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The Measure of Value

AS EARLY AS ARISTOTLE we find an attempt to discover a measure of the use value of goods and to represent use value as the foundation of exchange value. In the Ethica Nicomachea (v. 5. 1133a, 26–1133b, 10) he says that “there must be something that can be the measure of all goods. . . . This measure is, in reality, nothing other than need, which compares all goods. For if men desire nothing or if they desire all goods in the same way, there would be no trade in goods.”[2]  In the same spirit Ferdinando Galiani (Della moneta in Scrittoritclassici Italiani di economia politica, Milano, 1803–5, X, 58) writes “ch’essendo varie le disposizioni degli animi umani e varj i bisogni, vario è il valor delle cose.”[3]

     A.R.J. Turgot deals with this problem in an essay of which only a fragment survives (“Valeurs et Monnaies” in Oeuvres de Turgot, ed. by G. Schelle, Paris, 1913–23, III, 79–98). He explains (pp. 85ff.) that when human civilization has reached a certain stage man begins to compare his needs one with another, in order to adjust his efforts in procuring different goods to the degree of necessity and utility of these goods (besoins, a word used frequently in this sense by the Physiocrats). In evaluating goods man also takes into account the greater or less difficulty of procuring them, and Turgot thus comes to the conclusion that “la valeur estimative d’un objet, pour l’homme isolé, est précisément la portion du total de ses facultés qui répond au désir qu’il a de cet objet, ou celle qu’il veut employer à satisfaire ce désir.”[4] (Ibid., p. 88.)

     E.B. de Condillac comes to another result. In his Le commerce et le gouvernement (published originally in 1777 and reprinted in E. Daire [ed.], Mélanges d’économie politique, Paris, 1843, I, 247–445) he says: “On dit qu’une chose est utile, lorsqu’elle sert à quelques-uns de nos besoins; . . .  D’après cette utilité, nous l’estimons plus ou moms; . . .  Or cette estime est ce que nous appellons valeur.”[5] (Ibid., pp. 250–251.) Whereas Turgot makes the effort a person employs in procuring a good the measure of its use value, Condillac contends that its utility is the measure of its use value. These two fundamental views have frequently reappeared since that time in the writings of English and French economists.

     A deeper treatment of the problem of the measure of use value is to be found only among the German writers. In an often quoted passage, refuting Proudhon’s arguments against the prevailing theory of value, Bruno Hildebrand (Die Nationalökonomie der Gegenwart und Zukunft, Frankfurt, 1848, pp. 318ff.) says: “Da der Nutzwerth immer eine Relation der Sache zum Menschen ist, so hat jede Gütergattung das Mass ihres Nutzwerthes an der Summe und Rangordnung der menschlichen Bedürfnisse, welche sie befriedigt, und wo keine Menschen und keine Bedürfnisse existiren, dort giebt es auch keinen Nutzwerth. Die Summe des Nutzwerthes, welche jede Gütergattung besitzt, bleibt daher, sobald sich nicht die Bedürfnisse der menschlichen Gesellschaft ändern, unveränderlich, und vertheilt sich auf die einzelnen Stücke der Gattung, je nach der Quantität derselben. Je mehr die Summe der Stücke vergrössert, desto geringer wird der Antheil, welcher jedem Stücke vom Nutzwerthe der Gattung zufällt und umgekehrt.”[6] Hildebrand’s treatment gave an incomparable impetus to investigation, but it suffered from two shortcomings, which were felt (as we shall see) by later students of the theory who endeavored to eliminate them. In the passage quoted, the only thing that the value of a given “species of goods” can possibly mean is the value to human society of the total available quantity of all goods of that one kind. This value, however, has no real existence. It cannot anywhere be observed in the real world. For value arises only for an individual and for him only with respect to concrete quantities of a good (see p. 116 of the text). And even if we were to overlook this inaccuracy and conceive of Hildebrand’s “value of the species” as the sum of value of all concrete goods of a given kind for the different members of society possessing them, his statement would still be unacceptable, since it is clear that a different distribution of these goods, and even more a change in the quantity of them available, would change the “value of the species” in this sense, and in certain circumstances, reduce it completely to zero. If the term is taken literally, therefore, the “value of a species of goods” has no real nature and does not exist, unless “utility,” “recognized utility,” or the “degree of utility” is confounded with “value.” On the other hand, the value of a species of goods, in the sense of the sum of the value to the various members of society of all concrete goods of a given kind, is not an unchanging magnitude, even if the needs of the various members of society remain unchanged. The foundation upon which Hildebrand builds his calculus is therefore contestable. To this must be added the fact that Hildebrand does not consider differences in the degree of importance of satisfaction of the various concrete needs of men, if he attributes the “value of a species” to the various units of the species according to quantity. (See already the essay by Karl Knies, “Die nationalökonomische Lehre vom Werth,” Zeitschrift für die gesammte Staatswissenschaft, XI [1855], 463ff.) The correct element in Hildebrand’s theory lies in the acute and universally valid observation that the use value of goods increases when their available quantity is diminished, and vice versa. But he definitely goes too far in assuming that there is always a strict proportionality between the two.

     Friedländer (“Die Theorie des Werthes,” Dorpater Universitäts Schrift, 1852, pp. 60ff.)[7] adopts a different approach in his attempt to solve the problem, and comes to the conclusion that “die durchschnittliche concrete Bedürfnisseinheit (das Mittel der innerhalb der verschiedenen Classen der Gesellschaft gefundenen besonderen Bedürfnisseinheiten) der allgemeine Ausdruck für den objectiven volkswirthschaftlichen Gebrauchswerth sei, und der Bruch, welcher die Quoten ausdrückt, welche die einzelnen Brauchlichkeiten zur Bedürfnisseinheit beitragen und das Werthverhältniss derselben zur mittleren concreten Bedürfnisseinheit anzeigt, das Mass für den objectiven Werth der einzelnen Brauchlichkeiten abgebe.”[8] I believe that this solution of the problem is vulnerable, above all, in that it involves a complete misunderstanding of the subjective character of value if an “average man” with “average needs” is posited. For the use value of one and the same good is usually very different for two different individuals, since it depends upon the requirements of and quantities available to each of them. The “determination of the use value to the average man” does not, therefore, really solve the problem, since we are interested in a measure of the use value of goods that can be observed in real cases and with respect to specific persons. Friedländer therefore arrives merely at the definition of a measure of the “objective value” of different goods (ibid., p. 68), although a measure of this sort does not, in reality, exist.

     Karl Knies too has made a penetrating attempt to solve the problem in the essay to which I have already referred. He says quite correctly on p. 429 that “die Bedingungen für die Abschätzung des Gebrauchswerthes der Güter können in nichts Anderem als in den wesentlichen Elementen für den Begriff des Gebrauchswerthes gefunden werden.”[9] But the fact that Knies does not circumscribe the concept of use value narrowly enough (as we have seen earlier in Appendix C, p. 293) leads him to several doubtful conclusions about the determination of the measure of value. Knies continues:

Sonach hängt die Grösse des Gebrauchswerthes der Güter ab (a) von der Intensivität des menschlichen Bedürfnisses, welches sie befriedigen, (b) von der Intensivität, in welcher sie em menschliches Bedürfniss befriedigen. . . . Hiernach stellt sich eine Classification und Stufenleiter der menschlichen Bedürfnisse ein, mit welcher eine Classification und Stufenleiter der Gütergattungen correspondirt.”[10] But the need for water is one of the most intense of human needs, since our lives depend on its satisfaction, and no one will deny that fresh spring water satisfies this need most adequately. Hence, if Knies’ principle of the measure of value were correct, fresh spring water would occupy one of the highest points on the scale of species of goods. But concrete quantities of this good normally have no value, and species of goods cannot have value at all, as I already have shown. Although, in the course of his article, after an extensive examination of the measure of the “abstract value of goods,” Knies also touches upon the use value of concrete goods in the economy of a single individual (ibid., p. 461) he does so only in order to elucidate the difference between the “value of a species of goods” (really “utility”) and the value of concrete goods, thus very correctly formulating the proposition that the measure of the utility of a thing is something fundamentally different from the measure of its value. But Knies does not succeed in formulating a principle for determining the magnitude of use value in its concrete form, although he comes very close to it at one point (ibid., p. 441) in his richly suggestive essay.

     A.E.F. Schäffle has approached the solution of the problem from another standpoint (“Die ethische Seite der nationalökonomischen Lehre vom Werthe,” in Gesammelte Aufsätze, Tübingen, 1885, I, 184–195). This penetrating scholar writes: “Die Thätigkeit des Wirthschaftens wird um so energischer in Anregung kommen, je dringender das persönliche Bedürfniss für ein Gut, und je schwieriger das diesem Bedürfniss entsprechende Gut zu beschaffen ist. Je mehr diese beiden Factoren: Intensivität des Begehrens und Intensivität der Schwierigkeit des Erlangens, auf einander wirken, desto stärker tritt die Bedeutung des Gutes in das die wirthschaftliche Thätigkeit leitende Bewusstsein. Auf dieses Grundverhältniss führen alle Sätze über Mass und Bewegung des Werthes zurück.”[11] I fully agree with Schäffle when he says that the more pressing one’s need for a good the more energetic will be one’s economizing activity whenever it is necessary to procure the good in question. But it is just as certain that many goods for which we experience the most urgent needs (water, for instance) ordinarily have no value, while other goods that are only suitable for the satisfaction of needs of much less importance (hunting lodges, artificial duck ponds, etc.) have a considerable value to us. The urgency of the needs a good can satisfy cannot therefore by itself be the determining factor of the value of that good, even if we were to overlook the fact that most goods are suited to the satisfaction of several different needs that differ in intensity. Hence in this proposition, since the determining magnitude is not established with certainty, the very thing that was in question remains in doubt. But it is equally certain that the degree of difficulty of procuring a good is not, by itself, a measure of its value. Goods of very little value can often be procured only with the greatest difficulty, and it is not true that the economizing activity of men becomes more energetic the greater the difficulty. On the contrary, men always direct their economizing activity toward the procurement of those goods which, given equal urgency of the needs for them, can be acquired with the least difficulty. Neither the one nor the other part of Schäffle’s two-horned principle provides, by itself, the determining principle for the measure of value. Although he says that the more these two factors (intensity of desire and difficulty of procurement) operate upon one another, the more strongly does the importance of the good enter into the consciousness that guides the economic activity, and even if we assume, as Schäffle explicitly does, that economizing activity is “mit Bewusstsein gerichtet auf die allseitige Erfüllung der sittlich vernünftigen Lebenszwecke,”[12] (ibid., p. 185) (that is, in other words, even if we assume goods to be in the hands of rational economizing individuals, a fact that constitutes, as Schäffle quite correctly sees, an essential factor for the resolution of his dilemma) the question how these two factors influence each other, and how in consequence of this mutual influence each good attains a definite magnitude of importance for economizing men, still remains unsolved.

     Among the most recent economists who have treated the theory of the measure of value as parts of their systems, L. v. Stein must be mentioned in particular because of his original treatment of the subject. Stein defines value as “das Verhältniss des Masses eines bestimmten Gutes zum Leben der Güter uberhaupt.”[13] (System der Staatswissenschaft, Stuttgart, 1852, I, 169–170.) On page 171 he arrives at the following formula for the determination of the measure of value: “Das wirkliche Wertmass eines Gutes wird daher gefunden, indem die Masse der übrigen Güter mit der Masse des fraglichen Gutes dividirt wird. Um dieses aber zu können, muss zuerst für die gesammte Gütermasse ein gleichnamiger Nenner gefunden werden. Dieser gleichartige Nennner oder die Gleichartigkeit der Güter ist für sie aber nur gegeben in ihrem gleichartigen Wesen; darin dass alles wirkliche Gut wieder aus den sechs Elementen des Stoffes, der Arbeit, des Erzeugnisses, des Bedürfnisses, der Verwendung und der wirklichen Consumtion besteht, indem, wo eins dieser Elemente wegfällt, das Objekt ein Gut zu sein aufhört. Diese Elemente eines jeden wirklichen Gutes sind nun in diesem Gute wieder in bestimmtem Masse enthalten, und das Mass dieser Elemente bestimmt das Mass des einzelnen, wirklichen Gutes für sich. Daraus folgt, dass das Massenverhältniss aller einzelnen Güter untereinander, oder ihr allgemeines Wertmass gegeben ist in dem Verhältniss der Güterelemente und ihrer Masse innerhalb des einen Gutes zu demjenigen innerhalb des andern. Und die Bestimmung und Berechnung dieses Verhältnisses ist mithin die Bestimmung des wirklichen Wertmasses.”[14] (See also ibid.,pp. 181ff. for a formula of the value equation.)

[1]To Chapter III, Section 2. See note 11 of Chapter III.—TR.

[2]The passage from Aristotle given here is a literal English translation of the German translation offered by Menger. In the standard English translation by W. D. Ross (The Works of Aristotle, London, Oxford University Press, 1925, Vol. IX), the passage runs as follows: “all goods must therefore be measured by some one thing. . . . That demand holds things together as a single unit is shown by the fact that when men do not need one another . . . they do not exchange, as we do when someone wants what one has oneself.”—TR.

[3]since the dispositions of human minds vary, the value of things varies.”

[4]the esteem value of an object, for an isolated individual, is precisely equal to the portion of his total faculties [labor] that answers his desire for the object or that he wishes to employ for its satisfaction.”

[5]“A thing is said to be useful when it serves for one of our needs; . . . according to this utility we esteem it more or less. . . .  Now, this esteem is what we call value.

[6]“Since use value is always a relation of a thing to man, the use value of every species of goods is determined by the magnitude and rank of the human needs the species of goods satisfies. Where there are no men and no needs, no use value exists. The total use value of any species of goods remains unchanged, therefore, as long as the needs of human society remain unchanged, and the use value of a single unit of the species is equal to this total use value divided by the number of units. Hence the larger the total number of units, the smaller becomes the portion of use value attributed to each unit from the total use value of the species and vice versa.”

[7]See note 2 of Appendix C concerning this work.—TR.

[8]The average concrete need-unit (the average of all the separate need-units found among the various classes of society) is the general expression for objective economic use value. The fraction that expresses the shares that the various useful things contribute toward [satisfaction of] the need-unit, and that indicates their value relationship to the average concrete need-unit, furnishes the measure for the objective value of the various useful things.

[9]the requisites for the estimation of the use value of goods cannot be found anywhere but in the fundamental elements of the concept of use value itself.”

[10]“Thus the magnitudes of the use value of goods depend (a) on the intensity of the human needs they satisfy, and (b) on the intensity with which they satisfy these human needs. . . .  Hence we find a classification and scale of human needs to which corresponds a classification and scale of species of goods.”

[11]“Economic activity will be engaged in more energetically the more urgent a person’s need for a good and the more difficult it is to procure the good corresponding to that need. The more these two factors (intensity of desire and degree of difficulty of procurement) operate upon one another, the more strongly does the importance of the good enter into the consciousness that guides economic activity. All propositions about the magnitude of value and its changes are reducible to this fundamental relationship.” This passage could not be located in the reprinted edition of Schäffle’s essay, which alone was available to us. It is likely that the reprint constitutes only an incomplete version of Schäffle’s original article. But whether or not this is the case, it is quite clear from Schäffle’s other writings, for example, Das gesellschaftliche System der menschlichen Wirthschaft (Tübingen, 1873, I, 172), that Menger’s quotation accurately represents Schäffle’s thought.—TR.

[12]consciously directed to the all-around fulfilment of ethically rational purposes of life.”

[13]“The relationship of the measure of a given good to the run of goods in general.”

[14]“The true measure of the value of a good is found by dividing the magnitude of the good in question into the magnitudes of other goods. In order to be able to do this a common denominator for the magnitudes of all goods must be found. But this common denominator, or homogeneous element in goods can be found only in their homogeneous nature—that is, in the fact that all true goods originate from the six elements, matter, labor, production, need, usefulness, and true consumability, since if one of these elements disappears, an object ceases to be a good. These elements are contained in a given good only to a particular degree, and their magnitude determines the measure of each true good taken separately. From this it follows that the quantitative relationship of all the separate goods to one another, or the general measure of their value, is given by the ratio between these component elements of goods and their magnitude in one good relative to another. To determine and calculate this relationship is therefore to determine the true measure of value.”

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