Concept
Subjective theory of value
Overview
The subjective theory of value (STV) is an economic theory for explaining how the value of goods and services are not only established but also how they can fluctuate over time. The contrasting system is typically known as the labor theory of value.
STV's development helped to better understand human action and decision making in economics. The theory claims that the value of a good is not determined by any inherent property of the good, nor by the cumulative value of components or labor needed to produce it, but instead is determined by the individuals or entities who are buying (and/or selling) that good.
Thus a good's value may increase substantially following its creation if the good is perceived as being of greater importance, or as being more desirable than before. There are many variables that can influence this process, including, but not limited to, changes in the age of the good, personal affinity, cultural significance, scarcity, as well as situational circumstances. This is often seen in the case of collectable items such as cars, vinyl records, and comic books.
An additional variable, as Austrian economist Carl Menger pointed out, is the estimation of a good's value due to uncertainty and lack of knowledge, in which people "sometimes estimate the importance of various satisfactions in a manner contrary to their real importance".
It is one of several theories that sprang from the marginal revolution, which was a departure from classical economics, and in particular STV departed from the labor theory of value. The modern version of the subjective theory of value was created independently and nearly simultaneously by William Stanley Jevons, Léon Walras, and Carl Menger in the late 19th century. The theory has helped explain why the value of non-essential goods can be higher than essential ones, and how relatively expensive goods can have relatively low production costs.
Overview adapted from Wikipedia (CC BY-SA 4.0; see the article history for authors).
Possible passages
Found by search and not yet checked by a person; they may only mention the idea in passing.
When two things, though made by equal labor, are of unequal value because the one is called upon to yield profit for a greater number of years or months than the other, this difference of value will be greater when profits are greater, and less when they are less. The wine which has to yield five years’ profit more than the cloth will surpass it in value much more if profits are forty per cent than if they are only…
John Stuart Mill, Principles of Political Economy
States what Subjective theory of value is.
This change in apparent worth raises a new question: Is the aim first set up of the value it seemed to be? Is it, after all, so important, so desirable? Are not other results, playing with other boys, convivial companionship, which are reached more easily and pleasantly, really more valuable?
John Dewey, Ethics
States what Subjective theory of value is.
At first sight the wealth of society under the capitalist system presents itself as an immense accumulation of commodities, its unit being a single commodity. But every commodity has a twofold aspect, that of _use value_ and _exchange value_.[2] A commodity is first of all, in the language of English economists, “any thing necessary, useful or pleasant in life,” an object of human wants, a means of existence in the…
Karl Marx, A Contribution to the Critique of Political Economy
Close in meaning to Subjective theory of value; the term itself is not named.
Philosophers who discussed Subjective theory of value
Related ideas
- Free market
- Labor theory of value
- Competition
- William Stanley Jevons
- Classical economics
- Ludwig von Mises
- Carl Menger
- David Ricardo
Opposing perspectives
Place in the tradition
Part of School of Salamanca.
Explore Subjective theory of value in the interactive graph →