Value is thus nothing inherent in goods, no property of them, nor an independent thing existing by itself. It is a judgement economizing men make about the importance of the goods at their disposal for the maintenance of their lives and well-being. Hence value does not exist outside the consciousness of men.
Carl Menger
For centuries, value has been pronounced with the silent prefix “exchange”. Popular expressions like creating value, adding value, extracting value, value added, value proposition and even progressive ideas about shared value are products of thinking about exchange value problem. But be warned, however useful to understanding mainstream economics theories, these concepts have limited or no use when it comes to understanding value in use.
Put simply, the pre-classical Value Problem associated with best use cannot be solved in terms of the solution to the 19th and 29th century reformulated exchange Value Problem associated with markets and prices. Indeed, any attempt to import contemporary ideas about value into a discussion of value in use will just lead to dissonance, confusion, and frustration. The two perspectives on value seldom agree.
As objects of inquiry, pre-classical value in use and neo-classical exchange value are classic Kuhnian paradigms:
“The proponents of competing paradigms practice their trades in different worlds. One contains constrained bodies that fall slowly, the other pendulums that repeat their motions again and again. In one, solutions are compounds, in the other mixtures. One is embedded in a flat, the other in a curved, matrix of space. Practicing in different worlds, the two groups of scientists see different things when they look from the same point in the same direction.”
Kuhn (1972)
This phenomenon clearly illustrated by the expressions “use value” and “value in use”. Separated by only two letters, it is natural to conclude that they are synonyms. But as I will explain, they are confusing antonyms. Opposite concepts with entirely different meanings.
In contemporary economics use value or utility is a subjective concept. Utility refers to the total satisfaction received from consuming a good or service. However, this is a strange and curious form of utility that is disassociated from objects. The objective ability of thing to produce measurable change is not measured or even considered. Rather, utility is defined in terms of an individual’s subjective preferences. For economists, utility is something that derives from an individual’s tastes, wants and desires generated through consumption.
No attempt is made to understand whether exercising the preference results in enhancing the individual’s ability to perform socially useful work in their lives or whether there are more efficient engines for growth than markets. Economists assume that individuals, being rational, are somehow “all knowing” when it comes to the question of whether satisfying their taste through markets represents the “best use” of their capital or is in their (or the corporation for whom they work) “best interest”. The act of market exchange is deemed conclusive proof that an object has been put to its best use.
Of course, an individual may believe or more commonly led to believe, that a given exchange transaction will result in an increase in value. After all, universities offer degrees and corporations offer well-paying jobs to those who are expert in creating the appearance of value in use by manipulating and “nudging” individual preferences. Often without any regard to whether the appearance in any way reflect the actual value in use. In this sense there may be no correlation between things use value and its value in use. Indeed, they can operate independently. The paradox is that a person can be simultaneously satisfied from a use value perspective and dis-empowered from a value in use perspective . Satiated but unfed, the individual is starved of value in use.
In summary, through the lens of neo-classical exchange value, value in use is transformed into use value and the new use value, dissociated from the physical properties of a thing, became nothing more than the largely manufactured appearance of value.
But the transformation of value in use to use value is only the start of the problem. The contemporary version of utility and the subjective theory of value holds future generation hostage to ignorance and the dis-appearance of value in use. Encouraging unexamined passions to decide the best use of private, personal, and common capital is negligent. But having known of the danger of navigating solely by human perception of value in use alone for decades, the continued teaching and practice of economics in its current form must be approaching a crime.
The modern corporation among the longest suffering victims. Individuals can and do protect themselves against the appearance of value. Corporations have neither agency nor choice. Forced to accumulate profits and sacrifice in the pursuit, all things that hold more value in use than money, they have become rich in the poorest of all stores of value. But more on this later.
Value in use is the opposite to use value. As Carl Menger, a founder of the neo-classical value movement reminds us, use value is inherently fictional. On the other hand, value in use is the objective measure of a things potential and ability to produce real change under various conditions.
To understand the “best use” of a thing and whether an individual, corporation or society is better off before or after an event, we need a more reasoned or scientific approach to use and an objective theory of value in use. One that is based not on the under informed and subjective beliefs of individuals, but on the idea that value in use is derived from the intrinsic property and characteristics of things and from the relationship between those things. Only then can we begin to meaningful answer the questions of how value is created and when is value created or destroyed. Creating a sound theoretical basis to test whether a given use is the best use or in the best interest of an individual, corporation or society.