What is the subjective theory of value

Specialist literature Market value determination PART A 2 Valuation & assessmentÂ

Fair market value appraisal
Kathrina Völkner

2.1 Value concepts and value theories

The generic terms valuation and valuation have one thing in common; they contain the term value. Discussions about concepts of value have been controversial for more than a century. The discussions are not limited to different scientific disciplines, rather a dispute also takes place outside of science in legislation and case law. What these discussions have in common is the knowledge that there is no one true value for a good, but that several value concepts coexist (Jakob 1992: 208). In addition, there is the realization that the value itself is usually subjectively shaped (Müller 1968: 12) and is therefore not necessarily independent of the person making the assessment (Henckel et al. 2010: 554). Nevertheless, attempts are being made and have been made to create an â € œobjective exchange value which [â € ¦] is supposed to have a general meaningâ € (Müller 1968: 12). This requires a value system within which a good is assigned a value (Henckel et al. 2010: 554). As early as 1960, more than 200 concepts of value can be found in the literature (Just & Brückner 1961a: 213). â € œThe content of the numerous concepts of value is always to be understood against the background of their genesis and objectives (Heyde 1926, Kraft 1951, Spiller 1962, Ehrenfels 1897, Reininger 1947, Ruf 1955, Münsterberg 1921, Pausenberger 1962) â € œ (Henckel et al . 2010: 554). Since the concept of value is defined differently in different sciences, the most important approaches are briefly presented.

In philosophy, value means â € žin a broad sense, reason, norm or result of a (positive) evaluation, that is, the preference of one action over another or one object, one factual situation over another. Values ​​in the sense of the reasons and norms for evaluations are the subject and subject of philosophy within the framework of value-theoretical conceptions (value philosophy, value ethics) and every ethical-political theory ”(Brockhaus 1999: 208, keyword: value).

In economics, a distinction must be made between the perspective of economics and business administration with regard to the concept of value. â € œIn economics, value stands for the importance attached to a good with regard to individual preferences (consumer wishes). The degree of scarcity of a good in relation to the desire for consumption, which in turn depends on the subjective benefit that the good creates ”(Brockhaus 2006b: 761, keyword: value), is considered to determine its value. In economic value theory, a distinction must also be made between objective and subjective value theory. Behind these theories stands the common question: How is the relationship to which goods are exchanged determined? (Brockhaus 2006b: 761, keyword: value) The objective theory of values ​​takes the view that "value is a fixed component of every good and is therefore measurable and comparable with the value of other goods" (Müller 1953: 76). Adam Smith (1723â € “1790) founded the objective (functional) theory of value, which determines the value of goods (exchange value) from the cost of production. David Ricardo (1772â € “1823) based his theory of (relative) labor value on this, in which goods are to be exchanged in relation to the labor costs used. Karl Marx (1818-1883) developed the theory further into the theory of absolute labor values. The value of a good can therefore be expressed by the work involved. The value of other goods, on the other hand, is irrelevant for Karl Marx. The theories of classical economics are in contrast to modern economics. First and foremost, “the value is attached to the good as a separate, fixed component, the size of which depends on the production costs or the work embodied in the good” (Schmiedebach 1928: 345). While in modern economics â € œThe good is only given a value by the people who run it, which is variable according to the specific benefit that the good providesâ € (Schmiedebach 1928: 345). In contrast, according to Müller (1953: 77-78), the subjective theory of values ​​has no practical significance for price formation. Müller (1953: 78, emphasis in the original) goes on to explain: â € œAlthough the ultimate root of all ideas about prices is, in a sense, subjective values, in economic practice it is never value that is decisive, but price alone. At the center of all private and economic considerations are not subjective considerations, but objective facts. It is not the concept of value that is decisive for economic dispositions, but rather the reality of the price.â € According to value theories, various concepts of value can be distinguished: objective and subjective use value and exchange value. â € œThe price can undoubtedly be seen as the absolute objective exchange value of a goodâ € (Müller 1953: 79, italics in the original). Brockhaus (2006b: 761, keyword: value) defines exchange value as the â € œprice of a good which, according to classical economics, depends on the cost of production (objective exchange value), and according to neoclassical theory also on the subjective evaluation by the customer (subjective exchange value). â € œ The terms common value and market value can be subsumed under the objective exchange value, as their content corresponds to the objective exchange value (Müller 1953: 80).

In business administration there are value terms that depend on the purpose or occasion of the evaluation. The value there relates to "the price or the costs of products or production factors" (Brockhaus 2006b: 761, keyword: value).

The general, economic definition of the term value can be transferred to the value of land. â € œThe value of the soil is to be understood as its relative appreciation in the respective context of useâ € (Davy in the Academy for Spatial Research and Regional Planning 2005: 120). Whereby the economic land value is understood to mean the following: â € œThe economic land value results from the property of the land as an economic good (valuation as a purchase or exchange object in trade or as a location for consumption and production) â € œ (Davy in the Academy for Spatial Research and Regional Planning 2005: 120, emphasis in the original).

Depending on the point of view, philosophical or economic, there are different definitions. Applied to the determination of land values ​​or property values, this consequently does not lead to the one true value, rather the result of a value determination or assessment depends on the underlying reason. â € œThere is no â € œvalue per seâ € for a good, rather the value of a good depends on the purpose of the valuation. Different values ​​can therefore be assigned to a good depending on the evaluation objective pursued; there is therefore definitely a goal-dependent "value pluralism" "(Raupach 2007: 2039). This assessment of the value of companies can be traced back to the papers by Schultze (2003: 7) and Kolbe (1967: 175–176). â € œObjective value theory understands the value of a property as an inherent objective property and thus as a normal priceâ € (Gehri & Munk 2010: 113). In functional value theory, the occasion and purpose determine the choice of the valuation method and thus the valuation result (Gehri & Munk 2010: 113). â € œIt is to the merit of the BVerfG to have specified the objective of the valuation for inheritance tax purposes and to have identified a relevant value accordinglyâ € (Raupach 2007: 2039). Whether this "decisive value" (Raupach 2007: 2039) has actually been worked out by the BVerfG, especially in the resolutions of 1995 and 2006, and how this should look in detail, is analyzed and discussed in Chapter 2.3.