The market theory of value holds that value (utility) is subjective, or a matter of individual opinion.

In other words, value is a human determination of what an item is worth to the individual (the purchaser) making the determination.  This evaluation is always relative in respect to the extent and the intensity of the desire, the financial ability, and the alternatives available to the purchaser at that time.

In this view, the purchaser is essentially disinterested and does not care what the item he seeks to buy costs to produce.  He thinks only in terms of his own satisfations, not in terms of the satisfactions of the producers, distributors, or investors.

Under the market theory, value is never fixed or static -- as opposed to the labor theory, which holds that value is objective and intrinsic, and set by the costs of production.

To further illustrate the application of these two theories of value, consider the following examples:

John Jones, in hopes of finding oil, selects a location, negotiates with the owners, and proceeds with drilling operations.

He drills to a depth of 1,000 feet to no avail, and at that point becomes conviced that he will get nothing but a deeper hole if he continues.

His cost of drilling was $1,000 per foot, so the cost to him for drilling a 1,000-foot dry hole hole was $1,000,000.

Under the labor theory, this dry hole is now worth $1,000,000.

After giving up on this location, Jones proceeds about a mile up the road, again negotiates with the owners, and starts a second drilling attempt.

This time Jones drills to a depth of 100 feet and the oil comes gushing up out of the ground.

Assuming that the second drilling cost the same per foot as the first attempt, the second hole cost only $100,000 to drill, and according to labor theory, is now worth $100,000.

So here we have a hole 1,000 feet deep costing $1 million, and a hole 100 feet deep costing $100,000.

Obviously less labor went into drilling the second hole.  The labor theory of value would hold that the 100-foot hole producing oil is therefore worth less than the 1,000-foot hole which was dry.  This is clearly ridiculous on its face. 

It is doubtful that anyone would now pay as much as a dollar for the 1,000-foot dry hole, while many would gladly and eagerly pay many hundreds of thousands if not millions of dollars for ownership of the hole which is now producing a steady stream of oil.