COMPLEMENTARY GOODS
As the ultimate goal of economic effort is not the obtaining of goods
but the satisfaction of human want, we are not finished with our
subject till we have traced the finished good to its end and _raison
d’être_ in affording this satisfaction. In the present chapter, we have
to consider cases where several goods contribute to one satisfaction,
and to find what influence this satisfaction has upon their separate
values. In such cases the “good” we have to value is, properly
speaking, a group, and in the various forms taken by these groups, we
meet with some puzzling and far-reaching peculiarities.
The class of Complementary goods, to use Menger’s term, is much
wider than we are apt to suppose. In consumption goods, it tends to
increase with the variety of modern wealth and the development of new
tastes. Many of our enjoyments depend on the co-operation of a great
many factors, of which usually one is prominent, and the others only
assert themselves on rare occasions. Thus the part played by that
insignificant commodity, salt, in most of the pleasures of the table,
is never appreciated till the want of it—say, at a pic-nic—suggests how
indispensable a complement it is. Among productive goods, again, where
the division of labour is constantly adding to the number of factors
which work together in the making of any good, the complementary
character becomes even more apparent. The first thing to be noticed
here is that the value of a group, _as a group_, is determined by the
marginal utility of the group, not of the separate members. But, as
each group may on occasion be broken up, the interesting question is as
to the distribution of value among the members, the difference in value
between goods as complements and goods as isolated articles.
The simplest case is where the single members of a group are all
useless in any other form but that of the group, and are at the same
time economically irreplaceable. In valuing boots, for instance, the
“good” is the pair; if I lose one, I lose the entire utility. In such
cases—which are, of course, comparatively rare—if I have had the pair
and lose one, I lose the entire value of the pair: if I have one and
obtain another, I gain the entire value of the pair. Here, then, the
value of one single member of the group is the same as the value of the
whole group.
This case, however, is really of importance only as introducing the
others which follow; under the assumed conditions we are dealing with
a good similar, say, to a pair of compasses or a pair of spectacles,
which we can divide into two only at the cost of the whole; that is to
say, it is only externally a group.
A more common form is where the group can afford one utility, and the
individual members of it in isolation can afford another but a less
utility. Thus the utility of a well-matched pair of roans will be
valued at a figure much higher than would be realised by selling the
horses separately. Suppose that the utility of the pair is represented
by 100, and that of A roan and B roan separately by 50 and 40: what
is the value of A? To calculate it from the side of the owner: if he
has A and B, he has a value of 100; if he lose A, he has only B, and B
separately has a value of only 40. What he has lost is the difference
between 40 and 100. Or, from the side of the buyer: if he gets B he
obtains 40; if he gets A in addition he obtains 100; the value of A,
as before, is the difference between 40 and 100. Here, then, A has a
different value as complement and as isolated good: in the one case it
is worth 60, in the other 50. If we take the case of a well-matched
four-in-hand team, we have a more complicated instance of the same; the
whole team makes the most highly valued group, but each pair within
that again has a higher group value than the sum of the isolated values
which would be attached to each single horse. This case of valuation
holds in the very numerous cases where goods are in sets: if we “break
the set,” the separate members have a less value than they had as
complements.
A third case is, where, as before, the group can afford one utility,
and the individual members of it separately can afford a less utility,
but where some members are replaceable and some are not. In this case,
the replaceable members can never obtain any other than the one value:
however indispensable they may be to the making of the group, goods
that can be easily replaced cannot rise higher than the competition
of all other uses allows. Although a load of bricks, for example,
were absolutely indispensable to finish the building of a house, the
load could never obtain any higher value than that determined by the
marginal utility of bricks generally: that is, as determined by all the
uses to which bricks generally are put. To the irreplaceable member,
on the other hand, falls the remainder of the value of the group. Thus
suppose a group A, B, and C, with a group value of 100, and isolated
values of 10, 20, 30. If A and B are articles of large manufacture and
great demand, while C is a monopoly good, A and B will get 30% of the
value, and C the other 70%, although, if the other members were not
present in the group, the only value C could realise would be 30.[13]
[13] How far the theory of Complementary Goods admits of being applied
directly to the problem of distribution of product among the various
factors is matter of controversy. Böhm-Bawerk considers that it is
the key which will lead to its solution. The line which this suggests
would be something like the following. Labour and Capital enter into
the composition of all productive groups: in proportion as they are
abundant and mobile do they enter into competition with _all_ labour
and _all_ capital, and become perfectly replaceable. In entering
into products, then, they can never secure more than their outside
value—that fixed by all their employments or uses. The surplus in the
price of each product goes to the monopolist factor, whether that
monopoly be caused by natural and site advantages of land, mental and
technical qualities of undertakers and workers, peculiar conditions of
process, or the like. And in proportion as these factors lose their
monopoly, does the value of the group shrink; if all the members were
to become replaceable, as when first-class land in other countries
becomes available through rapid and cheap carriage, or when education
makes unskilled labour the exception, the group value, as distinct from
the combined isolated values, would disappear.
Wieser, again, considers that this is no more than a valuable
suggestion. What guidance, he asks, will this law give where there
are several irreplaceable members, and how is the outside value of
replaceable members given if not in other combinations of complementary
goods which in turn require to be split up into their factors?
He points out acutely, in reply to Menger, that, to estimate the
proportion contributed by any factor by the loss which would accrue if
that factor were absent, is to reckon too much to it, as the loss of
a factor from a co-operation will generally disorganise the group and
cause more damage than its presence would cause gain. Instead of using
the doctrine of Complementary Goods in this way, he proposes to find,
by a series of equations, what each factor positively contributes; not,
of course, the physical share, but the proportion of value which may be
economically “imputed” to it. A great part of the _Natürlicher Werth_
is taken up with this doctrine of the “Zurechnung,” which is treated in
Wieser’s usual strong and graphic manner.