We often talk about what things are “worth” or how much their “value” is. To talk truthfully about economics, we need to use the right definitions.
Ever since Aristotle, it has been acknowledged that there are two kinds of value: use-value and exchange-value.
The first kind of value is use-value. This refers to the ability of goods to satisfy a human need or desire. “[Aristotle] recognized that material things possessed by human beings could be used in two different ways. The first and original way that they could be used, the reason why people first begin to take or to make things in the first place, was to fulfill some human need” (“Use Values and Corn Laws, Aristotelian Marxists and High Tories”, Edmund Waldstein, O’Cist.). For example, a shoe fulfills the need to protect your feet when walking. A sandwich satisfies the need to eat. The use-value of a bed is that it provides a good night’s rest.
The second kind of value is exchange-value. This refers to how much a good can be exchanged for, in other words, how much it can be traded for in a market. Exchange-value is what capitalists are describing when they talk about “market growth” and “GDP.” Aristotle describes the difference between use-value and exchange-value:
A shoe is used for wear, and is used for exchange; both are uses of the shoe. He who gives a shoe in exchange for money or food to him who wants one, does indeed use the shoe as a shoe, but this is not its proper use, for a shoe is not made to be an object of barter. (Politics, Book I, Chapter 9, 1257a)
Notice that it is the same shoe which has both use-value and exchange-value. The value is not somehow transformed from one to the other: the different values exist in different contexts. Use-value is about the qualities of value: what can it be used for? The use-value of a sponge is cleaning. The use-value of a hammer is building. Its value can be found in the context of human life. Use-value is concerned with the telos, or, the ultimate purpose of a material thing.
Exchange-value, on the other hand, is only about the quantity of value: how much can it be sold for? The exchange-value of everything—whether a sponge, a hammer, or a shoe—is a certain number of barter goods, coins, or another currency. Its value can only be found in a market of some kind.
It is clear that use-value should be at the foundation of a just economy, because it is concerned with serving human persons. Exchange-value is disdained by Aristotle as not the “proper use” of a shoe, because a focus on this kind of value can lead to greed. Capitalism is the ultimate example of a system of greed because it is dedicated to the “infinite accumulation of exchange-value.” It is fundamentally different than premodern society because it prioritizes exchange-value over use-value and has radically transformed economic life.