Don’t bother about a carpet; do buy a nice shirt; no clutter; take great care painting the walls. Wilhelm Ferdinand Bendz, The Artist’s Brothers, c.1830.
One problem with the costing process is that a lot of things do not have set prices. Suppose it is really important to you to live in nicely furnished rooms. What does that cost? Well, in part it depends on your skill at finding and purchasing things you like. The same chest of drawers might cost four times as much in one outlet as in another.
Price is a public matter – a negotiation between supply and demand. A thing’s price is set in competition. So the price of a car is determined by how much some people want it, how much they are willing to pay, and how ready the manufacturer is to sell. It’s a public activity: lots of people are involved in the process, but your voice is almost never important in setting the price.
Value, on the other hand, is a personal, ethical and aesthetic judgement – assigned finally by individuals, and founded on their perceptiveness, wisdom and character.
How much value is yielded by a given quantity of money? What is the ‘value return’? We know this varies hugely. Some people are able to turn comparatively small quantities of money into wonderful experiences. They have marvellous holidays, they entertain charmingly, they have interesting paintings and you’d like to steal their furniture. And they do this on a smaller budget than you’d imagine (or than you or other people could). These characters are resourceful. They’re not necessarily trying to save money.
Don’t bother about a carpet; do buy a nice shirt; no clutter; take great care painting the walls. Wilhelm Ferdinand Bendz, The Artist’s Brothers, c.1830.
Here are the secrets of these resourceful characters:
1. They know what is important in creating an experience and what isn’t. For instance, at a dinner party most people don’t really care what the wine is so long as it is drinkable.
2. They don’t follow fashion – which inflates prices. They judge objects, ideas and people on their intrinsic merits (rather than on the reflection of their status – what others think).
3. They have good taste: they can home in on what they really like and why they like it, and therefore identify it in less obvious places and cases.
4. They are creative: they look at potential and are not worried about taking responsibility for realizing potential. They have the inner drive and flair to do this.
These qualities – which are not directly taught in economics classes – are crucially important to our economic lives.
Money is (to say it again) a means of exchange. Money needs to be exchanged for – or translated into – value. But that exchange is often an art, and only sometimes a science. This art entails wisdom and intelligence in getting the things that matter to you. For instance, what is the cost of a dinner party? Of a beautiful room? Of a great painting? Of attractive clothes? These don’t have fixed costs, because they depend on our creativity, resourcefulness and independence of mind.
Suppose, however, you’re saying to yourself, ‘That’s all very well, but I’m just not that creative’? I don’t think the lesson here depends on having the eye of an interior decorator or an art critic. It depends on following a fairly down-to-earth process. Take a selection of images that you like – images that speak to you. Then ask: what are they really saying to me? For instance: I’d always wanted to have a matching set of old teacups and saucers. But I couldn’t afford them. Then I saw a picture of quite a messy house, with a big table on which there were lots of mismatched old cups. The mess didn’t appeal, but it made me realize that matching wasn’t so important – and individually the cups and saucers are a lot cheaper. And now, about ten years later, I have quite a collection of individual pieces and get a reliable, everyday thrill from using them. It’s a tiny instance, of course. But it illustrates the process. The hints are out there. If only we pay attention to them.
Let me give an example on a bigger scale. A house round the corner from us was recently for sale. It’s quite different from our place. We live in an old building that’s been adapted at various times; it doesn’t fit the modern sales-pitch template. It isn’t ‘flooded with light’; it doesn’t have a ‘huge family kitchen’; it’s not ‘an entertainer’s dream’ (although we have had some lovely dinner parties). We occasionally get pitying looks from our neighbours.
The house round the corner isn’t beautiful; it’s about the same size as ours and has a smaller garden. But (to continue the language of real estate) it ticks the boxes. It sold for half as much again as our house is worth. The difference equals my entire income for several years. In a way it’s just a stroke of luck. We really like certain things (odd nooks and corners, unexpected changes in level, touches of architectural grandeur) that don’t command a high market price where we happen to live. But discovering that our house would sell for less than the one round the corner doesn’t make it any less valuable to us.