Value (economics)
Value as defined in economics is only a small subcategory of
value in general, as defined in
value theory or in the
science of value.
In general, the economic value of something is how much a product or service is worth to someone relative to other things (often measured in
money).
In
neoclassical economics, the value of an object or service is often seen as nothing but the price it would bring in an open and competitive market. This is determined primarily by the demand for the object relative to
supply. Other economists often simply equate the value of a commodity with its price, whether the market is competitive or not.
In
classical economics, price and value were not seen as equal. In this tradition, to
Steve Keen "value" refers to "the innate worth of a commodity, which determines the normal ('equilibrium') ratio a which two commodities exchange." (
Debunking Economics, p. 271,
ISBN 1-86403-070-4.) To Keen and the tradition of
David Ricardo, this corresponds to the classical concept of long-run cost-determined prices, what
Adam Smith called "natural prices" and
Karl Marx called "
prices of production." It is part of a
cost-of-production theory of value and price. Ricardo, but not Keen, used a "
labor theory of price" in which a commodity's "innate worth" was the amount of labor needed to produce it.
In another classical tradition, Marx distinguished between the "value in use" (
use-value, what a commodity provides to its buyer), "value" (the
socially-necessary labour time it embodies), and "
exchange value" (how much labor-time the sale of the commodity can claim, Smith's "labor commanded" value). By most interpretations of his
labor theory of value, Marx, like Ricardo, developed a "labor theory of price" where the point of analyzing value was to allow the calculation of
relative prices.
Others see values as part of his sociopolitical interpretation and critique of capitalism and other societies, and deny that it was intended to serve as a category of economics. According to a third interpretation, Marx aimed for a theory of the dynamics of price formation, but did not complete it.
In
1860, the year after oil was first struck in
Titusville, Pennsylvania,
John Ruskin published a critique of the economic concept of value from a moral point of view. He entitled the volume
Unto This Last, and his central point was this: "It is impossible to conclude, of any given mass of acquired wealth, merely by the fact of its existence, whether it signifies good or evil to the nation in the midst of which it exists. Its real value depends on the moral sign attached to it, just as strictly as that of a mathematical quantity depends on the algebraic sign attached to it. Any given accumulation of commercial wealth may be indicative, on the one hand, of faithful industries, progressive energies, and productive ingenuities: or, on the other, it may be indicative of mortal luxury, merciless tyranny, ruinous chicanery."
Gandhi was greatly inspired by Ruskin's book and published a paraphrase of it in 1908.
Economists such as
Ludwig von Mises asserted that "value" was always a subjective quality. There was no value intrinsic to objects or things and value derived entirely from the psychology of market participants. Thus, it was false to say that the economic value of a good was equal to what it cost to produce or to its current replacement cost.
The theory of value is closely related to that of
allocative efficiency, the quality by which firms produce those goods and services most valued by society. The market value of a machine part, for example, will depend upon a variety of objective facts involving its efficiency versus the efficiency of other types of part or other types of machine to make the kind of products that consumers will value in turn. In such a case, market value has both objective and subjective components.
*
Real versus nominal value*
Store of value*
Value (marketing)*
On Allocative Efficiency 
