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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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.
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