Supporters of capitalism usually agree with what is called the subjective theory of value (STV), as explained by most mainstream economic textbooks. This system of economics is usually termed "marginalist" economics, for reasons which will become clear.
In a nutshell, the STV states that the price of a commodity is determined by its marginal utility to the consumer and producer. Marginal utility is the point, on an individual's scale of satisfaction, at which his/her desire for a good is satisfied. Hence price is the result of individual, subjective evaluations within the marketplace. One can easily see why this theory could be appealing to those interested in individual freedom.
However, the STV is a myth. Like most myths, it does have a grain of truth in it. But as an explanation of how to determine the price of a commodity, it has serious flaws.
The kernel of truth is that individuals, groups, companies, etc. do indeed value goods and consume/produce them. The rate of consumption, for example, is based on the use-value of goods to the users (although whether some one buys a product is affected by price and income considerations, as we'll see). Similarly, production is determined by the utility to the producer of supplying more goods. The use-value of a good is a highly subjective evaluation, and so varies from case to case, depending on the individual's taste and needs. As such it has an effect on the price, as will be shown, but as the means to determine a product's price it ignores the dynamics of a capitalist economy and the production relations that underlie the market. In effect, the STV treats all commodities like works of art, and such products of human activity (due to their uniqueness) are not a capitalistic commodity in the usual sense of the word. Therefore the STV ignores the nature of production under capitalism. This is what will be discussed in the following sections.
Of course, modern economists try and portray economics as a "value-free science." Of course, it rarely dawns on them that they are usually just taking existing social structures and the economic dogmas build round them for granted and so justifying them. As Kropotkin pointed out:
"[A]ll the so-called laws and theories of political economy are in reality no more than statements of the following nature:'Granting that there are always in a country a considerable number of people who cannot subsist a month, or even a fortnight, without accepting the conditions of work imposed upon them by the State, or offered to them by those whom the State recognises as owners of land, factories, railways, etc., then the results will be so and so.'
"So far middle-class political economy has been only an enumeration of what happens under the just-mentioned conditions -- without distinctly stating the conditions themselves. And then, having described the facts which arise in our society under these conditions, they represent to us these facts as rigid, inevitable economic laws." [Kropotkin's Revolutionary Pamphlets, p. 179]
In other words, economists usually take the political and economic aspects of capitalist society (such as property rights, inequality and so on) as given and construct their theories around it. In other words, marginalism took the "political" out of "political economy" by taking capitalist society for granted along with its class system, its hierarchies and its inequalities. By concentrating on individual choices they abstracted from the social system within which such choices are made and what influences them. Indeed, the STV was built upon abstracting individuals from their social surroundings and generating economic "laws" applicable for all individuals, in all societies, for all times. Ironically enough, by trying to create a theory applicable for all time (and so, apparently, value free) they just hide the fact their theory justifies the inequalities of capitalism. As Edward Herman points out: