One of the great insights of modern economics is that value is subjective. Land, labor and production functions are valued at what an individual is willing to exchange for them, not some count of the labor hours required to produce the product or the amount of land used in its production. This insight is needed to understand why, for example, diamonds are observed to have more value to those willing to exchange for them than for air or water which are vital to life. There are good descriptions of subjective value in the economic literature. See references.
As humans became more aware of the their environment, especially other humans, they progressed from stealing, slavery and warfare as ways of obtaining others' land, labor and production functions [ let us not forget that slavery was not obliterated in civilized societies until very recently in human history] to voluntary exchanges.
Voluntary exchange means that one individual is willing, without being coerced, to trade the ownership right to specified land or production function, or perform labor for another, in exchange for the ownership rights to a different set of land, or production functions, or to perform labor.
Exchange implies that each individual in the trade is giving up ownership rights to something they value less than what they are getting in exchange. There is no equality in the values, simply that they now have something they value more in exchange for something they value less. There is no way of measuring value that has a common unit of measure valid across more than one individual. One can only say that, by observation, exchange between individuals occurred in certain amounts and that each individual at a point in time can give a cardinal list of the value of the items he or she deals with.
In primitive economies, exchange is bartering, meaning that no medium of exchange is used. For example, going back to our Nova Scotia settlers, one farmer may agree to exchange his labor to help build another's cabin if that farmer agrees to help the other build his cabin. They might agree that one farmer would raise pigs and exchange a pig for a specified amount of grain that the other farmer produced.
If we look a little more deeply into the cabin construction exchange, we realize that the two farmers can't construct their cabins at the same time, since cabin construction requires two people. They will need to construct one cabin first, then the other. Obviously each would desire to have their cabin constructed first as their tents are getting worn out and they are cold. They will most likely bargain, striking a deal such that some exchange is made that will satisfactorily compensate each individual in a way that the value of waiting for satisfaction is compensated.
In summary value is subjective. Exchange occurs because individuals value the same thing differently and want to trade an item of lower value to them for one of higher value. People prefer items now rather than in the future, all other things being equal.
Copyright 2014-2019 Richard A. Cornell, PE