VALUE. In economics, use is made of three closely related conceptions of value : exchange value, subjective value and im puted price.
or value in exchange. This denotes the relative importance which the community, as a whole, manifesting its preferences through the process of the market, attaches to a particular good (commodity or service) in comparison with other goods. It is often defined in the older treatises on political econ omy as "power in exchange." The exchange value of a particular "good" is measured or expressed by the quantity of other goods for which a unit of that good can be exchanged, or, preferably, as a ratio of exchange. Any one good, of course, really has many different specific exchange values, corresponding to the various ratios at which it can be exchanged for different commodities and services. The notion of the general exchange value of a good rests upon an inclusive view of all of its different specific exchange values. The money price of a good is conceived of as one of its specific exchange values or, in other connections, as its general exchange value expressed in terms of money, which thus serves as a "common denominator of values." Because the direct barter .
of goods for goods is uncommon, the exchange values of different goods have to be inferred from their money prices. Indeed, the conception of exchange value is derived from the conception of price by making abstraction of the use of money as an instrument of purchase and sale. This abstraction has been found useful in economics because, first, some aspects of important economic problems are seen more clearly when values are looked upon as though they were determined by the direct comparison of goods with goods without the intervention of money, and second, be cause it is of ten desirable to eliminate the effects which changes in the value of money have upon the money prices of different goods. With the development of statistical technique, however, it has been found possible to take separate account of general changes of prices and of relative changes in the prices which are paid for particular goods. For this and other reasons the con ception of exchange value has lost some of the importance which it once had in economics. Economic analysis now commonly deals, more directly and realistically, with money prices.
This denotes the relative importance which an individual consumer attaches to a particular good, in comparison with other goods. It relates always to specific quan tities or specific increments or decrements of goods. Even an indivisible good, an automobile for example, is a compound of various qualities, such as size, power, comfort and appearance, and buyers have a certain range of choice within which these qualities may be had in larger or smaller measure and combined in different proportions. So far as a consumer chooses rationally rather than impulsively he apportions his outlays so that he would gain nothing by buying more of one thing and less of another. Thus he brings his monthly or annual outlays for different pur poses to or towards a common boundary or margin (his "margin of consumption") where the importance which he attaches to what he gets for the final or marginal pound or dollar which he spends, say for food, is equal to the importance of what he gets for the marginal pound or dollar spent for clothing or other object.
This is an estimate of the amount of money for which a given article or a given quantum of goods could be sold or bought. When we say that the value of a work of art, a house, or a stock of goods is so many pounds or dollars, we are using the word value in the sense of imputed price. The "valu ation" or appraisal of goods for purposes of taxation or of formal transfer is an imputation of price. A nation's wealth can be expressed in terms of its money value only by imputing prices to the various items of which it is composed. Value, in this sense, is not the price would could be got at a forced sale or the price which would have to be paid by buyers in order to induce holders to part with their goods en bloc. It is, instead, an estimate of the price which could be obtained in due course, with no sudden ac celerating of either supply or demand. Statements to the effect that the price of a commodity is above or below its value generally mean only that because of a temporary excess of supply or demand or because buyers or sellers lack knowledge of facts which, if known, would affect their offers, the present price is out of line with the probable future price.