A few weeks ago, my parents came to visit me in Seattle. It was great to see them again, hang out with some family friends, and spend some time exploring the Pacific Northwest. Never having been to Washington before this summer, one of the things we wanted to do was check out the rainforests in the Olympic Peninsula. We settled on going for about a 5 mile hike in Quinault, since it was the easiest of the Olympic’s three rainforests to get to. Unfortunately, Quinault was a little bit disappointing. There were fallen trees everywhere. So, instead of the shady canopy I had been expecting, we were met with fairly regular sunlight. (It turns out that the area was hit with hurricane force winds in 2007, which was probably the source for many of the fallen trees we saw)
It was not all bad though. There were still some amazing sights on our hike, like the world’s largest spruce tree and some pretty sweet waterfalls. Additionally, we found that the trail was littered with foxglove. This was pretty cool to see, especially for my mom. My mom loves all types of flowers, and has some pretty extensive landscaping at our house. Coming from Indiana foxglove is, to her, the type of flower that you carefully select from your local garden store to fill that gap in your landscaping where it will complement your peonies and daylilies just so. In the Pacific Northwest, however, foxglove grows wild. So much so, in fact, that it’s considered a weed. In Indiana, it sells for $10 a pop; in Washington, you can earn $10 an hour to get rid of it (and other weeds, of course).
The irony of this was not lost on me. It is, after all, the same plant in both places. It has the same bright colors, the same bell shaped flowers, and the same ability to make bees happy, as seen in the picture above. It does not, however, have the same ability to make people happy in both places. In one state it is a vile plant, to be stomped on or ripped out; in another, it’s a thing of beauty. So why has this happened? Well, of course I know why it’s happened, I’m an economics major. It’s a simple issue of scarcity and surplus. But I still want to ask why: not why the price structures are the way they are, something beyond that. What is value, and where does it come from?
It seems to me that value is partially objective and partially subjective. The objective part is fairly straightforward: we all have needs (though, as I’m learning, sometimes our “needs” are actually more like wants), and there are certain things in this world that will satisfy those needs. Objective value, then, comes from a product’s ability to undeniably respond to a human need. The subjective part is a little more complicated. This is where our preferences, tastes, and opinions come into play. We won’t all use a product for the same applications, and beyond that, a product won’t evoke the same feelings and emotions in all of us either. So we come to value a product based on a cohesive view of its usefulness in our lives: for the physical things it provides and for the feelings that result from its use.
Additionally, we must deal with the fact that we do not have an unlimited supply of any resource. If a product is especially scarce and has few substitutes, the producer can charge a higher price; if a product is plentiful or has many substitutes, competition will drive the price down. In theory, this process is separate from my definition of value above; whether a product is scarce has no bearing on how it satisfies our needs. In practice, however, this is not true. Ultimately, a product or item only has value if we believe that it is valuable. (Money is the perfect example of this, it’s really just paper, but our society believes that it is valuable, ergo, it is.) Scarcity, I propose, changes our beliefs about value, if we believe that it has at least some amount of value in the first place. Going back to my dichotomy of value, the objective value hasn’t changed. The subjective value, the opinions and feelings aspect, has. It seems that we always want what we can’t have, and we want to have things that other people can’t have as well. Scarcity, then, in addition to increasing the price of a product, increases its perceived value as well.
To illustrate how scarcity and belief of value are intertwined, I would like to consider the example of diamonds. We know diamonds as the finest of all gemstones: extremely rare, extremely beautiful, extremely necessary for engagement rings, extremely valuable. But it hasn’t always been this way. According to this article, the source of much of my information on the topic, diamonds were indeed extremely rare until 1870. In this year, massive diamond mines were discovered in South Africa. With an influx of diamonds on the market, their price, based almost entirely on their scarcity, began to drop. This was a problem that could not be tolerated, so the diamond producers did the most ethical thing they could think of: they formed a cartel. Consolidating under the mantle of De Beers, the mine owners could now control supply, keeping scarcity, and therefore price, high. This worked for awhile, but when the Great Depression hit, demand and prices began to drop. Up to this point, De Beers had only sought to create scarcity. They knew now that they had to create demand, they had to change the perceived value of diamonds.
So, they enlisted the help of N.W. Ayer, an advertising firm, to embark on a massive ad campaign. No, that’s not quite the right description. It was more like a campaign to change the culture of U.S. society, and eventually, the entire developed world. Through the use of catchy slogans (“A Diamond is Forever, anyone?), movie placement, newspaper articles, fashion statements, and anything else they could think of, they changed the subjective value of diamonds in the eyes of nearly everyone. Whereas before diamonds were gems for the elite, valuable only for their (now artificial) rarity, now they were a veritable marriage requirement, eliciting value from their synonymy with love, devotion, and power. To summarize, spending more money than you have on a tiny piece of compressed carbon to demonstrate your love for your bride-to-be is an American institution because the people who sell diamonds told us it should be, and we believed them.
This brings me back around to foxglove. Similarly to the diamond, I’m not chiefly concerned with pricing here, but more concerned with the actual value the flower holds in our minds. In the Midwest, its example is very similar to the diamond one. Both its scarcity and society’s opinion of it dictate that it’s valuable. But the people of the Northwest aren’t really different from Midwesterners; they just buy plants that aren’t foxglove, plants that don’t grow in the wild.* So if the people aren’t different, and the flower isn’t different, the difference must come down to the feeling aspects of subjective value discussed above. In the Midwest, the want for flowers that are different and rare dictates that foxglove is valuable; in the Northwest, the same desires lead to the conclusion that foxglove is not valuable. It comes down to this: we are not satisfied by, we do not appreciate, the things that are already at our fingertips.
It appears to me that if we could just learn to appreciate the things we already have we would be spared a great deal of expense, both mentally and monetarily. If we always want things that we can’t have or don’t have, then we will never be satisfied, for the procurement of an object does not change us. Just as the quality of a marriage in the long run is not dependent upon the purchase of a ring, our quality of life is not dependent upon the purchase of a product. When we make a purchase, we may enjoy it for a short time, but at some point we have to decide what to do next. If the purchase has not changed us, then we still want what we can’t or don’t have. Our response, therefore, is to set our sights on the next object of our affections, and the cycle continues. If we wish to find contentment, we must at some point stop that cycle. If we wish to find contentment, we must at some point change the way we think about contentedness, from something to be arrived at to something we decide that we already have.
Finally, if we wish to find contentment, we must learn to discern value from price, because the most valuable things in this life cannot be priced at all.