What is value?

I've used the word "value" on several occasions in my previous posts. One of the great things about getting involved in Bitcoin is that it makes you question your understanding of concepts that previously seemed simple. The concept of "value" is one of those.

If you'd asked me a couple of years ago "is a golden ring valuable" or "is a 100 dollar bill valuable" I would have answered "yes" without a moment's hesitation. Now I'd be more likely to say, "well, it depends."

Here is how I see value now (and apologies for re-inventing centuries of philosophy):

Some things have innate value, because people need them. Clean drinking water. Food. Medicine. Housing. And in Finland - heating. Without these things our lives are dramatically shortened. And yet ironically, the more important the item with innate value, the cheaper it is in Western civilisation. There seems to be a drive in civilisations to reduce the cost of essential, innately valuable items. Without water you can survive three to five days, and yet clean drinking water costs cents per liter in Finland (and I flush most of it down the toilet or use it to wash  my clothes). And although every one is complaining that food is terribly expensive these days, for survival you just need a bag of rice or potatos (one euro per kilo), and some fruit and vegetables (cabbage, carrots or cheap apples are also a few euros per kilo), Medicine and housing are more expensive (actually, health care is an odd one, which possibly needs more discussion). But when I look at the breakdown of my own family budget I find that the quicker we'd all die without it, the less we spend on it.

Other things seem to have value because we want them. Nice cars. CDs or DVDs. Gold rings. But without them you'd still live to see another day. They're considered valuable because they reduce boredom, or because they give us some kind of satisfaction. Personally I've felt a strange desire to have the latest computer gadget, or technological toy at some gut level even though I've known at an intellectual level that it wasn't going to really give me any kind of real lasting satisfaction. It's like the desire of dragons in fantasy novels to obtain and hoard gold - they have no real need for it, but they feel compelled to have and hold it. Similarly, a Lada is just as good as a Corvette to get you from A to B (and a lot cheaper with it), but I know which one I'd like to own and drive (unfortunately I own and drive the other one).

Finally there's things that have value because they can get us things in the other two categories. Dollar bills, or Euro notes, or gold bars. Bank notes don't even make good kindling or toilet paper. Gold is just as good as the next heavy metal, but costs substantially more. However, if you have it, you can give it to people to get them to give you stuff you want, or need. You can get them to work for you. And Bitcoins are clearly in this final category. The easier it is to give them to people, and the more widely they are accepted for things you need or want, the more valuable they will become.