In spite of the importance of value to the development of sound economic theory a lot of people disagree about the source and measure of value. I will touch on the more prominent value theories Over the next couple of posts.
But, before I move on to the discussion of the theories of economic value I have one point that I need to emphasize:
Money does not represent a source or measure of value of any sort.
In the future I plan to devote considerable space to discussing the nature and role of money. I may, in those future post, repeat some of these comments, but I need to clear away any doubts that readers might have that I have overlooked money as either a source or a measure of value.
Economic goods of one sort or another play the role of money. Those goods get traded in the same way that any other good gets traded. In their role as money they get traded as mediums of indirect exchange. That money role influences the source and the measure of their own value, but it has no bearing whatsoever on the value of the goods for which people trade them. The real source and measure of the value of money goods abide by the same parameters as all other economic goods—as I will discuss on detail later.
Thus, phrases like “worth 100 dollars” carry no validity in economic logic. When someone pays 100 dollars for an item, that action reveals that the person values the item more than they value the 100 dollars. It reveals nothing about how much more they value the item.
In the next several posts I will address some primary theories of value:
- Intrinsic Value
- Labor Value
- Cost of Production Value
- Subjective Value
I will show why only subjective value theory holds up to logical scrutiny.
I will begin with a discussion of the concept of Intrinsic Value.