Economic Value

ECONOMIC VALUE. - Economic value, in its most general meaning, is the importance of things insofar as they answer to the needs of men. It is therefore a subjective valuation, not an objective one; not absolute, but comparative; not permanent, but instantaneous, that is, always relative to the moment and to the circumstances of the valuation.

The whole of economic science, and in particular applied economics, hinges on the concept of economic value and on the necessity of measuring it. The abstractness with which classical economics treated the question, and the attempt to resolve it with the fanciful calculation of hours of labor crystallized in the objects of value (from Ricardo [v.] to Karl Marx [v.]), led to disinterest in the problem and to the well-founded accusation of sterility leveled at economic science: which shows that it prefers the more practical theory of prices.

Economists further distinguish a use value and an exchange value: referring the former to the natural fact that man, whether by instinct or by 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 practically exchanged on the market, and which assigns to each good a purchasing power with respect to each other good.

The determining elements of economic value are first of all the utility and therefore the desirability of the good to be valued, which is expressed in demand; then the actual availability of that good on the market (supply); finally its substitutability by other goods, the possibility or not of postponing its purchase or consumption, and the cost of reproduction should the good be lost.

I. MEASUREMENT OF ECONOMIC VALUE

The common measure of exchangeable goods for the purpose of realizing commutative justice is money (v.): it may be coined, as are the various national metallic or paper currencies, or it may be money of account, that is, not coined but virtual, to be used solely in calculations. A just valuation (that is, the just price)

could only emerge from a rapid comparison, as complete, easy and precise as possible, among all exchangeable goods. The advances of applied economics tend concentrically toward this ideal, oriented toward the unification and technical and instrumental perfection of the market and its auxiliary means, the formulation of standard contracts, the use of indices of value (v. below), and the search for a currency of constant purchasing power across space, time and occupations. It is still held today that gold currency is an effective instrument for the measurement of value. This is true only with very broad approximation, as is confirmed by the continual and extremely costly maneuvers to which States producing gold or possessing large gold reserves are compelled in order to keep its purchasing power unaltered; from the fluctuations of that power and from the far more sensitive fluctuations of paper currencies there originate vast involuntary exploitations, far more serious than premeditated ones, between rich countries and poor countries, between city and countryside, between the norths and souths of every country, between classes and between occupations. 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 the other goods exchangeable for the former, only from a stable equilibrium of all world prices can there arise the constancy of purchasing power of a currency anchored to all the world's currencies. This insight has served not to discourage the attempts, ever more frequent and important, aimed at creating a currency of constant purchasing power, to be obtained by shifting its anchor from gold to labor, 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 money of account of the Venetian and Genoese bankers of the 13th century.

In recent years there have been proposed Lord Keynes's bancor, the unitas of the White-Morgenthau Plan, the free currency of the German-Argentine anarchist Gesell (recently submitted to a plebiscite in Switzerland), the hallis of hallesism (v.). Finally there is the epnoti of the E.P.U. ("European Payments Union"), which, however, is nothing other than the US dollar, just like the unus created by UNESCO for its own particular institutional purposes. Interesting for its scientific character is the hallis, also a money of account, guaranteed not by a gold reserve but by an extremely subdivided world income-reserve, so that the unlimited fragmentation of risk achieves a genuine insurance of capital. It corresponds to the price of the percentage unit of a refined income, that is, free of risk and unlimitedly available: hence of practically constant value. Anchored, in fact, to all national currencies and to all world production, its purchasing power would float steady upon the purchasing powers of all other currencies "like a raft that were as large as the sea."

II. INDEX OF ECONOMIC VALUE

Important for trade is the procedure aimed at transforming the price of a given quality of goods in a given locality into the price of another quality of the same goods in another locality in the world, contracted under the same or different conditions. The transformation is carried out by correcting the original price by means of coefficients or additional terms that take into account the merceological variations in quality, the differential costs of transport, freight, insurance, customs, as well as the conditions of payment and the related guarantees, etc.: that is, by modifying the base price according to indices of quality, of economic and legal distance, and of solvency. The procedure, still imperfect but capable of improvement, promises to be of great help in facilitating trade, in comparing prices and in their worldwide equilibrium.

III. ECONOMIC 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 nature or of charity (human relations within the enterprise, welfare provisions, accident prevention, insurance, the normative part in collective contracts, etc.) which are gradually being resolved through a more widespread and reasoned sense of morality, every other question of social justice would fall away once a perfect ordering of the market were to determine automatically and beyond appeal, as well as in a manner persuasive to all, the just price of products and of labor, withdrawing them from arbitrariness, from compromise and from the influence of politics. In this way each person would be guaranteed the maximum real price of his useful labor, which constitutes the object of his social right.

IV. CAPITAL GAIN

From the fact that market value is generally higher than the cost of production, and following the Ricardian concept (v. RICARDO) that the value of a product or service depends on the hours of labor crystallized in it, K. Marx deduced that the entrepreneur appropriated a part of the value owed to labor: industrial profit (v.) would be the result of this.

A consequence and proof of exploitation would be the fact that workers are unable, with their wages, to buy on the market all the goods that they themselves have produced; part of which therefore remains unsold. This is contradicted by the facts, inasmuch as crises are generally crises of under-consumption and arise from many causes: intermediary and useless labor, waste and destruction in war and in peace, the high cost of buying and selling and of capital, imperfect organization of production and of the market, imperfect circulation of money, monetary devaluation, etc. Industrial profit, moreover, continually whittled away by competition, is only one of the causes, neither the first nor the greatest, destined to disappear together with the others.

Mario Baronci