On May 11, 2016 I posted an article describing the source of economic value. I revisit that subject because of its vital importance to economic reasoning.
In this post I will respond to some questions which have arisen since I posted that article more than two years ago. I’m sure that these questions are not all-inclusive. Thus, I will address the source of value when it becomes pertinent to other topics on this blog.
Validation of Source
How do we know that individuals are the only source of value?
Of all the sources that have been proposed for economic value, only the individual as the sole source holds up to logical scrutiny. Every other source, whether it be intrinsic value, labor input, or production cost, require some modification when looked at in detail. The only element consistently involved in the determination of value consists of individual people.
Economic goods seem to have different values under different circumstances and different uses. This fact negates the validity of any intrinsic value.
The production of nearly identical economic goods can require vastly different degrees of labor in terms of time and quality. Thus, no consistency exists in the labor theory of value.
Different producers of nearly identical economic goods can have significantly different cost structures. The cost of production theory of value also fails logical tests.
On the other hand, the existence of value always involves individuals.
Use or Exchange
Is there a difference between use value and exchange value?
Some theorists have attempted to distinguish between “use value” and “exchange value.” From the standpoint of source these distinctions make no difference. From the standpoint of the individual “exchange” consists of just another form of use. This provides yet another consistency in advocating that individuals provide the only source of economic value.
Value of Money
Does money have a different source of value than other economic goods?
Some people have the mistaken impression that money has a different source of value than other economic goods. This could not be further from the truth, for money consists of just another economic good (or the claim for an economic good.) The only significant difference on this good is that it’s held for the purpose of indirect exchange. It has, however, exactly the same source of value as does any other economic good.
Having a logically consistent source of economic value plays a critically important role in the development of logically consistent economic theory.
The development of reliable theories in any field of study relies on consistent fundamental premises. The same applies to the source of value in the development of any reliable economic theory. The only consistently fundamental premise in the development of theories of value consists of individuals as the source of value.
I shall return to the importance of this fact many times in the course of my blog entries.