Natural Value (1889)

by Friedrich von Wieser (1851-1926)

Book III: The Natural Imputation of the Return from Production

Chapter X
The Individual Factors of Imputation (continued). II. – Demand and Complementary Goods

NV-III-10.1 In the case of goods for immediate consumption, demand and want coincide: the amount of agricultural produce required for the full satisfaction of personal want forms the demand for agricultural produce. It is otherwise with production goods; here personal want does not always create a demand. If land, of its own accord and without cultivation, were to bring forth fruits in superfluity, there would be no demand for agricultural implements. And likewise, on the other hand, if land refused to make any return, if all land were waste and barren, there would be no demand for agricultural implements, there could be no use for them. A demand for means of production arises only when, on the one hand, we are obliged to employ them or else go without what they produce; and when, on the other hand, we can employ them, inasmuch as we have at our disposal the necessary complementary goods. So long as the complementary goods are wanting, we can, at best, speak of a latent demand; the demand is effective only when we have also acquired the complementary goods. 1
NV-III-10.2 It follows from this that the effective demand for means of production must vary, not only when there is a variation in personal want, but also when there is a variation in the quantity of complementary goods. 2 In both directions we must examine the effect upon the imputation, and thus, in looking at demand in the case of production goods, we have a far more complicated causal connection than in the case of consumption goods. We shall find, however, that the law remains the same for both. The contribution imputable to production goods always varies with the demand, just as does the value of consumption goods. If demand increases, from whatever cause, so does the contribution, and, as demand sinks, the contribution sinks with it. To prove this in the shortest manner possible.
NV-III-10.3 First: it may be granted that the effective demand rises when the abundance of complementary goods increases, personal want remaining the same. Suppose e.g. that the amount of agricultural capital and available agricultural labour power increase, and that the effective demand for land also increases thereby, inasmuch as latent demand becomes active; suppose, that is to say, that it is now and henceforth possible, – so far as depends on complementary goods, – to cultivate more land and more completely satisfy want. How will this affect the calculation of agricultural return? Evidently there are again several cases which must be distinguished from each other. It may be that the ground will not permit of any further cultivation, so that, in spite of increased facilities in capital and labour, production cannot be extended, – as might readily happen with vine-growing land in a specially favourable situation. Or the return may increase in perfect proportion with the increase of capital and labour, as we may assume to be possible on the slightly cultivated land of a new colony. Or, finally – and this is the general rule in old countries – the return may indeed be increased, but not entirely in proportion to the increase of complementary goods; here indeed all the new capital and labour find employment, but with diminished results.
NV-III-10.4 Different as these cases are, the final result is the same in all, although it comes about in a variety of ways. In every case a larger share of the return will be imputed to the land.
NV-III-10.5 (a) If production cannot be extended, the value of the products remains the same as before, as no reason for change has emerged. What does change is the distribution of the imputation. The equation on which, in the above example, is to be calculated the return of the vine land, of the capital employed upon it, and of the labour employed upon it, all taken together, remains as it was. But the added capital and labour must now find employment elsewhere; must enter into new combinations, either on other land, or in some trade or industry where they give a smaller return. Their equations are, therefore, on the whole less favourable, and the consequence is that the equation, which the wine production presents, is now solved in a way less favourable for them. Their marginal productive contribution sinks, and, less being deducted for capital and labour, the value of the wine leaves a greater share to the credit of land. Land obtains a greater share, as it were, by absorption of the effects which can now no longer be attributed to the complementary goods, inasmuch as the marginal law requires that these should everywhere be estimated at the same value, and inasmuch as the common margin of their possibility of employment has fallen.
NV-III-10.6 (b) Where production admits of being extended indefinitely the total value of the products rises (in the “up grade” of the movement of value), although the single product may lose in value. The equations of return are more favourable equally for all factors concerned, and the greater total return gives, equally to land, capital and labour, an absolutely greater share.
NV-III-10.7 (c) Where production can be only partially extended we have a combination of both results. The contribution credited to land experiences a double augmentation, one due to increased utilisation, and the other to the reduced valuation of the auxiliary means employed.
NV-III-10.8 Second: the effective demand rises when personal want increases, complementary wealth remaining the same. Here the matter is very simple. The figures of the ratio which decide the distribution of return remain unaltered, but the value of the return has risen. The consequence is that the same quota has an absolutely greater value.
NV-III-10.9 Every-day experience makes the changes of relation, which we have just pointed out between the co-operating factors of production, sufficiently familiar to every one who knows about exchange value. Every undertaker knows that it is to his advantage when the auxiliary means he employs come upon the market in larger quantities, whether it be because they are being more largely produced, or because there is less use for them in other directions. He can now extend his business, or make more out of it, by spending less upon the auxiliary means of production he requires, while the return remains unaltered. Every undertaker, on the other hand, knows that it is to his disadvantage when the auxiliary means he employs become scarcer in the market, or, what amounts to the same thing, are drawn off in larger quantities by other branches of production. In the communistic state entirely similar calculations will require to be made, in order to estimate correctly the mutual effects of the complementary goods on each other. Assuming the circumstances just mentioned, a vineyard, even in the communistic state, would inevitably be more highly valued wherever the auxiliaries towards its cultivation came forward in greater quantity, or were less freely employed in other directions: and it would certainly be estimated at a lower figure wherever the auxiliaries towards its cultivation were more highly valued, either on account of a diminished amount of them coming forward, or of their increased employment in other directions. Further, its share in the return would sink to zero whenever the auxiliary means of its cultivation were so highly valued that their contributions equalled the whole return of wine; and its cultivation would have to be given up entirely whenever it became impossible to meet these contributions out of the return of wine.
NV-III-10.10 Should any one factor of production, be it land, capital, or labour, come more freely into our disposal, the natural rules of imputation require that all the others obtain a higher valuation; as they also require that all the factors be more highly valued if there should be an all-round increase of personal want.

NV-III-10.n1.1 1 See on this point Menger, p. 39.
NV-III-10.n2.1 2 Compare with this Marshall’s Principles, p. 563: – “In the account given of the demand for the several agents of production, it was indicated that the ultimate demand for each depended on the co-operation of the others in raising the joint product of their labour; or, to state the case even more broadly, that the demand for each is in a great measure governed by the supply of the others.” – W.S.

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