The limits of exchange value

This point about deflation in the prices of valuable goods raises a whole new set of issues, though. There is a difference between exchange value, what something can be sold for in the marketplace, and use value. There is a long history of discussion over this point. Marx argued for a labor theory of value, the amount of work which went into a good. And so he argued that if the good was sold for more than the labor value, workers were being exploited.

But what if the manufactured goods are being produced by robots - capital goods - in any case, as in the Foxconn story below?

Still, the point remains that market value or exchange value is not the only motivating economic force or measure. For one thing almost half our economies are already state-owned, and therefore not subject to market forces in the same way. We give out many valuable services like grade-school education free at the point of delivery, funded by taxes.

Historically, most people relied on subsistence production for themselves in any case. The market had little role to play in their lives, apart from occasional trade for things that could not be produced locally, like iron or salt.

Value is a knotty thing.

The reason we rely on markets so much is they are a very good coordination device. Price signals can be remarkably efficient at allocating resources. Money prices also solve the 'revealed preference' problem to a large extent. That means people can say or believe or claim they want something. But what they are willing to pay for it in relation to other things in offer is much more of a concrete fact.

The question comes down to where the borderline of the market is. And not in the old sense of where the limits of the state are, either, though that is becoming very sensitive again as Washington is close to gridlock over the size of government. It is about which areas the market is most useful for as a social technology (which I'll talk more about soon.) If most daily needs are becoming cheaper and cheaper, then will the same market allocation devices work as well for the new needs or demands which open up, and which will drive the evolution of the economy?