Water as an example is an absolute necessity for life. Little is more important – yet because it is abundant we pay very little for it.
But if we were in the middle of a desert dying of thirst – we would probably be willing to give everything we have for a drink.

That is the entire point. There is no such thing as a fair price or objective price, or price based on merit, or on the value of the resources used or utilitarian price, or use price or ……
Under some even many circumstances any or all of the above factors may be measured. But the price of anything is what the buyer and the sellor freely agree to – nothing more. And by free, I mean neither the buyer nor the sellor puts a gun to the others head. The agreement is still free and the price is still “legitimate, fair, appropriate, …” if you are in the middle of a desert dying of thirst. Circumstances you got yourself into, or nature put you into or anyone other than the other party put you into, that are purportedly “coercive” are irrelevant.

I do not happen to think most entertainers, celebrities, sports stars, …. are worth what they are paid – meaning I would not chose to pay them that, and I normally chose not to see sports live, or really even on TV much, go to movies in theatres, ….
My “vote” on prices is cast by my actions and choices with respect to those values – and the market weighs my input and determines the price for those celebrities. Not the fair price, not the …. price.

This may all seem arbitrary and “unfair”. We all have some sense that there is or should be some intrinsic price to everything. To an extent there is, but that price is different for each item for each of us.
There are not enough computers or bureaucrats in the world to factor each of our different setts of intrinsic prices and arrive at a price that will actually work without disruption. But the free market does that trillions of times everyday, and adjusts instantly to changes in conditions and preferences.

You may or may not like that, but you can not come up with a system that actually works better. The best you can do is comeup with one you like better. But unless everyone else feels very close to the same – it will not work.

Worse still even if we had the technical ability to weigh each and every preference and factor to arrive at the price that would work with the least disruption, most of the factors effecting price are subconscious preference – we do not think deeply about them. But that does nto mean they are not real or important.

If all of this sounds distant from your life and esoteric – what does it really matter if we get prices right ?

All you need to do is look arround you.

The root cause of every single economic mess in existence is a price failure.

It is irrelevant whether you beleive government was the cause or the market. Whether the price that failed was credit, or risk, or Mortgage Backed Securities or Credit Default swaps, or ….
Regardless, the failure is a failure to get the price of something right and the consequence is economic disruption.

I agree with your post above. I had to rub my eyes and re-read it to make sure, but I think you stayed within boundaries I can accept. Well, to an extent..

Let’s see if we can discuss the example of a baseball player who demands a 35 million dollar contract and gets it.

I believe you would say that he can get what the market is willing to pay. Fair enough to an extent, but let’s take a closer look.

That baseball player’s skills would not have gotten him anywhere near 35 million dollars a few decades ago. This is nothing to do with inflation adjustments. This is because baseball is now further empowered by advances in TV/mass media and because baseball has become further intertwined in our culture and with powerful advertising dollars and because the bottom of the pyramid (population) is bigger and bigger. Another way to say it that a vastly larger number of people spend their time watching baseball on TV and advertisers will pay to reach those people. Ticket sales to games is just a small slice in comparison.

The importance that baseball and other sports has in our modern lives is preposterous, foolish, a tad insane. We’ve got very real serious problems to deal with, but about a hundred million average American Joe’s just want to watch and talk about sports. (Incidentally, I grew up fully immersed in sports, playing & watching, as a kid putting the little football helmets of the two teams playing on top of the family TV during a game, sleeping with a football to improve my catching hands, and later playing ice-hockey at the semi-pro level, and so I enjoy a good game now and then, and the value of competition, but, thankfully, later in life I realized how much of a distraction and how unhealthy and stupid all this excessive sports fanaticism is, especially when we’ve got serious work to do…

So, Dave, et al, the market value of the baseball player is based upon an entrenched industry that is based to an extent upon foolishness and stupidity, not real value for the fans. It’s a “perceived value” that is largely a false value. We don’t need to be spending so much time viewing sports. This situation is akin to the 120 million dollar art treasures. It’s a perceived value in a specific context. Give a man lost in the desert the choice between diamonds, a Van Gogh painting, or a glass of water…

The laws of supply and demand are out there working, very real. But some contexts, like the uber-rich and so-called “art treasures,” have as much to do with human craziness as scarcity & so-called value.

Global markets mean that ordinary mass market goods with infinite market will be produced and sold by corporate giants. No sane person would seek to start a small business competing with Proctor & Gamble producing toilet paper.

But they also mean that goods and services with insufficient local market to be profitable, can be very profitable for a small business in a global market.

Further even huge businesses have discovered that making a good product for a low price is insufficient. some of us want scented toilet paper, some quilted, some quilted and scented, or multiply, or with long fibers or short fibers, or fair trade, or biodegradable, or …..

Contrary to the predictions of the progressive economists of the last century as markets and businesses have grown products have expanded and diversified.

Any mom and pop organization can easily become very well off if not super rich on products that would not have sold enough to keep their doors open a few decades ago.

Further larger businesses like Amazon and eBay provide reputation and trust services that make selling globally easier.

Regardless, the ability of the “uber-rich” to buy “The Scream” or whatever comes directly from their ability to provide the bottom of the market with the goods and services they want at prices they can afford.

As Rick noted, if we cease to go to Broadway performances ticket prices will drop.
Woods, Depp, DiCaprio, all of the somewhat rich, rich super, rich, uber-rich, … must provide the rest of us something we value sufficiently to aquire their riches.

There are really only three ways to aquire something of value.
Produce it yourself.
Produce something else of value and trade for what you want.
Or steal.

Do you understand that though your analysis is flawed you are making my points.

“The Scream” is worth $120M because there is only one (alright maybe 4), and there will never be more, and lots and lots of people – some with substantial amounts of money want it really bad.

Movie prices are stable, because there is really no limit to the supply. If demand increases prices will increase and more theaters will be built. If demand decreases theaters will close.

Expanding quality live performances is far more difficult. Hence broadway and live concert ticket prices rise – but there are limits. If the prices go too high then only the rich can afford them and the rest of us seek out lessor artists, or wait for CD’s and DVD’s.

If you wish to organize a strike against Broadway or Springstein in order to bring prices down – go right ahead. Though so long as the supply is inelastic you will get nowhere.

Springstein has been trying and failing for years to keep is concert prices affordable. All he has managed to do is to create a more profitable market for scalpers. Anytime you attempt to manipulate a price artificially you will create conditions for someone else to profit.

The subjective nature of prices is the means that the market matches supply and demand. High demand drives prices down where supplies are elastic – which is true of most things, and up where they are not.

Of course “The scream” is not worth $120M to you – or you would have bought it.
If you paid $200 for your Broadway or Springstein tickets then by definition you thought that was what they were worth, or you would not have paid it. If you chose not to then you established they were not worth that much to you.

The value that “savvy distributors” provided in the past is diminishing – BTW that does not mean they did not provide value, just that we have discovered new means of securing the same value at lower cost.

I would also note that those “savvy distributors” that are at risk of losing their cut of the pie in the changing economy are actively engaged in seeking protection from government – give power to government and it will be used – though not likely in the way you had hoped.

As I have claimed repeatedly, the trend of truly free markets if for ever decreasing prices overall.

The increase in in information does not alter the fact that price is subjective, it just increases the information we have available to make our decisions.

This is all the normal way that markets work. It is how they have always worked.
Marco Polo going to china, and Columbus heading west to rich the east indies, were just early efforts at expanding the markets, at bringing goods and services from the world to our doorstep more efficiently.

I do not know how this will continue to happen in the future – if I did, I would be set to join the uber rich at the pinnacle of the pyramid, and buy myself a Renoir, Van Gogh or Munch. but i do know that it will happen. Tomorrows poor will have the toys of the rich today, at prices they can easily afford. Markets will be even more global. The real wealth of humanity per capita, and aggregate will be greater than today.

Unless I managed to foresee and capitolize on the means by which we get there, A renoir, Munch or Van Gogh will be further out of my reach than it is today.

The laws of supply and demand mean that where supply is elastic in but for a very few items – there can never be another “The Scream” or “Starry Night”, supply is highly elastic, and therefore we have mega flatscreens and ipads, and, ipods, and …. at prices even Chinese factory workers seem to manage.

Sure, there’s a set of differences between the sale of pop music for example and the sale of top “art treasures,” but I’m saying that the price tags of the art treasures have gone up because the buying power of the uber-rich has gone up to outrageous heights (as well as the salaries of sports figures and entertainment celebrities but not to the level of the uber-rich) because the populations/markets that they’re distributing to (through their various global holdings in the case of the Big Owners of the world, and through TV/mass media in the case of sports and entertaiment celebrities) are growing and expanding.

A local business person with thirty or fifty regular customers may have a wad of cash in his or her pocket, but the global mega corporations are looking at (trying to gain access to and getting better and better at it) 6 billion customers monthly, weekly, and daily, depending on the products. When I video taped the processes at Just Born candies in Bethlehem PA in the late nineties (Mike & Ikes, Hot Tomales, and marshmallow Peeps are some of their products) they had recently gone global and had 3 shifts a day making marshmallow peeps for around the world, but they couldn’t make them fast enough at the time to meet the demand. The bottom of the population pyramid is freakin’ BIG, and with our current systems that can lead to outrageous piles of money at the TOP.

Those outrageous sums paid for paintings are of course more than just a matter of supply and demand. As you related in different words, they are also examples of the CRAZINESS of “perceived value” and of the exponentially expanding wealth at the tip of modern society’s pyramid. During the times that Elvis Presley and the Beatles were topping the charts they were achieving gold record status. Later bands and musicians were regularly surpassing gold to platinum and multi-platinum sales because there were more fools buying and the distribution channels were even more savvy, ubiquitous, and entrenched. (Then digital and Napster came along and the music game changed a bit.) Anyway, as the base of the pyramid gets bigger with population some of the wealth at the very top gets more outrageous. I am hoping that succeeding generations will learn to not need the “ savvy distributors” at the top so much.