A Theory of Value

After a few Belgian beers at The Cheeky Monk, my friend Chad and I began to talk about economics.

As we discussed the source and nature of money, we began to zero in on the idea of value. What is value? How is it created? Where does it come from?

Initially, I argued that value is created by humans: a combination of physical labor and intellectual capital. But it turns out, my definition was incomplete.

And, as Chad and I argued our individual points of view, I quickly discovered that defining value is actually a bit harder than I initially expected.

How True Value Is Created

Raw materials — like wood, metal, and even human labor — are created by God. God has given us time, natural resources, bodies, and brains, which we can then translate into all sorts of services and products.

As Deuteronomy 8:18 says, “But you shall remember the LORD your God, for it is He who is giving you power to make wealth.”

But does the act of creating something automatically create value? Not necessarily.

If I create a product that nobody wants and is never used, I have not created true value, rather only latent value. And if that latent value is never realized, then my investment of time and effort has been a waste.

For true value to be created, there has to be demand on the other side of the equation. At the moment when latent value meets demand, true value is created.

Of course, there is an additional ingredient in this equation. Because how else can latent value and demand connect except through advertising?

Latent Value + Effective Advertising + Demand = True Value

Anybody can create true value by:

1. Identifying demand.
2. Using their God-given abilities to meet the demand with a product or service.
3. Advertising the product or service they’ve created.

What Appears as Value Is Not Always True Value

Any discussion of value wouldn’t be complete without at least touching on the broader societal implications.

For instance, a man may demand a gun to murder somebody with, and another man may manufacture that gun. When the exchange is made, value has only been created on a purely economic level.

The use of the gun to murder does not create value at all, and in fact harms society as whole.

Ultimately, true value can only be realized when the products and services being exchanged are moral in nature and are used in compliance with the law. Otherwise, there is only an illusion of value.

These are my thoughts on the nature and creation of value. If you have anything to add, feel free to leave a comment below.

-Ryan M. Healy