Price and Value

I recently bought a book and my showed it to my friend. My friend told me that it is not worth the price(34SGD) that I paid for it since the book is thin, around 220 pages, and the print was not that good.

This kind of thinking is prevalent(even guilty of this myself). A price of a book is not determined solely by the thickness and type of paper(price of production). It also depends on the price that readers would be willing to pay for it. If my 34SGD is more valuable than the book then I would not buy it. In my case the book has more value.

Price and value is often misunderstood. Value is something that you give while price is something that you pay for. It is related, but it is different. You can add value to something by giving it a high price. The luxury car business is a good example. The high price of a Mercedes gives it a high value. The high price is not solely the reason, but it adds value. You could not give a Toyota of the same quality the same price as of the Mercedes. The brand(Toyota) will prevent you from doing so.

Understanding the concept of price and value is not only important to economics. Price and value permeates human behavior. Our actions are usually determined by the things that we value and the price that we are willing to pay for it.

Imagine yourself in a situation where you have two party invitations on the same day organized by two of your friends. Friend1 is your close friend since highschool and a lot of your other batchmates will be there. Friend2 is your officemate and a close friend of your bosses, which will also be at the party. Which would you choose? Do you attend Friend1’s party since you want to meet your batchmates and you find it more fun or would you attend Friend2’s party since it will be a boost for your career? The price for attending Friend1’s party is the opportunity to rub elbows with your bosses. The price for attending Friend2’s party is that your friends may not think well of you.

We can also apply this to morality. Do we not lie because we value honesty or because we do not want to pay the price(being branded as a liar)? Do you not steal because you believe that it is wrong or are you afraid of being caught?

Many people love to moralize(“they should have done this and done that because <insert moral code here>”) or compare the situation of others to their situation(“I can do it why can’t they”). Different people value different things. Even if you value the same things, the price you are willing to pay for it is also different.

When in a dilemma it is useful to ask yourself what are the things you value and what is the price you are willing to pay for it. Most of the time it is the only question you need to answer.

One of my favorite lines in the Godfather series is: “That is the price you pay for the life you choose.” If you know price and value you would understand people and situations better.