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In general, the ''value'' of something is how much a product or service is worth to someone relative to other things (often measured in Money ). In Neoclassical Economics , the ''value'' of an object or service is often seen as nothing but the price it would bring in an open and competitive market. This is determined primarily by the demand for the object relative to Supply . Other economists often simply equate the value of a commodity with its price, whether the market is competitive or not. In Classical Economics , price and value were not seen as equal. In this tradition, to Steve Keen "value" refers to "the innate worth of a commodity, which determines the normal ('equilibrium') ratio a which two commodities exchange." (''Debunking Economics'', p. 271, In another classical tradition, Marx distinguished between the "value in use" ( Use-value , what a commodity provides to its buyer), "value" (the Socially-necessary Labour Time it embodies), and " Exchange Value " (how much labor-time the sale of the commodity can claim, Smith's "labor commanded" value). By most interpretations of his Labor Theory Of Value , Marx, like Ricardo, developed a "labor theory of price" where the point of analyzing value was to allow the calculation of Relative Prices . Others see values as part of his sociopolitical interpretation and critique of capitalism and other societies, and deny that it was intended to serve as a category of economics. According to a third interpretation, Marx aimed for a theory of the dynamics of price formation, but did not complete it. In was greatly inspired by Ruskin's book and published a paraphrase of it in 1908. Economists such as Ludwig Von Mises asserted that "value" was always a subjective quality. There was no value intrinsic to objects or things and value derived entirely from the psychology of market participants. Thus, it was false to say that the economic value of a good was equal to what it cost to produce or to its current replacement cost. The theory of value is closely related to that of Allocative Efficiency , the quality by which firms produce those goods and services most valued by society. The market value of a machine part, for example, will depend upon a variety of objective facts involving its efficiency versus the efficiency of other types of part or other types of machine to make the kind of products that consumers will value in turn. In such a case, market value has both objective and subjective components. SEE ALSO EXTERNAL LINKS |
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