Market Value

One of our cherished ideas about the market is that it properly (and efficiently) sets the value of items. We even believe that it properly values people: Whether someone is making $10,000, $100,000, or $1,000,000, we often contend that the market has accurately determined their value to society, and they are being paid appropriately.

Leaving aside whether that is true or not, let’s poke a little at some of the ramifications. One observation that we can make is that it is the current value – the market does not attempt (with a couple of possible exceptions) to predict our future value. In other words, our current pay reflects our current value to our current employer – nothing more.

A co-worker made the assertion the other day that people who are poorly valued by the market have no business demanding Health Care. His idea was simply that if they hadn’t done what it takes to be highly valued by the market, and since the market reflects value to society, society is proper in denying them health care – we don’t get a good return on our investment by fixing them up.

But, that only reflects current value. We have no idea (and the market makes no predictions) about their possible future value. Most individuals, upon leaving High School, are relatively unemployable. Gradually, through time, they find a trade, complete college, and raise their wage.

Fortunately, most young people have good health. But, if they were to become sick, or injured: Can we take their current position in society, as determined by their wage, to fairly determine whether they deserve Health Care? Do we know that they will never amount to more, and our judgment that they should have only a bare minimum or face a lifetime attempting to pay their medical debts is fair?

Consider this, too: When CEO’s make mistakes, when those we’ve judged (by their salary only) to have high worth to society over extend their company: It is the rank and file worker who takes the brunt of the punishment, and loses their job, and frequently any Health Insurance / Care.

Did the worker’s value to society actually go to zero at the moment they lost their job?

I think we would say not – and the very act of denying the truth of this statement calls into question the earlier assertion that markets accurately value people.

And if markets don’t accurately value people, the idea that we can use a market valuation to determine eligibility for Health Care is also suspect.