Natural Value (1889)

by Friedrich von Wieser (1851-1926)

Book IV: The Natural Value of Land, Capital, and Labour

Chapter XI
The Value of Production Goods, With Reference to the Competition Between Present and Future Interests

NV-IV-11.1 To distribute a supply of means of subsistence, or other consumption goods, over a considerable period of time, and to value it with regard to the competition between present and future wants, is, at bottom, a very simple task. One would select the highest satisfactions which can be reached on the whole, and these would form the basis for the valuation of the goods, the marginal satisfaction deciding the value of the unit. At what point of time the marginal satisfaction will occur cannot be stated generally. It may be at the beginning that the highest satisfactions are possible, as in the case of stocks which are large and liable to spoil, and cannot well be preserved for any length of time. It may be that the greatest amount of satisfaction can be attained only at the end of the period; as when forethought demands that a certain restraint be observed at the earlier dates in case of possible accidents.
NV-IV-11.2 Not infrequently this task is complicated by the fact that there is a question between the productive employment of goods, and their direct employment in the satisfaction of wants. Coal, for instance, exerts its power of heating equally well in the dwelling and in the factory, and so with many other material goods which may be employed either for consumption or as capital. The same will be observed in the case of land; a field may either be employed in producing a return, or be laid out as a park. And, finally, it is the same with labour. It may either be employed as personal service – domestic service in a house for instance – or used for productive ends. As all production provides for consumption sooner or later, the choice between immediate consumption and productive employment is always a choice between present or proximate consumption and future or more distant consumption. The principle which governs this choice is the one just given; that employment which, in a consideration of the whole ground, is found to be the marginal one, decides the value. And here again it is impossible to state generally at what point of time the marginal employment will occur. It may occur in the present, the period of immediate consumption; it may occur in the future, the period of productive employment. The marginal value of coal might be decided equally well, either by its service in heating the dwelling or by its service in the factory.
NV-IV-11.3 This consideration may be carried further within the sphere of production. Production may be made to yield its fruits to consumption sooner or later, according to the manner in which it is directed. It is possible either to limit production principally to objects of direct consumption, – by which means the end that is nearest in point of desire is more speedily reached, – or to direct it on and on, devoting it to the making of production goods themselves, and to ensuring the conditions of great and lasting “rentability” – by which present enjoyment is postponed for the sake of a greater degree of enjoyment in the future. Not only does the choice of objects of production come into consideration, but many other circumstances also. Almost every kind of production – with the exception possibly of those strictly dependent upon seasons of the year – permits of a shorter or longer process; almost every production – with still more trifling exceptions – may be carried out “extensively” or “intensively,” with slighter means and more temporary results, or with stronger means and more durable results. In all such cases it has to be decided whether the present, the nearer enjoyment, or the future, the more distant, be preferable. And finally there is still another peculiar circumstance, which contributes to the competition between present and future interests. The accomplishment of almost every undertaking demands personal exertion; it thus demands the overcoming of the resistance offered by the natural desire for rest and comfort. In this connection also the considerations of present and future welfare come into collision.
NV-IV-11.4 The principle which must guide one’s choice in this respect is in all cases the same, although the difficulty of applying it increases with the complication of the case. That scheme for the employment of goods which promises the greatest advantage on the whole, must be the one chosen, and valuation – so far as is practicable, marginal valuation – must be adapted to this scheme.
NV-IV-11.5 In general, indeed, labour and capital are more concerned in what has just been said than is land. The motives which make for labour always, or almost always, encounter in the pleasure of the moment a certain resistance which must be overcome. And capital, as it must continually be reproduced, continually raises the question whether the means necessary for its re-creation could not be employed elsewhere to more advantage. In this have originated two celebrated theories, intimately related to one another, although they have emerged separately: the one relating to the value of labour, the other to the value of capital. The former derives the value of labour from the “sacrifices” of labour; this theory we shall discuss later. The other derives the value of capital, or, rather, interest, from the “sacrifice” which, as it asserts, is made by the capitalist in devoting his capital to production instead of directly consuming it. This is the well-known Abstinence Theory, which regards interest as a wage for the abstinence of the capitalist. A few words upon this theory may not be out of place here. After what has just been said there should be no difficulty in forming an opinion upon it.
NV-IV-11.6 It is true that, in all cases of the formation of capital, capital might have had another destination than the one actually chosen, – for production is a very Proteus in its capability of taking various shapes; but it is not true – as will now be generally acknowledged – that every capital permits also of being immediately consumed. Since Lassalle’s criticism it is unnecessary to waste another word on this point. But even supposing it were true, supposing that every concrete form of capital might be immediately consumed, the abstinence theory would none the less be false. In no way is it possible that a consumption, from which it is economical to refrain, can serve as a measure of value. What kind of sense would there be in this? Goods are of value to us because of what we can obtain from them, and those destinations of goods which are chosen as the economically permissible ones, furnish the basis of value. The consumable nature of capital goods can influence their value only in so far as capital goods are actually devoted to consumption; if capital be consumed the productive stock will be diminished; if much capital be consumed it will be sensibly diminished, and productive value will rise. But even this effect must not be regarded as a one-sided one. The productive employment of capital and the personal consumption of it mutually determine one another. Moreover they determine one another only in consideration of the amount of value employed at the time. On the other hand, neither of them can be basis for the other. The circumstance that capital is consumable can no more give value to a foolish employment of it in production, than the circumstance that capital is capable of productive employment can make it consumable, if it be not so in its own nature. The value of an employment must be founded on itself: productive value can be derived only from production, and consumption value only from consumption. The amounts of value gained in the various employments of capital are, of course, compared with each other, so far as is practicable, in the effort to attain to the greatest possible result on the whole: and, moreover, even where they are not compared, they are still put at an equal value with one another in virtue of the particular form of valuation which the marginal law brings with it. As a matter of fact abstinence from consumption is nothing more than a symptom of productive value, – occasionally of so much productive value that the sacrifice of abstinence is at least counterbalanced.
NV-IV-11.7 The abstinence theory in its essence bears a striking resemblance to that theory which derives the value of products from their costs. As we shall see immediately, the law of costs does indeed exist as a very good working law of valuation. But costs do not form the foundation of value; they only equalise it: and, moreover, the circumstance that costs are expended makes us conclude for the existence of value. The cost theory, like the abstinence theory – except that it is confined to a narrower sphere – confuses a law of the more or less of value, or more exactly, a law of the equalisation of values, with the fundamental law of valuation. In the one theory as in the other, a symptom, which allows us to conclude for the existence of value, is taken to be its cause and explanation.

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