise definition, subjective value is the relative importance of one economic good as compared to another economic good for an acting person at a distinct moment in time. So we have various elements that come here into play. Most importantly there is a relation. Subjective value cannot be expressed absolutely. I cannot say well the subjective value of this microphone is so and so, cannot give a figure to express it. It needs to be expressed relative to something else. So it is truly a relationship in which one economic good stands as compared to another good. But a relationship from which point of view, well from the point of view of an acting person who has to make a decision about the two of them. A decision that takes place at a distinct moment in time, usually therefore at a distinct place. So we have these elements. It's a relationship. It's relative to another good. It's relative to a distinct person. It's relative to a distinct moment in time. Three relations that come here into play. Then in economic analysis and actual price theory we use a variant of subjective value that we call a value scale. Which is an ordinal ranking. So this does not belong to the nature of subjective value. But it's a way of expressing, of representing, of symbolizing what subjective value is all about. So a value scale is the ordinal ranking of the subjective values of different economic goods. For example, let's say I have different economic goods at my disposition. Most notably the way I use my time. So I can use my time attending a class. You can use your time attending this class. You could also spend your time taking a walk. Now it gets a little hot out there, but still you could take a walk. Or you could sleep at home or at your student residence or in the hotel or wherever. Or in a park. There are some shadowy places here. So all of you, by being in this room, you have demonstrated that you prefer attending this class to the other alternatives that were open to you. So we may represent this by putting these three alternatives in a horizontal order. So I put attending the class on top. And then taking the walk would have been my next best alternative and sleeping at home the third best alternative. Now please notice that, of course, strictly speaking what we know is that you attend the class. That's what we see. That's demonstrated through the action. It becomes already much less clear when we talk about the precise ordering of the alternative options because here we do not really know. I mean each one of us says, yes, if I had not attended this class I would have studied at home. I would have given my old mother a telephone call and all these nice things. But truly you might have spent your time playing video games or doing other such silly things. So we do not know. We do not know. But in any case, as long as there are alternatives we know well there must be a second best, there must be a third best and so on. But of course we cannot prove them. Now, so we've learned already various things about subjective value, about the nature of subjective value. And one of, we've also learned something about its basic cause. It's the cause that Ludwig von Mises emphasized in the cause of subjective value is always the choice made or a choice made by human beings. So that's the most fundamental thing that we can say about subjective value. Value reflects the choices that we make. Now there are various economic laws that pertain to the causes of subjective value that we can articulate to a particular class of goods, namely homogenous goods. And these are especially important for a great number of economic laws, especially in price theory but also elsewhere. So we have homogenous goods. Now it needs to be said right from the outset that strictly speaking in physical terms it's very difficult to define such a thing as a homogenous good. Even if you think of something like wheat or oil and so on. There are always very tiny differences between distinct, concrete units of that good and sometimes even difficult in the case of oil or other liquids to define what the unit should be. So this is certainly the case that if we try to define what homogenous good is in terms of physical terms we might have difficulties. And we might end up in something saying like well this is an ideal conception or something of this sort. Something that facilitates our thinking about this kind of object. Now as far as economics is concerned we're not really automatically troubled with these kind of difficulties because what counts for us is human behaviors. It's the choices of human beings and the way human beings approach their environment. So from the point of view of human beings we know that certain goods are considered to fall within the same class. That is from the subjective point of view of the acting person they are considered to be homogenous. And that's all that counts for us. So even though there might be differences between this and that car or this and that sack of wheat and this and that pair of shoes, from if the acting person considers them to be homogenous from the point of view of the activity that is being considered, well that's then homogenous good. Now from that point of view a great many goods are homogenous or could at least potentially be homogenous. So it's a theory that applies to a wide variety of phenomena. Now we have here a first law that pertains to the subjective value of homogenous goods, namely that a larger stock of such a good is always preferred to a smaller stock. So for example we have, if we take one of my favorite examples, apples. I like apples. It's very healthy. Much more vitamin C by the way than in oranges. Just to say this as a side. And the place where I live in France is a big apple producer. We export them also to Russia and other places. That is in recent months the exports to Russia have a little bit declined. So it's good for the local producers. Well, so you take any homogenous good. For an homogenous good a higher quantity is always more valuable for each person than a smaller quantity. Now this is remarkable. This needs one explanation, namely that of course we can imagine that we come to a point, well if you have millions of apples, how can I possibly eat even in my lifespan millions of apples? So why should this be better than having just the amount that I need for my life? So that's correct. But then the important thing is that this only pertains to economic goods. So the good character of any object is not independent of its quantity. It can become a nuisance if it is too much. So then it would be an economic bad. But as long as it is a good, this relationship always holds. A higher quantity is more valuable than a lower quantity. So again, of course we do not know by looking just at something whether it is a good, whether it is too numerous to be still a good or whether it's still sufficiently scarce to be a good. We don't know but looking at a thing. So we need to have this concept that comes from economic analysis and not from some physiological characteristic of the good that we are looking at. So as long as it is a good, a higher quantity is preferred to a smaller quantity, always. That's a logical necessity. Now that's very interesting because although we are talking about something that is involved with choice or rooted in choice, we might think that while choice we are completely free, we can prefer a smaller quantity to a higher one and so on. No, we are not. As long as it is an economic good, we always prefer the higher quantity to the smaller one. And if we sometimes, of course, we could say, well, give me whatever, 99 apples, I'll give you 101 in exchange. I'm free to do that, of course. But then, of course, the point what I actually would demonstrate is only that I prefer to give a counter example to this law. And it's not really your refutation of this logical point that a higher quantity is always preferred to a smaller one, always has a higher subjective value. Okay, then there's a second very important law and I'll spend the rest of my time essentially on this one because there are other variants. According to this law, each unit of a larger stock has a lower value than each unit of a smaller stock. This is sometimes said also expressed in the way that we say that each unit of a larger stock has a lower marginal value than each unit of a smaller stock. All right, so this is then the law of diminishing marginal value. One of the most fundamental laws in economic analysis. So, to give you an example, give you an example that Bumbavak has used, if I have five sacks of wheat, then I think of what will I do with the size of the five sacks of wheat so I will use one of them to bake bread and feed my family and then I have another sack that I will use to make cake also for my family. I have a third one that being a good German that I will use to distill some alcoholic beverage. Okay, I also consume myself and I have a fourth sack which I will use to make bread for friends and relatives and so on and a fifth sack that I will use for charitable purposes because I try to be a good Christian. Okay. Now what happens if one of those sacks disappears? Or not disappears, but let's say it's eaten by rats or I don't protect it well and the rats eat it or it becomes unusual because it's a victim of a fire or whatever. It's no longer available for use. Now clearly then let's say it's the sack that I earmarked for bread making for my family, which would for me be the most important use. Subjectively speaking, that's the highest valued use that I would have made of the sack. Now does this mean if that sack is being eaten by the rats, does it mean that I would renounce to that use? Of course not, right, because I have four homogenous units that I could also apply to this use. In fact, what I would do is to renounce of that use that I cherish least or that for me subjectively speaking is least important. So let's say it's making cakes for neighbors and so on. Okay, so then that use would disappear but I would still be able to pursue the other projects. Okay, so the value of the sack that was eaten by the rat corresponds to the least important use that I would have made of it. Okay, now that is therefore we say well each unit of a larger stock, we might say of a smaller stock has a higher marginal value than each unit of the larger stock. So before I had five sacks, each sack had the value that corresponded to the least important use that I could make of it. Each sack had the value that corresponded to the cake making for neighbors. Now if I take one of those sacks away because it's been eaten by the rats it's so that four sacks left. Now the value of each of those sacks corresponds to the least important use that I can make out of four. So let's say the least important out of the four is the spirits making also the drink making. Oh, I'm shedding tears. Okay, but let's say I tried to be rational so this is what I do. So then each of these four sacks would have the value that corresponds to that use. So the smaller is the total size the total stock that I have the more important becomes each one of the units that remains. And the other way around if I acquire additional sacks for example because well I labor and so I get obtained additional wheat or if somebody gives me an additional sack and so on then with each additional sack I can realize projects that were inaccessible before but which are less important than those projects that I would have pursued with a smaller number of sacks. If somebody gives me two extra sacks I can now do things that I would have been unable to do with the first five sacks. So these things, so I kept them in my mind but I didn't think too much of it because anyway I just had five sacks but now I have a sixth sack and a seventh one so I can realize those projects that before were inaccessible and become now realizable but these projects being less important than the first five it means that the sixth sack will have a lower value than or more precisely each sack out of a stock of six will have a lower value than each sack out of a stock of five. Now let me just insist that again I just stated the law in the wrong way I said that the sixth sack has a lower value than the fifth sack that would not be correct as a way you find very frequently in the literature, in the sloppy literature the world is full of this so that would not be correct, it's not that the sixth sack has a lower value than the five preceding ones it's that each unit in a stock out of six has a lower value than each sack in a stock out of five. Each unit in a homogenous stock has the same value so it's as the stock increases then each unit has a lower value than each unit in the stock of the smaller size. So if we give an example now again with apples an increase of a stock it means so that each additional unit will have a lower value than the previous additional units that are received so the first additional apple that are received will necessarily have a higher marginal value than the second apple additional apple that are received and the third additional apple that are received because the first apple increases the size of the total stock let's say from five to six the second apple that I receive increases the size from six to seven and the third from seven to eight and so on and so on so with each additional apple the stock increases so more projects become accessible but these additional projects are of a lower subjective value as compared to the projects that I would have realized with the smaller stock so therefore the marginal value of each unit of the higher stock diminishes so we can say the first additional apple is necessarily of a higher subjective value than the second additional apple received and the third and so on so this is an interesting result we can turn this the other way around we can now consider the reduction of a stock here so it's the opposite the third apple gone necessarily has a higher subjective value than the second apple gone and then the first apple gone if I initially have a stock of five it's one apple gone I still have a stock of four I can realize for the four most important projects if three apples are gone I can only realize two projects and these two projects are necessarily of a higher subjective value for me then the fifth one that I would have realized with a stock of five so the third apple gone must have a higher value than the second apple gone than the first apple gone the fourth one would have a higher value the fifth one would have an even higher value and so on so we get these orderings that are a logical consequence of the very nature of an economic good we can also articulate these two aspects in one common value scale so the third apple gone is a higher value the second apple gone and the first apple gone which in its turn must have a higher value than the first apple received must have a higher value than the second apple received the third apple received and so on so we can create reconstruct this value scale this general value scale as it pertains to one homogenous goods good now the next thing we can do is to usually I should now make a pause let it sink in this is already very important stuff let it sink in but since I have only 45 minutes let it sink in so we move on to the next thing which is the creation of composite value scales the same thing that we did here for one good we can do by integrating several goods several homogenous goods in particular so let's say we have here a very primitive market there's no money so we have some body persons who are exchanging chicken for apples as the chicken apple market it's not likely that this has ever existed in the history of in economic history but it doesn't matter so we imagine something in which there's no money so we have here a pure seller of chicken so he owns chicken and he wishes to acquire apples now let's say he has the following value scale what is important for us is not this concrete value scale but just to get a feeling how this would look like so we have here a value scale expressed in terms of apples per chicken that he receives so the first law that we discussed comes into play a higher quantity received or higher quantity is always preferred to a lower quantity so 100 apples per chicken is always better than 99 is always better than 98 and so on per chicken now I put those quantities in brackets taking over the writing convention proposed by Rothbard I put this into brackets to signify that he does not own apples he wishes to acquire apples and he sells chicken so he's a chicken owner and let's say he has 4 chicken or at least 4 chicken then the first chicken that he sells is necessarily of least value for him because it would still leave him with a relatively high stock right and the more chicken he sells well the smaller is the number of projects that he himself can realize with the chicken that is as he sells more chicken then each chicken becomes more valuable the marginal value rises now we can express this relative to apples so the first chicken he would sell in exchange for 91 apples because in his subjective judgment they are more important than the chicken that he sells he would not sell it for 90 apples the ranking of the 90 apples is lower a second chicken he would sell for 92 apples a third he would sell for 95 apples per chicken and a fourth he would sell for 100 apples per chicken there's nothing really complicated it's just an integration of the two things that we discussed before with the further complication that there are now two goods that are involved I know this is quick this is fast but you'll find it in much detail at exactly the pace that you wish in Rothbard's many economy in state chapter 1 so we can translate exactly here the same value scale so this is the same value scale as on the previous slide it's into a graphical expression now it's not I didn't plug in exactly the quantities and the prices then it would look somewhat different but just the tendency so we obtain this tendency that the higher the price the greater is the quantity supplied to the market so we have a positive relationship between the quantity supplied to the market and the price that the seller can expect and which is of course the familiar curve that we know from economic studies you see that at some point this curve must become vertical because you cannot sell more than you have for some people try to sell us more than they have but that's a different story same thing from the point of view of a buyer for the buyer it's the other way around he owns apples and he wishes to buy chicken the first chicken for him has the highest subjective value both as compared to the other chicken that he might buy but also as compared to other economic goods that he might acquire so the first chicken he buys he would be ready to buy at the highest price he would be ready to pay 97 apples for that chicken not 98 then the 98s would have a higher value for him than the chicken but he would pay 97 and for the second he would pay 92 apples and for the third he would pay 90 apples and so on so we get again demand schedule the tendency that we see here is that as the price declines the quantity demanded on that market increases and this is what we express with this curve we have this negative relationship between the price on the one hand and the quantity demanded on the market so this is how Austrian economists reconstruct demand and supply curves so it involves no element of psychology that you would find in more mainstream texts of a neoclassical band there often you have some psychological underpinning and this works a little bit in the case of demand curves it doesn't work well but it works at least a little bit when they say yes the first chicken is wonderful it smells good and it tastes great and I'm very hungry and so on the second chicken I'm already much less hungry and so on and then the third one is even worse and eventually I get fed up with chicken and so there's no more value at all right so okay that's okay in many cases that works but it doesn't work in all cases certainly this would not be a universal law sometimes you need to eat a first unit in order to develop a little appetite I didn't know chicken before but wow this is not bad either first chicken great and the second one yes there were nuances that I didn't realize before so my appetite even increases if I can stomach them and sometimes the appetite increases even though you cannot stomach them so this is a different thing I will not go into the history of culinary arts to make my point but believe me this psychological foundation does not always work but the praxeological foundation that I've presented to you this is a universal it's always the case that a greater number of units allows us to pursue additional projects and these projects by definition must be less important to us than the projects that we would have pursued with a smaller number of units so this is a rock bottom explanation derivation of a demand curve now we can bring these two perspectives together the perspective of the seller and of the buyer and see that there is a possible agreement between those two sides that is maximizing the size of the market which is here in the case of two chickens exchanged on the market so certainly these two persons might exchange one chicken or the buyer might just buy one chicken but it's also possible to buy a second chicken with mutual benefit the person who wants to buy the second chicken he's ready to pay 92 apples for each of the two chicken and the person who wants to buy to sell two chicken wants to have at least 91 apples for each of he wants to at least have 92 apples for each of the two chicken so at that price he is ready to sell a first chicken and a second chicken and the buyer would be ready to pay for two chicken at that price the first one he would actually pay more but certainly pays also 92 for the second so in that case then it's possible to exchange two chicken with mutual benefits for the seller and for the buyer it would not be possible to exchange three chicken because you see the the buyer he would only give 90 apples in exchange and the seller he would require to have at least 95 so they could not with mutual benefit exchange three chicken we can express this in this usual format it's the point where the two curves intersect so graphically we have here the price 92 apples for chicken and the market quantity would be two chicken so that's how you do it okay we can summarize I did my job I'm happy maybe you are not because after all I mean go through all this in 40 minutes so 45 minutes well it's quite a sport okay so we can summarize our findings in three main points and we've seen that subjective value is a relation it's not a substance something that is inherent in a good it's a relationship in which an economic good stands relative to some other economic good relative to some person who has to decide between the two goods in a certain specific point in time okay second subjective value has some universal causes as we've seen it depends on the expected size of the stock of the good I plugged in here the word expected there's another complication sometimes the time dimension plays a role and for example if you use the weed here that you are right now planting you know you will harvest the weed in August or in September so you're making plans of how to allocate and you can only do this once you have a rough idea of how much weed will be at your disposition so it's the expected amount that is relevant here so the subjective value of a homogenous good depends on the size of the stock homogenous good repeat again what is homogenous depends on the point of view of the acting person so what is homogenous for one person does not need to be homogenous for another person it cannot be defined in all cases in physical terms and if you look hard in physical terms there is no such thing as a homogenous something and then we have the law of diminishing marginal value so there is an inverse relationship between the subjective value of any good and the size of the stock the higher is the the larger is the stock the smaller is the subjective value of each unit of that stock and the other way around the smaller is the stock the higher is the subjective value of each unit of that stock so these were the two laws that I was concentrating on there are others that will be brought up in subsequent lectures which are actually quite important for example the relationship between what Austrians call higher order goods and lower order goods Professor Solerno talked about this so if here in Austrian theory a value relationship between the two lower order goods of higher subjective value than higher order goods because you use higher order goods in order to obtain lower order goods that is if you could choose between one and the other you would rather have directly the lower order good you would rather directly have the consumer good than having just the spare parts if somebody gives you all the elements of the microphone and as an alternative the microphone already ready made well you prefer the microphone ready made because it would relieve you of the additional work same thing for present and future goods so according to the theory of time preference present goods held to have a higher subjective value than future goods of the same type so a present meal is to have a higher value than a future meal of the same sort a present car is considered to be a higher subjective value than a future car etc etc so this is important again that subjective value has subject to these laws which is a difficulty if you think that of course value in itself springs from choice in choice we are free but still our freedom our liberty is not absolute it's constrained by these laws that we do not usually notice we wouldn't even notice unless we are specifically trained and this is what we are doing here and then finally subjective value has also contingent causes so that depends on the specific circumsensors of time and place after all it's always a human choice that enters here into the picture my present choice might spring from a variety of considerations I might have this ice cream than another one for a number of considerations that depend on this specific day maybe I would usually choose let's say a strawberry ice cream but not today because I already had strawberry for breakfast so this is a contingent conditional something that holds true only for today therefore I make a different choice today so these factors also come into play so finally the only relevant criterion by which we can judge the subjective values always effective action that is being taken place so the effective choice that is being made you are in this room therefore you demonstrate that you prefer attending this lecture rather than pursuing other activities and so it is on the market as well it's very speculative theoretical if you wish sometimes to speculate about the contingent causes that might have come into play because strictly speaking we don't know them as we hear the opinion of the person who has acted and some people are pretty good judges of their own activities but others are not they do not know what has prompted them or they do not want to allow what has really prompted them in this and that condition but we always see what they have effectively done and what they have effectively done reveals their number one preference as the principle of demonstrated preference concept that we owe to Murray Rothbard which he expressed in an article published in 1956 reconstruction of value and utility of welfare and utility economics so you can look this up as well well I hope that you are not deceived sometimes after one's choice when is deceived you say oh I made an error it's another important concept right in the theory of value I made an error so I hope you did not make an error in attending this lecture this morning