I ripped on Half Sigma’s conception of value earlier in the week. I think it would be helpful to explain various conceptions of value, as misconceptions of value cause most of the worlds’ economic problems.
Let’s keep using the same example that HS used. Assume that Professor Mankiw gives an economics speech and is paid $1000.
Mainstream economists: Mainstream economists say that the value of the speech is $1000. Note that this allows them to do all sorts of fancy calculations and modeling exercises. Marvelous consequences follow from the belief that economics speeches = $1000. Unfortunately, this belief is incorrect.
Marxist economists: Marxist economists believe that the price paid is not the true value. For these economists, the price paid represents the value and profit. Such economists would have some way (which they generally don’t define) of determining what portion of the $1000 is "profit." Generally, they would grant that Professor Mankiw’s time spent giving the speech and preparing for the speech is worth something of value. The rest is profit, which represents a loss to society.
Half Sigma: His conception of value transfer is basically the Marxists’ conception of profit. However, HS goes further and does not allow that Professor Mankiw’s time spent writing the speech, for example, is worth anything. Presumably, under this methodology, if Professor Mankiw gave a speech for free, HS believes that no one would come – after all, the value of the speech is zero. (I suppose if a person’s only other alternative activity had a negative value, such a person might attend a free Mankiw speech. However, my point is that if HS was correct, we would expect to see no one attending Mankiw speeches).
Austrian economists: For Austrians, value is ordinal. So, from the speech example, all we can conclude is that Professor Mankiw valued $1000 more than not giving a speech. Similarly, the person that paid for the speech valued a Mankiw speech more than $1000. From this, we cannot conclude that speech = $1000 (or $1001, etc). The professor may have been willing to give the speech for $900 and the organizer may have been willing to pay $1200. Also, we cannot conclude that $x of the $1000 is profit. We simply do not have enough information to make such a conclusion.