A theory of value is a theory about what in the physical world confers value on things; why do different things have different price tags from each other? Is it the cost of producing the good or service in question? Is it the time between the beginning and end of production? Is it the labour that the workers put into production? Is it just a form of preference or opinion inside people's own minds?
Any theory of value is supposed to describe how value literally functions in economics, not the day-to-day present state of affairs surrounding the economist, which might differ from what they envision. Case in point, Marx was observant enoug to notice that markets do not price goods according to the labour that went into them, but on the other hand believed that the true value of things was imputed by the labour of the workers.
This is the distinction between the epistemology of economic theory and the occurring practice at any given time. For example, the market process was deliberately done away with by the governments of many states during the wave of state socialist adventures in the 20th Century. People continued to survive in these countries mainly through black markets .
Objective value theories hold that true value is imputed in stuff itself, and that the just and unjust apportionment of produced stuff or proceeds from sale of produced stuff can be discovered with reference to this source.
But there are several to choose from. All rely on some physical process or behaviour giving value to things, whether it's the cost of production, the time passed, or the labour expended. Smith held to something resembling a cost theory of value and demonstrated that free trade led to falling prices over time. Ricardo plumped for labour, which inspired Proudhon and Marx to do the same.
Unbeknownst to Ricardo, once labour becomes the explanation for where just or fair or true prices emerge it becomes an intuitive next step to say that markets don't represent this and so are fraudulent or downright oppressive. Marx developed the idea of exploitation as the gap between the wages of workers and the total revenue of their capitalist employer. Only a gap of zero would mean no exploitation.
Thankfully Carl Menger, William Stanley Jevons and Leon Walras saved economics from this nonsense in the 1870's. While they all employed slightly different methods they all ultimately came up with marginalism, the ultimate subjective theory of value that killed objective value theory for good in mainstream econ.
Marginalism is the idea that a person experiences positive and negative emotional and psychological feedback as a consequence of the actions they take, or pleasure and displeasure, utility and disutility. Marginalist economists say that if a person weighs up the utility and disutility they think they'll get from performing an action and the total utility is greater than the total disutility they will perform the action.
This is massively pared down but it's enough to get around the difference between objective and subjective value. Once one hears the subjective value argument the objective value one suddenly looks ridiculous; how could the value that determines prices be in things themselves? Where the hell would it be stored? No, value exists in our minds and is nothing more than our subjective appraisal - all humans exhibit subjectivity, that is we are individuals with our own individual frames of reference - of the ends we could attain and the means with which we could attain them.
this leads to the supply and demand explanation of prices and shows how prices reflect true relative scarcity of materials - the supply of and demand for the good or service on each side of a trade. On the subject of trade, objective value theorists held trade to be a single exchange of equal values. In subjective econ, however, each party to a trade is exchanging a less desirable before-trade state of being to a more desirable after-trade state. Thus trade is mutually unequal because two exchanges are taking place.
Any questions?
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