Use Value versus Exchange Value Essay ⋆ Environment Essay Examples ⋆ EssayEmpire

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Use and e xchange value are two different measures of the value of resources, goods, or services for humans. Use value refers to the actual use of something; for example, fruits and vegetables have a use value in providing nutrition for people. Exchange value refers to the price on the marketplace; for example, a commercial farmer grows crops for their exchange value. Anything that does not exist in commodity form has no exchange value, even if it has use value. This may be because property rights and/or markets do not exist, either because they are difficult or impossible to establish (e.g., clean air to breathe, many kinds of knowledge), or because there has been little or no interest in a given society to develop them (e.g., many societies did not provide for market exchange of land until they were colonized). Also, people lacking means of exchange (i.e., the poor) may place a high use value on basic necessities but be unable to pay for them. Therefore, the highest exchange value can be realized from selling a commodity to rich people, even if they have little need for it. Thus, exchange value is not an accurate measure of use value.

Mainstream economics usually assumes that exchange value is the best available measure of use value, however. This has both environmental and social implications. Environmentally, economic “efficiency” leads to treating noncommodified components of nature as if they had zero value, including clean air and water, scenic beauty, biodiversity, the “existence value” of species, and human health. The destruction of such values is ignored by indicators of economic welfare and economic growth (e.g., Gross National Product). Economic growth policies that ignore these adverse effects promote environmental destruction. Cost-benefit analysis attempts to overcome this problem, but only by arbitrarily defining exchange values of things for which no markets exist.

In social terms, the assumption that exchange values are a good measure of use values helps to justify an allocation of resources that favors the wealthy. The concept of Pareto efficiency claims that the most efficient allocation of resources exists when any change in allocation would lead to the loss of economic welfare of at least some individuals. This ignores that, if some amount of money were transferred from rich to poor people, the latter would surely gain more use value than the former would lose. Hence, arguments for economic efficiency tend to justify an unequal distribution of resources, such as highly unequal land ownership favoring large export-oriented plantations that typically apply large amounts of agrochemicals, at the expense of small peasants trying to eke out a living on the marginal land not occupied by the plantations. A large portion of peasant production is subsistence-oriented, meaning that it is devoted to use and not exchange value, and hence tends to be regarded as “unproductive.”

The distinction between use and exchange value also has a gender dimension, in that women working in the household, or in subsistence-oriented agriculture, are often classified as unproductive because they do not generate exchange value. The greater difficulties they may face as a result of environmental degradation (e.g., long treks to collect fuelwood) are therefore also underestimated in economic calculations.

In fact, even in the wealthiest countries, a very large portion of production occurs within households (e.g., cooking) or within contexts of mutual aid and gift exchange (e.g., the free exchange of knowledge among scholars). Hence, as particularly pointed out by J.K. Gibson-Graham, a focus on the money economy (and thus exchange value) alone ignores a huge portion of the real economy, severely restricting any attempts to effect positive change.

In principle, the most severe discrepancies between use and exchange values could be overcome if: (1) most things of use value were made into commodities, and (2) income distribution were made more equal. However, it is hardly desirable to make everything into a commodity, and a larger degree of equity in income is hard to achieve. Furthermore, even use value is a utilitarian concept; people may wish to preserve spiritual or other values in nature that cannot be reduced to use value (because nature is not there just to serve humans). Hence, nonmarket mechanisms, including actions by government as well as civil society, are needed to preserve many environmental resources that have little or no exchange value.

Bibliography:

Herman Daly and Joshua Farley, Ecological Economics: Principles and Applications (Island Press, 2004);
Paul Ekins and Manfred Max-Neef, , Real-Life Economics: Understanding Wealth Creation (Routledge, 1992);
K. Gibson-Graham, The End of Capitalism (as We Knew It}: A Feminist Critique of Political Economy (Blackwell, 1996);
F. Schumacher, Small Is Beautiful: Economics as If People Mattered (Blond and Briggs, 1973).