What is an item worth?

[IndigoHawk]

Even mind numbing activities like farming shards only incur a base price of the damage/cost to repair your gear once one is done farming.

This is wrong. The time spent farming is an opportunity cost.
If you farm shards to level up mining or because it's fun, then the shards are a waste product. You can sell them for anything.
If you farm shards for profit, then shard price has to be competitive with gil you would make doing something else.

In games like FFXIV, the people who mine for fun or education have a large impact on the ore supply. This turns the MMO economy into a garage sale instead of a self sustaining free market.

If you want a market, take away dungeon loot, quest rewards, and make crafted items only available from crafters. This makes it harder for casual players to attain items (since they have to compete with the hardcore players who have more resources), which is why MMOs have quest rewards instead of self sustaining free markets.

[Zigkid3]

What Indigo said is correct, Time is an opportunity cost in gathering mats.

[Hwasung]

This is wrong. The time spent farming is an opportunity cost. ... If you farm shards for profit, then shard price has to be competitive with gil you would make doing something else.

I won't be so naive as to try to argue that there is not an opportunity cost associated with farming in time. My counter point to you is what is a given unit of time worth in in-game currency? And do you suppose that you can transpose that derived cost onto every other activity in the game?

Others have commented (although they used different terms) that the utility gained from the crafting experience may be payment enough for an act.

All participants are gaining utility from their actions in the marketplace - some through increased gil income, some from experience, and some from storage space woes incurred from over farming.

TL;DR - Time doesn't have a fixed value when translated to in-game currency.