The Nature and Origin of Subjective Value
[This article is excerpted from The Positive Theory of Capital, book 3, chapter 2, "Nature and Origin of Subjective Value."]
All goods without exception — indeed according to the very conception of them as "good" — possess a certain relation to human well-being. There are, however, two essentially distinct grades of this relation. A good belongs to the lower grade when it possesses the general capacity to subserve human weal. The higher grade, on the other hand, demands that a good should be more than merely a sufficient cause; it must be an indispensable condition of human well-being — a condition of such a kind that some gratification stands or falls with the having or wanting of the good. In the expressive vocabulary of everyday life we find a separate designation for these grades. The lower is called Usefulness, the higher Value. This distinction, already recognized in common speech, we must try to make as clear and well-marked as its fundamental importance for the whole theory of value deserves.
A man dwells beside a bubbling spring of water. He has filled his cup, and the spring goes on pouring out enough to fill a hundred other cups every minute. Another man is traveling in the desert. A long day's journey over glowing sand still divides him from the nearest oasis, and he has come to his last cup of water. What is the relation in each case between the cup of water and the well-being of its owner?
A single glance shows us that the relation is very dissimilar; but wherein lies the difference? Simply that, in the former case, we have only the lower grade of the relation we call well-being, that of usefulness; in the latter case we have the higher grade as well. In the first case, just as in the second, the cup of water is useful, that is, capable of satisfying a want, and, moreover, in exactly the same degree; for evidently the refreshing qualities of the water — the qualities on which its capacity to quench thirst is based, such as coolness, taste, etc. — are not in the least degree weakened by the fact that other cups of water chance to possess similar properties; nor, in the second case, are these refreshing qualities in the least augmented by the accidental circumstance that there is no other water near. On the other hand, the two cases become essentially distinct when considered with reference to the second grade. Looking at the former case we must say that the possession of the cup of water does not provide the man with one single satisfaction more, nor its loss with one satisfaction less, than he could have obtained without it. If he has that particular cup of water he can quench his thirst with it; if he has not that cup — well, he can quench his thirst quite as well with one of the hundred others which the spring puts freely at his disposal every minute of the day. If he likes, therefore, he may make that one cup the cause of his satisfaction by quenching his thirst with it; an indispensable condition of his satisfaction it cannot be; for his well-being it is dispensable, unimportant, indifferent.
It is quite otherwise in the second case. Here we must say that, if our traveller had not that one last cup, he could not quench his thirst; he must bear its pangs unassuaged, perhaps even succumb to them. In the cup of water then, in this case, we see not merely a sufficient cause, but the indispensable condition, the sine qua non of human well-being. Here it is of consequence, even of urgency; it possesses importance for his well-being.
Now it is not too much to say that the distinction here drawn is one of the most fruitful and fundamental in the whole range of our science. It does not owe its existence to the microscope nor to any hair-splitting distinctions of the logician. It has its life in the world of men, who know it and use it and take it as guide for their common attitude towards the world of goods, not only as regards the intellectual estimate they apply to these goods, but as regards their actual business transactions. About goods which are only useful the practical business man is careless and indifferent. The academic knowledge that a good may be "of use" cannot evoke any efficient interest in the good, in face of the other knowledge that the same use may be obtained without it. Such goods are practically naught as regards our well-being, and we treat them as such; we are not put about when we lose them, and we make no effort to gain them. Who would fret at, or make an effort to prevent, the spilling of a cup of water at the spring, or the escape of a cubic foot of atmospheric air? Where, on the other hand, the sharpened glance of the economic man recognizes that some satisfaction, well-being, gratification, is connected with a particular good, there the effective interest which we take in our own well-being is transferred to the good which we recognize as its condition; we see and value our own welfare in it; we recognize its importance for us as value; and finally, we develop an anxiety, proportioned to the greatness of that importance, to acquire and hold the good.
Thus, formally defined, value is the importance which a good or complex of goods possesses with respect to the well-being of a subject. Any addition to this definition, regarding the kind and reason of the importance, is, strictly speaking, not necessary, since goods can only have an effective importance for human well-being in one way, viz. by being the indispensable condition, the sine qua non, of some one utility which subserves it. In view of the fact, however, that in other definitions of value it is very often translated as an "importance," while the importance spoken of rests, erroneously, on a simple capability of utility, or, not less erroneously, on the necessity of expenditure of costs, or the like, we shall define it, un-ambiguously and exactly, as: That importance which goods or complexes of goods acquire, as the recognized condition of a utility which makes for the well-being of a subject, and would not be obtained without them.
All goods have usefulness, but all goods have not value. For the emergence of value there must be scarcity as well as usefulness — not absolute scarcity, but scarcity relative to the demand for the particular class of goods. To put it more exactly: goods acquire value when the whole available stock of them is not sufficient to cover the wants depending on them for satisfaction, or when the stock would not be sufficient without these particular goods. On the other hand, those goods remain valueless which are offered in such superfluity that all the wants which they are fitted to satisfy are completely supplied, and when, beyond that, there is a surplus which can find no further employment in the satisfaction of want, and which, at the same time, is large enough to spare the goods or quantities of goods that we are valuing without imperiling the satisfaction of any one want.
After what has been said as to the nature of value, it should not be very difficult to prove these propositions. When the supply of goods is not sufficient, and some of the wants which they are adapted to satisfy must remain unsatisfied, it is clear that the loss of even a single good involves the loss of a possible satisfaction, while the addition of a single good involves the acquisition of a satisfaction otherwise impossible; and it is clear, consequently, that some gratification or form of well-being depends on the existence of that good. Conversely, it is quite as clear that, if goods of any class are to be had in superfluity, there is no harm done if one of the goods be lost — since it can be immediately replaced from the superfluous stock, nor any utility got if another such good be added — since it cannot be employed in any useful way. Suppose, for instance, that a peasant requires 10 gallons of water per day, and no more, for general purposes — say, for his own drinking, for that of his family and servants, for watering his cattle, for cleansing, flushing, etc. — and suppose that the only spring within reach supplies no more than 8 gallons a day. It is quite evident that he cannot spare 1 single gallon from his water-supply without suffering, to a more or less sensible extent, as regards the wants and aims of his economy. Every gallon in this case is the condition of a definite sphere of usefulness. Even if the spring supplied just 10 gallons this would still be true. But if the spring supplied 20 gallons per day, it is just as obvious that the loss of 1 gallon would not do the slightest injury to our peasant. He can only employ 10 gallons usefully, and he must let the other 10 gallons flow away unused. If 1 gallon is spilled it is replaced from the overflow, and the only effect is that now the unusable surplus is reduced from 10 gallons to 9.
Now as it is the insufficient, or the barely sufficient, goods that are the objects of economical care — the goods we "economize" or endeavour to acquire and keep — while such goods as are to be had in superfluity are free to everybody, we may express the above propositions shortly in the following form: All economical goods have value; all free goods are valueless. In any case it must steadily be borne in mind that it is only relations of quantity that decide whether any particular good is merely capable of use, or is also the condition of a utility for us.
 See Conrad's Jahrbücher, vol. xiii. p. 11.
 Some very interesting phenomena of value may, in certain circumstances, be exhibited by free goods also. For the explanation of this see my Grudzüge, p. 15.
 Those numerous writers of whom Scharling is the latest instance (Conrad's Jahrbücher, vol. xvi. pp. 417 and 513, and particularly 424, 430, 651), who say that the distinguishing criterion of "economical" and "valuable" goods is difficulty of attainment, the necessity of expending labor, and the like, are giving a secondary ground of definition instead of the really decisive and primary one. It is only when and because we are suffering, or fear to suffer, loss of satisfaction from insufficient supply of goods that we decide, generally speaking, to submit to the hardships of acquiring them, to labor, and so on. Labor and hardship could not by themselves confer an economical character on goods were it not that, for the most part, another circumstance, and that the really decisive one, is also present; in other words, that those kinds of goods, which are difficult or troublesome to obtain, are, at the same time, the goods that remain scarce. That, however, it is not the difficulty but the scarcity that decides is vividly shown in those cases — not, I grant, very common — where the technical circumstances are of such a nature that the good can be got only, indeed, by conquering difficulties, but then in superfluous amount. When the peasant obtains good drinking water, e.g., by bringing it along a pipe to a house, it may occasion him a permanent expenditure of labor and costs for construction, upkeep, and management of the water-supply. But if this brings the water in greater quantity than he requires, it will not occur to the peasant, in spite of the labor, that he must "economize" the water.