Rambling On About Value

Sitting in a business meeting yesterday I heard the word value in about ten different phrases, and not once was it clearly explicated.

Value is a concept that is vexes economists and political activists alike, especially when they attempt to confabulate across the aisle. Adam Smith and Karl Marx, two eminent thinkers that have been fallaciously placed in these two camps respectively, can help us understand what value has come to mean in our modern, advanced capitalist world.

Adam Smith, perhaps the most misinterpreted philosopher ever, wrote about two kinds of value, use value and exchange value: "Nothing is more useful than water but it will scarce purchase anything, scarce anything can be had in exchange for it. A diamond, on the contrary, has scarce any value in use, but a very great quantity of other goods may frequently be had in exchange for it."

Delineating between use value and exchange value holds no water these days and this is principally due to the Marginal Revolution, which ushered in the notion of relative scarcity (which Smith was obviously familiar with). Diamonds are scarce, water is not (yet), therefore they hold vastly different values. Obviously there is more to value than this, but the marginal way of thinking about utility is powerful and resilient.

Where the neoclassical economists that followed the Marginal Revolution have an abstract notion of utility, Smith, aware of the effect of scarcity, retained a notion of value-in-use. He explained that the real price of something "to the man who wants to acquire it, is the toil and trouble of acquiring it." He continued (in what can be considered today a Marxist fashion) by claiming, "Labour alone, therefore, never varying in its own value is alone the ultimate and real standard by which the value of all commodities can at all times and places be estimated." Smith believed wages would tend toward equality across all vocations in the long run. Tell that to the Reganites!

Where Smith grappled with the notion of labour, time and effort creating exchange value, Marx went one step further by establishing in his labour theory of value the notion of 'socially necessary' labour time as determinant of wages. The socially necessary (or normal) time it takes to do something in an industry is socially contrived and therefore dependent upon power and politics. 


Marx saw labour as a personal ability to make one's work available to capitalists, those in power. Any value that the labour created beyond what it took to replenish the labourers ability to work, that 'socially necessary' amount, he called surplus value. This, he thought, was the ultimate source of profit and ultimate form of exploitation.

The notion of tying together value and power is one that ought to be taken seriously, despite the efforts of economists at removing dirty politics from the realm of economics. This concept of a political/labour theory of value has been all but lost in today's economic discourse, as most modern economists argue that things are valued solely by what would be given up to obtain them.

Though I disagree with Marx and Smith about the existence of a cardinal measure of value, their labour value, Marx was right about the power relations inherent in value. Those in power (corporations...) will do as much as possible to extract value from people and parallel to Marx's theory, one great way they have found out how to do this is through advertising. 

Today we have advertising that helps is to value things more and more. Advertisers have cleverly created an entire new notion of value where people can enjoy not only a fictional story behind a product while consuming it, but also feel as if they are a part of a select group of people that can afford to enjoy such products. This may afford them some feeling of conspicuous leisure through what Thorstein Veblen would call 'pecuniary emulation'.  

Many stories could be told about the distorted value that advertising creates. Particularly tragic are those that involve children; they get 'em when they are young. Anne Becker observes the consequences of US advertising on Fijian youth. In the first three years of US ads eating disorders went from affecting no child to affecting fifteen percent of children. A more recent study in the United States found that banning advertising of junk food could cut the number of overweight children between the ages of 3 and 11 by 10% and the number of overweight adolescents by 12%. If the happiness of a child depends less on what appears to be given to other children, parents need not keep up with the Joneses and so will spend less on such unnecessary items.

I would like to think of value as the capability of a good to increase the well being of a person or a society. Of course this is quite open to interpretation, but even being phrased in this manner, I believe, ought to strip away or at least call into question many of the social constructions that inflate the value of goods in our modern advanced capitalist world. 


How does a diamond increase well being?