The term value and the concept of value theory have taken on two distinct definitions in relation to economic theory.  The first definition of the term value pertains to the role of normative analysis within economic theory.  As discussed in chapter 1, for orthodox economic thinkers there is little room for normative thinking in the rigorous world of scientific economics.  Subjective or moral judgments are discouraged in favor of utilizing a positive, value-free approach that is not a statement of anyone’s value judgment or subjective feelings, but rather of what “is.”  By the standard orthodox textbook definition, the term “value” relates to personal biases and subjective beliefs.  Also, recall from Chapter 2, the positive versus normative conflict presented by orthodox economics represents a false dichotomy.  As has been discussed by non-orthodox economic theorists, subjective values tend to be present in all economic paradigms and are unavoidable.

The second definition of value that is common in economics is the one most people think of when they think of the term “value.”  For most people when they think of the value of something, such as a product, they are simultaneously thinking of the price of that product.  Therefore, the term value and the term price tend to be used interchangeably.  As a result, for many economists it is important to develop a theory of value because the theory of value provides the theorist with a sense of the origin of prices.  After all, if an economist can identify the root source of value, then the same economist will also understand the root origin of prices.  Since prices are incredibly important informational signals, being able to explain from where prices originate adds an important depth to economic theory.

On the surface both usages of the term “value,” as described above, appear to be mutually exclusive.  However, closer inspection reveals two interrelated issues.   Scientists, economists included, already tend to, whether knowingly or unknowingly, assert subjective values within their theories.  Values not only generate a necessary entanglement of facts and values, but they then become present throughout the very act of theorizing.  In the case of economics, this means that the economic ideas that theorists present will include elements of their basic worldview or, as some would say, their philosophy.

The remainder of this chapter is laid out in such a manner as to explore the role of philosophy in economics.  First, the philosophical foundation of orthodox economics, and its history, is explored.  As will be shown, orthodox economics relies upon utilitarian philosophy for its value-based understanding of human action and motivation.  As such, orthodox economics believes that the concept of utility holds the key to understanding the origin of prices.  Additionally, utilitarianism forms the basis for the ethical perspective presented by orthodox economics.  Upon closely examining the orthodox story of utility, the chapter moves on to identify important limitations that develop as a result of the use of utility.  The chapter then moves on to provide alternative examples from heterodox economics, pointing out philosophical worldviews outside of utilitarianism that can form the basis of economic thought.  Importantly, the alternative approaches presented do not suffer the pitfalls that are present within the orthodox, utilitarian approach.