by Andrew McColl, 14/4/2015
- Individuals impute economic value to scarce resources. This act of imputation became the cornerstone of the Austrian School of economics in 1871, when Carl Menger of the University of Vienna wrote his book, Principles of Economics (1871). Menger argued that economic value does not come from inputs, whether labor or raw materials. Economic value is imputed by consumers, meaning final customers. Their competing bids in an open market establish final prices. These final prices ratify or thwart the output decisions made by producers. Prices in the production process are the result of entrepreneurs who forecast future prices. Then they buy production goods in order to produce final output. Some of these people reap profits. Others reap losses. The production process is future-oriented (p.69).
I may think the car I’m selling is worth a lot of money, and I may be right. But there is an ultimate test for my beliefs: the market. The market talks, and it can be very unforgiving for any foolish seller who isn’t aware of the real value of his product.
This means that the seller ought to find out what the market wants. Of course, he may think, “Well, people don’t know just how good my product is.” That may be the case: perhaps it is in a niche market. So, the marketing has to be tailored to this.