Theory of value (economics)
Encyclopedia
"Theory of value" is a generic
term which encompasses all the theories within economics
that attempt to explain the exchange value
or price
of goods and services. Key questions in economic theory include why goods and services are priced as they are, how the value of goods and services comes about, and for normative value theories how to calculate the correct price of goods and services (if such a value exists). Theories of value fall into two main categories:
Intrinsic (objective) theories
Subjective theories
In either case what are being addressed are general prices, i.e. prices in the aggregate, not a specific price of a specific good or service in a given circumstance. Theories in either class allow for deviations when a particular price is struck in a real-world market transactions, or when a price is set in some price fixing regime.
Generic
Generic or Generics may refer to:* Generic mood, a grammatical mood used to make generalized statements like Snow is white* Generic antecedents, referents in linguistic contexts, which are classes...
term which encompasses all the theories within economics
Economics
Economics is the social science that analyzes the production, distribution, and consumption of goods and services. The term economics comes from the Ancient Greek from + , hence "rules of the house"...
that attempt to explain the exchange value
Exchange value
In political economy and especially Marxian economics, exchange value refers to one of four major attributes of a commodity, i.e., an item or service produced for, and sold on the market...
or price
Price
-Definition:In ordinary usage, price is the quantity of payment or compensation given by one party to another in return for goods or services.In modern economies, prices are generally expressed in units of some form of currency...
of goods and services. Key questions in economic theory include why goods and services are priced as they are, how the value of goods and services comes about, and for normative value theories how to calculate the correct price of goods and services (if such a value exists). Theories of value fall into two main categories:
Intrinsic (objective) theories
-
- see main article: Intrinsic theory of valueIntrinsic theory of valueAn intrinsic theory of value is any theory of value in economics which holds that the value of an object, good or service, is intrinsic or contained in the item itself...
- see main article: Intrinsic theory of value
- Intrinsic theories, as the name implies, hold that the price of goods and services is not a function of subjective judgements.
Subjective theories
-
- see main article: Subjective theory of valueSubjective theory of valueThe subjective theory of value is an economic theory of value that identifies worth as being based on the wants and needs of the members of a society, as opposed to value being inherent to an object....
- see main article: Subjective theory of value
- Subjective theories hold that for an object to have economic value (a non-zero price), the object must be useful in satisfying human wants and it must be in limited supply. This is the foundation of the marginalistMarginalismMarginalism refers to the use of marginal concepts in economic theory. Marginalism is associated with arguments concerning changes in the quantity used of a good or service, as opposed to some notion of the over-all significance of that class of good or service, or of some total quantity...
theory of value. In the context of explaining price, the marginal utilityMarginal utilityIn economics, the marginal utility of a good or service is the utility gained from an increase in the consumption of that good or service...
theory is not a normative theory of value.
In either case what are being addressed are general prices, i.e. prices in the aggregate, not a specific price of a specific good or service in a given circumstance. Theories in either class allow for deviations when a particular price is struck in a real-world market transactions, or when a price is set in some price fixing regime.
See also
- Cost-of-production theory of valueCost-of-production theory of valueIn economics, the cost-of-production theory of value is the theory that the price of an object or condition is determined by the sum of the cost of the resources that went into making it...
- Labor theory of valueLabor theory of valueThe labor theories of value are heterodox economic theories of value which argue that the value of a commodity is related to the labor needed to produce or obtain that commodity. The concept is most often associated with Marxian economics...
- MarginalismMarginalismMarginalism refers to the use of marginal concepts in economic theory. Marginalism is associated with arguments concerning changes in the quantity used of a good or service, as opposed to some notion of the over-all significance of that class of good or service, or of some total quantity...
- Paradox of valueParadox of valueThe paradox of value is the apparent contradiction that, although water is on the whole more useful, in terms of survival, than diamonds, diamonds command a higher price in the market. The philosopher Adam Smith is often considered to be the classic presenter of this paradox...
- Value (economics)Value (economics)An economic value is the worth of a good or service as determined by the market.The economic value of a good or service has puzzled economists since the beginning of the discipline. First, economists tried to estimate the value of a good to an individual alone, and extend that definition to goods...