The Theoy Of Value

Value Theory: The Natural Outgrowth of the Controversy Over Wealth

As economic theory bordered on maturity, economists began to realize that definitions of wealth implied preliminary conceptions of utility and value. Early economists assumed an understanding of these terms or ignored their existence; those coming later felt that they needed to be more precise. Utility is defined as the power to satisfy a want or serve a purpose. If, as some writers claim, wealth includes all things which have utility, fresh air and sunshine are wealth. Yet that seems too broad an interpretation. To restrict the all-inclusive nature of this definition, the idea of scarcity was introduced. That had its fallacies too, for— as has been pointed out above—it is not common sense to hold that if items have become less plentiful, wealth has increased. And it is just as absurd to hold that if the quantity of goods in the country has increased—which may result in a decline in the value of each unit—the nation is thereby impoverished. A third way of analyzing wealth was to consider only those things which can be procured with difficulty. Thus the pain involved in the production was the essential factor in differentiating between things which were wealth and those which were not.

Difficulties here are obvious. Is all labor of the same importance, the same quality, the same speed? If not, who is to determine the relationship between some labor and other labor? How could various kinds of wealth be evaluated for purposes of exchange? Thus—between the extremes of utility, scarcity, and labor—has the theory of value been evolved over the last two hundred years. Not that we have arrived at any acceptable statement as yet; for the specific problem of increasing farm income by creating scarcity of farm products without at the same time reducing the wealth of the nation has in recent years brought this issue once more to the fore.

If one were to look at the definition of value as a philosophical problem it would resolve itself into the age-old conflict of the ideal versus the material. Value in the former sense is a subjective matter; it is an estimate of the power of an object to give satisfaction. In the latter sense there is a striving for objectivity: it is the quantity of an object which another object can command in exchange for itself. Attempts have been made to set a quantitative measure upon the utility possessed by an article in order to-make the subjective aspect of value as concrete and exact as the objective. To most economists this is artificial. It is doubtful whether the gap between these two estimates of value can ever be bridged satisfactorily.

There has been and there still exists great confusion in economic thought upon the subject of the value and the market equivalent of value (which is price). Some writers think of these terms- as interchangeable; others hold value to express all the underlying factors contributing to an ideal estimate of importance while price is but the reflection of unstable market conditions at a specific time. There is no solution to this difficulty save a more precise use of terms and adequate statement as to how they are being used.