Dear Ayn Rand Fans, For several years, since my book was published in June 2011, I have been writing a blog elaborating ideas that are in my book. This entry is my third blog on the theory of consumer choice. I think it is largely self-contained, but if you want to see Parts I and II, please visit my web site at objectiveeconomics.net. I have chosen to post my blogs on The Forum in order to extend my audience and perhaps elicit some helpful comments. If you have something to say, I hope you will respond to this post. The theory of consumer choice in modern economics is a theory of utility maximization. if you know anything about that theory, you need to be warned that you will not find anything resembling it here. Northrup The Theory of Consumer Choice III By M. Northrup Buechner July 31, 2013 Another in a series of essays elaborating Objective Economics: How Ayn Rand’s Philosophy Changes Everything about Economics by the author. I concluded my last blog by saying that a valid theory of consumer choice requires the concept of “a hierarchy of values.” I should also have said that consumer choice is not unique, that all human choices reflect an individual’s hierarchy of values to some extent. Since consumer choice is a subdivision of human choice, it is easier to understand the former if we first understand the latter. The meaning of a hierarchy of values depends on grasping the two concepts of which it is composed. Let us begin with the concept of “hierarchy.” There are other definitions of hierarchy, but the one I prefer is “a graded or ranked series, one thing above another.” (I have been using this definition for so long that I have forgotten its origin.) Hierarchies are everywhere in the world that one choses to look for them. There are the ranks of authority in the Catholic Church (priests, bishops, cardinals, archbishops, patriarchs, etc.). All the military services have hierarchies of command (in the army: private, corporal, sergeant, sergeant major, 2nd lieutenant, lieutenant, captain, etc.). Universities have hierarchies of (presumed) knowledge (instructor, assistant professor, associate professor, full professor). The students in a college or university are ranked in a hierarchy according to their grade-point average. Investors exist in a hierarchy defined by their wealth. The list is endless. Having grasped the meaning of hierarchy, we need to grasp the concept of values. Let us begin with Ayn Rand’s definition of value: “that which one acts to gain and/or keep.” A value, in this sense, is a goal, end, or purpose that one acts to reach or attain. Usually it is a fact of external existence, such as a house, a car, or an ice cream cone, but it can also be an aspect of consciousness that one strives to achieve, for example, happiness, or virtues such as pride and integrity. A value presupposes an evaluation, that is, an act of consciousness that gives the object a positive ranking. An evaluation in turn presupposes a standard or end to which the value is a means. Evaluation is the process of ranking things by whether they cohere with a standard or contradict it, and to what extent. When several items are ranked by reference to the same standard, we get a hierarchy. If the standard is “getting ahead at work,” then the hierarchy might be (1) volunteer for jobs; (2) work long hours; (3) an MBA. If the standard is rational, if the standard is, in the words of Ayn Rand, “derived from the facts of reality and validated by a process of reason” (CUI, p. 14), then the values are objective. If one also ranks objectively the values in the hierarchy, then action based on that hierarchy will serve one’s life. In these blogs, sometimes I have referred to “the value placed on an object.” When I have used that phrase, I thought the context made the meaning clear, or at least clear enough that my audience would not be troubled. (I would like to hear from anyone who cares to confirm or deny my judgment on that.) But until now, I have not defined value in the sense of value placed on something—which certainly is not the meaning Ayn Rand defined. Now I can say exactly what that value is: It is the ranking of the object in a hierarchy of values. A hierarchy of values is a phenomenon of consciousness. The values ranked in the hierarchy are phenomena of existence, in exactly the meaning Ayn Rand defined: goals of action, things one wants to gain and/or keep (including things like happiness, integrity, and pride). The value placed on values is their ranking in one’s mind. Clearly, there are two concepts of value here. First, there are the things one acts to gain and/or keep—objects of action in reality; for example, “Water is a value to a thirsty man.” Second, there is the ranking of those values in consciousness—in a hierarchy of values; for example, “Water has a high value to a thirsty man.” Metaphysically, values as ends of action come first; a hierarchy of values cannot be grasped without the concept of values as goals of action in reality. The “values” in a hierarchy of “values” are the values Ayn Rand defined. Existence comes before consciousness. Causally, values presuppose evaluation by a human mind. To create a value, someone evaluates an item as valuable according to some standard, and gives that goal positive ranking in a hierarchy. Simultaneously with that evaluation, the item becomes a value to that person. Next time we will elaborate further the idea of a hierarchy of values, and begin the process of understanding human choice.