A Word About Value

It has been an interesting experience in my travels through so many pieces of literature by economists who seem to struggle with and about what it means to say value in use compared to a value in exchange. The reason they struggle is because they think they have to find some correlation and some absolute meaning that the word must share in the two different applications.

There really is no big problem if we realize that we are talking about two different animals using the same phonetic structure. Value in use speaks to what importance something has to its owner. That’s simple to grasp. An old garden rake, a pair of old sneakers, a portrait of a great grandmother and so on and so on. All of these have some value in use to their owner and that value can be rated using any system its owner desires. It might be numbers. It might be letters. They could be letters and colors. As long as the owner understands his system of grading the importance of a thing in his own life he can use any system he wants and it will make sense.

Value in exchange is a different animal. It is a value compared to the value of something else, in terms of the thing it is being exchanged for. So each exchanged item is being rated according to a quantity of the thing it is being exchanged for. And those exchange values will be determined by the people performing the exchange. They will be negotiating and developing a mutual understanding and agreement about what the owners will exchange their services for. Services in this case meaning production of tangible goods or just time creating some change in conditions.