Here I am republishing a short excerpt from my book the Locust and the Bee, explaining the nature of value. Since it was published there has been a growing stream of books on value, social value, public value, ecological value and more. Many of these are useful and worthy. But I think many miss some essential points which I covered here.
I start by defining the essence of capitalism. I don’t discount the importance of looking at who has power, or at the rules, or the culture, or the flows. All of these are dimensions of what we call capitalism, and all shape its character. But capitalism is better understood as something altogether simpler, that lies behind these manifestations. It is at root an idea, an imaginary, a way of seeing the world. This idea is the single-minded pursuit of growth in value, or more specifically of growth in representations of value that can be exchanged with others.
Braudel’s description of a hierarchy of markets captures this well: each move up the hierarchy brings with it a purer embodiment of the idea, and ever greater distance from everyday life.
From this idea many other ideas derive, including the myriad of rules, techniques, organizational forms, and measurement tools that make up capitalism. From it, too, derive the values and ideals that make capitalism a culture, a form of civilization as well as an economy. And from it, too, derives a logic of power, in which power gravitates to those who can accumulate the most representations of value.
If value really is so important, it then becomes vital to understand exactly what it is. Value appears to be a solid concept, especially when embodied in a strong currency, or the gold held in the central bank’s vaults. Yet we know that value can prove ephemeral and volatile—and the ways in which currencies and stock markets crash, or company accounts turn out to be fictions, reveal a great deal about value’s true nature.
To understand value we must first find its roots. These can be found in our nature as biological creatures: we value what helps us flourish. We know how to distinguish happy from unhappy; safe from unsafe; comfortable from uncomfortable. We value things that contribute to our survival, and enhance our experience, and our ancestors, like us, could always distinguish the relative value of different things such as an axe or a carcass, in terms of their contribution to survival or flourishing. This is “lived value”—value that is real and experienced in space and time.
A very different kind of value exists in representations, which are abstracted from daily life: money, gold, and more recently a proliferation of devices from the stock and bond to the credit card. Their appeal is that they promise lived value in the future, and they provide a store as well as a medium of exchange, and perhaps a sense of security and pride. But the representations are radically different in nature from the value they represent. The representations only come alive, paradoxically, at their moment of death, when they are disposed of, and turned into real things. And value is ultimately only meaningful in real places and times: we may sit on a bulging bank account or a vault full of gold, but it’s only when we spend it on a meal, a home, or a journey that its potential is realized.
These distinctions are obvious, or at least they used to be. Many past societies distinguished between the production of value, which is seen as good, and money making, which is of doubtful virtue (Aristotle used the term “oekonomia” for the first and “chremmatistica” for the second). For Thomas Aquinas just exchange meant each side received exactly his due, and he opposed lending money for interest as a breach of this principle. A later fourteenth-century writer, Nicolas Oresme, summed up the prevailing view when he wrote that “it is monstrous and unnatural that a …thing specifically sterile such as money should bear fruit and multiply of itself.”[i] These ideas can seem quaintly anachronistic amidst an economy so dependent on money in all its forms.
But we have lost an important insight as modern economics (unlike classical economics) has become uncomfortable with value that isn’t at least notionally monetized. This may be because capitalism has done so much to amplify the means of representing value, and orchestrating these representations, through everything from double entry bookkeeping to management accounts, futures markets to actuarial tables. In all of these cases, value has been made abstract, manipulable, and thus amenable to the creativity of mathematics. The promise, all along, has been that new ways of manipulating represented value will lead to the expansion of lived value, and that has indeed happened. Turning future value into a number makes it easier to justify investment; turning knowledge into an asset makes it easier to justify devoting resources to research.
But most of the vulnerabilities of capitalism also derive from the less than solid relationship between lived value and its representations. These include the high incentives for predation and free-riding and the tendency of crises to spin out of control when representations stretch too far from the reality they represent. They include capitalism’s crises of meaning, which derive from the perception that it knows the price of everything and the value of nothing, and the corrupting moral ambivalence that comes from the distance between decisions and their effects.
What I’m describing here as lived value isn’t exclusively material. From the earliest times some things became representations of value despite having no direct use: symbols of status, or continuity, or magic, had a cognitive value even if they had no obvious material one. Today, too, meanings and values are hard to distinguish: we genuinely enjoy a bottle of wine more if we think it’s expensive, or a work of art if we think it’s not a fake. We appreciate cars or clothes more if they are semiotically rich—and not just fast or comfortable. And, as Adam Smith was keen to point out, we admire systems and institutions as much for the beauty of their design as for the utility they provide.[ii]
I also don’t want to imply that representations of value float freely. They may appear to be abstract, but all monies, and all other representations of value, are grounded in institutions and social relationships. The orbit of money expands when there are strong states and strong institutions—like banks, monastic orders, or corporations—and it contracts during times of acute social and political crisis. But the crucial point to emphasize is that capitalism’s uniqueness lies in its handling of representations of value, even though its usefulness derives from its ability to create genuine, lived value. It institutionalizes a very distinctive way of seeing. What is seen is the potential for exchangeable value in anything, and then the infinite ways in which value can be measured, traded, or stored. Possibility can be seen in otherwise inert places and things. All things can be measured by their degree of use and waste, and judged not by what they are or what they mean, but by the value latent in them, whether it’s a field waiting to be turned into an orchard, a seam of metals waiting to be mined, or a tune or a talent waiting to find a market.
What isn’t seen is everything else: meaning, context, belief. Market capitalism is in this sense precisely analogous to the information theory developed by Claude Shannon and others which sees all information as equivalent, and amenable to being manipulated, transmitted, or stored, but only so long as everything else is ignored: all meaning, context, or culture.[iii]
Information theory made possible an explosion of new tools for communication, from the computer to the fiber-optic cable, just as the pure idea of the market made possible an explosion of innovations around money and value, such as the application of sophisticated probability theories to the management of risk.
What follows is much more than a tool, an economic system that serves practical goals. Instead the tool also shapes us. Everything that we know about our cognition shows that we do not experience reality directly. Instead we create representations of reality through which we engage with an external environment. Much of our mental energy goes into sustaining its coherence. Capitalism works by becoming a way of seeing and thinking. Like so many other parts of human civilization, it thrives by becoming part of us, not just a tool, so that we see things only through their representations, through their potential to be bought and sold, like the singer of the “Trader’s Song” in Bertolt Brecht’s opera, Die Massnahme (“The Measure Taken”):
how should I know what rice is?
How should I know who knows what it is?
I’ve no idea what rice is, I only know its price
[i] Quoted in Bruce Carruthers and Wendy Nelson, “Accounting for Rationality: Double-entry Bookkeeping and the Rhetoric of Economic Rationality,” American Journal of Sociology 97, no. 1 (1991): 31–69. [ii] See Adam Smith, The Theory of Moral Sentiments, part IV, chapter I. “Of the beauty which the appearance of Utility bestows upon all the productions of art, and of the extensive influence of this species of Beauty” (Cambridge: Cambridge University Press, 2002). [iii] Claude Shannon, a twentieth-century American mathematician and engineer, is known as the father of the information age, mainly thanks to the paper he wrote in 1948: "A Mathematical Theory of Communication," published that year in the Bell System Technical Journal.
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