ECONOMIC VALUE. — In its most general sense, economic value is the importance of things in so far as they meet human needs. It is therefore a subjective evaluation, not an objective one; not absolute, but comparative; not permanent, but instantaneous, i.e., always relative to the moment and circumstances of the evaluation.
The entire science of economics, and in particular applied economics, hinges on the concept of economic value and the necessity of measuring II. The abstractness with which classical economics treated the question, and the attempt to resolve it through the fanciful calculation of the hours of labour crystallised in the subjects of value (from Ricardo [v.] to Karl Marx [v.]), led to a disregard for the problem and to the well-founded accusation of sterility levelled at 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, both by instinct and reflection, places the goods he needs in a hierarchical scale of subjective esteem, i.e., of utility; the latter is the average value according to which goods are practically exchanged in the market, and which assigns to each good a purchasing power in relation to every other good.
The determining elements of economic value are, first and foremost, utility and hence the desirability of the good to be evaluated, which is expressed in demand; then the actual availability of that good on the market (supply); finally, its substitutability with other goods, the possibility or impossibility of deferring its purchase or consumption, and the cost of reproduction should the good be lost.
I. MEASUREMENT OF ECONOMIC VALUE
The common measure of goods exchanged in order to realise commutative justice is money (v.): it may be coined, as are the various national metallic or paper currencies, or it may be a unit of account, i.e., uncoined but virtual, used solely for accounting purposes. A just valuation (i.e., the just price)could only emerge from a rapid comparison, as complete, easy and precise as possible, among all exchangeable goods. Towards this ideal, the progress of applied economics is directed concentrically, aiming at the unification and technical and instrumental perfection of the market and its auxiliary means, the formulation of contracts, the use of value indices (v. below), and the search for a currency with a constant purchasing power in space, time and professions. It is still held today that gold money is an effective instrument for measuring value. This is true only with a very broad approximation, as evidenced by the continuous and costly measures to which gold-producing States or those holding large gold reserves are compelled in order to maintain purchasing power unchanged; from the fluctuations in this purchasing power, and from the far more sensitive fluctuations of paper currencies, there arise vast involuntary exploitations, far more serious than premeditated ones, between rich and poor countries, between cities and countryside, between the northern and southern regions of every country, between classes and between 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 exchangeable goods, only a stable equilibrium of all world prices can bring about the constancy of the purchasing power of a currency anchored to all world currencies. This insight has not discouraged increasingly frequent and important attempts to create a currency of constant purchasing power, by shifting its anchor from gold to labour, or to the volume of exchanges, or to one or another staple commodity (wheat), to typical services (transport), or even to entirely conventional values, in the hope of reproducing the unit of account of the Venetian and Genoese bankers of the 13th century.
In recent years, proposals have been made for Lord Keynes’s bancor, the White-Morgenthau unitas, the anarchist German-Argentinian Gesell’s franca (recently submitted to a plebiscite in Switzerland), the hallis of hallesism (v.). Finally, there is the epunit of the E.P.U. (European Payments Union), which is nothing other than the US dollar, like the unus created by UNESCO for its specific institutional purposes. Of interest for its scientific character is the hallis, also a unit of account, guaranteed not by a gold reserve but by a world income reserve, extremely subdivided so that the unlimited fragmentation of risk realises a genuine insurance of capital. It corresponds to the price of the percentage unit of a refined income, i.e., free from risk and infinitely available: hence of practically constant value. Indeed, anchored as it is to all national currencies and to all world production, its purchasing power would float, steady, above the purchasing powers of all other currencies, like a raft as vast as the sea.
II. INDICES OF ECONOMIC VALUE
Important for exchanges is the procedure aimed at transforming the price of a given quality of a commodity in a given locality into the price of another quality of the same commodity in another world locality, traded under the same or different conditions. The transformation is effected by correcting the original price by means of coefficients or additional terms that take account of variations in the quality of the commodity, of differential transport costs, freight, insurance, customs duties, as well as payment conditions and related guarantees, etc.: in other words, by adjusting the base price according to indices of quality, economic distance, legal and solvency conditions. The procedure, still imperfect but capable of improvement, promises to be of great assistance in facilitating exchanges, comparing prices and achieving world price equilibrium.III. VALUE IN SOCIOLOGY
The central problem for sociology, too, is the measurement of particular value in relation to labour. Apart from questions of a moral nature or of charity (human relations in the enterprise, social security, accident prevention, insurance, normative aspects in collective contracts, etc.), which are gradually being resolved through a more widespread and reasoned sense of morality, every other question of social justicewould disappear if a perfect market order automatically and unappealably determined, and moreover persuasively for all, the just price of products and labour, removing them from arbitrariness, compromise and the influence of politics. In this way, everyone would be guaranteed the maximum real price for their useful labour, constituting the object of their social right.
IV. SURPLUS VALUE
From the fact that market value is generally higher than production cost, and following Ricardo’s concept (v. LEÓN, RICARDO) that the value of a product or service depends on the hours of labour crystallised in it, K. Marx deduced that the entrepreneur appropriated a part of the value due to labour: industrial profit (v.) would be the result.The alleged consequence and proof of exploitation would be the fact that workers, with their wages, cannot purchase on the market all the goods they themselves have produced; part of which therefore remains in inventories. This is belied by the facts, since crises are generally under-consumption crises and arise from many causes: unnecessary and wasteful intermediary labour, destruction in war and peace, high costs of buying and selling and of capital, imperfect productive organisation of the market, imperfect circulation of money, monetary devaluation, etc. Industrial profit, moreover, is limited by competition and is only one of the causes, neither the first nor the greatest, destined to disappear along with the others.