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Encyclopedia > Value (economics)

In general, the economic value of something is how much a product or service is worth to someone relative to other things (often measured in money). The various ways of evaluating or explaining a good's value are the subject of the "Theory of Value." An example of Money. ... See also Cost-of-production theory of value Marginal theory of value Labor theory of value Categories: Stub ...


In neoclassical economics, the value of an object or service is often seen as nothing but the price it would bring in an open and competitive market. This is determined primarily by the demand for the object relative to supply. Other economists often simply equate the value of a commodity with its price, whether the market is competitive or not. Neoclassical economics refers to a general approach (a metatheory) to economics based on supply and demand which depends on individuals (or any economic agent) operating rationally, each seeking to maximize their individual utility or profit by making choices based on available information. ... The supply and demand model describes how prices vary as a result of a balance between product availability at each price (supply) and the desires of those with purchasing power at each price (demand). ...


In classical economics, price and value were not seen as equal. In this tradition, to Steve Keen "value" refers to "the innate worth of a commodity, which determines the normal ('equilibrium') ratio a which two commodities exchange." (Debunking Economics, p. 271, ISBN 1-86403-070-4.) To Keen and the tradition of David Ricardo, this corresponds to the classical concept of long-run cost-determined prices, what Adam Smith called "natural prices" and Karl Marx called "prices of production." It is part of a cost-of-production theory of value and price. Ricardo, but not Keen, used a "labor theory of price" in which a commodity's "innate worth" was the amount of labor needed to produce it. Classical economics is a school of economic thought whose major developers include William Petty, Adam Smith, David Ricardo, Thomas Malthus, John Stuart Mill and Johann Heinrich von Thünen. ... Steve Keen is a senior lecturer in economics in the University of Western Sydney. ... David Ricardo (April 18, 1772 – September 11, 1823), a political economist, is often credited with systematizing economics, and was one of the most influential of the classical economists. ... Adam Smith, FRSE, (baptised June 5, 1723 – July 17, 1790) was a Scottish political economist and moral philosopher. ... Karl Heinrich Marx (May 5, 1818, Trier, Germany – March 14, 1883, London) was an immensely influential German philosopher, political economist, and socialist revolutionary. ... Prices of production refers to a concept in Karl Marxs critique of political economy. ... In economics, the cost-of-production theory of value is the belief that the value of an object is decided by the resources that went into making it. ... The labor theory of value (LTV) is a theory in classical economics concerning the value of an exchangeable good or service. ...


In another classical tradition, Marx distinguished between the "value in use" (use-value, what a commodity provides to its buyer), "value" (the socially-necessary labour time it embodies), and "exchange value" (how much labor-time the sale of the commodity can claim, Smith's "labor commanded" value). By most interpretations of his labor theory of value, Marx, like Ricardo, developed a "labor theory of price" where the point of analyzing value was to allow the calculation of relative prices. Others see values as part of his sociopolitical interpretation and critique of capitalism and other societies, and deny that it was intended to serve as a category of economics. According to a third interpretation, Marx aimed for a theory of the dynamics of price formation, but did not complete it. In Marxs critique of political economy, any labor-product has a value and a use value, and if it is traded as a commodity in markets, it additionally has an exchange value, most often expressed as a money-price. ... Socially necessary labour time in Marxist political economy is the source of all value. ... In Marxian political economy, exchange value refers to one of three major aspects of a commodity, i. ... The labor theory of value (LTV) is a theory in classical economics concerning the value of an exchangeable good or service. ... The price of one thing (usually a good) in terms of another; ie, the ratio of two prices. ... The labor theory of value (LTV) is a theory in classical economics concerning the value of an exchangeable good or service. ...


In 1860 John Ruskin published a critique of the economic concept of value from a moral point of view. He entitled the volume Unto This Last, and his central point was this: "It is impossible to conclude, of any given mass of acquired wealth, merely by the fact of its existence, whether it signifies good or evil to the nation in the midst of which it exists. Its real value depends on the moral sign attached to it, just as strictly as that of a mathematical quantity depends on the algebraic sign attached to it. Any given accumulation of commercial wealth may be indicative, on the one hand, of faithful industries, progressive energies, and productive ingenuities: or, on the other, it may be indicative of mortal luxury, merciless tyranny, ruinous chicanery." Gandhi was greatly inspired by Ruskin's book and published a paraphrase of it in 1908. 1860 is the leap year starting on Sunday. ... Upper: Steel-plate engraving of Ruskin as a young man, made circa 1845, scanned from print made circa 1895. ... Unto This Last is an essay on economy by John Ruskin, first published in December 1860 in the monthly journal Cornhill Magazine in four articles. ... Mohandas Karamchand Gandhi (October 2, 1869 – January 30, 1948) (Devanagari: मोहनदास करमचन्द गांधी), called Mahatma Gandhi, was the charismatic leader who brought the cause of Indias independence from British colonial rule to world attention. ...


Economists such as Ludwig von Mises asserted that "value" was always a subjective quality. There was no value intrinsic to objects or things and value derived entirely from the psychology of market participants. Thus, it was false to say that the economic value of a good was equal to what it cost to produce or to its current replacement cost. Ludwig von Mises Ludwig Heinrich Edler von Mises (September 29, 1881 – October 10, 1973) was a notable economist and a major influence on the modern libertarian movement. ...


The theory of value is closely related to that of allocative efficiency, the quality by which firms produce those goods and services most valued by society. The market value of a machine part, for example, will depend upon a variety of objective facts involving its efficiency versus the efficiency of other types of part or other types of machine to make the kind of products that consumers will value in turn. In such a case, market value has both objective and subjective components. Allocative efficiency is the market condition whereby resources are allocated in a way that maximises the net benefit attained through their use. ...


In philosophy, economic value is a subcategory of a more general concept of value, as defined in goodness and value theory or in the science of value. This article or section is in need of attention from an expert on the subject. ... The science of value, or value science, is a creation of philosopher Robert S. Hartman, which attempts to formally elucidate value theory using both formal and symbolic logic. ...


See also

Nominal value is the value of anything expressed in money of the day, versus real value which removes the effect of inflation. ... To act as a store of value, a commodity, a form of money or financial capital must be able to be reliably saved, stored, and retrieved - and be predictably useful when it is so retrieved. ... Value of a product within the context of marketing means the relationship between the consumers expectations of product quality to the actual amount paid for it. ...

External links

  • On Allocative Efficiency

  Results from FactBites:
 
Value (economics) - Wikipedia, the free encyclopedia (708 words)
Others see values as part of his sociopolitical interpretation and critique of capitalism and other societies, and deny that it was intended to serve as a category of economics.
The theory of value is closely related to that of allocative efficiency, the quality by which firms produce those goods and services most valued by society.
In philosophy, economic value is a subcategory of a more general concept of value, as defined in goodness and value theory or in the science of value.
Economic value added - Wikipedia, the free encyclopedia (338 words)
Economic Value Added (EVA) is often defined as the value of an activity that is left over after subtracting from it the cost of executing that activity and the cost of having lost the opportunity of investing consumed resources in an alternative activity.
In the field of corporate finance, economic value added is a way to determine the value created, above the required return, for the shareholders of a company.
Shareholders of the company will receive a positive value added when the return from the equity employed in the business operations is greater than the cost of that capital; see Working capital management.
  More results at FactBites »

 
 

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