The use-values, coat, linen, &c., i.e., the bodies of commodities, are combinations of two elements -- matter and labour. If we take away the useful labour expended upon them, a material substratum is always left, which is furnished by Nature without the help of man. The latter can work only as Nature does, that is by changing the form of matter. Nay more, in this work of changing the form he is constantly helped by natural forces. We see, then, that labour is not the only source of material wealth, of use-values produced by labour. As William Petty puts it, labour is its father and the earth its mother.What do people mean when they use the term 'value'? Four competing defintions are in use:
[Karl Marx, Capital, Volume 1, Chapter 1, Section 2, online at http://www.english.ilstu.edu/strickland/495/etexts/ch01b.html.]
'When I use a word,' Humpty Dumpty said, in rather a scornful tone, 'it means just what I choose it to mean -- neither more nor less.'
'The question is,' said Alice, 'whether you can make words mean so many different things.'
'The question is,' said Humpty Dumpty, 'which is to be master -- that's all.'
[Lewis Carroll, Through the Looking Glass, Chapter 6, online at http://www.sabian.org/Alice/lgchap06.htm.]
1) Utility
This is a subjective quality. There is, as far as we can measure, no utility value implicit in objects or things; it derives entirely from the capricious psychology of individuals and groups. Because it is not measurable, theorising about it tends not to be particularly helpful.
People, it is true, will be prepared to pay more for things which are more useful to them; but in actuality that is not what they pay - they pay only what the current market price is, and that is determined by supply as much as demand. What they would be prepared to pay in situations with different levels of supply is not known, could only be guessed at by means of marketing research surveys or application of arbitrary rules of thumb to estimate supply-demand curves. Basing any intellectual endeavours on such shakily measured foundations would be foolish.
Marginal utility is measurable - it is simply price, described below. But marginal utility is not related to utility as a whole - the utility of the last thing of its kind produced is not the same as the utility of all the things of its kind. Bread is low in marginal utility as measured by price because the utility of producing yet another loaf of bread is low. But bread, or staple foodstuffs in general, would most often be thought of as being very useful, even most useful - that is, of high utility. The problem is that that feeling of how useful a thing like bread is, is subjective and unmeasurable.
2) Price
Price is obviously measurable. But it is not 'utility', nor is it even related in any apparent way to 'utility' - we are dealing here with a different meaning for the word 'value'.
Because price fluctuates according to the vagaries of supply and demand, some people prefer a more stable concept to apply the label 'value' to. That can be provided by imagining a long term price or natural price, which the actual price would be believed to tend towards in the long term when fluctuations were ironed out. That, it can be supposed, would be equal to the cost of production. One drawback of using imaginary concepts such as long term price is that the long run never actually arrives. Every change in technology ripples through an economy causing new price levels to appear. And constantly changing fashion means changes in demand, again rippling price changes through the economy. So the connection between price on the one hand and cost ('long term price') on the other is so tenuous as to mean we are really dealing with a third definition of the word 'value'.
3) Cost
Cost (of inputs) is different to both price and utility, and, at least for utility, is not
even related to it in any apparent way.
Input costs are categorised three ways: land, labour, capital. Capital is itself ultimately manufactured from the first two, so could, by taking the analysis back far enough, be removed from the picture, and replaced with its own component land and labour input costs. If that is done, we are left with two separate factors of production. That is a problem if there is a desire to draw up simple relations between cost
and other concepts, because the relative contribution to cost of the land and labour factors can only be calculated using their relative prices.
At least for land, there is no way of replacing its price to its natural price, its cost of inputs. Land cannot be manufactured, it has no inputs to assign a cost to.
So defining value as cost rather than price, ends up by defining value as ultimately the price of land and labour.
Labour has sometimes been imagined to have a measurable cost, the cost of replacing a labourer in terms of food and housing required to have children created and raised to working age. But that would really only apply to some kind of horrible slave breeding program and has thankfully disappeared as a conscious idea long ago. Free men sell their leisure time when they provide labour, and the price their leisure is worth to them is dependant only on their whims at that particular moment. No 'natural price' or 'cost of input' can be imagined for free workers.
Because both land and labour have no 'cost', there is no non arbitrary way of calculating their relative contributions to cost. Price could, arbitrarily, be used instead, or individual thinkers could arbitrarily decide on what they feel the 'costs' of land and labour should be counted as, based on their own particular prejudices. If, for example, you despised landowners or peasants or environmentalists, you might set low costs for land input. Or you might take that to an extreme and assign a zero cost for land input.
Assigning a zero cost to land is arbitrary, but it does allow a single variable - price of labour - to determine cost. And labour price is determined by humans, so has some relationship to utility- it is the price people at the margin will give up their leisure time to work.
But of course, the price of land is not zero. Often the contributing prices of land and labour inputs are similar. Land (and natural resources) prices are especially important in the cost of foodstuffs, housing, textiles, electricity, gas, oil. These are important, dominant, sectors in any economy.
Nevertheless, because people do want to have a definition of 'value' as costs excluding land input, then it is necessary to add a fourth(!) definition of the word to the list:
4) Labour
This is the 'cost' of labour, the marginal price of labour input.
Note that this is a labour definition of value, rather than a labour theory of value. It is different from all of the four definitions of value above, except in the special case of commodities which have a
vanishingly small land input, when definitions (4) and (3) become the same.
So, is Value Valuable?
The answer is, I think, not very.
It might be better to cease referring to 'value' at all, and instead use unambiguous phrases: price, cost, labour,
when embarking on discussion of ideas. Clarity of language will however be a drawback for some:
authors with woolly ideas will be unable to chance their way
around holes in their arguments by switching definitions midstream. To them, value is indeed valuable.
I suppose we have returned to our subjective quality of
utility - value is in the eye of the beholder.