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Natural Value (1889)

by Friedrich von Wieser (1851-1926)


Book III: The Natural Imputation of the Return from Production

Chapter XII
The Individual Factors of Imputation (continued). IV. – The Imputation to Cost Goods and to Monopoly Goods


NV-III-12.1 What has been said as to the influence of supply, of demand, and of technique, gives sufficient evidence that, in the imputation of return, there is a certain category of production goods particularly favoured, and another peculiarly prejudiced. The line of division, however, which separates these two categories cannot be drawn with any great strictness; the transferences from one group to the other are imperceptible; the grouping changes with the change of circumstances; and, even within the separate groups, there is the same division. Goods which are favoured above many others may nevertheless be quite the reverse in comparison with just as many more.
NV-III-12.2 The first group is composed of those goods to which attaches a natural monopoly (as opposed to a legal monopoly). Characteristic of this group is the comparative rarity of such goods as compared with the demand for them, or, it may be, the comparatively small quantity that can be produced. As examples of goods which have pronouncedly the character of monopoly may be mentioned the following; – scarce raw materials, land exceptionally situated, the work of one peculiarly gifted, – particularly an artist or scientific worker of the highest rank, – a secret and at the same time successful process (or, more exactly, the exclusive knowledge of such a process, whereby the persons who have it obtain a preference over others), and, finally, works of human hands, which, on account of their size, or on account of technical difficulties, cannot be repeated.
NV-III-12.3 Goods which belong to the second group may be called “Cost Goods,” inasmuch as they are the elements in the calculations of cost.1 They are goods easily accessible and abundant, or goods whose production can be indefinitely increased. The following goods have markedly this character; – unskilled labour, coal, wood, the common metals, and also land devoted to industrial undertakings where there is no question of any particular advantage in situation. Things which are to be had in superfluity are not counted among cost goods; indeed they are not reckoned among economic goods at all. While monopoly goods are specific elements of individual industries, cost goods are the common cosmopolitan and indispensable powers and materials of production.
NV-III-12.4 Articles whose making requires no monopoly goods may be produced, comparatively to others, in the largest quantities; on the other hand, those will be produced in the smallest quantities which demand productive factors of a peculiarly marked monopoly character, even although cost goods, subject to very little limitation, should be employed along with them. Assuming equal wants, then, the value of goods produced under monopoly must, by reason of their small available quantity, stand comparatively high; and consequently, to monopoly goods, as compared with cost goods, must generally be imputed a contribution of higher value. This is the first advantage which monopoly goods enjoy. In the course of economic development, however, many other advantages accrue to them, as the development itself accentuates the gulf which naturally exists between them.
NV-III-12.5 In the ordinary course of economic history the available supply of many monopoly goods increases but slowly, or not at all, – in many cases, indeed, it becomes smaller; whereas the available supply of many cost goods increases rapidly and uninterruptedly. We have here two causes which widen the difference between the two imputations, inasmuch as the contribution imputed varies for every good in inverse ratio to the change in its supply, and in direct ratio to the change in complementary wealth. Now in the ordinary course of economic history, wants are continually increasing, and the numbers of those who want are continually increasing, while, at the same time, technique is always becoming more perfect. Both of these facts create a tendency towards raising the value of production goods. This tendency affects monopoly goods unreservedly, but, in the case of cost goods, on the other hand, it is frequently outweighed, – either immediately or after a certain lapse of time, – by the opposing tendency which comes from their increase. Generally speaking, cost goods gain only by such rises in the value of return as are wide-reaching enough to extend beyond the sphere of one single industry. Rises in value which are confined to individual branches of production are completely absorbed, as we have shown (Book III. chapters x. and xi.) by the specific elements in that branch, by the monopoly goods. And even should there be no such elements – as sometimes happens – an increase of value in one particular industry has comparatively little effect upon elements which are simultaneously employed in a great many.
NV-III-12.6 Although cost goods are thus prejudiced in the calculation of the return, they have nevertheless the strongest influence on the result of production and its regulation, and, consequently also, on the basis of imputation. They are the goods of universal diffusion – the goods which are to be found in every market; they form the majority of goods, and build up generally the body economic. Monopoly goods must conform more to circumstances made for them; the using of them changes constantly with the change in the general economic conditions, for it rises and falls with them, just as the level of a stream when it runs below ground rises and falls with the level above. Thus, practically, it would seem to come to this; that the imputation of the share due to the monopoly goods is made only after that due to the cost goods is finished. The shares due to cost goods are always first deducted from the total return of production, and the residue then falls to the monopoly goods. But closer consideration shows the matter to be somewhat different. It is only in the individual case that such a calculation can be made. In the totality of cases it is impossible to overlook the influence of monopoly goods upon the ordinary formation and imputation of return. This influence is in part an indirect one, inasmuch as great quantities of cost goods are employed in monopoly productions, whereby the marginal productive return of the monopoly goods must be indirectly affected; and it is in part direct, inasmuch as through the results of monopoly productions, value equations are furnished, which are indispensable to the total valuation.
NV-III-12.7 Monopoly goods have often received a quite peculiar position in theory. Ricardo, for example, teaches that they owe their value altogether to their scarcity, while all other goods receive their value from the labour of producing them. A sufficiently wide consideration, however, shows that monopoly goods come altogether under the ordinary conditions of valuation, and differ from other economic goods only in that they display much more strikingly the character common to all. 2



NOTES:
NV-III-12.n1.1 1 See below, Book V.
NV-III-12.n2.1 2 In the second note to Book III. chap. iv. reference was made to the present chapter, stating that it would there be shown that, without taking into account the distinction to which Böhm-Bawerk has drawn special attention, and which deals with the opposition between monopoly goods and cost goods, the subject could not be finally settled. The importance of the distinction ought by this time to have become clear. The reader will remember that, in distribution as Menger would have it, there is an “undivided residue.” Now, in every combination, this “undivided residue” falls, for the greater part, to that good which possesses most strongly the character of a monopoly. Consequently, where a pronounced monopoly good is combined with pronounced cost goods, the “undivided residue” is imputed to the monopoly good; where cost goods alone are combined it is imputed to that good which most nearly resembles the monopoly goods; and, lastly, where several monopoly goods are combined it is imputed to that one which most distinctly bears the monopoly character.
NV-III-12.n2.2 It must be noted, however, that only the greater part, not the whole, of the “undivided residue” is to be imputed to the good in question. Some part of it – although often a most trifling and indeed practically indistinguishable part – must always be ascribed to the other co-operating goods, as all of these experience a certain increased utility from the maintenance of the combination, while the dispersing of it would destroy that plan of production which is regarded as best. The share to be ascribed to the other co-operating goods will be the greater, the more the maintenance of the above-mentioned combination is dependent upon them – i.e. the more they themselves possess the character of monopoly goods, and the less they possess that of cost goods. A scarce good will, as a rule, be more seriously affected by a trifling change of productive destination than one that is less scarce; as was explained in the text, there must be considerable alterations in demand and supply before the value of goods which are most distinctively cost goods, shows a corresponding change.
NV-III-12.n2.3 The difference, therefore, between “contribution” and “co-operation” remains fundamentally clear for all cases, although practically it does not come to much, and, so long as only units of goods are concerned, need for the most part scarcely be taken into account. So much the more important is it when we are examining the influence that larger quantities of production goods have upon the amount of productive return.
NV-III-12.n2.4 In this sense I had, in the Ursprung des Werthes, although only by way of suggestion, already disposed of the problem of “complementarity.” There I stated that to production goods must be imputed their “marginal productive contribution,” while, to the “specific productive factors belonging to individual productions” falls the residue of return, after deducting the quotas of all supplementary goods. The only matters omitted were: what would happen were several monopoly goods combined together, and an exact formulation of the law for calculating the contributions.



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