Question

How does subjective value make “gains from trade” possible?

Answer 1

Value is subjective and it is in the eyes of the person doing the valuing not in the object itself. It is in the tastes of the person doing the valuing.People value things differently as for eg a reading glass will have value for the person who uses it not for a person who does not use reading glass.Trade can create wealth because people value things differently.As for eg if two people value things differently and are going to exchange and if one person has a reading glass and the other a cup,If the first person values cup more than the reading glass and the second person values reading glass more than the cup, both can exchange and be better off.Both are in a better position from the view of their own individual values.Thus trade can create wealth.It is often believed that one man's loss is another person's gain which is not always true. If every person gives away what he values less for what he values more , then one man's loss is not another man's gain.