ECONOMIC VALUE. — Economic value, in its most general meaning, is the importance of things insofar as they respond to human needs. It is therefore a subjective, not an objective, assessment; not absolute, but comparative; not permanent, but instantaneous, that is, always relative to the moment and circumstances of the assessment.
The whole of economic science, and applied economics in particular, revolves around the concept of value and the need to measure II. The abstractness with which classical economics treated the question, and the attempt to resolve it through the fanciful calculation of the hours of labor crystallized in the objects possessing value (from Ricardo [v.] to Carlo Marx [v.]), led to a loss of interest in the problem and to the well-founded accusation of sterility leveled against economic science—which shows a preference for the more practical theory of prices.
Economists still distinguish between use value and exchange value: the former refers to the natural fact that man, whether by instinct or reflection, places the goods he needs on a hierarchical scale of subjective worth, that is, of utility; while the latter is the average value according to which goods are actually exchanged on the market, assigning each good purchasing power in relation to every other good.
The determining elements of economic value are, first of all, the utility and hence the desirability of the good to be assessed, which is expressed in demand; then the actual availability of that good on the market (supply); and finally its substitutability by other goods, whether or not it is possible to postpone its purchase or consumption, and the cost of reproducing it should the good be lost.
I. MEASUREMENT OF ECONOMIC VALUE
The common measure of exchangeable goods, for the purpose of achieving commutative justice, money (v.): it may be coined, as are the various national metallic or paper currencies, or money of account, that is, uncoined but virtual, to be used solely in calculations. A correct valuation (that is, the just price)could arise only from a rapid comparison, as complete as possible, easy and precise, among all exchangeable goods. The advances of applied economics converge upon this ideal, directed toward the unification and technical and instrumental perfection of the market and its auxiliary means, the formulation of standard contracts, the use of value indices (v. below), and the search for a currency with constant purchasing power across space, time, and professions. Even today, gold money is regarded as an effective instrument for measuring value. This is true only as a very broad approximation, as demonstrated by the continuous and extremely costly measures to which gold-producing states or those possessing large gold reserves are compelled in order to maintain its purchasing power unchanged; from fluctuations in this power, and from those of paper currencies, which are much more pronounced, arise extensive involuntary exploitations, far more serious than those deliberately planned, between rich and poor countries, between towns and countryside, between the northern and southern regions of every country, and between classes and professions. The class struggle has its roots here.
Since the value of a good, and therefore also of gold, is a function of the value of all other goods exchangeable for it, only from a stable equilibrium of all world prices can there arise constancy of purchasing power in a currency anchored to all the world’s currencies. This insight has served to prevent discouragement of the increasingly frequent and important attempts aimed at creating a currency of constant purchasing power, to be achieved by shifting its anchor from gold to labour, or to the volume of exchanges, or to one or another widely consumed commodity (grain), to typical services (transport), or even to entirely conventional values, in the hope of reproducing the money of account of the Venetian and Genoese bankers of the thirteenth century.
In recent years, lord Keynes’s bancor, the unitas of the White-Morgenthau Plan, the monnaie franche of the German-Argentine anarchist Gesell (recently submitted to a plebiscite in Switzerland), and the hallis hallesism (v.) have been proposed. Finally, there is the epnoti of the E.P.U. (“European Payments Union”), which, however, is nothing other than the U.S. dollar, just as the unus created by UNESCO for its particular institutional purposes is. The hallis is of interest for its scientific character; it too is money of account, guaranteed not by a gold reserve but by an extremely subdivided world income reserve, so that the unlimited fragmentation of risk effects a genuine insurance of capital. It corresponds to the price of the percentage unit of a refined income, that is, one free from risk and available without limit: hence, one of practically constant value. Anchored, in fact, to all national currencies and all world production, its purchasing power would float steadily upon the purchasing powers of all other currencies “like a raft as large as the sea.”
II. INDICES OF ECONOMIC VALUE
Important for trade is the procedure whereby the price of a given quality of merchandise in a given locality is transformed into the price of another quality of the same merchandise in another place in the world, contracted under the same or different conditions. The transformation is effected by adjusting the original price by means of coefficients or additional terms that take account of variations in the quality of the merchandise, differential costs of transport, freight, insurance, customs duties, as well as the conditions of payment and the corresponding guarantees, etc.: that is, by modifying the base price according to indices of quality, economic and legal distance, and solvency. The procedure, still imperfect but capable of improvement, promises to be of great assistance in facilitating trade, comparing prices, and achieving their equilibrium throughout the world.III. VALUE IN SOCIOLOGY
The central problem for sociology as well is the measurement of value, particularly in relation to labor. Apart from questions of a moral or charitable nature (human relations within the enterprise, welfare provisions, accident prevention, insurance, the normative component of collective agreements, etc.), which are gradually being resolved through a more widespread and reasoned sense of morality, every other question of social justicewould disappear if a perfectly ordered market automatically and irrevocably determined—persuasively for everyone, moreover—the just price of products and labor, removing them from arbitrariness, compromise, and the influence of political policies. In this way, everyone would be guaranteed the maximum real price for his useful labor, which constitutes the object of his social right.
IV. SURPLUS VALUE
From the fact that market value is generally higher than the cost of production, and following the Ricardian concept (v. LEÓN, RICARDO) that the value of a product or service depends on the hours of labor crystallized in it, C. Marx deduced that the entrepreneur appropriated a portion of the value due to labor: profit (v.) would be its result.A consequence and proof of exploitation would be the fact that workers are unable, with their wages, to purchase on the market all the goods that they themselves have produced; some of these therefore remain unsold. This is contradicted by the facts, since crises are generally crises of underconsumption and originate from many causes: intermediary and useless labor, waste and destruction in war and peace, the high cost of buying and selling and of capital, imperfect productive and market organization, imperfect circulation of money, monetary devaluation, etc. Industrial profit, moreover, continually reduced by competition, is only one of the causes, neither the first nor the greatest, destined to disappear along with the others.