THE DIFFERENCE BETWEEN UTILITY AND VALUE
Utility and not Value, says Wieser, is “the supreme principle of
all economy; where value and utility come into conflict, utility
must conquer.” The statement is suggestive. The economic goal of
civilisation is to turn the whole natural environment of man from a
relation of hostility or indifference into a relation of utility.
Certain goods we have from nature without money and without price, and
the incessant effort of the industrial world is _in the direction_
of bringing all goods nearer to that category. Indeed, some of the
necessaries of life have already been brought so nearly to that
condition that states and municipalities occasionally pay the small
remaining price, and distribute them as heaven does the rain. The
effort to improve production generally is nothing else than the effort
to multiply utilities and, as consequence, to reduce their price. For,
while value reflects utility, the mirror is too small to hold all the
picture. To use Wieser’s words again, “Value is the calculation-form
of utility”—an expression which will be appreciated if we realise how
impossible it is to estimate the utility of a harvest, how easy to
calculate its amount and its price.
Value, then, is a much less comprehensive conception, and does not
emerge till a certain limitation is put upon this utility. But the
limitation in question is not an arbitrary one. To drain a river of a
few hundred gallons, or even to drain it all but a few hundred gallons,
will not necessarily give the remainder any value. To change utility
into value there must be, not only a capability of satisfying want, but
a felt dependence of some want on the particular good containing the
utility. The relation of value to utility, in fact, may be described
as the relation of a positive condition to a capability. As capable
of quenching thirst, all water is useful, but it does not obtain any
value till some limitation of the available quantity makes it the
indispensable _condition_ of a satisfaction. The water led into a city
may come from a stream which, as a whole, flows to the sea unvalued,
but, in the city, it conditions the wellbeing of thousands of people,
and obtains a value from the satisfaction of wants that are conditioned
by it.
If, then, the distinction between Value and Utility, which seems
essential to clearness of thinking, is to be maintained, it will be by
attaching the former to an indispensable and felt condition, the latter
to a general capability of ministering to human wellbeing.
Thus we may say that, while utility is the importance which a good
possesses as generally _capable_ of ministering to the wellbeing of
a subject, Value is the importance which a good possesses as the
_indispensable condition_ of the wellbeing of a subject. Or more
fully: Value is the importance which a good acquires as the recognised
condition of something that makes for the wellbeing of a subject,
and would not be obtainable without the good.[8] It cannot be too
firmly grasped then, that the relation between utility and value is
_quantitative_, and that the same thing may or may not have value
according to change of circumstances, or difference in points of view
and comparison.
[8] Menger’s definition is “Die Bedeutung, welche concrete Güter oder
Güterquantitäten für uns dadurch erlangen, das wir in der Befriedigung
unserer Bedürfnisse von der Verfügung über dieselben abhängig zu sein
uns bewusst sind.”—_Grundzüge_, p. 78.
To put this in another way. The first thing the economist sees in
man is, that he stands in a relation of want to the world outside
him. Economically, man is a complex of wants, some physical, some
intellectual, some æsthetic, and so on. And, the higher man rises in
the scale of spiritual being, the more numerous and varied are his
wants. But want is in itself, if not a painful feeling, at least, a
feeling of incompleteness. As an animal, man knows instinctively,
and, as an intellectual being, he learns by experience, that certain
things or arrangements in the outside world are the objects which such
a feeling craves: as they are supplied to the organism in which the
wants inhere, the feelings of want, gradually or immediately, fade
away, and feelings of satisfaction or pleasure supervene. In time the
satisfaction fades, the wants reappear, and the process begins over
again. Thus the wants of man’s life, whether these wants are wise or
unwise, natural or acquired, constitute a demand for satisfaction.
Each individual has his quota of wants, and the sum total of all wants
makes the community’s demand for satisfaction. To meet this demand the
working portion of the community is set producing. The whole end and
aim of the industrial organisation of society is to put the matter and
forces of nature into shapes capable of satisfying this demand, and
these shapes, now recognised as “good,” society significantly calls
“Goods.”
If, in any class of goods, the supply is not sufficient to meet this
demand for satisfaction (whether the demand be that of the individual
or of the community), some want goes unsatisfied; the painful feeling
of emptiness points to some good or other as the condition of a certain
wellbeing; the relation of dependence between person and thing is
established, and value emerges. If, on the other hand, the supply
of any class of goods is so great that every demand is met, and yet
there is such a surplus that no ordinary waste will cause scarcity,
then no want goes unsatisfied, and value does not emerge. Suppose
that a housewife is in the habit of using ten gallons of water a day
for various domestic purposes. If the well, from which she draws her
supply, holds just ten gallons and no more, then every gallon is the
condition of a definite use or satisfaction, and every gallon has a
value—the test being that, if one gallon is lost, some domestic purpose
is not served. But if the well yields twenty gallons, the loss of even
ten gallons involves no loss of wellbeing to the housewife; no want
goes unsatisfied; no value emerges. And, again, if the wants increase
to eleven, or the supply sinks to nine gallons, certain wants go
unsatisfied, and value emerges.
One begins to see that the centre of value is within us. It is only by
association that we transfer to goods the “value” which we get through
the consumption of them. We attach importance to goods only as we find
that our life is incomplete or impossible without them. Thus water,
air, etc., being, in their totality, conditions of our life, we attach
value to them _as a whole_, and, indeed, speak of them as “infinitely
valuable.” But we do not attach value to any individual portion of
them, because, where there is enough to allow of waste, our lives are
not _dependent_ on any individual portion.
Thus it is that the theory of value lies at the basis of all economic
theory. The only goods we “economise”—the goods which alone are objects
of economic attention—are the goods which are insufficient, or just
sufficient, to meet our wants. Contrasted with these are the “free
gifts of nature,” meaning by the expression such things, adapted to
man’s use, as are given us by nature in superfluous abundance. As goods
which we economise, therefore, are the only goods which we recognise as
_conditioning_ our satisfaction, we may say that, while all goods, by
definition, have utility, only economic goods have value.[9]
[9] In view of the loose way in which we use “economic” and
“economise,” Menger’s definitions are worth remembering. When men
recognise that their wellbeing is bound up with the command over
certain goods within certain periods of time, and that such goods
are likely to be insufficient for their demand, their impulse is (1)
to get such goods into their possession or disposal; (2) to preserve
the useful properties of the same; (3) to decide which are their more
important and which their less important wants, and to satisfy the
former only; and (4) to so dispose of the goods as to get the greatest
possible result or satisfaction on the whole, and to obtain every
individual result with the smallest possible expenditure. “The activity
men direct to those ends, in its totality, we call their ‘economy,’ and
the goods which stand in these quantitative relations, as the exclusive
objects of that economy, we call ‘economic goods.’”—_Grundsätze_, chap.
ii. § 3.