What is the way economics distinguishes between items that people buy to use/keep, and people just buy to sell at a higher price to other sellers? I see both referred to as “commodities”, and both have “intrinsic value” (People will pay for them), but they seem clearly different to me.


What is the way economics distinguishes between items that people buy to use/keep, and people just buy to sell at a higher price to other sellers? I see both referred to as “commodities”, and both have “intrinsic value” (People will pay for them), but they seem clearly different to me.

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Commodities are goods which are basically uniform; crops & minerals are typical examples (corn is corn, copper is copper).

Intrinsic value is value from actually using/consuming the thing (e.g., using gold to manufacture high-quality electronics) as opposed to value from selling it.

commodities are expendable, you eat the crops we don’t save them (though you can hang colorful indian corn as decor.)

You buy paint for your house. But a painting is usually valued much more than the cost of materials and labor.

Now something that can move from commodity to intrinsic are cars. Most are commodities, we buy them, we drive them, after 10 years maybe 20 years they are scape, junk. But some cars pass through commodity phase and become collectible like just about any car that is still drivable 50 years later.

In communist schools of thought you may differentiate these two things as private property (things owned for the purpose of producing capital, often by selling) and personal property (things owned for personal use).

Commodities are fungible, by which economists mean that there is little to no differentiation between different providers. It’s possible for the same broad category to contain both commodities and non-commodities. Consider underwear. If you’re buying it in a 6-pack at Walmart, you’re purchasing a commodity where the only differentiation tends to be price. If you’re buying it at a lingerie store, there are design considerations that make it non-fungible.

Intrinsic value refers to a value calculated from underlying assets (it has nothing to do with “people will pay for them”). Your car has an ‘intrinsic value’ from the steel and plastic that goes into it. Intrinsic value is normally used as a practical floor for the cost of producing a good.

In general, commodities have high intrinsic value compared to their price while goods with low intrinsic value are more suited to high profits from speculation.

Marxist economics have a classic differentiation here, where items to keep/use only have a relevant *use value* and are referred to as such (or things, objects, whatever), whereas the other type of item – one that you only purchase in order to sell it again for a higher price – are specifically considered *commodities*, the process being *commodification*.

Well the first example is an item you consume.

The second example is acquiring inventory to re-sell.

In macroeconomic accounting identities one would fall under consumption spending and the other would fall under investment spending.

I’m not a professional economist, but in my interpretation, there are three kinds of value that every item has:

– Utility value, the value you get from owning and using the item.
– Exchange value, the value you could get from selling the item.
– Labor value, the value it would take to create or replace the item.

Utility value covers all intrinsic sources of value, like how much time and effort a power tool would save you over a handsaw, or how much faster and more comfortable a car is rather than walking.

Exchange value is influenced by factors like rarity, utility to others, and supply and demand.

Labor value is more esoteric than the other two, and I’ve found it’s only really useful in regards to manufacturing and Marxism. Along with a given wage, it’s a way of converting time to money.

These three values relate to the way purchasing decisions are made. For example, if you want to buy an item, you measure its exchange value (how much you’re willing to pay for it) against its projected utility value (how much time and money you expect it to save you). Or if you want to make an item and sell it, you compare its exchange value with its labor value, and if the labor value is higher than the exchange value, then you might not want to bother selling it, because you wouldn’t be getting much money for your time.

There are a lot of historical economists who only consider one of these the true source of value (usually exchange value, but sometimes labor value), but I see no reason why an item must have one canonical value, rather than being assigned value from many different sources.

One of the problems with single-value theories is that they sometimes lead to nonsense results. In an exchange-only theory, the value of an item is determined by the price it sells for. Haggling over a price, therefore, is the act of collaboratively determining the value of the item for sale, and if the deal goes through, then that’s what the item is worth. But if you get home after buying an item and find out that you’ve been scammed, and the item is much less desirable to own than the seller promised, then even though you were operating on incomplete information when you accepted the sale, the sale continues to be a valid determination of the item’s value. That’s not a very sensible result, so exchange value doesn’t seem like a good canonical source of value to me.

Sometimes (usually) the practice of buying things to sell them later at a higher price is called _speculation_. I’m not sure if the distinction between goods only bought to use/keep, goods only bought to resell, and any goods inbetween has a name.

There is no difference and economics does not distinguish between them.

Commodities are uniform goods that are interchangeable with each other. A good example is Oil, where one barrel is just as good as any other,

Intrinsic value is a complicated thing to understand, and in general there is no such thing. That being said certain specific subjects in economics and finance do have a more limited definition of “intrinsic value” that does exist. For example, a bank account has an intrinsic value equal to its balance (even though that balance itself may have no intrinsic value).

In Keynesian economics (which is derived from the work of English economist John Maynard Keynes) there is the idea of wage goods, which are what wage earners consume and e.g. exchanged for labor, and non-wage goods, which are more like the example you provided where the goods are bought to be sold for profit. In Keynesian economics, which is primarily about employment (and of course interest and money) the level employment can be raised with a shift from the consumption of wage goods to non-wage goods. If you have an issue with that see “Austrian economics”

Just wanted to say, thank you for all the answers. I am still a bit confused, but I think part of that comes from how these definitions are abstracted ways of viewing a much more complex system.

The distinction isn’t the item, it’s the action.

Purchasing an item with the intent to use the item is consumption, or expenditure. If it’s something you’ll use and reuse for a while it’s a durable good. If it will be used up, or wear out quickly it’s a consumable good. If you’ll use the durable good to aid your business it’s a capital expense.

Purchasing an item with the intent to resell is called trading,, or brokering, or speculation; depending on the details.