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That’s how ripping someone off works.
So how is value determined?
I would say based on consensus. That’s how we determine it in real life (stocks, real estate, market values). If there’s one person in the world who would pay $1,000 for Swift’s shit, then that person just doesn’t know the value of it, because most people wouldn’t pay anything for it. I’d imagine most people would pay not to have it.
If I trick you into paying money for something by telling you it’s super valuable, I’m ripping you off, I’m not increasing the value of the item.
The consensus of who? Everyone? Because how does society determine the value of, for example, an MRI machine when most people have no idea what it could be worth?
The whole concept of the game show The Price is Right is that most people don't know how much anything costs.
The consensus of the market. Prospective buyers. People can still buy things that are overvalued, but when the market is exerting pressure on you to lower its price, you know it’s overvalued.
The market? Weird, because I've seen a lot of complaints that things like houses are priced too high to be affordable. And yet by your metric, their value is the correct one because the market has decided so. Is that really what you think?
That may be a case of something being overvalued. That can especially happen when there is artificially limited supply.
I thought you said the market determined the value.
So who determines if something is overvalued?
If you are trying to sell something in the market, and you are not getting any interest, you have probably overvalued the item. You might be able to sell it at that price if you wait long enough, but not because that item has that value generally. In that case, you’ve probably overvalued that item, and would be able to sell it if you reached the value others perceive it to have.
If I sell a cup of water to a man dying of thirst for $100, I shouldn’t expect that my next cup of water will sell for $100 on the market. The cup of water doesn’t have $100 worth of value, it just fulfilled someone’s needs or desires at the time enough that they were willing to pay more than its value to get it.
Again, the market has priced houses at the level they are now. You claim they are overvalued. You have not explained how that is determined. We're not talking about one house like your one cup of water, we're talking about most houses.
So, again, if the market sets the value, who determines those houses are overvalued?
I didn’t claim they are overvalued, I said that may be a case of overvaluation. Do you disagree that things can be overvalued? What do you think market corrections are in that case? It’s incredibly difficult to determine if a section of the market is overvalued before a market correction, and if I had that ability, I’d probably be rich.