VALUE IN ECONOMIC THEORY

 

To understand the centrality of value in economic theory, consider these simple situations. If I exchange an apple with another person who is willing to exchange it for a banana, what we have engaged in is simple barter. And the reason why we have exchanged an apple with a banana and vice versa is that the use value of the banana is greater to me than that of the apple, and the opposite is true for my counterpart. In barter, the essence of use value is evident: it is a relationship between human need and objects. Use values are the objectification of human needs.

 

Now consider a different situation. I sell an apple for one dollar from my counterpart. Next, with the dollar obtained, I purchase a banana from a third party. Here, the ultimate outcome for me is the same: I have obtained the use value of a banana in exchange for the use value of an apple. But the crucial difference is that now I have achieved this outcome not through barter, involving strictly use values, but rather through a monetary medium, one dollar. The difference is that now what the apple and the banana have in common are no longer the respective use values between the bartering parties, but rather the exchange values of the apple and the banana which are socially quantified in the monetary medium of one dollar.

 

In other words, what is happening in this monetary exchange as against the barter is that now the transaction involves exchange values which, unlike use values, no longer relate purely to the subjective needs of the parties involved (two for barter) but rather to the socially objective valuation of the exchanging parties through the monetary medium. Thus, where the monetary medium is concerned, we can see that exchange value is socially objective instead of being subjective as in the case of barter. Exchange value removes the direct link between human needs and objects by introducing money as filter between them and other human beings. Money as exchange value has now become socially objectified use value or wealth.

 

The question now is: - how is it at all possible for two very different objects, with utterly incomparable use values – an apple and a banana – to be equated not through direct use values (I need a banana and my counterpart needs an apple, so we agree on the barter), but rather through an abstract socially objective validated exchange value that is fixed through the monetary medium at one dollar? What is the quality that one dollar indicates which makes two utterly different objects measurable and equivalent? This common quality measurable in a socially objective manner we call “exchange value”. But what exactly is the substance, the content - the essence, the quintessence, the quidditas - of this “value”?

 

And further we may ask: what then is the difference between use value and exchange value? It is not sufficient to say that use values are subjective and exchange values are socially objective – because surely there is a social dimension to use values as well – that is why they are exchanged through barter just as exchange values are exchanged through money. Indeed, it may be said that use values are more socially significant than exchange values because they relate to the actual organic needs of human beings as against the more mercantilist or transactional or ephemeral desires of social agents who exchange objects for money so as to realise more money than when the exchange began! Because the ultimate aim of agents who engage in exchange through the monetary medium is not so much, and often it is not at all, to obtain a final use value but rather to realise a greater quantity of the monetary medium, of socially objective value, than the one with which they began the exchange!

 

And yet we know that the objectification of exchange value, the monetary medium, must also have an ultimate use value or human need that justifies the whole process of exchange of exchange values through money. The difference between use value and exchange value is that with the former the focus is on the intrinsic objective usefulness of the object, whereas with exchange value the focus is almost exclusively on the extrinsic ability of the object to generate a profit, on its “exchangeability”. Certainly, in both cases, the use value of the object plays a role. But in the case of exchange value, use value is almost irrelevant or at least comes a distant second to the ulterior motive of the ability of the object to generate a profit. Hence, the contrast between the two kinds of value could not be starker: use value is founded on human needs first and foremost, on the limited and specific function and purpose of the object; exchange value is founded almost entirely on the endless accumulation of exchange value as a source of profit.

The next question then arises: what exactly is the content of exchange value as a source of endless accumulation of value or profit? In other words, what is the use value of exchange value? What human needs does exchange value serve or satisfy?