Theory of value (economics)
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"Theory of value" is a generic term which encompasses all the theories within economics that attempt to explain the exchange value or price of goods and services. Key questions in economic theory include why goods and services are priced as they are, how the value of goods and services comes about, and—for normative value theories—how to calculate the correct price of goods and services (if such a value exists). Theories of value fall into two main categories:
Intrinsic theory of value
Intrinsic theories, as the name implies, hold that the price of goods and services is not a function of subjective judgements. This is the basis for the labor theory of value.
Labor theory of value
The labor theory of value asserts that the economic value of a good or service is determined by the total amount of socially necessary labor required to produce it. When speaking in terms of a labor theory of value, value without any qualifying adjective theoretically refers to the amount of labor necessary to the production of a marketable commodity, including the labor necessary for the development of any capital used in the production process. Both David Ricardo and Karl Marx attempted to quantify and embody all labor components in order to develop a theory of the real, or natural, price of a commodity.
In either case, what is being addressed are general prices—i.e., prices in the aggregate, not a specific price of a particular good or service in a given circumstance. Theories in either class allow for deviations when a particular price is struck in a real-world market transactions, or when a price is set in some price fixing regime.
Subjective theory of value
Subjective theories hold that for an object to have economic value (a non-zero price), the object must be useful in satisfying human wants and it must be scarce. This is the foundation of the marginalist theory of value. In the context of explaining price, the marginal utility theory is not a normative theory of value.
- Cost-of-production theory of value
- Labor theory of value
- Paradox of value
- Power theory of value
- Utility theory of value
- Value (economics)
- Gilman, D. C.; Thurston, H. T.; Colby, F. M., eds. (1905). "Value (political economy)". New International Encyclopedia (1st ed.). New York: Dodd, Mead.
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