Pavitra comments on Open Thread June 2010, Part 3 - Less Wrong

6 Post author: Kevin 14 June 2010 06:14AM

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Comment author: Pavitra 19 June 2010 06:06:50AM 1 point [-]

The concept of "true value" is incoherent, at least in my model of reality. The correct price to attach to a good at any time is its market price at that time. If you had the set of information I listed in my last comment, you'd have the market prices, since they're implied by the other stuff.

It might be valuable to talk about a "true value" of a given good to a given agent. Yes, the correct price to buy or sell a good at is always the market price; but whether I want to sell at that price or buy at that price depends on how much I want the good. If I sell, then the "true value" of the good to me is less than the current market price; and if I buy, then the "true value" of the good to me is greater than the current market price. In general, the "true value" of a given good to a given agent is the price such that, if the market were trading at that price, that agent would be indifferent regarding whether to buy or sell that good.

Comment author: James_K 19 June 2010 06:21:53AM 0 points [-]

Yes that is a coherent definition of true value. It's not a concept that maps well to price indices though.