$75 For a Cup of Coffee Isn’t That Crazy

Alice Salles Comments

Klatch Coffee is now selling what CNN calls the world’s most expensive coffee, and Southern Californians are about to shell out $75 for a small sample of it. Needless to say, Twitter users didn’t take the news too well.

After all, people could be spending their money “better,” they contended, helping charities or the homeless, for instance.

But those complaining aren’t the same type of people who would spend $75 on a cup of coffee. So why do they believe they know what people should spend their own money on? Regardless of what triggered their response, what lies at the core of this confusion is the fact they know nothing of economics. But while the social science isn’t everybody’s cup of tea, it isn’t rocket science either.

coffee marginal utility

After CNN reported that Klatch Coffee Roasters are selling $75 cups of Elida Natural Geisha coffee, Twitter users promptly responded, calling those willing to pay that much a series of unflattering terms. Others felt “ashamed,” saying this piece of news exemplified how rotten our society is. People are starving out there, they said, who would spend that much on a cup of Joe?

As it turned out, a lot of people.

Just under an hour after the CNN report was shared on Twitter, a user pointed out that the expensive coffee had already been sold out, prompting even more outrage from others.

While some tried to justify the cost by mentioning all the details that make this particular type of beans more special than others, many called the coffee roasters con artists for getting away with asking so much for it.  Some were extremely angry at people who make their own decisions, saying that the country is “sick” because people will pay $75 for coffee but won’t help the “millions” of people in poverty out there.

Regardless of your opinion on coffee, especially the Geisha variety, what matters is that this story helps to illustrate what marginal utility is and how Austrian economists explain it.

As Carl Menger once explained, value isn’t a feature, a property, or something that exists independently. Instead, he wrote, “[value] is a judgment economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well being.”

As such, he added, “value does not exist outside the consciousness of men. It is therefore, also quite erroneous to call a good that has value to economizing individuals a ‘value,’  or for economists to speak of ‘values’  as of independent real things, and to objectify value in this way.”

The best way to understand value then, Austrian economist Ludwig von Mises argued, is to look at it as the product of the “value judgments of the individuals involved” in a particular transaction.

“What is called the price structure is an abstract notion derived from a multiplicity of individual concrete prices,” he added.

In other words, a man’s priorities are his own, and none of us can say otherwise. As such, we cannot understand “utility” without understanding that decisions are made by people acting purposefully. Therefore, prices aren’t set up simply because of differences regarding supply and demand curves, but because individuals make their choices based on specific goals.

If your neighbor is willing and happy to pay $75 for a cup of coffee, that is his decision to make, whether or not the beans that made that cup are rare or not. Pretending to know what that coffee is worth to someone else is, therefore, a pointless task.

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