How And Why They Differ, And The Dangers In Conflating Them.
When we think of how the word value is used, both as a noun and as a verb, it is very important to not conflate it (as a noun) with utility, to know the differences between the two, and always remember that value, as a verb, in describing economic principles through voluntary exchange does indeed imply an evaluation and a comparison of services in barter/direct exchange, or their equivalent of such with money in indirect exchange.
What has been thought to be the principle determining factors of value has gone through an evolution throughout the centuries but what remains today in various schools of thought does have fragmented pieces of older ideologies, especially from those classical economists who embraced value as being objective and determined by labor inputs in production, not by the level of output.
In chapter five of the Harmonies, I personally think Bastiat parsed, compared and contrasted the concepts of value and utility very cogently with solid logical consistently outside of his assumptions of labor spared being more influential than labor expended in his famous water/diamond paradox. More on this later but first, the early definitions that he gave to both value and utility lay sound groundwork for the whole chapter’s exposition.
“And yet I must say: From the viewpoint of political economy society is exchange. The primary element of exchange is the notion of value, and consequently the connotations that we give to this word, whether true or erroneous, lead us to truth or error in all our social thinking. …
…But, to succeed in my effort, I must explain two things, namely:
1) Utility-that is, the service a thing renders tends to cost less and less, to become more generally available, as it gradually passes outside the domain of individual ownership.
2) Value, on the contrary, which alone can be claimed as a possession, which alone, in law and in fact, constitutes property, tends to decrease in proportion to the amount of utility it represents.
Consequently, if I base my demonstration both on private ownership but exclusively on private ownership of value, and on public ownership, but exclusively on public ownership of utility, I should be able, provided my reasoning is valid, to satisfy and reconcile all schools, since I recognize that all have had a glimmering of the truth, but only of a part of the truth seen from different points of view.” 
This excerpt highlights the main points of the chapter:
-the primary element of exchange is the notion of value.
-the differences between value and utility, and why they are important.
-where some of the past economists went wrong in their understanding of value, and where they were right.
-why and how some of the classical economists errors gave dangerous fuel to the fire of the communists and socialists. Continue reading “Economic Harmonies: Chapter 5 Review – Value and Utility”