value

For two centuries economists discussed the relation between exchange value, production costs and use value. The "marginalist revolution" settled the issue by wedding the concept of subjective utility to the concept of >equilibrium. As a result, given the neoclassical assumptions on the structure of >competition, value could be shown to be based on exchange value - i.e. prices - exclusively, since in equilibrium this implies the maximization of subjective utility for all participants in the market. This marginal value analysis is also the foundation for Paretian welfare economics.

Although this was probably the most far-reaching and fundamental theoretical innovation in modern social sciences underlying most 20th century economics, EE cannot but question these assumptions, because the underlying structural and behavioral hypotheses on rationality and equilibrium need to be rejected. An evolutionary theory of value has to take the following aspects into account.

• Exchange takes place in a non-equilibrium (non-tatonnement) fashion and is the precondition for the formation of knowledge about >needs. This implies that after a series of exchange opportunities have been used, >knowledge may have revealed that past choices were not the preferable ones from hindsight. In >networks, >transactions create knowledge and, hence, the possibility of regret, such that the individual welfare becomes >path-dependent. Regret reflects the more basic characteristic of irreversibility of past exchange, because of the endogeneity of the endowments and of the existence of transaction costs, which imply an increase of >entropy. At the same time, although this >learning process might lead to the ex post violation of the Pareto principle, it generates progress of our knowledge about needs, which is the major precondition for innovation in >consumption.
• The existence of >externalities implies that there is always a divergence of market valuation and subjective utility. Externalities exist even in the hypothetical general equilibrium of a neoclassical world, so that a perfect measurement of value would have to assume a final state of internalization of external effects, taking account of costs of internalization. Because of various reasons (infinite regress, recurrent disturbances by innovations etc.) this state of the economy will be never attained, so that there will always be a difference between "objective" and "subjective" values.
•  The extent of market transactions is subject to frames which entail a non-utilitarian valuation of types of transactions and the goods being transacted. For example, the frame of friendship precludes market valuation of the good of friendship. Frames, however, are not only a subjective cognitive phenomenon, but are rooted in social structure, >communication and >language games. This implies that the institutional and normative structure of exchange has independent >welfare consequences as compared to exchange proper.
• Finally, any kind of utility concept has to be consistent with evolutionary theories of human >needs. Though this may imply a hierarchy of needs with a considerable cultural diversity, there is a large number of human needs which are part of our human nature and, therefore, lend themselves to intersubjectively valid valuation.

In conclusion, EE rejects subjective/equilibrium value theory and researches into the dualism of >meaning and function of goods in relation to human needs. Though market valuation is of paramount importance also from the evolutionary perspective because it reveals knowledge about distributed knowledge about individual needs and goals, there is also an important role of intersubjective processes of value formation which are based on >communication and on the social construction of >meaning. The evolution of human >culture includes a reasonable consensus about the valuation of human goods. Thus, market valuation and social value are the two EE dimensions of value which always need to be considered in an reflective equilibrium of analysis.

Basic References

To understand the complexities of the "marginalist revolution" in value theory and the possible crossroads that were passed by on the way of its evolution, it is helpful to return to classics as Carl Menger:
Menger's theory of value

Evolutionary economists mostly avoid discussion of value theory.
value   need
market   welfare