Natural Value (1889)

by Friedrich von Wieser (1851-1926)

Book III: The Natural Imputation of the Return from Production

Chapter II
The Problem of Imputation

NV-III-2.1 No productive instrument, be it ever so efficient, yields a return by its unaided agency; it always requires the assistance of others. And the more the art of production is developed, the more numerous will be the productive instruments which co-operate. The very simplest products often require the most complicated methods of production, because they, more than any others, allow of the application of machinery and, therefore, of power in the mass. The proposition that production goods obtain their value from the value of their returns, suffices only for the valuation of the co-operating productive factors as a whole; not for their valuation individually. To obtain this also, we need a rule which will make it possible to divide up the whole return into single parts.
NV-III-2.2 When land, capital, and labour work together, we must be able to separate out the quota of land, the quota of capital, and the quota of labour from the joint product. More than that, we must be able to measure the services of each separate piece of land, of each separate quantity of capital, and of each separate labourer. Of what use is it to know the return which falls to machinery, coal, and raw material together? It is necessary to distinguish what each has contributed to the total result, just as the contribution of the stone-cutter who hews the block must be distinguished from that of the artist who chisels it into the statue.
NV-III-2.3 If we may form a judgment from economic practice, we should say there is such a rule of division. No one, practically, is limited to saying that return is due to all the producing factors together; every one understands and practises, more or less perfectly, the art of division of return. A good business man must know, and does know, what a day labourer and what a skilled worker would yield him; what profit a machine will bring in; how much has to be ascribed to the raw material; what return this and what return that piece of land will produce. If he did not know this; if he could only compare his outlay and his results as a whole and in the lump, he would not know what to do in case the return proved less than the outlay. Must he give up the production altogether? Must he alter the management? Must he be more saving with labour or capital, with machinery or raw material; or, on the contrary, must he employ more of these? Only if there is some adequate means of following out individually the working of each productive element, can he judge clearly upon these points. That there is such a means is testified by the fact that economic decisions of the nature we have just mentioned are made, and made with as much confidence and as favourable results as are any other decisions in matters of value generally. The existence of this means of calculation is still more certainly proved by the fact that decisions of this nature are so often made in the same way by many people, – in fact, by all persons who find themselves in the same circumstances. Why at a certain point of time does the entire body of undertakers, in some particular branch of manufacture, suddenly replace hand labour by machinery, when previously they had not found machinery profitable? Why is agriculture in one country so much more “intensive” than in another? Chance and caprice are here out of the question. It is calculations of production that effect these alterations. They give arithmetical proof that it is advantageous to eliminate the one element of production, with its accompanying share in the return, and substitute for it the other. The more perfect the production, the more exact will be its calculations, and the more highly will the art of distributing the return be developed. A “model economy” calculates everything. But the rudest peasant, and the wildest savage, make calculations, inexact and hasty though they be. They, too, make use of their experience, though very imperfectly of course, in regard to matters where the impulse and the confidence are given by nature. The peasant, dwelling in some cleft of the mountain, says to himself that this field is more valuable than that; and this he could not do unless he understood the art of separating the return of the field from the return of the co-operating labourers, tools, and materials. These are rules which arise naturally, from the very nature of man, when he finds himself confronted with the problems of economic life. In applying them, the attempt would undoubtedly be made even by a communistic state, to calculate the result of each individual productive element. And in a highly cultivated state these calculations would be made with great exactitude, in order to lay down that plan of production which, for the time being, was most effective.
NV-III-2.4 It is singular how few of those writers who have attempted to grasp economic procedures into the unity of theory have tried to discover this rule, – which is certainly one of the most important followed in practical economic dealings. Of the many difficulties which have to be overcome if we are to get, apart from actual transactions, a purely theoretical and scientific account of what people actually do when impelled by circumstances, probably the first and most difficult of all is to put before ourselves what are the problems really put in business transactions. Every theory begins with the least important of the things it has to do, and only in the end arrives at its true vocation.
NV-III-2.5 The second difficulty is to state the problem correctly. The few writers who have managed to get over the first obstacle mentioned have almost all come to grief at the second. For the most part they pitch the question too high, and thus change, what to the simple man is a simple and natural thing, into a subtle and sophistical riddle, of which they then say, rightly enough, that no solution is possible. They try. to discover which portion of the joint product, physically considered, each factor has produced, or of which part of the result each factor is the physical cause. This, however, is not to be discovered. At the most it could be possible only in cases where the product is a complex of materials externally bound together; and even that only so far as regards the materials, and not as regards the power which makes them a complex – a power whose effects inhere in all the constituent parts of the mass, without being incorporated in any one of them. Looked at in this way, we cannot get beyond the proposition that the result is the joint product of all its factors and causes; that those factors must work in combination or they cannot work at all, – like the four brothers in the tale who saved the princess only by their united endeavours. If we wish to find the principle for division of return which is applied in practical life, the question must be put quite differently; it must be put as practical life puts it, and it must be put simply.
NV-III-2.6 The causes of any phenomenon, whatever it may be, can be interpreted in very various ways. The philosopher looks at them in one light, the peasant in quite another; and yet both may judge rightly, and, so far as their judgment is correct, may apply rightly their conception. The difference in their opinions rests on the fact that they judge from different points of view. The former searches after the final causes that may be grasped by human reason; the latter limits his attention to the proximate and immediate causes, taking for granted the agency of all those which are further removed. Each would fail were he to make use of the other’s knowledge; the peasant’s maxim does not answer the purpose of philosophy, and the philosophic conception has no place in the economy of the peasant; yet each is serviceable enough in its own place. In whatever industrial situation men come to a judgment as to the causes of the phenomena which they encounter, the horizon of the judgment is always strictly limited by the point of view they take. Whatever lies beyond that cannot properly be taken into consideration, or the judgment would never come to anything. It would only end in needless critical reflection, which would be of no help as regards the objects aimed at. If we wish to obtain a practical judgment the object must be kept in view, and the matter looked at from the point of view of those concerned. A theory which proposes to explain the idea in business life, must, of all things, not be above its business; it must limit itself, so as not to give too deep a meaning to, and thereby really distort, the limited subject.
NV-III-2.7 A science nearly related to our own as regards its subject, that of jurisprudence, may give us admirable instruction on this point. For an act of murder there must necessarily be a perpetrator, a victim, an instrument, and an opportunity. Besides these, the act is influenced by innumerable circumstances, which can often be shown to reach back to a far distant past in the previous history of the murderer, and even in the history of the community among which he came into existence and grew into manhood. The sociologist, the historian, the philanthropist, and the lawgiver will have much to consider that has but an indirect connection with the committing of the murder. But, however far back they may carry their consideration, some idle brain can always go still further, and follow ad infinitum the series of causes which led to the deed, – as, for instance, the history of the tool with which it was done, as well as the history of the doer. The judge, on the other hand, who, in his narrowly-defined task, is only concerned about the legal imputation, confines himself to the discovery of the legally responsible factor, – that person, in fact, who is threatened with the legal punishment. On him will rightly be laid the whole burden of the consequences, although he could never by himself alone – without instruments and all the other conditions – have committed the crime. The imputation takes for granted physical causality. It cannot fall upon any one who stands outside the series of causes which led to the result, and any proof that the accused does stand outside exempts him from condemnation. But if the causal nexus is once established, far more is laid to the account of the doer than was or could be physically done by him. Only a foolish interpretation of the judgment could take exception to this. The expression “this man has done it” does not mean “this man alone has done it,” but “this man alone, among all the active causes and factors, is legally responsible for the deed.”
NV-III-2.8 In the division of the return from production, we have to deal similarly not with a complete causal explanation, but with an adequately limiting imputation, – save that it is from the economic, not the judicial point of view. Observation of the fruits of the earth suggests to a religious mind the Creator of all things. A scientific investigator is directed by the same observation towards the pursuit of the cognisable causes of their creation. A Faust pines after knowledge regarding the hidden forces of their life. The farmer, as farmer, thinks differently from all of these. He ascribes his crops, soberly and unsentimentally, to a very limited and small circle of all the causes which have actually produced them. He asks – “Towards what things must I direct my economic attention in order to receive this return?” – and reckons the result accordingly. He therefore sets apart from the total active causes all those which lie behind in the past. From the present causes he then sets apart all those which can be of no use, or are not recognised as having any use. From the recognised and useful, again, he divides off all those which are not under economic command. From these last he, finally, separates out all those causes which need not be cared for, because they are present in superfluity. As we can readily understand, he does not in the least believe that the remainder is the sole originating cause of his return. At the same time he rightly attributes or imputes the return to it alone, taking the working of all the other elements as assured. His judgment, though limited, is neither false nor even inexact. It embraces all the causes which have to be considered by him if his labour is to be attended by good results.
NV-III-2.9 If, in the economic working out, parts of the total result should be traced back to individual instruments of production, it is that we continue the reasoning with which we started: we trace back the total result not to its numerous wider causes, but simply to the economic instruments of its production. In regard to the part we limit ourselves still more than we did in regard to the whole; we seek out that one among the economic elements to which the part is practically to be imputed, although, certainly, it could have produced it only in combination with the other elements. Here, again, there is neither fallacy, nor even inaccuracy. On the contrary, so far as this method succeeds in founding, upon the imputation of the return, a valuation of goods and a plan of production which insures the most successful employment of each single element, it is the height of practical wisdom.
NV-III-2.10 To show that imputation in this sense is both allowable and practicable take one single case. Suppose that two fields, the one fertile, the other poor, but both worked with similar amounts of capital and labour, give different returns. To which account is the surplus return of the better field to be attributed – to that of the seed, or the manure, or the plough, or the labour? But these were the same in both fields. Is it not rather to be attributed to the land itself and its greater fertility? No one can be in doubt as to that, nor can one raise the objection that, without seed, manure, plough, and labour, there could have been no surplus return. Taking things as they are, more depends upon the possession of the better soil – just as much more, in fact, as the surplus return amounts to.
NV-III-2.11 It is of great importance that we should try to formulate theoretically the rules for the imputation of productive return, not only as regards land but as regards all productive instruments. If we do not succeed in doing so, the valuation of production goods will remain an enigma; and the existing order of things, under which the actual imputation of returns forms the basis for the distribution of national income among the citizens, will lie under the accusation of arbitrariness, if not the worse accusation of force and injustice. It would not even be possible to justify the difference in wages paid to some labourers as compared with others. If there is no rule by which to adjust the quarrel between owners and workers, neither is there any by which to measure the rank of the inventor against that of the day-labourer who carries out the invention. It would be purely arbitrary if one tried, even approximately and by way of valuation, to show respect to genius, devotion, art, power, skill – in short all the virtues and excellences which, from time immemorial, have been held in respect in economic matters as well as in others, and which society has to thank for the most beneficent and useful services of its members.

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