I’m sure other people have pointed out the phenomenon I call “the use theory of value” and perhaps described it more succinctly than I am about to. Nevertheless. The point of this note-making process is to get my ideas down, no matter how incomplete my current context—and this idea is, I think, a pillar of any just (hell, any functional) economic system.
The use theory of value is the observation that a given amount of money—say, $80,000 CAD—is worth more in the hands of a poorer person than in the hands of a richer person. Furthermore, the use theory of value posits that the more money a single person controls, particularly for their own personal use, the more the value of all their money declines.
Considering how much of the world’s money is currently controlled by a few individuals in the top 1%, it seems immediately apparent (at least to me) how consequential the use theory of value is.
Let’s take that $80,000 and give it to a working class Canadian (because the middle class no longer exists). Assuming this person has no egregiously expensive medical conditions and no dependents, $80,000 allows them to live, with basic comfort, in a city like Edmonton for one year. In terms of its utility, its value to this working class Canadian, the value of that $80,000 is almost infinite. It represents the difference between being housed and unhoused, between putting good food on the table and subsisting on instant ramen, between being able to participate in basic communal pleasures (like going to the movies, like meeting a friend for a drink) and not being able to afford these essential luxuries.
Now give the same person another $80,000 a year. In addition to being able to afford the basics (food, shelter, coffee), they can now support a parent or child, perhaps go on vacation, adopt a new hobby, put some money aside for the future, pay off some debt. Not all of these things. But maybe they can pick two. Unlike the first $80,000, which made survival possible, the second $80,000 facilitates a measure of leisure. It makes life easier, and in some ways better. It has value, but not quite as much as the first $80,000.
Now give $80,000 to an extremely wealthy person—say, Galen Weston, CEO of Weston’s, owner of Loblaw, umbrella company of Superstore, where I have bought groceries for most of my adult life. The Weston family is currently worth somewhere around 8.7 billion USD (that’s approximately 11.7 billion CAD). What is Galen Weston going to do with another $80,000? Buy a fourteenth watch? No. He probably wouldn’t even notice the influx. He probably wouldn’t do anything with it.
Now. Think about this scenario in terms of that spectre of horror that policy makers like to hold over the public: inflation. Inflation is the devaluation of currency, particularly the devaluation of currency relative to the cost of essential commodities. (There’s a reason we always talk about that one billion dollar loaf of Zimbabwean bread.)
Let’s bring in Galen Weston again. Here is a person raising the price of food and diapers, thereby increasing his own personal wealth, thereby increasing his stockpile of useless money while at the same time devaluing the everyday Loblaw shopper’s dollar. The value of the everyday shopper’s dollar disappears—quite directly—into the black hole of Galen Weston’s personal wealth.
Inflation is often associated with a flood of cash that suddenly becomes available to everyday people. I hypothesize, however, that the concentration of wealth in the hands of the 1% does more to devalue currency than any other mechanism.
We see how this could be working if we compare growth of wages (available cash) against growth of the price of commodities against growth in the salaries of CEOs. It’s easy to see to whom the “flood of cash” is actually flowing. Looking at the period from 1970, when North American wages started stagnating, to the present:
The average American wage has risen 80% since 1970
The Consumer Prize Index (CPI)—a measure of the average price of basic goods and services—has risen over 500% since 1970
The average CEO salary rose 1,460% between 1978 and 2021
The same 2023 Consumer Affairs article cited above puts these numbers in perspective by noting that a 2023 US dollar has 86% less purchasing power than a 1970 US dollar.
I want to bring the conversation back to the real, physical world as often as possible. The skyrocketing price of commodities relative to wages might make sense if the supply of commodities had dwindled or the cost of production had gone way up. However, we know that productivity has dramatically increased over the past fifty years, cost of labour relative to productivity has decreased, and we live in a world of unprecedented material abundance.
We also know that many, many people in the world, including in “developed” or “first-world” countries, don’t have access to a share of this abundance that allows them to meet their basic needs. To quote Wikipedia for a moment: “A 2021 Oxfam report found that collectively, the 10 richest men [yep, all men] in the world owned more than the combined wealth of the bottom 3.1 billion people, almost half of the entire world population. Their combined wealth doubled during the pandemic.”
That’s a lot of money that’s not accessible to the general population. That’s a lot of money sitting around doing nothing.
(Relevant factors I did not discuss here include consumer debt, unemployment rates, and what, exactly, obscenely wealthy people do with their money. To be continued.)
Fascinating read. You've taken this discussion in a new space for me. When I think of use value I immediately want to contrast it with exchange value and place it in the realm of commodities.
For example, If I have a cup of sugar I have enough sugar to do all kinds of things. I can make pancakes for breakfast or cupcakes for dessert or destroy the internal combustion engine of an SUV; it's got a ton of use value. But from the perspective of the market it's pretty worthless. It's just a cup of sugar after all. If I wanted to sell it I wouldn't be able to get much for it. Realistically, i'd more than likely have trouble giving it away. It has almost zero exchange value.
But if I have a ton of sugar the inverse situation emerges.
A TON of sugar?? Where am I ever going to store it all? How am I going to keep it clean and dry and free of pests? What could I ever do with a literal ton of sugar?? These bulging sacks of white granules have negative use value for me.
However, I could exchange them, and profit by that exchange.
I think contemporary liberal economics is hyper-fixated on exchange value as a measure of prosperity - to the point where exchange value is the measure of value itself. Take the fetishization of GDP as an example; post-covid GDP growth is being reported as a sign of unambiguous economic strength by the business press, however, what is being celebrated as 'economic recovery' is really the accrual of wealth by monopolists through debt-driven consumption. These dogmatic economists are equating the health of an economy with the metrics of exchange value.
I don't think a feminist economist would share the liberal's enthusiasm for this model of growth.
My sense is that a feminist economist would want to know more about whose value is growing from all this exchange and what use that growth is to them before making any declarations of prosperity or economic health.
A feminist economics would place use value would be at the heart of any normative analysis.