Read Adam Smith's "On the Wealth of Nations" and you'll see a quick explanation of how value is: A) The amount of labor put into a thing; B) The amount of labor purchasing a thing saves the buyer over making it himself (e.g. the seller is more efficient); and C) the amount the buyer is willing to pay. These aren't the same thing; he uses the term "value" without explaining which, continuously invoking an equivocation fallacy.
Karl Marx does the same thing, positing the value is the amount of labor put into a thing, somehow concluding we should avoid efficiency because things will have less value (less invested labor), thus we want *more* people laboring to make a thing, instead of *fewer*. He also somehow decided that a tractor made with 1,000 labor-hours has a value of 1,000 labor-hours even after new techniques start making the same damn tractor in 200 labor-hours.
Eventually, the concept of value posed so many problems that we got the subjective theory of value: diamonds are worth a lot because of belief. People believe it has value, therefor it is invested with inherent value.
Georgists believe in land value: value comes from the land, and we derive value from the land upon which we produce. There are so many things wrong with this I don't know where to start, and I don't feel like rambling on all the reasons this is *wrong* right now. The most obvious is we keep making more things with less land usage, building more efficient machines or building vertically.
I believe in *valuation*: Consumers identify a thing as worthy of commanding a certain price. They value (verb) a stock, a diamond, a hunk of gold, or whatever else at a price higher than its cost. That thing does not *have* value (noun); it has *valuation* (noun), the estimate of its worth.
Because of this, contemporary and classical economics have continuously tried to discuss what the price of goods should be, or how the stock market should work. Wikipedia explains Theory of Value:
"Theory of value" is a generic term which encompasses all the theories within economics that attempt to explain the exchange value or price of goods and services. Key questions in economic theory include why goods and services are priced as they are, how the value of goods and services comes about, and for normative value theories how to calculate the correct price of goods and services (if such a value exists).
In other words: Shopkeepers and accountants being shopkeepers and accountants.
I started writing my own economic theories in which I tried to avoid Drake equation bullshit and focus on economic mechanisms. For example: we expend human labor time to make things; technology is the creation of new techniques to reduce the human labor time per good created. By reducing the human labor time per good, we reduce the portion of a standard-of-living expended to purchase that good; we also increase the amount of human labor we can expend on other things. Instead of spending 50% of our time acquiring food, we spend 2% of our time doing that (using machines and modern farm management techniques), and some of the other 98% goes into building rocket ships and putting men on the moon. That's what I explained above.
I don't have a good way to measure productivity, and I'm disinclined to make something up. I don't have a good way to measure *production*.
We currently measure GDP by measuring money: how much money was spent on purchasing all the crap we made? This is a useful metric, with subtle problems. Let's first look at my theories about fiat currency.
It's obvious that every unit of currency (dollar) spent equates to every good or service produced and sold: what are you spending dollars on, if not some service rendered or some product delivered? Production may be as simple as pulling a rock from a ground, or as complex as fabricating semiconductors. It doesn't matter. People spend money, and that money goes to businesses; businesses write off the wages paid to workers, who then file those wages as income. Every dollar spent is either business profit or someone's wages.
While that may be true--let's just take it as postulate--the world is a complex economic system. Firstly, we exchange currencies across international bounds, and have trouble measuring all that. Second, the whole system doesn't change state instantly: it *approaches* this value for a reasonable time frame, i.e. for the past year, just like how pushing down a piston propagates a pressure wave through a closed vessel which (quickly) settles down in line with the ideal gas law.
So I have a mechanism, but the real world is so complex that this mechanism is duplicated a whole hell of a lot, and then the duplicates are crudely smashed together. Surprise. The universe is made entirely of four fundamental forces (gravitational, electromagnetic, strong nuclear, weak nuclear) and look how complex that turned out.
Back to GDP.
We measure GDP by the dollar amount we sell products for, in total. We adjust that for inflation based on Consumer Price Index, which we gather by recording the prices of goods and comparing their change over time.
What happens when you double the amount of money people have? Double their income, zero additional productivity. Prices rise (otherwise we just dump money that never gets spent in people's mattresses, and all that money rolls straight off the printing presses rather than coming from jobs). You now have a zero change in GDP. So far, so good.
What happens when you improve productivity, reducing the cost of a product, and inject more money?
Well, you get inflation. Everyone has $15 instead of $10; food costs $12 instead of $15. CPI then says inflation is 20%, and spending all this money to buy new goods (using the same labor-hours) gets you a GDP increase of 25%. Seems close enough.
What if you don't get *any* more productive at making food? Rising prices anger the consumer, and so you went from $7 cost and $10 price (30% mark-up) to $10.50 cost and $12 price (14% mark-up)?
Your GDP goes up, and you peg food at 20% inflation. Two problems: Food has gotten 33% cheaper by price, but food productivity has not increased at all. In other words: you're not suddenly capable of producing 25% more food with the same labor; people are just spending less on food, and spending that money elsewhere, creating new jobs (broader consumer market spending does this in general, but it's not strictly a rule--big government spending takes up *enormous* infrastructure projects that a broad consumer market can't support, which create a *ton* of job demand).
So GDP actually kind of works; CPI doesn't quite work as well; and the interaction between the two occludes a lot of the movement.
Again: my take on this is "here's a mechanism. I don't have math for you." This is why. These metrics are *useful*; they're not *perfect*, which means they're wrong, just within a tolerance which doesn't quite render them meaningless.
I have no interest in computing the supposed value of a good for the same reason: it's a meaningless term. Goods have cost, price, and so forth. Goods even have valuation, so far as the consumer assigns their perception of a good's worth to that good. Goods do not embody the command of some inherent worth; that's not a thing.