The Structure of the Neoclassical Theory

In the structure of the classical theory, we know that utility and subjective evaluations of the usefulness of commodities play no role in the determination of relative equilibrium prices and the economy’s general rate of profit. Hence, we need to distinguish between the use-value of classical economists and the utility of neoclassical economists. Use-value, for classical economists, meant the property of a good to satisfy human needs (real or imaginary), whereas utility – a concept that was developed gradually in the mid to the end of the nineteenth century – means the satisfaction that an individual derives from the consumption of a good or the use of a service. Since utility refers to the consumer and the intensity of satisfaction that he or she derives from a good or a service, it follows that utility has an apparently subjective character. By contrast, use-value refers to the properties of a commodity to satisfy social needs; it has an altogether different character.