The value of goods and services is determined by the relationship we have with them based on their ability and capacity to satisfy our needs. If this need-satisfying ability and capacity of goods and services changes, so does our relationships with them, and the value we derive from these relationships.
In classical economic thought, the ability or capacity of goods to satisfy our needs was seen as their usefulness or utility. Goods served specific purposes when they were consumed – e.g. food removed hunger, clothes covered our nakedness and provided warmth, houses provided security and comfort – and their importance in our lives was a function of how well they satisfied our needs.
The greater the satisfaction experienced from the goods, the greater was the goods’ usefulness or utility to us. This reasoning applied to all goods: those available free and in abundance, as well as those which were scarce (i.e. difficult to obtain when the needs were felt). It was this (second) category of scarce goods that was important as these goods commanded much greater attention from us.
Their importance increased or diminished according to their utility, thus influencing and contributing to how we experienced and perceived these goods when we consumed them. The greater the utility in satisfying our needs, the greater was our attachment to these goods, the stronger was our relationship with them, and the more we valued these goods.
Hence, value was something we derived from the utility of these scarce goods based upon our experience with these goods and the relationships we formed with them. As the utility of these scarce goods changed, so did the value we derived from them.