Informed by the work of classical political economics, Eugen Von Bohm-Bawerk (1851-1914) offered a more in depth critique of the labor theory of value that focused on consumers as the foundation for what is called a marginal utility or subjective theory of value. With an alternative emphasis on the relation between changes in individual needs and desires, Bohm-Bawerk argued that economists have failed to distinguish between use value and exchange value in their discussions of value -- with the notion of use value landing in the “dust bin”. Bohm-Bawerk called exchange value “objective value” and use value “subjective value”. He then argued that many economists ignored the relatively simple fact that something like a diamond was “subjectively” valued more than iron; thus rejecting the work of those who tried to explain this difference in terms of labor time. Marginal utility emphasizes that changing values and interests related to “usefulness” as well as the “scarcity” of an object or service are primary, independent factors in determining value. Moreover, as skilled labor is paid more than unskilled labor, it is the skill not the (abstract) labor embodied in a commodity that determines value.
Simply, this view argues that value is determined by how consumers (subjectively) evaluate one good compared to another. It may include labor, but only as another -- not a “special” -- component of “value”. And it may not include past labor or the labor responsible for the means of production. However, while the subjective theory of value and marginal utility may help explain changes and variations in price at a particular point in time, Marx would likely argue that these theories do not explain how it is that commodities are exchanged for each other over time. In other words, as long as a commodity continues to have use value, the subjective or “psychological” factors impacting the demand for that commodity only affects its price – or the quantity of another commodity it can be exchanged for – not the fact that it has value or that it can be exchanged for other commodities. Thus attitudes and psychological disposition do not change the fact that it is socially necessary labor that allows the exchange of commodities and that this is what exchange value represents. In this way, Marx’s notion of “use value” incorporates the subjective and marginal utility theories in terms of explaining price, while his “law of value” addresses other, essential dynamics of commodities that (bourgeois) economists fail to explore.
Indeed, the subjective and marginal utility theories appear to have emerged and gained prominence as capitalism increasingly confronts contradictions related to profit taking. An extraordinary amount of labor and resources are used to advertise goods and services that require little labor to produce relative to price but augur to increase happiness and self-esteem. For example, many buy products and use services for brand name alone in an attempt to create a new identity or enhance their social status. Guy Debord (1931-1994) referred to this as “spectacle”, where commodities gain spectacular value. But related “alien consumption” frequently does not counter the alienation people experience in their work life and may also exacerbate financial woes. And while this may temper problems related to dwindling consumer demand, it heightens problems related to the “ability to pay”, as less labor is paid to produce luxuries and interest payments related to the extension of credit takes away from “purchasing power”. And while it may appear that when someone buys a purse for a thousand dollars that required only minutes to produce (albeit perhaps much more to advertise, etc.), labor is just one factor contributing to its “value”, price is confused with value, and a “law of price” is argued against Marx’s “law of value”.
