The Relative Theory of Value

I attempt to resolve the logical inconsistencies of modern theories of value which include SUBJECTIVE, LABOR, and OBJECTIVE/INTRINSIC theories of value

disclaimer: the mathematics i refer to for this theory is not meant to confuse the viewer. it is meant to clarify using the most logically rigorous discipline. while some of these concepts are somewhat abstract, they are not beyond a person with a strong comprehension of grade school algebra.

The Relative theory of value states that all value is both relative and objective.  this includes the value of a good to a consumer.

object: anything existing in reality. anything the mind can attempt to comprehend. a POTENTIAL object of thought, but ones who’s existence is not necessarily dependent on thought.

objective: being an object

a well defined object has a time coordinate. so objects are static. there is no such thing as change

subjective: an object in a mind (in particular the intelligence side of the brain process) that is objectively determined (assigned a value) completely by a mind, arbitrary (mathematical); perception and personal definition.  perception is the product of sensory data and intelligence

non-subjective: an object that is partially determined by the mind or independent from any mind.

value (general): the measurement of an object. value is an object itself.

an infinitely defined object (binary) because you can infinitely decompose any object in to component objects

you can infinitely decompose objects into other objects including the criteria that describe it

f(x,y….) = value

funtions that yield a non-numerical value


value as a “solution”, determined value

the term relative and my theory

relative to what?

  • relative and comparative, in terms of a specific units of measurement
  • any unit of measurement is of the same type of object you are trying to measure. proportional to it is subjective/arbitrary
  • if f were some type of value function. f(x) vs f(x, unit of measurement/comparison) 
  • value can be evaluated (attempt at comprehension) from any perspective! it is objective
  • velocity is relative, it is with respect to another object as a reference point



mathematical relation and equality

for simplicity focus on a mapping f:Rn -> R

infinite relation

relative: determined by a mathematical relation of variables/objects

just because a value is “dependent” upon the variables doesnt imply causality

variables are objects

f(x,y,z)= value

relative is set equivalent to objective because of the identity mapping


poorly defined statements/terms: the distinction between ambiguity and profundity

well defined = specific

well defined function or statement is unambiguous!!!!!!!!!!!!!!

poorly defined functions assign either no value to an element in its domain or multiple elements. well defined functions assign UNIQUE values/objects to elements in its domain

poorly defined objects and subjectivity


terms like beauty, good, evil are poorly defined terms. and the statements that use them are by transitivity poorly defined

one can necessarily eliminate all subjectivity with classifying objects by specifically identifying both the term(definition) and the object youre trying to classify.


analogy to chemical reaction or an output of an interaction

state of water function

f(temperature) implicit variable

f(Bryan, Molyneux)= brain asplosion


the value of a diamond is like asking what is the carat of a diamond. it is poorly defined

  • we know value. value of the good is a type of value. .
  • utility = usefulness in satisfying objectives (goals), not happiness. happiness is an emotional indicator of usefulness. it is the same reason why nature gave us pleasure, to indicate what behavior is desirable for existence
  • value of a good = the marginal utility extracted by the consumer from consuming that marginal unit of the good
  • the value of a good to the consumer is the marginal utility extracted from that entity from consuming a unit of that good.  in otherwords what happens when that consumer uses the good.
  • the value of a good is derived from the consumer’s ability to use the good in order to satisfy an objective.
  • therefore like the chemical reaction example, value is a reaction between a good and the consumer


  1. the relative value of a good = r(a specific good, a specific consumer) = r(g,c)

c accounts for all conditions and goals of consumer

in other words

  1. consumer= c(goals, abilities, external conditions)

notice that c is not a subjective object. while a goal is subjective variable, the other two variables are non-subjective. thus making c only partially determined by the mind, making c a non-subjective object, Also, consumption can be decomposed into a sequence.  the consumer must first establish a goal, then acquire the good. once the goal is set that becomes an non-subjective FACT and therefore the value of the good is determined. in other words c is THE STATE OF THE CONSUMER AND NOT DEPENDENT UPON HIS MIND.

replacing consumer in the function with producer is trivial since the producer is essentially a consumer when he goes to spend the revenue. the analysis is the same.

  • criticism of ltv: its relative value that creates labor, not the other way around. . the goal of the supplier is to maximize profit, therefore he compares the value of the resources used to produce his product to what he believes he can sell his product at in order to determine how much he will produce. in economics he will produce until mr=mc
  • all production costs is a sunk cost relative to the consumer
  • energy theory of value is more comprehensive, since energy is the ability to do work or work itself
  • the quality of labor. the same education is different for intelligent and stupid people. the ability to utilize knowledge/capital  distinguishes labor.  . take a fishing net.
  • in general some methods are more efficient than others in producing goods. therefore when comparing  superior and inferior methods you will come to the paradox that the outputs are the same in terms of value. so the LTV doesnt take into account the quality/method of labor. very simple versions of this paradox can be presented. producing nothing with your labor, or worse destroying goods with your labor.
  • silver as a byproduct, rarity. this is only valid because labor is proportional to supply which is a determinant in price, not value.
  • distinction between value and price. value is not determined by supply(how scarce a good is). the marginal unit would have the same value whether or not the good was scarce or abundant at that point in consumption.

value has to do with a person. so collectivists will always find a way to rationalize this into some kind of action and call it labor.


was told STV was an ad hoc theory to criticize labor theory of value, true theories should stand alone and transcend any historical trivia that concerns it. theories are supposed to help the mind understand reality, not to criticize another theory.

subjective value exists, but it can be wrong. it is wrong because of the existence of relative value. but subjective value itself is relative! this is evident in the consequences of consuming the good.

subjective valuation (general) is the individual’s perception of relative value

subjective valuation (of a good) is the individual’s perception of the relative value of a good to a particular consumer/the marginal utility of the good to the consumer.

subjective valuation is a function of the relative value of the good and the individual’s perception (experience/information and intelligence/the ability to process information)

  1. subjects mind = m(the subject’s information/sensory data,the subject’s intelligence/ability to process data) = m(sensory data=d, intelligence=i)= m(d,i)
  2. subjective value of a good =  s(m) = s(d,i)

one can argue that sensory data, especially accurate sensory data may be dependent on relative value. therefore accurate sensory data is non-subjective. for now we will define the senses as the boundary between the mind and non-subjective reality but still  entirely part of the mind. so you can see that subjective value is entirely determined by the mind and therefore a subjective object

subjective value is ones opinion of the relative value of a good.  it is their expected value/expected marginal utility. expected because consumption is a sequence of events thru proper time.  you must first acquire the good before you consume it.

since experience and intelligence are fallible, then subjective valuation is fallible. it can and often is wrong.

subjective valuation is quite a dynamic and continuous, so error is ensured. because maximizing “utility” is virtually impossible because it requires omniscience (perfect information and intelligence)which is itself impossible. when you value an activity of consumption you forego all other activities that are possible. so implicitly youve made a subjective valuation of all other possible actions (one can argue that even not possible actions are valued, just at 0). if we did not define the boundary of the mind then nothing can be subjective

cardinal value is by default ordinal value, but ordinal is not cardinal.  cardinality contains more information. one can go a step further and value things continuously (mapped to the real number line). the advantages with continuous valuation is that you can apply mathematical analysis to continuously valued objects. continuous valuation is necessary for certain goods like ones that are sold by weight (infinitely decomposable due to weight being mapped to the real number line). ordinal and cardinal dont work in a money economy or with an economy with nearly an infinite amount of goods. it cant value things like time since it can be infinitely decomposed into smaller units.

diamond water paradox application. its because the market someone has high marginal utility for diamonds that their demand is essentially your demand.  the end consumer projects his expected marginal utility/subjective value on others thru the market.

RTV accepts the marginalist resolution to the diamond water paradox.

ordinal in the sense of heirarchy of needs and law of diminishing marginal utility to existence (the normative objective)

this is why we ask advice from experts because their subjective valuation may be closer to relative value and thus produce a more desirable outcome for the consumer

aversion to mathematical modeling, and government being able to determine whats best for you.


distinction of price (market clearing, or negotiated) and value.

price = p(subjective value of buyer, subjective value of seller)

p( s of buyer, s of seller)

price is also dependent upon the relative bargaining power of the seller and buyer. so if the bargaining power is greater for seller then price will be closer to the subjective value of buyer and vice versa.

bargaining power is dependent upon the relative competition in the supply and demand market.

network goods

the relative theory of value is a revised version of the objective theory of value.

even if my theory is not perfect, at the very least this initial version rational theory of value is a better alternative than the other theories ive presented here. im hoping with the help of others i can refine this theory that better explains the phenomenon of the value of a good.

  • criticism of ltv: its value that creates labor, not the other way around. a supplier of a good compares the resources that include labor that he can utilizes and compares it to the value of the good to determine if he will produce it or not.  what you dont see are all the goods that dont come to market because the use value does not sufficiently exceed all the inputs that go into its production (unprofitable projects).
  • all production is a sunk cost relative to the consumer and producer.
  • energy theory of value is more comprehensive
  • its relative value that creates labor, not the other way around.
  • dependent upon how specifically you define a good like monopoly
  • labor plus inherent properties of object.  the same education is different for intelligent and stupid people
  • silver as a byproduct
  • distinction between value and price

value has to do with a human. so collectivists will always find a way to rationalize this into some kind of action and call it labor.

here is a paradox, when you take into account capital it becomes apparent. take a fishing net.

in general some methods are more efficient than others in producing goods. therefore when comparing a superior and inferior methods you will come to the paradox that the outputs are the same in terms of value. so the LTV doesnt take into account the quality/method of labor.

very simple versions of this paradox can be presented. producing nothing with your labor, or worse destroying goods with your labor.

a flags “objective” properties is its visual representation of an ideal. values can be intersubjective if the subjects share the same objectives. but unless their abilities and conditions are also the same, the strategy to accomplish that goal may not necessarily be the same.

application of relative value to explain the other fallacies

There seems to be a lot of contention around the issue of value. When talking about anything, we must take great care in being specific as to what we are referencing so we may avoid leaving any room for arbitrary interpretation (subjectivism). When concerned with value from an economic perspective, we are often referring to the value of a good.  There are ideas out there that the value of a good is derived from inherent properties.  There are ideas out there that say the value of a good is derived from the resources that went into it.  There are also ideas that say the value of a good is whatever the consumer/seller believes it is.  Since all these have some reasoning to them, one can attempt to reconcile them to see if the actual truth lies somewhere in between.  It is apparent that these theories are distinct so one must ask if these theories are mutually inclusive, and then analyze this intersection.

What is value? When we mention value, we are referencing a measurement of an object. All values are dependent upon the variables that determine them. In other words, all values are mathematical relations between its determinants. If any of these critical variables are not defined, one cannot come to an accurate evaluation or at the very least can only give an estimate of the value with some margin for error.

We must acknowledge value exists independent of our minds perceiving them. What the Subjective Theory of Value describes is

but the method in how you measure utility is either by perfect understanding of natural laws prior to consumption (determinism or ex ante evaluation) or comparing the outcome of alternatives after consumption(consequential or ex post evaluation. and the presentation of the measurment is the same way you measure anything, by comparison with another good. in a money economy this can be done with relative value or in terms of a money price. i can put my height in terms of your height instead of the standardized unit feet and inches, which in themselves are taken from body parts.



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