Value Theory

The concept of value is a fundamental economic category, the subject of which is extremely difficult to understand and analyze.

Classical economists, such as Adam Smith and David Ricardo, separately considered the exchange value (the ability of goods to exchange for others) and use value (utility, the ability of the product to satisfy any need). The basic elements of the labor theory of value developed by them are aimed at analyzing the nature of the exchange value. A complete form of this theory was in the economic writings of Karl Marx.

Supporters of the Austrian economic school deny the labor nature of value. They emphasize the utility (use value) of the commodity, as the main motive for the exchange. They believe that the proportion of exchange dictates usefulness and rarity, as well as the desire to possess useful and rare objects.

Labor theory of value

According to this theory, the basis of value is socially necessary working time (labor expenditure) for the reproduction of goods. Marx noted that the cost of goods depends not so much on the expenditure of working time in their direct production, as on the expenditure of working time for the production of similar goods under current conditions. The work is not meant to be specific, but abstract – simplified and averaged for the current typical production conditions. Complex, skilled labor per unit of time can create more value than simple, unskilled labor.

The theory of marginal utility

The term “marginal utility” was introduced into economics by Friedrich von Wieser (1851-1926). According to this theory, the value of goods is determined by their marginal utility by subjective assessments of the ability of the goods to meet human needs. The marginal utility of a good denotes the benefit that the last unit of this good, consumed from the totality of a multitude of similar goods, brings. In the process of gradual satisfaction of needs of the subject utility of the next new thing falls.

Subjective value is a personal assessment of the goods by the consumer and the seller; objective value is the exchange proportions, prices that are formed in the course of competition in the market. In this case, the rarity of the goods is declared a cost factor.

A variety of the theory of marginal utility is the laws of Gossen.

Perhaps at the moment, it is the theory of marginal utility (English Marginal Value Theory) adheres to the bulk of Western academic economists.

Cost theories

Quite popular theories, which deduce cost from production costs. But all of them are forced to operate with prices expressed regarding the amount of money. The cost of labor also applies to costs. The difficulty for such theories is the explanation of the nature of the value of money itself and the formation of the value of labor.