What is "intrinsic value"?

[heavenlyboy34]

I see/hear the phrase "intrinsic value" thrown around often in conversation about PMs. What is meant by this? In philosophy and religion, a thing with "intrinsic value" is valued for its own sake. I don't see how that would apply to PMs, as they are generally sought after as a medium of exchange, material for arts/industry, etc.-IOW, they aren't sought just for the sake of owning them.

Thanks!

[Zippyjuan]

Nothing really has "intrinsic value"- things have whatever value people put on them. In a desert, water could be said to have a high intrinsic value but during a flood it has negative value. Something which is "naturally" useful and hence valuable.

[TheGrinch]

Was I the final straw when I used the term about gold in the bitcoin thread?

Our local contrarian Zippy does have it right here as to what was meant. I guess in a more strict sense, something that is more utilizable would really have intrinstic value. It would seem that gold only has as much value as long as we're in good enough economic standing to really desire it (it may be worthless in a disasterous situation), but then again it has stood the test of time (and of course many of these metals/gems do have intrinsic value in that they can be utilized for things like tools, microchips, piping, etc.).

Though while resources certainly have the most intrinsic value, if they were to be used for currency, then we'd run into the same issues as bartering, that your trade can be limited only to those who have what you want and/or you have what they need, or run into similar inconveniences that effective money is meant to be a more convenient medium for. Thus is why for a long time metals were a very ideal medium, not incredibly scarce or vital, yet more convenient and intrinsically valuable (not to mention costly to mine them) than previous currencies of things like seashells.

[heavenlyboy34]

Nothing really has "intrinsic value"- things have whatever value people put on them. In a desert, water could be said to have a high intrinsic value but during a flood it has negative value. Something which is "naturally" useful and hence valuable.

That's exactly how I understood it. Thanks!

[heavenlyboy34]

Was I the final straw when I used the term about gold in the bitcoin thread?

Our local contrarian Zippy does have it right here as to what was meant. I guess in a more strict sense, something that is more utilizable would really have intrinstic value. It would seem that gold only has as much value as long as we're in good enough economic standing to really desire it (it may be worthless in a disasterous situation), but then again it has stood the test of time (and of course many of these metals/gems do have intrinsic value in that they can be utilized for things like tools, microchips, piping, etc.).

Though while resources certainly have the most intrinsic value, if they were to be used for currency, then we'd run into the same issues as bartering, that your trade can be limited only to those who have what you want and/or you have what they need, or run into similar inconveniences that effective money is meant to be a more convenient medium for. Thus is why for a long time metals were a very ideal medium, not incredibly scarce or vital, yet more convenient and intrinsically valuable (not to mention costly to mine them) than previous currencies of things like seashells.

Nah, I just hear the phrase thrown around a lot (even among libertarian types), and it strikes me as odd every time I see/hear it.

[Petar]

Water's intrinsic value is that it is wet. FRN's intrinsic value is that Ben Bernanke controls them. BTC's intrinsic value is that Ben Bernanke doesn't control them. Gold is yellow.

[TheGrinch]

Water's intrinsic value is that it is wet. FRN's intrinsic value is that Ben Bernanke controls them. BTC's intrinsic value is that Ben Bernanke doesn't control them. Gold is yellow.

Gold is also tangible.

[Sola_Fide]

Nothing really has "intrinsic value"- things have whatever value people put on them. In a desert, water could be said to have a high intrinsic value but during a flood it has negative value. Something which is "naturally" useful and hence valuable.

Agree. Nothing on this side of eternity has intrinsic value.

[Petar]

Gold is also tangible.

Yes, a very solid yellow (also not controlled by the Bernanke).

[TheGrinch]

Yes, a very solid yellow.

What color are bitcoins?

[jj-]

Non-monetary value. For example, the intrinsic value of gold would be its value based on its uses, such as decoration. The value that comes from the expectation that someone would pay you in some distant future for the gold wouldn't be included.

The value of things that are not used as money are their intrinsic value. For example, suppose no one buys salt to store value. Then the value of salt would be its intrinsic value, because it wouldn't have a monetary component.

[oyarde]

Not sure intrinsic is a good word for much outside of science .

[Petar]

What color are bitcoins?

I dunno, the color of Rothschild's tears?

[oyarde]

In the 5th & 6th Centuries, the people near the black sea used bronze money .It was forged into arrowheads.Thatis utilitarian , trade it until you need to put it on a shaft and shoot dinner with it. You can still buy original pc.'s of these for $40. In the desert , water is the most valuable thing.In lands with plenty of water, things that feed or help feed people are of value.Oncethese basics , shelter, warmth , food, water are taken care of and there is excess people start expressing themselves individually , art, decoration etc

[TheGrinch]

Not sure intrinsic is a good word for much outside of science .

Sure it is. It is a poor choice here because, as I was reminded from a quick search, intrinsic value is an accounting term with a slightly different meaning.

However, the word intrinsic is defined as "Belonging naturally; essential" and thus is understood as meaning that it derives it's value naturally (most notably food and water to us), and not arbitrarily (though I do realize that outside of food and water, situation could make nearly any "intrinsic" value arbitrary and subject to change).

Nevertheless, it is still a useful distinction between a commodity and something more akin to fiat. You just can't take it too literally, or else we're jsut arguing semantics rather than understanding.

[oyarde]

Sure it is. It is a poor choice here because, as I was reminded from a quick search, intrinsic value is an accounting term with a slightly different meaning.

However, the word intrinsic is defined as "Belonging naturally; essential" and thus is understood as meaning that it derives it's value naturally (most notably food and water to us), and not arbitrarily (though I do realize that outside of food and water, situation could make any "intrinsic value arbitrary and subject to change).

Nevertheless, it is still a useful distinction between a commodity and something more akin to fiat.

Essential and part of the whole
Maybe, blood, organs?

[TheGrinch]

Essential and part of the whole
Maybe, blood, organs?

You caught me before the edit

You just can't take it too literally, or else we're jsut arguing semantics rather than understanding.

[oyarde]

You caught me before the edit

I try to understand everything , that can get difficult .

[oyarde]

The minimum value of a 1914 Buffalo nickel is about $14.This is due to many people having excess to collect them .They are somewhat rare.Most would be worn to where the date cannot be seen.About 20 million were made , only a slight percentage would still survive and there are more people that collect them than there are nickels available. I think the same could be said about silver and gold..... more or less . Not everyone can have an ounce of silver or gold .Eating is still a priority in places of the world .I doubt that changes.....

[WhistlinDave]

Technically it's true that things only have whatever value we put on them, but in my mind what makes one thing have "intrinsic value" vs. something else is, 1. Is the item tangible? and 2. Does it have a universal or nearly universal utility that would make it valuable to just about anyone?

Real estate (land) has intrinsic value. You need it to produce food, for starters... There are many other uses for land that make it valuable. Everybody needs a place to sleep at night.

Gold and other precious metals also have utility: Many of them are very good conductors of electricity, so they're used in a lot of electronics. Now, in a world without electronics, at first glance it would seem the main thing that made gold or silver desirable is that it can be used to make pretty things. Jewelry and whatever. But there's a little more to it than that.

Back in ancient times gold and silver were believed by some cultures to possess innate magical or spiritual properties and so they were often used to create items used in rituals, religious ceremonies, and/or magic. Pharaohs' death masks and all the gold stuff they were entombed with would be a good example. Silver or gold mirrors used for scrying is another example.

[oyarde]

Technically it's true that things only have whatever value we put on them, but in my mind what makes one thing have "intrinsic value" vs. something else is, 1. Is the item tangible? and 2. Does it have a universal or nearly universal utility that would make it valuable to just about anyone?

Real estate (land) has intrinsic value. You need it to produce food, for starters... There are many other uses for land that make it valuable. Everybody needs a place to sleep at night.

Gold and other precious metals also have utility: Many of them are very good conductors of electricity, so they're used in a lot of electronics. Now, in a world without electronics, at first glance it would seem the main thing that made gold or silver desirable is that it can be used to make pretty things. Jewelry and whatever. But there's a little more to it than that.

Back in ancient times gold and silver were believed by some cultures to possess innate magical or spiritual properties and so they were often used to create items used in rituals, religious ceremonies, and/or magic. Pharaohs' death masks and all the gold stuff they were entombed with would be a good example. Silver or gold mirrors used for scrying is another example.

That sounds about right , tangible and the ability to make into smaller pc.'s,copper, silver , gold.Able to easily transport .....Moonshine is easier to carry than large amounts of corn ....

[WhistlinDave]

That sounds about right , tangible and the ability to make into smaller pc.'s,copper, silver , gold.Able to easily transport .....Moonshine is easier to carry than large amounts of corn ....

I don't know if the ability to subdivide something matters... I think what's most important is that it's something that would have value to everyone, or almost everyone. For example I would probably argue that corn has intrinsic value because it can be used for food, or to make food, by just about anyone.

Moonshine, on the other hand, only has value to some people--those who enjoy drinking homemade hard liquor. And you could also throw in people who make their living making, selling, or transporting moonshine, although I think all of them would probably fall into the first category--people who drink moonshine. Either way moonshine does not have value to everyone; only to some people. So I don't think it would be correct to say moonshine has intrinsic value. (At least that's my opinion.)

[TheGrinch]

I don't know if the ability to subdivide something matters... I think what's most important is that it's something that would have value to everyone, or almost everyone. For example I would probably argue that corn has intrinsic value because it can be used for food, or to make food, by just about anyone.

Moonshine, on the other hand, only has value to some people--those who enjoy drinking homemade hard liquor. And you could also throw in people who make their living making, selling, or transporting moonshine, although I think all of them would probably fall into the first category--people who drink moonshine. Either way moonshine does not have value to everyone; only to some people. So I don't think it would be correct to say moonshine has intrinsic value. (At least that's my opinion.)

I think you're getting too literal. Intrinsic to me means that it derives value naturally (meaning it's desired for it's properties accordingly) rather than being assigned a value purely from consensus.

I think maybe the confusion is that value means several different things. In intrinsic value, it means natural usefulness, whereas market value would mean arbitrary value.

[Barrex]

I dunno, the color of Rothschild's tears?

Ha ha ha...... Pure gold there.... or should I sa pure bitcoin there....lolz

[stuntman stoll]

The way I see it is:
Intrinsic value is the value of something even if there is absolutely no market for it. A sandwich has intrinsic value be cause you can eat it. Gold has intrinsic value because a person may think it looks cool, or because it conducts electricity well without corroding. Much of the same can be said for copper which has a subjective value of 20 cents per ounce.
Because everything is a limited resource (other than air and saltwater), there is a market for everything; and therefor there is a subjective value place on everything by the market that often has very little to do with the intrinsic value.

[osan]

I see/hear the phrase "intrinsic value" thrown around often in conversation about PMs. What is meant by this? In philosophy and religion, a thing with "intrinsic value" is valued for its own sake. I don't see how that would apply to PMs, as they are generally sought after as a medium of exchange, material for arts/industry, etc.-IOW, they aren't sought just for the sake of owning them.

Thanks!

No such thing. Value is BY NECESSITY gaged versus some meter. Does oxygen have value? To air-breathing organisms, most certainly but to anaerobes it is actually poisonous if I am correctly recollecting. Therefore, in this context the value becomes a function of oxygen's life-sustaining or inhibiting qualities.

As to your assertion that there are things valued for "its own sake", that is also the false result of one failing to sufficiently consider the reasons why any given object, idea, commodity, or other thing is valued. Value is ALWAYS measured against a standard. Whether the standard be serious, a joke, wisely chosen, or adopted on a completely idiotic basis is irrelevant. All that counts is that it is present and serves as the basis of measure.

Oddly enough, I find PMs to be of higher intrinsic value because of the utility they offer as stores of purchasinging power. That utility is the supply discipline they impose. Because an issuer cannot simply pull more gold from his butt in arbitrarily large amounts, using it as a representation of value, which in turn represents real purchasing power makes very strong sense. There would be absolutely nothing wrong with non-backed paper currencies so long as two conditions held (ignoring the problem of counterfeiting), the one being that they were not debt-based notes as are FRNs, for example, and the other that their supply remained steady. Because neither condition holds they are crap and cannot qualify as money. The precise opposite is true with gold and similar commodities and THAT is why they may be said to be intrinsically valuable. They are so because they are intrinsically safe after a fashion. They can be tested for purity and weight and the supply cannot be casually grown in some precipitous manner... at least not yet. If the day comes we are able to synthesize elements at will in arbitrarily chosen quantities, gold & co. will most likely cease holding this intrinsic value. But that may not me bad news because the technology that would put gold to pasture as money may well also be able to provide humanity with all its material needs, and were that the case I would be more than happy to see money off to retirement.

Lastly, the word "intrinsic" as used in this sense is a nonsense for the reasons stated above. The value is not intrinsic, but predicates and measures against a standard. Change the standard and the values may change or even disappear completely.

When one sits quietly and considers deeply the concept of money it becomes clear that it is a very strange notion at heart. Money represents a form of generalized power that puts the specific powers of the division of labor at one's disposal. You may not be a fabricator, but with money you can purchase the fabricator's product - perhaps an equipment trailer or a steel staircase for your home. I believe that money represents the best that men have thus far been able to come up with in terms of endowing themselves with this generalized power. Technologies have altered this game and promise to continue to do so. If one day replicator technology such as depicted in Star Trek and other scifi entertainments, money will no longer be necessary... but I repeat myself.

[Danan]

Value is not intrinsic, it is not in things. It is within us; it is the way in which man reacts to the conditions of his environment. Neither is value in words and doctrines, it is reflected in human conduct. It is not what a man or groups of men say about value that counts, but how they act.

Ludwig von Mises - "Human Action", page 96

Value is always subjective. Things have "value" because we derive utility out of having/using/owning them.

In the money context the term is often (falsely) used to describe potential uses of a good besides its function as a medium of exchange.

[osan]

Ludwig von Mises - "Human Action", page 96

Value is always subjective. Things have "value" because we derive utility out of having/using/owning them.

In the money context the term is often (falsely) used to describe potential uses of a good besides its function as a medium of exchange.

I am going to have to read it one of these days. It appears I have evolved along a track very similar to that of Mises and the ilk. I consider that no small blessing.

[brandon]

Intrinsic value is a way to figure out someone arguing in the internet doesnt understand the basics of economics. The subjective theory of value is the cornerstone of all libertarian and free market philosophy.

[WhistlinDave]

I see this whole discussion as being parallel to discussing what people mean when they say "National Defense."

Of course on this forum, we are going to have much different version of what this should mean than someone who watches MSM all day long. They will say what we're doing overseas is keeping this nation safer, while we here know that's bull$#@!.

So when I say certain things have intrinsic value because they are tangible and they have universal utility (usefulness to every person), I'm trying to help the OP understand the common definition of the term, because he asked what people mean when they use the term. I am not trying to argue whether things really do have intrinsic value in the deepest philosophical sense. I'm merely trying to clarify what the term means when most people use it.

So back to the OP: I think the most important thing to understand when people use the term is the distinction between intangible assets that only derive their value because it is assigned and agreed upon (stocks, bonds, treasury bills, Federal reserve notes and other fiat currency, a paper deed to a property, wheat futures, corn futures, etc.) versus things that are tangible and useful (precious metals, land/real estate, wheat, corn, etc.).