IN THE FOURTH CENTURY BCE, Aristotle posed a question that has never ceased to trouble philosophers, economists, and anyone who has ever wondered why a diamond costs more than a glass of water. He distinguished between two kinds of value: use value, which inheres in a thing’s utility, and exchange value, which emerges in the act of trade. A shoe, he observed, serves both purposes. Worn on the foot, it is a use value. Traded for food or coin, it is an exchange value. The distinction seems simple. Yet it opened a fissure that would widen over two millennia, splitting thinkers into rival camps and shaping the very foundations of modern economic life.
The quarrel at the heart of value theory is deceptively simple: does value reside in the object itself, or is it projected onto the object by human desire? Are some things intrinsically valuable—by virtue of the labor that made them, the materials they contain, or the divine order they reflect? Or is value entirely subjective, a matter of individual preference, shifting with fashion and circumstance?
The answer matters. If value is intrinsic, then prices can be unjust. A worker can be exploited if he is paid less than the value he produces. A good can be overpriced if its price exceeds its true worth. If, on the other hand, value is subjective, then the price is always right—not morally right, but descriptively accurate. Whatever a buyer will pay is the value. The Rolex is worth its price because someone will pay it. The Casio is worth its price for the same reason. There is no deeper fact to appeal to.
This is not an academic dispute. It is the philosophical scaffolding beneath every pricing decision, every wage negotiation, every debate over inequality, and every late-night reflection on whether one has spent wisely or foolishly. To understand the Casio on the wrist and the Rolex beside it is to enter a quarrel that began in ancient Athens and continues in every boardroom, every marketplace, and every consumer’s mind.
The Classical Inheritance#
Aristotle’s distinction between use value and exchange value was not merely taxonomic. It was ethical. He worried that the pursuit of exchange value—of money itself—could become detached from the proper ends of life. The art of household management, he argued, was concerned with use: providing for the family, cultivating virtue, living well. The art of money-making, by contrast, was potentially limitless and therefore dangerous. It had no natural terminus. One could always want more. This was, for Aristotle, a corruption of the good life.
His concerns echo in later thinkers. The Scholastics of medieval Europe, writing in the tradition of Thomas Aquinas, developed the doctrine of the “just price.” A price, they argued, should reflect not merely what the market would bear but the objective value of the good—its labor, its materials, its contribution to the common good. To charge more was to commit the sin of avarice. The just price was not a market price but a moral one.
This view presupposed an ordered universe in which value was not arbitrary. God had created the world with a hierarchy of goods; human reason could discern their proper worth. The merchant who inflated prices violated not merely fairness but the natural order. For centuries, this doctrine constrained economic life, enforced by guilds, church courts, and local custom.
But the medieval synthesis was fragile. As commerce expanded in the early modern period, as new worlds opened and new goods flooded European markets, the idea of a divinely ordained hierarchy of value became harder to sustain. How could one determine the just price of tobacco, or sugar, or silver from Potosí? These goods had no precedent. Their value seemed to emerge from the vagaries of trade itself. The ground was being prepared for a revolution.
The Labor Theory#
In the 17th and 18th centuries, a new answer emerged: value is rooted in labor. John Locke, the English philosopher, argued that labor was the source of private property and, by extension, of value. A man who mixed his labor with the land—by tilling it, fencing it, improving it—made it his own. The same logic applied to goods: their value derived from the work that went into them.
Adam Smith, writing a century later, developed this intuition into a more systematic theory. In “The Wealth of Nations” (1776), he distinguished between the “value in use” and the “value in exchange” of goods, echoing Aristotle. But he also offered a provisional answer to the question of what determined exchange value. In a “rude and early state of society,” he suggested, labor was the measure. If it took twice as long to kill a beaver as to kill a deer, one beaver would exchange for two deer. Labor, in other words, was the ultimate source of value.
Smith knew this was too simple. He observed that in advanced economies, the price of a good also included profit and rent—returns to capital and land, not merely to labor. But the idea that labor was the source of value, even if price included other components, proved enduring. It became the foundation of classical economics and, later, of Karl Marx’s ferocious critique of capitalism.
Marx took the labor theory of value to its logical extreme. He distinguished between labor and labor power—between the work a worker does and the capacity to work, which the worker sells for a wage. The value of labor power, Marx argued, was determined by the labor required to sustain the worker. But the worker, in the course of a day, produced more value than that. The difference—surplus value—was extracted by the capitalist as profit. This was exploitation, not in the moral sense but in the technical sense: the worker was paid less than the value he produced.
For Marx, the labor theory of value was not merely an economic doctrine. It was a theory of injustice. If value is created by labor, then those who live off profits and rents are appropriating value they did not create. The Rolex, in this view, embodies not only the labor of its makers but the exploitation of a system that extracts surplus value from workers and concentrates it in the hands of owners. The Casio, produced in vast quantities with efficient manufacturing, represents a different relation of labor to value—but still one in which the worker does not receive the full value of what she produces.
The labor theory of value is now a minority view among economists. But it retains a powerful hold outside the discipline. The intuition that things are worth what it cost to make them—that a high price should reflect real work, real materials, real effort—is deeply embedded in popular moral reasoning. It is why the notion of paying thousands for a watch whose materials cost hundreds can feel like a kind of fraud. And it is why the Casio, with its honest functionality, appeals to those who suspect that luxury goods are a form of theft.
The Marginalist Revolution#
In the 1870s, three economists working independently—William Stanley Jevons in England, Carl Menger in Austria, and Léon Walras in Switzerland—overturned the labor theory of value. Their insight was deceptively simple: value is determined not by total labor or total utility but by marginal utility—the utility of the last unit consumed.
The classic illustration is the water-diamond paradox. Water is essential to life, yet cheap. Diamonds are ornamental, yet expensive. Why? The answer, the marginalists argued, is that we do not pay for total utility but for marginal utility. Water is abundant; the marginal unit—the next glass—is of low value because there is plenty more where it came from. Diamonds are scarce; the marginal diamond is of high value because few exist. Price, in other words, is determined by scarcity relative to desire.
This was a revolution. It shifted the locus of value from the object (its labor content, its materials) to the subject (the preferences of the buyer). Value was no longer something that inhered in things. It was something that humans projected onto things, moment by moment, in the act of choice.
The marginalist revolution gave intellectual legitimacy to the market. If value is subjective, then there is no such thing as a “just price” independent of what buyers and sellers agree. The price of a Rolex is not a measure of its labor content or its material cost. It is a measure of the subjective valuation of those who buy and sell it. If someone is willing to pay $40,000, that is its value—for them, at that moment. The Casio, too, is worth its price because someone is willing to pay it. There is no deeper fact to appeal to.
This view has become the foundation of modern economics. It explains why the same good can have different prices in different contexts (a bottle of water is cheap in the supermarket but expensive at a desert festival). It explains why prices fluctuate with fashion. And it explains why the Rolex and the Casio can coexist: they serve different preferences, different subjective valuations.
But the subjective theory of value has always faced a philosophical objection. If value is purely subjective, then anything can be valuable. There is no basis for saying that one thing is truly valuable and another is not. The person who spends his life accumulating Rolexes is no less rational than the person who spends his life accumulating Casios, if both are satisfying their preferences. This is liberating, but it is also disquieting. It seems to leave no room for wisdom, for judgment, for the intuition that some pursuits are genuinely better than others.
Value as Relation#
A third tradition, less prominent but no less important, has insisted that value is neither intrinsic nor subjective but relational. Its roots are in sociology and anthropology rather than philosophy or economics. Its central insight is that value is not a property of objects or individuals but a product of social relationships.
Georg Simmel, a German sociologist writing at the turn of the 20th century, argued that value emerges from the tension between desire and resistance. We value things not because of what they are but because of what it costs us—in effort, in money, in social standing—to obtain them. Value, for Simmel, was a kind of bridge between subject and object, a relationship of distance and overcoming.
Marcel Mauss, in his study of the gift, showed that value in pre-market societies was inseparable from social obligation. A gift was valuable because it carried the history of its giving and the promise of its reciprocation. Value was not a property of the shell necklace but of the relationship it mediated. Even in modern societies, Mauss argued, value retains something of this relational character. A Rolex is not merely a watch; it is a gift, an inheritance, a marker of relationship.
Pierre Bourdieu, a century later, gave this insight a sharper edge. In “Distinction” (1979), he argued that taste—what we value, what we disdain—is a marker of class position. The bourgeoisie value subtlety, restraint, and form. The working class value substance, functionality, and durability. These are not merely preferences; they are strategies for distinction. To value a Rolex is to position oneself in social space. To value a Casio is to position oneself differently. Value, in this view, is a weapon in an unending status competition.
This relational view of value has the advantage of explaining what the subjective view cannot: why value is not merely individual but social, why the same good can be valued differently in different groups, and why the distinction between the Casio and the Rolex is not merely a matter of price but of identity, class, and belonging.
The Quarrel Continues#
The three traditions—intrinsic, subjective, relational—remain in tension. They are not merely academic positions. They are lived philosophies, implicit in how people understand their purchases, their work, and their lives.
The labor theory lives on in the moral intuition that a fair price reflects the work that went into a thing. The Casio, made efficiently, honestly priced, appeals to this intuition. The Rolex, with its vast markup, offends it.
The subjective theory lives on in the economist’s insistence that price is simply a signal of preference. The Rolex is worth what someone will pay; there is no deeper truth to appeal to. The Casio, too, is worth what someone will pay. The market does not judge; it only clears.
The relational theory lives on in the sociological awareness that value is always also a signal. The Rolex signals membership; the Casio signals something else. Neither is merely a watch. Both are communications, bids for status, negotiations of identity.
The quarrel over value is 2,500 years old and shows no sign of resolution. Perhaps it cannot be resolved, because it is not a single question but several: What is value? How should we value? And how do we actually value? The first is a metaphysical question, the second an ethical one, the third an empirical one. The confusion between them has generated centuries of disputation.
But if the quarrel cannot be settled, it can be understood. And understanding it changes the way one looks at a watch. The Casio on the wrist tells the time. But it also tells a story about labor, about subjectivity, about relationship. So does the Rolex. To see both is to see the quarrel made visible—a philosophical dispute worn on the wrist, resolved by no one and engaged by everyone who ever chose one watch over another.
This is the second in a ten-part series on the architecture of value. Next: “The Price Machine”, on how modern markets manufacture the very value they claim merely to measure.