VALUE
The extent of Aristotle’s contribution to the theory of value has been very diversely estimated.[[521]] In a classic passage of the Politics, he distinguishes between the two uses of an object, the direct use for which it was produced, and the indirect as an article for exchange.[[522]] This has often been heralded as an anticipation of Adam Smith’s distinctions between value in use and value in exchange.[[523]] Such an interpretation, however, is hardly warranted.[[524]] The entire emphasis of Aristotle in the passage is upon use rather than upon value. The exchange use is declared subordinate, and the context shows that the purport of the statement is to teach the uneconomic doctrine that exchange (μεταβλητική) is an artificial use, especially when pursued for gain.
Moreover, the passage fails to develop the definition further by distinguishing between economic utilities that involve a cost of production, and other necessities that are devoid of exchange value because of their universality.[[525]] Need is recognized as an element in exchange value,[[526]] but it is not differentiated from economic demand that has the means to purchase. All that can safely be said of this statement of Aristotle, therefore, is that he accidentally hit upon a basal distinction, which, had it been his purpose, he might have used as starting-point for the development of the modern theory of value.
Certain other passages from his writings reveal a clearer apprehension of the distinction. In the Rhetoric, he states the principle that exchange value is measured by rarity, though this may not be a criterion of the actual value of the commodity to life.[[527]] The latter is measured by its necessity or practical utility.[[528]]
A paragraph from the Nicomachaean Ethics, though it does not treat the problem directly, is also an evidence of Aristotle’s insight into the elements of economic value.[[529]] It has been strangely slighted by most historians of economic thought, though its significance has been recognized by editors of the Ethics.[[530]] It grows out of his discussion of fair exchange, which is a part of the larger subject of justice. He observes that a proportional equality (κατὰ τὴν ἀναλογίαν ἴσον) between diverse products must exist before exchange can take place,[[531]] since the labor involved in their production is not equal.[[532]] This equality he obtains through a proportion, in which the objects of exchange stand in inverse ratio to the producers.[[533]] The equalization of the commodities is thus based, according to Aristotle, upon an estimate of the labor or cost of production in each case.[[534]] Again, he points out that the standard by which all products are measured is need or demand (χρεία) for reciprocal services,[[535]] thereby making demand a social fact dependent upon organized society. It is, in his thought, the “common denominator of value” which finally determines the actual basis on which all goods are exchanged or services rendered. Elsewhere Aristotle’s conception of value is more individualistic, like that of Xenophon and Plato, but Haney[[536]] overlooks this passage in asserting that his notion of value is “purely subjective.” It is not merely “equal wants” that are considered, as he states, but equal costs as well.[[537]] This demand, or common measure of value, is expressed in terms of money (νόμισμα).[[538]]
It is clear then, from this passage in the Ethics, that Aristotle understood that economic value is determined by demand, as measured in money, and by labor invested or cost of production.[[539]] This latter element, of course, involves the condition that the product be limited in supply, though this is not expressly stated.[[540]] To be sure, the interest of the moral philosopher is also paramount here,[[541]] as in the Politics passage. The thought is centered on fair exchange, as a phase of justice, rather than upon the problem of value. Nevertheless, his discussion reveals a clear insight into demand and cost of production as the two most important elements in economic value.[[542]]