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Vienna vs. Omaha

“Price is what you pay. Value is what you get.”

Price is determined by the operation of the laws of supply and demand. Value is determined by the operation of human whim and preference.

In classical and Marxist economics, the correct price for a good is something that can be calculated precisely in terms of material and labor required to produce that good. Classical/Marxist theory implores people to adjust their perception of value to align with those correct prices. People ultimately serve the means of production.

In the Austrian school of economics, there is no “correct” price. Without the subjective factors of whim and desire, a calculated price has little meaning in the real world. Austrians hold that human subjective value will be always be served. And prices discovered through bargaining in markets are the only way to know how one whim weighs against another preference .

Quote attritbuted to Warren Buffett, via Maggie’s Farm.