Friday, September 10, 2010

Decoupling of price and value

In these days, the price is determined solely by demand and supply, and therefore, there's a decoupling of price and value.

For example, when you eat a lunch box, the foam box was very cheap because of the law of supply and demand. However, the environment cost of the foam box is extremely big, it takes hundreds of years to decompose. And the processing of rubbish is expensive as well.

Such a phenomena is best exploited in the stock market, in which you can drive the price away from the value given you have enough money in the first place. And then after distorting the price, you can "create" value in this process. Of course, those were not really "value" since there's no production afterall.