What is Real Value?

Nothing can have Value without being an object of utility—-Karl Marx  Too many people latch on to the meaning of value someone famous has coined, such as Value requires to be an object of utility, according to Marx.

Utility can mean useful, helpful, effective, convenient etc.

Utility value is defined in many ways by different people mostly taken from Google: 

• Value is how much a person would be willing to pay for a specific level of utility. So, value is equated to price in this example
• It is a measure of satisfaction an individual gets from the consumption of the commodities. In other words, it is a measurement of usefulness that a consumer obtains from any good. A utility is a measure of how much one enjoys a movie, favourite food, or other goods. Here Value is equated to Benefits
• Utility value is how the task relates to future goals. While students may not enjoy an activity, they may value a later reward or outcome it produces (Wigfield, 1994). The activity must be integral to their vision of their future, or it must be instrumental to their pursuit of other goals.
• Utility and value, in economics, is the determination of the prices of goods and services.
• To find total utility value, economists use the following basic total utility formula: TU = U1 + MU2 + MU3 … The total utility is equal to the sum of utils gained from each unit of consumption. In the equation, each unit of consumption is expected to have slightly less utility as more units are consumed.

Use value is also defined in Marxist terms by Wiki: 

Use value or value in use is a concept in classical political economy and Marxist economics. It refers to the tangible features of a commodity (a tradeable object) which can satisfy some human requirement, want or need, or which serves a useful purpose. In Karl Marx’s critique of political economy, any product has a labour-value and a use-value, and if it is traded as a commodity in markets, it additionally has an exchange value, most often expressed as a money-price. This of course, is flawed, because with automation, the labor content falls, or with low cost labor, the labor content is lower, implying the value is lower.

Use value is “real” value, and only labor can create it.

So, one can surmise that use value is a sub-set of utility. Utility is potential value.

As a matter of economics, scarcity is the source of all value, even if it is a combination of ‘manufactured’ scarcity via monopoly control and relative scarcity due to the costliness of extraction and the preferences of consumers.” According to Marx

Marx develops a theory of value in which labor plays a crucial role, but “simply claiming that labor is the source of value,” as Kevin D. Williamson does in his measured analysis of Marx’s work, “misses out the dialectical and historical dimensions of Marx’s argument.”

But what is value? Is it an economic term? Or is it price, or is it more than that?

Most people use value contextually, in the context or situation they are in. They see a car and ask what is its value? (Price? Usefulness, Utility?)

They see a dress and ask what is its value. The value is what they perceive it to be. The value is what the dress is worth to them. In use, in utility, in benefits in usefulness, in style, in getting compliments, in ease of taking care of…. So ultimately, value creates some benefits for you, but there is a cost to the benefit: What you pay for it, the effort in buying and trying out the dress, the convenience etc. So worth or value in the context of the dress is derived if the benefits in your estimate are greater than the cost as defined above.

That is why we are willing sometimes to buy online, because the cost may be lower than going to a store and spending time and effort. Avoiding the cost of going to the store and your time makes it worthwhile to buy on line, the benefits include saved effort, saved time, more convenience; the benefits are lowered because you cannot touch or feel the dress. Hence an entrepreneur who can add this feature will create immense value to the customer and perhaps to the seller.

In a broader sense, going beyond business, value is doing good and improving the wellbeing of someone or some item. So, the dress can improve your well-being, or buying it may make you feel good. Or buying on line may increase the good to you.

For you, dear reader, Value is doing good and improving the wellbeing of someone or a product or a company. It could be potential or real, it could happen in the future. Most value comes from embedded perceptions and feelings, and therefore transactional value is deceptional. You may enjoy an ice cream but may never eat that brand again.

So long term value is based on embedded feelings of good or of one’s wellbeing or worth. Whether useful or not is also a perception, and a person takes all this together in deciding what is of value to him/her. Try it and you will realise why someone or some item creates value for you.

Best,

Gautam Mahajan, President, Customer Value Foundation
Founder Editor, Journal of Creating Value jcv.sagepub.com
New Delhi 110065 +91 98100 60368
mahajan@customervaluefoundation.com
http://www.customervaluefoundation.com
Twitter @ValueCreationJ
Blogs: https://customervaluefoundation.wordpress.com/
Author of Value Creation, Total Customer Value Management, Customer Value Investment, How Creating Customer Value Makes you a Great Executive, The Value Imperative, Value Dominant Logic, Customer Value Starvation can Kill
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