So how do we decide what to produce/distribute/consume? In other words, what makes something valuable?
Why are some goods and services like sports cars so expensive while others like nailclippers are much cheaper? Socialists argue that there are only two sources of all value: nature and human labor. Obviously without raw materials and other gifts from nature we would not have the metal to produce cars or nail clippers. The more labor that goes into the production of something, the more valuable it will be. Making one car also takes much more time than making one nail clipper.
What is the value of a car , or a nail clipper?
Well there’s what a car or nailclipper can do for you. Your car is valuable because it can help you get from home to work. It is a means of transportation. A nailclipper helps you cut your nails. But each of these also has a price. The value of a car then is what it costs to buy it, say $35,000, and the value of a nail clipper is $2. Socialists call this the difference between a good’s use-value, what it does for you, and its exchange-value, its price.
Why does this distinction matter?
It matters because it helps us understand many of the social problems that capitalism creates. Think about housing. Housing provides an essential use-value as shelter. We all need a place to live. But our society treats housing like a financial asset. Developers don’t build housing to help house the houseless, they build housing in order to sell it for profit. The difference between the use-value of housing and its exchange-value is necessary to understand why we live in a society with large, wealthy cities full of empty houses while thousands sleep on the streets.
