Price and Value

One of the biggest problem in today’s society is ‘We tend to calculate the Price of everything and seem to understand the value of nothing’

I came across a mind-boggling headline today - “A Single Parking Space in Hong Kong Sells for $1.3 Million”.

The figure roughly translates to 10 crores in Indian Rupee — an amount sufficient for housing of 100 families in India (considering a price of Rs 10 lakhs per LIG flats).

So, how come these 2 disproportionately unequal services - parking space for 1 car and housing of 100 families - command the same price?

To solve this elusive riddle, let us ponder over the notions of Utility, Price and Value and their inter-relation.

Utlility, Value and Price

Utility: It is the inherent nature or ability of a commodity to fulfil a need.

Value: It is the degree to which a commodity fulfils a certain need.

Price: It is the amount one is willing to pay for the ‘perceived value’ of the commodity.

Therefore, for a commodity to have a price, it must have certain value, which is derived from it’s utility.

With this logic, it is tough to comprehend the above scenario: two commodities with disproportionately unequal Utilities — housing for 100 families and parking space of 1 car - being priced equally.

This is due to the ‘perception of value’.

Perception of Value:

Once a commodity becomes scarce in a particular geographical area, more and more people offer to pay greater amount for the commodity and the ‘perception of value’ begins to rise.

It is pertinent to note here that the rise in price here is not due to the inherent nature — the utility, rather something completely external to the commodity- people’s perception about it.

It is this driving force that has led to OVER-PRICING of commodities only due to it’s scarcity rather than utility and UNDER-PRICING of abundant, despite it being a fundamentally essential commodity.

This perception can reach to unimaginable proportions as in the million dollar parking case.

The Societal folly — Inability to evaluate unpriced commodities

Quiet sadly, the society has replaced this relationship of ‘commodities with utility being valuable and thus pricey’ with a misguided and evil deduction.

That is ‘anything that is pricey must be valuable’ and worse still that the ‘things which do not command a price are of no value’ or in colloquial language — worthless.

Value — which was supposed to be an indicator of utility, has been reduced to an outcome of price.

The best examples of this human inability is its attitude towards abundant natural resources; the air we breathe or the water we drink — both have a greater utility for human survival than food, clothing or housing- but the wastage and pollution that these resources are subjected to, shows the lack of human ability to comprehend the value of commodity which has not yet been price tagged.

This folly of human mis-comprehension extends dangerously and quite disparagingly into the valuation of human services — where value is assigned on the basis of price charged by the human delivering the service. Therefore, underpaid services are perceived to be of low value, only due to the low price charged, disregarding entirely the utility that the service is bringing.

It is in this recklessness of ‘price determining value’, that honorable human endeavours like spirituality, soul-searching, conscientious pondering and opining over societal events, altruistic efforts out of empathy, taking the time to develop inner conscience - which have the potential to enhance humanity and make this world a better place, are termed as worthless activities or misuse of time by the ‘practical’ generation of today.

So, the next time while judging an effort, trying doing it with regard to the utility it brings — who knows, the perception of ‘worthless’ might actually turn into ‘priceless’.