Cognition, Value, and Price: A General Theory of Value.

• Author: Barreto,Humberto

The thrust of this book is captured by its very last sentence: "It thus seems that value theory, rather than price theory, remains the first and foremost problem in economics". For Henry K. Woo, a fundamental and devastating criticism of modern day, neoclassical theory is that it merely has a theory of price, not of value.

Undoubtedly, the quintessential neoclassical economist would respond, "A theory of price is a theory of value ." It is here that the semantic battle is joined, but, unfortunately, with little hope of any resolution. This review will show that the basic disagreement can be found in the fact that Woo sees a much broader scope for economics than today's reigning orthodoxy. Woo holds that preferences should not be assumed away or determined exogenously, but instead should be part of the subject matter of economics. In addition, this review will evaluate Woo's "crude, first framework" for the analysis of the source of tastes and preferences.

What is the point of economic theory? Debreu responds, "the explanation of the prices of commodities resulting from the interaction of the agents of a private ownership economy" |1, p. ix~. Hicks says, "We want laws of market conduct--laws, that is, which deal with the reaction of the consumer to changes in market conditions" |2, p. 23~. Samuelson replies, "The derivation |of demand functions~ is the whole end and purpose of our analysis of consumer's behavior" |3, p. 97~. In order to explain price, price movements, consumer's reactions to changing prices, and the role of prices in the allocation of resources, orthodox economic theory restricts the scope of the problem--in particular, preferences are assumed given and the consumer is endowed with rational behavior. Importantly, these assumptions are purely instrumental. No orthodox economist believes that we are born "hardwired" with all preferences fully determined nor is the consumer thought to actually apply the equimarginal principle. Instead, these (and other unreal assumptions) are part of the "act as if" methodology that is applied in order to reach a solution. For Woo, on the other hand, economic theory, in general, and a theory of value, in particular, should not begin with preferences and rationality given nor should unreal assumptions be tolerated. Woo argues that a "tenable" theory of value must have a theory of value formation ("how patterns of value are formed in the human mind") and this, in turn, requires a theory of the...