THE ANALYSIS OF VALUE
Political Economy is based on the analysis of economic conduct. As
has been said, we are not at liberty to lay down new categories or
even to give new names to economic phenomena. We have to take our
categories and our vocabulary alike from the industrial and commercial
world, and our most original work in this department is no more than
the interpretation of a life which is, for the most part, unconscious
of its own laws: a category of “the useful” or “the valuable” which
practical people did not recognise as containing useful and valuable
things and no other, would be quite unscientific. True, the economist
has sometimes to show that the practical world is unfaithful to its own
principles, but he can do so only after extended study of the economic
organism has yielded these principles. The theory of value, therefore,
must begin with a careful analysis of what the word means in the mouths
of ordinary people.
A man values food, clothing, shelter, and the like, because they
minister to his physical life, and he values music and books because
they minister to what he calls his “higher life.” As a nation, we
value our service rifle because it can kill at so many hundred yards,
and many forms of art and literature are highly valued because they
minister to corrupt desires and moral decay. A collector values a piece
of ugly china because it is old and rare, just as most women value
their diamonds because everybody cannot wear diamonds.
Taking these instances as fairly typical, and collating the common
ideas out of them, we seem to learn three things about value.
_First_, that, in probably the great majority of cases, the word has
some direct or indirect reference to human life. On the whole, one
would be inclined to say that the root idea of the valuable is that
which _avails towards life_.
_Second_, that men, as not only imperfect in nature but erring in
judgment, have made an easy extension of the term “human life” to cover
“human desire,” and count things valuable because they satisfy some
want or other. The economic “want” is not necessarily a rational or a
healthy want—and political economy, as primarily analytic, must not
be censured for the statement, nor condemned as if it approved of the
fact—but simply a want, and the things which satisfy such wants we call
“goods.” The _desirable_ is interpreted in economics by the _desired_.
_Third_, that the element of scarcity somehow plays a large part in
many, and seems to have a share in all, estimates of value.
Were it not for this element of scarcity one might conclude that the
“valuable” and the “useful” were synonymous terms. Few writers have
been careful to keep the two conceptions sufficiently separate, and
the distinction which we have now to draw, while contained in Ricardo,
was not scientifically formulated till the appearance of Menger’s
_Grundsätze_ in 1871.
The economically Useful is that which is capable of satisfying the want
of man—always meaning by “want” no more than “desire.”[5] Corresponding
with this conception, economically, is that of the “Good.”[6] To
constitute a good, four things, according to Menger, are required: (1)
a human want, (2) certain properties in an object which make it capable
of satisfying a human want, (3) the knowledge of this capability, (4)
power to dispose of this object in the satisfaction of want.
In these two conceptions, the Useful and the Good, there is no
reference to scarcity.
[5] “Anything which an individual is found to desire and to labour for
must be assumed to possess for him utility. In the science of Economics
we treat men, not as they ought to be, but as they are.”—Jevons,
_Theory_, 2d Edition, p. 41.
[6] It is one of the difficulties of our economic vocabulary that,
where we wish to express the singular of “goods,” we have to use
“commodity” or some such word. In my translations, I have made no
scruple of rendering the honest German _Gut_ by its literal equivalent,
and it is in this sense that the word is used above and throughout
this book. It will be noted in what follows that there is a difference
between simple goods and “economic goods.”
We shall find the Valuable separating itself naturally from the Useful
if we look at what are called the free gifts of nature. Air, water,
light, are recognised by every one as useful. But are they valuable?
Most people—economists without knowing it—would answer in the negative,
although certainly there is reason to suspect that they base this
answer on the fact that they “could not get anything for them.” Again,
those scarce things which we seem to value just because they are
scarce (as rare statues, pictures, books, coins, wines made from grapes
of one limited locality, etc., to use Ricardo’s examples), have always
a background of usefulness, as satisfying some social, or class, or
individual desire.
Evidently Usefulness or Utility is the larger conception of the
two, and embraces Value. But if all valuable things are useful,
while all useful things are not valuable, value must emerge at some
particular limiting point of utility. Value, then, will be based on
utility—utility limited in some particular way, but still utility.[7]
[7] It is perhaps a pity on two grounds that the word “utility”
should have been adopted by economic science:—(1) that the word seems
to suggest things really useful, when it means no more than things
desired, bought, and sold; (2) that it has so often suggested to
shallow thinkers that Political Economy is a “sordid science” whose
investigations do not go beyond mere material considerations.