1 The formation of the concept
Economic theory begins with an examination of the nature of value. We are not concerned with things from alleged planes of existence beyond the universe we inhabit, so we will ignore them and discount the values commonly associated with them.The two-fold nature of value
There are two senses in which the word ‘value’ may be used in economics. These are the ideas of value as an entity
and value as a magnitude
. An entity is only referred to as being
a value as an entity because it possesses
value as a magnitude. Both are fundamental to economics as it is at root the study of the nature and causes of interaction between value as an entity and value as a magnitude, as apply under different circumstances.
By ‘entity’ we do not mean solely physical objects
. Entity means anything that actually exists, so long as it has at least some form of physical existence. To start with, a value may well be as obvious as a single specific item or collection of items. These are the directly observable physical objects, such as a cat or a pen or a house. Other values are also directly observable and have a physical existence but are not objects. Examples of these are specific characteristics of items such as choice of brick colour in one’s intended house, activities performed by others as in all labour services, and relationships with others such as someone being on call for work. These can also become broader and more abstract, extending all the way to whole social systems and cultures. Value can also go on to foci of value that are sometimes harder to correctly identify. An example will be access
to something whose existence or other characteristics may be taken for granted, such as sunlight in northern climes as opposed to those closer to the equator. Whatever they are, what may be a proper value will be something that exists in some physical form in this world. As real existents, the values we are concerned with are subject to the same laws of identity and causality as the same as everything else that exits.
Both uses of the concept can be found outside of economics. The concept of value as an entity is also used in social sciences and some life sciences. As economics is itself a social science, it is directly dependent on the principles of its use as developed by core science that sets the tone for all social sciences. The concept of value as a magnitude is also extensively used outside of the field of the social sciences altogether, where many of the principles of dealing with the concept of value developed by them are also applicable to economics. The primary source of those principles is mathematics, which are then used in the physical sciences. Economics uses the principles developed by both. It takes the principles from the fundamental underlying all social sciences, then in conjunction with many relevant ones from mathematics, formulates its own to add to the total for its own use.
The main source for economics is that which allows its use in all the social sciences. The formation of the concept of value for use in social science is the province of the philosophical field of ethics
. It is no accident that concepts such as value
, and many others like these, are fundamental to both ethics and economics. Political and economic theories are all derivative fields that depend on ethics and general philosophy. Economic action is a subset of all action generally, and the principles that hold for action generally are applicable to all subsets within it, including economics. Similarly, economic value is a subset of all moral values generally. To understand the concept of value fully it is therefore necessary to start with how ethics explains it and then apply it to economics.The meaning of value
The formation of any concept begins by looking at all the instances of something. The practice is to cast one’s vision and mind over a wide range of concretes, and then seeing what simultaneously unites them and also differentiates them from other concretes. Our world is a physical one, where what exists primarily is entities
. Magnitudes of value are characteristics assigned to or ascribed of them, and do independent of entities. There can be entities that possess no value, but there cannot be values that exist without entities. It is values as entities we must look at first as magnitudes are a derivative phenomenon.
When we look at all the entities that are said to be valuable we will find a great many characteristics that are common to them all. In order to understand any concept we must pick out from that set what is essential for that concept. This means simultaneously picking out what best distinguishes the concretes from what not part of that concept and also what best causally explains the largest number of all the other common characteristics. That characteristic is then used as the central element in the formal definition of the concept. Apply this to value and we arrive at this definition: a value is that which one acts to gain or keep
. Consider sunlight, for example. Plants act to make use of it, so do lizards, and so do people who are beachgoers. A comet, by contrast, reacts
to sunlight but does not initiate
action and does not try to gain or keep sunlight.
This definition holds irrespective of why anything is said to have value. Whatever it is, if there is action to gain or keep an entity then that entity is treated as a value. The easiest to see are the ‘instrumental’ values, those things we use as instruments for various purposes. The plant and lizard value sunlight for specific purposes, and a person can value sunlight because it lights things up. Other values are not instrumental, and are valued as ends in themselves rather than as useful for purposes. They are still acted towards so as to gain or keep them, such as a day at the beach. Irrespective of the whys and wherefores, we call entities valuable because they possess magnitudes of value, where that possession of magnitude of value causes us to separate them from what does not bear any magnitude of value. We separate them in mind as a precursor to determining action to gain and/or keep entities that are valuable because they possess magnitudes of value.The need to look at conceptual roots
We know that values are that which one acts to gain and/or keep, that entities are called values and pursued because they possess a magnitude of value – but why
? Why do some entities possess those magnitudes of value in the first place? What is so special about them that they are separable from other things and worthy of action to gain or keep them while what they are separated from is not worthy of that action? The question is most obviously relevant to non-instrumental values, but even for the instrumental values there is the question of why the purpose is valued? A beachgoer will value a beach-towel because it is something to place on the sand to lie on, but people aren’t reptiles so what purpose does lying in the sun serve? Is something a value merely because at some point it comes down to that someone or something says so?
That kind of question only arises because most people use the word ‘value’ without fully understanding where it came from in the first place. All we have done so far is to point out that value is not an invalid concept, but not explained what value really is and why. Value is an abstract concept, not a perceptual level primary. It cannot be properly understood simply by physically pointing out a host of examples and saying “that’s what value means.” To try to develop scientific theories from with a primitive notion like that is to become vulnerable to confusion and error. A key problem in every science is that people who lack a full understanding of a concept they’re using frequently end up denying the necessity of the concepts that are logically prior to it. This error is called the fallacy of the stolen concept, and especially destructive when committed in relation to fundamental concepts. Full understanding requires the understanding of the logically prior concepts and principles that give rise to it. We must reduce the concept back through its conceptual roots.Life as the prime conceptual root
When we look at all the instances of value and realise that they are called so because of action to gain or keep them, we raise the questions: action by whom and for what
? After rejecting supernaturalism there is only one answer: living beings, so that they may live
. When the process of forming the concept of value is properly performed, it will also be found that those entities claimed as values for which a life-serving purpose cannot be found are those whose purported status as values cannot be sustained without stepping beyond the proper epistemological method. Only through observation of the fact that good versus bad is meaningful exclusively in relation to what is good or bad for living things can one arrive at either concept, whether of life or value.
To understand life, perform the same concept-formation principles as was necessary to form the concept of value. Take a look at a wide range of living things and what they have to do in order to remain alive. Contrast them to non-living things, which can change form but need not do anything in order to remain non-living. What separates the living from the non-living is that life-forms continually have to initiate action to sustain themselves. If they fail then they die, and their bodies join the ranks of the non-living. A plant, a lizard, and a person, are all able to and all need
to continually act to sustain themselves even if not actually harmed by something else. A comet cannot act, and need not act as it will continue to exist indefinitely unless an external force interferes with it. The action required is to pursue the material means of living, and it is these material means of living that are values. Values only exist because life exists, and life only continues to exist because living things are successful in pursuing their relevant values. Values are necessitated by
and necessary for
life. It is only the concept of life that makes the concept of value necessary and meaningful.
Why does life exist? This question may be taken two ways. In terms of efficient
causation: how come life arose? That is a question not for philosophy but one we may leave to the physical science of biology. After leaving origins to the biologists, we can
say that it continues
to exist because living things have been successful at gaining and keeping the values they need in order to live. The second way of taking the question is in terms of final
causation: what end does life serve? The answer is that the end of life is life, that it exists for no other reason than to continue to exist for its own sake. It has no higher purpose to serve, and the entire idea of action and values having an end only has meaning within the context of life. There is only the one fundamental alternative: life or death. Those who have no choice will automatically act to live and pursue relevant values accordingly. Man, who does
have choice, is faced with having to discover what values are and choosing to pursue them. In either case, choice or not, life is an end in itself. Values presuppose the context of life, and it is only life that sets the terms for all valid values.Measurement as the conceptual root of value as a magnitude
All value as magnitude is by its nature a quantitative concept. To say that something is valuable is to imply that there is an answer to the question of how
valuable. In giving that answer, to evaluate is to compare something against a standard and arrive at a quantitative relationship signified by the magnitude of value. Value presupposes measurement
Measurement as a root of value applies both as a root within the roots of the concept of life, but it also stands outside of life as a root of the concept of value in the more general sense used by mathematics and the physical sciences. Consequently, a separate examination is worthwhile.
Many of the core principles of numerical measurement and use of the concept in the mathematical sense apply to the evaluation of concrete valuables. Some of the concepts that are roots of the concept of measurement and are of interest to economics are standard
, and calculation
. We will see their uses as we progress.
 Rand, A, (1964) “The Objectivist ethics” The Virtue of Selfishness, p15
 Rand, A (1990) Introduction to Objectivist Epistemology, 2nd Edition, Meridian, pp9-17
 Rand (1964), op. cit.
 Rand, A, (1990) op. cit, p3, 60; Peikoff (1991) op. cit, p136
 Hull, G, (1999) Reduction: the tie to reality, Second Renaissance Books; Peikoff, L, (1991) op. cit, pp132-141
 Rand (1964), op. cit, pp15-17
 Rand (1964), op. cit, p17
Edited by John McVey, 18 July 2007 - 05:20 AM.