Aristotle was the first recorded philosopher ever to talk about economics and money
He came up with the theory that every good has to values: it’s usefulness, what it can
be used for, and its exchange value, what the good can be exchanged for. He was the
first to do this, and this notion has stuck around.
For example, a shoe can be worn by
a person or it can be exchanged for something of equal value, say a bushel of apples.
However, using the shoes, merely for exchange, for things like apples or luxury
items has no limits, a person can keep trading to accumulate material possessions
beyond what is needed for natural wealth and the good life.
Marx however says that the value of any good, (like previously discussed by
Ricardo) is equal to the labor needed to create that good.
Ricardo’s example of that
the exchange of beaver for deer is not the number of deer that the beaver will
exchange for, but the number of hours it takes to catch the beaver is what the beaver
This is because commodities are only the product of congealed labor time.
In the C-M-C circuit, the circuit that doesn’t cause problems, a commodity is
exchanged for an equal value of money, which is then exchanged for another equal
Although the two commodities have equal exchange rates, they have
He also factors in that labor is also a good that can be exchanged for money.
had a problem because often times, labor was received unfair compensation.
worker would work for 10 hours and thus produce ten hours worth of goods, but
would only receive compensation for eight hours worth of goods which would have
been previously been determined.
And this is the surplus that leads to capital. This
has become a mess because the capitalist has bought the labor power and not the
actual goods produced.
Menger is the first to deviate from the classical thought of labor value of exchange.
His theory is based on the fact that a value for a good is equal to the demand of that
good and the quantities present.
Instead of exchanging a good based on how much labor it took to make is good or
that good, you will exchange a good for another based on how much you need that
other good and how much you already have.
He expresses the opinion that the value of a good has nothing to do with the good
itself, but rather the scarcity of the good and its ability to satisfy our needs.
shares the same sentiments as Jevons, but her doesn’t include the Bentham pain and
pleasure value aspect as jevons does.
Simply that human needs are subjective to
each person and we simply want to satisfy these needs.
He addresses the diamond and water paradox at first.