What is Value?

I was re-reading Castell's Rise of the Network Society today, and I came across this intriguing quote:

"The new economy brings information technology and the technology of information together in the creation of value out of our belief in the value we create" (p. 160).

Leaving out the cute play of words in the first half of the sentence (where Castells again argues for the centrality of information technology in reorganizing capitalism since 1970), Castells is making a key claim about the source of value in the contemporary economy.

Leading up to this quote, Castells argues that valuation -- that is, the social determination that company X or commodity Y is more or less valuable -- has become detached from objective measurements of profit and the return of dividends. Remember, he's writing in the late 1990s. This was a world where, in 1999, at the height of the dot.com bubble, the stock of a single company, Amazon.com, was worth more than twice as much as the entire Russian economy--this despite the fact that Amazon had yet to turn a profit. What gives? On what basis does the collective intelligence of global financial markets determine the value of assets, commodities, or firms?

Castells writes that "two key factors seem to be at work in the valuation process: trust and expectations" (p. 159). If the collective intelligence of investors trusts a firm and its directions, and if they have high expectations for future gains, they express this by raising the value of the firm. This is largely a subjective process -- I say "largely" because objective calculations of profitability, costs, and returns play into the "buzz" that investors and fund managers generate about firms, products, and services. But the subjective element is there, made up of "a vague vision of the future, some insider knowledge distributed on line by financial gurus and economic 'whispers' from specialized firms, conscious image-making, and herd behavior" (p. 159).

Yet the subjective nature of value creation -- the ability to increase the value of a firm not by producing more efficiently or selling more widgets but by simply building trust and increasing expectations in a social network -- does not necessarily mean we need to toss out the Marxian connection between labor and value. As Castells writes:

"within the logic of capitalism, the creation of value does not need to be embodied in material production. Everything goes, within the rule of law, as long as a monetized surplus is generated, and appropriated by the investor. How and why this monetized surplus is generated is a matter of context and opportunity...There is a growing de-coupling between material production, in the old sense of the industrial era, and value-making. Value-making under informational capitalism is essentially a product of the financial market. But to reach the financial market, and to vie for higher value in it, firms, institutions, and individuals have to go through the hard labor of innovating, producing, massaging, and image-making in goods and services. Thus, while the whirlwind of factors entering the valuation process are ultimately expressed in financial value (always uncertain), throughout the process of reaching this critical judgment, managers and workers (that is, people) end up producing and consuming our material world -- including the images that shape it and make it" (p. 160)

Thus, the source of all value is still human labor -- whether it is the application of human energies in material production or the application of human energies in the creation of new financial instruments, innovations, processes, or the symbols used to hype these instruments, innovations, and processes.