No discussion of the subject of money can be intelligently conducted
without a correct conception of the meanings attaching to the terms
employed. For a misconception of those meanings is the root of much of
the confusion and difficulty by which the subject is surrounded.
"Value" is a word which, of necessity, is more frequently used--and, I
will add, more frequently misused and misunderstood--than any other
employed in the discussion of economic science. Volumes have been
written upon it, and yet, from the daily misapplication of the word in
leading magazines and newspapers, it is evident that its meaning is very
imperfectly understood.
The idea involved in the word "Value" is so broad and pervasive that
within the limits of a speech it would be impossible to discuss it in
all its bearings. I shall not, therefore, at this time, do more than
present what I conceive to be a basic definition of it.
Value is human estimation placed upon desirable objects whose quantity
is limited, and whose acquisition involves sacrifice. In order that an
object may have value it must not only be the subject of human desire,
but there must be a limitation of its quantity, and its acquisition must
demand a sacrifice from him who would obtain it. The term "intrinsic
value" is used by many writers with a total disregard of the idea
involved in the word _value_. An article may have estimable qualities
that are intrinsic, but no article whatever can have intrinsic value.
Its "value" is the mental estimation of its qualities, as modified by
the limitations of its quantity and the amount of sacrifice necessary to
obtain it. In other words, value is subjective, not objective. In
economic discussion, however, value is treated as though it resided in
the object, rather than in the mind, and while, for convenience, I may
occasionally use it in that sense, it is important to bear in mind the
distinction.
In that acceptation, value is usually divided into value-in-use, and
value-in-exchange. Certain esteemed qualities of an object may make it
of great value-in-use; but unless its acquisition demand sacrifice, it
can have no value-in-exchange. It is only with this class of value that
economists deal. No matter how important the intrinsic qualities of any
article may be, if there be no limitation of its quantity and its
acquisition requires no sacrifice, it can have no value in the sense in
which the word "value" is used in political economy. The air has
qualities inestimable to mankind; it must be regarded as incomparably
the most useful of all the objects of human desire; yet it has no value
because there is no limitation of its quantity. By reason of its
universality and accessibility, air requires no sacrifice to get it. If,
however, circumstances should render air limited in quantity it is
conceivable that it might become of surpassing value. A man confined in
the "Black Hole" of Calcutta would give a fortune for free access to
air. So water, where freely obtainable, without sacrifice, although
indispensable to life, has no value in the economic sense--no value in
exchange. But when not so obtainable, as in populous cities, where
sacrifice of time and labor would be necessary to obtain it from river,
lake, or spring, people pay for the convenience of having it in their
homes. The indispensable prerequisites of value in all objects are
utility--either actual or attributed--combined with limitation of
quantity and the sacrifice necessary to be made in order to obtain it.
But value is not a property inhering in any article itself. It is not
intrinsic. If the value were inherent or intrinsic it could not be taken
away.
To illustrate: A generation ago the cradle with which wheat was
harvested was said to possess intrinsic value. It was undoubtedly one of
the most useful of all the articles needed by man. All that was then in
that machine is in it still, yet the value is gone. Had the value been
something that was intrinsic, had it resided in the object, and not in
the mind, that cradle would still be worth all that it ever was. So, on
the other hand, an article may possess most estimable qualities, but if
those qualities are not known or recognized by the human mind the
article will have no value.
A few years ago cotton seed had no value as an article of general
commerce. To-day it is exceedingly valuable, because it has been found
to possess estimable qualities not before suspected.
Indeed so strongly does the idea of value rest upon the estimation of
the mind that it is not even necessary for an article to possess in
reality any desirable quality whatever in order to have value. It will
be sufficient if such quality is popularly attributed to it. Numbers of
instances could be cited in which there was present no element of value
except limitation of quantity, added to a mere belief, or conception of
the mind, that the article had desirable qualities. Many will remember
that a few years ago a herb called "Cundurango" was introduced into this
country from Central America. It was generally believed to possess
healing qualities in cases of cancer, and so came to have great value.
As soon as this popular illusion was dispelled the article ceased to
have even the slightest value.
Land being indestructible and irremovable, is believed to be the
embodiment of the idea of intrinsic value. Take, then, a lot on Madison
Avenue, New York; it is worth perhaps a thousand times as much as a lot
of equal size in a village remote from the city. What proportion of its
high price is derived from what is called its greater "intrinsic"
value? A lot on that fashionable thoroughfare has no intrinsic
attribute, or quality, that is not equally the attribute or quality of
the village lot. The difference in its value, or, more correctly, the
difference in the estimation in which it is held, as compared with that
attaching to the village lot, is derived wholly from circumstances that
are extrinsic, not from qualities that are intrinsic.
The action of society in utilizing land in the neighborhood of the city
lot by building up around it gives that lot a value greater than one of
equal size elsewhere.
But in order that a thing may subserve a useful or beneficent purpose it
is not necessary that the quality which enables it to subserve that
purpose should be intrinsic or inherent in the thing itself.
To apply this reasoning to the subject under discussion--whatever
intrinsic qualities the metal, gold, may possess, they confer no force
whatever on gold-money.