1. The distinction between use value, or utility, and exchange value in price formation, was introduced into economic thought by Adam Smith during the second half of the eighteenth century.
It was in the following terms:
"It must be observed that the word value has two different meanings; sometimes it signifies the utility of a particular object, and sometimes it signifies the faculty which this object gives of purchasing other commodities. One can be called value in use and the other value in exchange."
Immediately afterwards, Smith rejects the systematic attribution of dearness to utility:
"Things that have the greatest value in use often have little or no value in exchange. […] There is nothing more useful than water, but it can buy almost nothing; there is scarcely any way of getting anything in return. A diamond, on the other hand, has almost no value as to use, but it will frequently be found to be exchanged for a very large quantity of other commodities."
2. In the second half of the nineteenth century, the marginalist revolution occurred.
Those who are convinced of the validity of marginalism have their own way of reading "the old authors" (Professor Jean Marchal). On the Paradox of Water and Diamonds, here is what Professor Frédéric Teulon wrote about it in the 1990s31:
"This paradox can be explained using the concept of scarcity. Water is a vital but abundant good, so the marginal utility that an individual derives from the consumption of the last amount of water he uses is very small. Water will therefore be marginalized, with little value, despite its immense usefulness in terms of the survival of the species. »
The validity of Adam Smith's rejection of the attribution of dearness to utility is nevertheless easily verifiable and largely verified. By circumventing it by subterfuge of the utility of the last quantity, marginalism reduces scarcity to the rank of universal determinant of price formation and economic "science" to sophistry: what is scarce is expensive, what is expensive is rare.
3. This is in contradiction with Adam Smith and then David Ricardo, who judged that the relative quantities of labor play a major role in terms of price formation.
In the first quarter of the nineteenth century, David Ricardo endorsed this judgment, but excluding commodities that were permanently or temporarily scarce, as well as taking into account what some economists have called "capital intensity", which could be very different from one commodity production to another – that of coal mining and that of wicker baskets or shoes Like what.
4. In reality, and in a competitive situation, the prices of tap or bottled water depend above all on production costs and profits.
These costs themselves depend very much on the quantities of labor, new and past. The profits are at a normal height, variable in time and space, under the conditions set forth further in the present treatise. Ricardo states very clearly, in the first paragraphs of chapter 1 of his Principles, that there is no common determinant of all commodities of their exchange values. Again, it is because of those of these commodities which are scarce—as distinct from others which, in greater numbers, are "reproducible at will by human industry."
5. Nothing, apart from the habit that has been adopted, allows us to prejudge the existence of a universal determinant of price formation.
It is only after the observation of the formation of prices in each main category of commodities that it becomes a good method of pronouncing on this existence. Thus ex post and not ex ante, failing which a petītiō principiī is committed by asserting an existence which it is precisely necessary to demonstrate that the practice of economic exchanges establishes it. No petītiō principiī is scientifically acceptable. This is one of the reasons why the marginalist solution to the so-called water and diamond paradox is unscientific. Since it is not possible to prove that this solution is part of the reality established by the practice of commodity exchanges, it is the uselessness of marginal utility to found a general theory of economic exchange that reason obliges us to stick to, until the eventual ex post proof that the universal functions attributed to marginal utility and scarcity really exist.
6. From this last consideration follows the reason why the division of all services and marketable goods into homogeneous sub-assemblies is an irreplaceable prerequisite.
A theory of economic dearness that is not based on this prerequisite is condemned to be at least partly imaginary. Yet, of course, the more unrealistic the theory that guides the choice of an economic policy, the less adequate this policy will prove to be once implemented.
7. In Objective Political Economy, the expression "exchange value" and the word "price" designate exactly the same relation.
This ratio is that of quantities exchanged on a commercial basis, the most convenient and widespread use being by far to express this ratio by a quantity of money (money). Let us repeat this, because neglecting it leads backwards: it is not just after having made the distinction between two kinds of value that it is possible to investigate with fairly good knowledge of the facts the question of whether or not all commodity values have more in common than being prices.