Goods have value based on the use or labor required to produce them. Trading goods weakens their value, so gold became a medium of exchange. The value of a good is determined by a single consumer, but Marxist theory values goods based on socially acceptable labor.
A physical good is an item that consumers can buy, sell, or exchange for other items. The study of these goods is common in economic theory or philosophy. There are many theories that determine the value of a material asset. For example, classical economists believe that goods have a value placed upon them by the use an individual receives from owning them. Marxist economic theory states that the value of a good comes from the labor required to convert raw materials into a valuable object.
Classical economic theory describes goods by the value or use a consumer receives from the item. In historical times, a means was needed to buy or trade different goods in an economy. A consumer with a farm could trade corn with a consumer who grows cotton. In this scenario, each material asset has a value to the other, as individually each individual grows only one item. Trading in goods offers each individual a chance to improve their livelihoods without growing the item themselves.
Unfortunately, the constant trading of one material asset for others eventually weakens their value. When everyone in an economy has corn, the value of the good drops precipitously. Thus, individuals seek a good that has value that provides a medium of exchange, that has consistent value to all individuals at all times. Historically, gold has become this medium. This commodity was valuable to all individuals, allowing the corn farmer to exchange corn for gold and then exchange the gold for cotton or other items, satisfying the individual’s needs.
According to this classical economic theory, each individual has the ability to place a value on each material asset in the economy. Transactions, purchases or sales occur only when each individual believes the goods in the transaction to be of equal value. Therefore, the value of a good can only be determined by a single consumer. Eventually a commodity market will arise, with an individual selling goods at a value deemed by most individuals in the economy. Every material asset in the economy falls under this theory until an asset has any value or use by individuals in the economy.
Contrary theories attribute a different value to material goods. Marxist theory attempts to value a good based on the labor required to produce the item. The corn farmer, for example, would value his assets by his labor to produce it in society. While many classical economists believe in a labor theory of value, Marxist theory takes it to a level beyond the personal level. The socially acceptable labor required to produce goods places a social price on top of the personal level of labor to produce a material good.
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