Natural Value (1889)

by Friedrich von Wieser (1851-1926)

Author’s Preface

NV-Pref.1 It has been said that one finds in Adam Smith nearly all the explanations of value which have ever been attempted. What is certain is that, in his explanation, Adam Smith has put together two views that contradict each other. To put it shortly: he gives two theories, one philosophical, the other empirical. In the first he tries to make clear what should be thought of as the characteristic attribute of value; what it is we ascribe to some things and deny to others that, to all appearance, are entirely the same; what it is of which we ascribe a great deal to certain things and very little to other things which, measured by outside standards, seem infinitely superior. In this view value is an attribute per se, coinciding with no other that we know, and, least of all, with the usefulness of things. In carrying out this attempt Adam Smith first of all abstracts from the complicated circumstances of ordinary economic life, and confines himself to the simple, primitive, natural state. In this state he finds that it is labour in which value originates. Goods are worth to us what they cost in labour, and what, therefore, their possession saves us in labour. The idea of value thus arrived at Adam Smith goes on to apply to the empirical instances of the phenomenon of value. Thereafter when he comes across value he sees nothing mysterious in it; he has a means of distinguishing it from the other attributes of things; he knows how to get to the heart of it; indeed, through its relation to the labour from which it receives its content, he can even measure it.
NV-Pref.2 But, independently of this, Adam Smith describes – and here we come to his empirical theory – the causes of value and of the more or less of value, as he finds them in actual life. He sees clearly that labour which he has recognised as, philosophically, the sole cause of value, is not also, practically, its sole cause. As a rule three factors together, he thinks, make up the exchange value of products; besides the labour of production there is also interest on the capital required and rent of the land required. This is not to say that the “value” of observed experience is of another nature from the “value” of philosophy. That value which is created by land and capital is of the same nature as that created by labour. As regards it also, it is labour to which we must refer, if we are to grasp its content and measure it. The only sign of his being aware that there is any contradiction between his philosophical and his empirical explanation is where he passes from describing the primitive natural condition of economic life to describing a society based on private property in land and capital. Here he cannot resist a gibe at those who “love to reap where they never sowed,” although, once within the kingdom of reality, he takes interest and rent into his system as self-intelligible facts.
NV-Pref.3 Nearly half a century passed, and then Ricardo tried to clear his master’s doctrines of their imperfections. Ricardo deeply felt the contradiction which Adam Smith had scarcely noticed. How did he seek to remove it? In a way that, more than Adam Smith’s mistake, betrayed how young a science political economy was. To-day when, in virtue of the labours of these great pioneers of the science, we stand face to face with the problems which are to be solved, it is scarcely possible to put ourselves back into those conceptions in which they first gave shape to their observations and thoughts. In their effort to escape from absolute perplexity they took frank delight in explanations which, to us now, are more of a riddle than the phenomenon they were meant to explain. What, then, did Ricardo attempt? His whole endeavour exhausted itself in trying to show that the philosophical and the empirical theory of Adam Smith, – both of which, indeed, in taking up this position he had to clear and carry further, – did not contradict each other so much as at first sight would appear. If we limit ourselves to the general rule and the average, value as it is and value as we get it from labour, agree in their amounts – not altogether, indeed, but almost so – with one exception, which is so trifling that it may be quite properly neglected. Of the two empirical factors in the formation of value which Adam Smith named besides labour, the rent of land – and this was the ultimate gain of Ricardo’s famous theory – is entirely eliminated. Rent does not determine the value of products but is determined by that value. Interest, of course, remains, but Ricardo thinks he has shown that it increases with the value of products in, approximately, the same ratio as the quantities of labour required for production, so that the quantities of labour do, in the long run, give a fairly true measure of the value relations of all products. Interest, as treated in this way, forms no hindrance to his system, and Ricardo consequently does not really try to explain it. He takes it as he finds it – a fact that needs no explanation. This treatment, which has excited the astonishment of so many later writers, is perfectly intelligible if we remember the impulse which set Ricardo’s mind to work. He had no intention of explaining the whole of economics. He wished to show only that the value which is, is very much the same as the value which can – although only from a certain point of view – be understood. Ricardo was the last man in the world to think of reforming economic life. He never opposed, to the value which is, the value which ought to be. It never came into his mind to condemn interest, and his system, understood in the sense of its author, does not in the least involve the condemnation of interest. In this there is nothing illogical, and when the socialists base their crusade against interest on his system, they do not complete it, as they imagine they are doing, but destroy it. Only if interest is undoubtedly a good thing can one pass over it as Ricardo does.
NV-Pref.4 Since Ricardo’s book appeared another half-century has fled, and, since the Wealth of Nations, more than a century. In that time the demands on the social sciences have grown apace. In Adam Smith’s day people explained the existing condition of things by the “original” nature of man and the “original” state of things, and were content. We, on the other hand, like to explain reality by reality. Philosophy itself has become empirical. It allows no argument which is not drawn from well-founded experience. The historical state, positive law, the economy of every-day life, are the objects of research, and, at the same time, the ultimate sources of the instruments of research. If Adam Smith and Ricardo were writing to-day, they would be full of the spirit of to-day, and even if they had not command of the abundance of observation and knowledge which the genius of the one and the acuteness of the other have put at our service, their books would be ever so much more perfect than they could have been in their time. Certainly they would avoid the mistakes which the human spirit since their day has outgrown.
NV-Pref.5 Their school, however, still pursues the path they trod, hesitating between uncomprehended empiricism and the purest speculation. And it is a great school. It is strange indeed to find that while, as regards questions of politics and of method, whole sides have renounced the English parent school, – from the socialists to the adherents of the historical school in Germany, – as regards the old economic problem of value many of the newer economists have remained true to its dogmas. As a man’s judgment about value, so, in the last resort, must be his judgment about economics. Value is the essence of things in economics. Its laws are to political economy what the law of gravity is to mechanics. Every great system of political economy up till now has formulated its own peculiar view on value as the ultimate foundation in theory of its applications to practical life, and no new effort at reform can have laid an adequate foundation for these applications if it cannot support them on a new and more perfect theory of value.
NV-Pref.6 Of course the ruling theories of value have, in many respects, put themselves in antagonism to the theory of Adam Smith and Ricardo, particularly in Germany – although, indeed, in that country there has of late years been a widening acceptance of the labour theory. The advances which theory has made therefrom can scarcely be overestimated. More particularly may it be noted that Use Value has now been put by the side of Exchange Value, and that, besides the economic life of the individual, we now take cognisance of national and other more general economies. Here, again, the connection between the theory of value and practical politics is strikingly shown. Hostility to the individualist reading of the conception of value took sides with the struggle against the individualist tendency in economics. It seems, however, as if this branch of the ruling doctrine also has exhausted its force, and that this movement also hangs on the “dead centres.” As economic research stands to-day, people, on the whole, are investigating, not the phenomenon of value, but the popular conception or conceptions of value. I have said in another place that, for the sciences which deal with human action in any of its departments, the peculiar danger is that of missing their mark. Passing by the act and its motive, they are too ready to investigate the meanings which men take out of their own actions. Thus we get “popular theories,” particularly those which can be read out of the ordinary meaning of the terms in which phenomena they deal with are expressed. This remark seems to me peculiarly applicable to the value theories just spoken of.
NV-Pref.7 That the theory of value needs reforming from the very foundation no one will, I think, deny. The imperfection of the prevailing views is confessed even by their own adherents. But while the great majority of economists are still at a loss where to turn, a new theory has come to the front. At first unnoticed, and then for long but little thought of, worked out by men who, for the most part, did not know of each other but yet agreed where so many had doubted and disagreed, came a new theory based on a new foundation – an empirical theory on an empirical foundation.
NV-Pref.8 The new theory starts from the old proposition, that the value of goods comes from the Utility of goods, or – what is the same thing – from the satisfactions of want which goods assure. To find the laws of value, then, one must first know the laws of want. Now, in this pursuit, we come upon the fact that the want for the same things – even in the same person, and in given economic conditions – is of quite different strengths, varying according to the degree in which the want has already been satisfied through the employment of goods. But since the employment of goods depends upon the amount of goods which one possesses, the quantity of goods obtains a decisive influence on the valuation of wants and so on the source of value itself. This observation is the starting-point of the wider investigation. In itself it is of great importance because it ultimately gives the solution of the paradoxical phenomenon that value falls as goods increase. But it is as important through its effects on economic method, because it guides the economist, from the false objects to which speculative methods and ordinary language point, to the empirical heart of the phenomenon of value.
NV-Pref.9 As forerunners of the theory we may name generally all those who have derived value from utility; specially those who were persistent in basing even exchange value altogether on utility, particularly when they did not shrink from their principle in spite of the obvious influence of costs of production. Usually on this point the statement of the theory is either inconsequent or obscure, or retains its logic and its clearness, at the expense of renouncing completeness, by leaving out the question of costs. As forerunners of the new theory in the stricter sense of the term we may name those who take up the question of quantities of goods as well as their utility. Usually, of course, this goes only to the extent of showing the changes in the amount of value which follow from changes in supply and demand. But, in the case of a few writers, it has taken a much more exact form, where “scarcity,” “limitation of supply” is recognised as condition under which utility creates value – and that not only, as Ricardo says, as regards certain rare goods, but as regards goods generally. Among writers answering to this description, who may be held the immediate precursors of our theory, are Auguste Walras (De la Nature de la Richesse et de l’Origine de la Valeur [Online editor’s note: On the Nature of Wealth and the Origin of Value. – RTL], Evreux, 1831), and also Condillac, Genovesi, and Senior.1
NV-Pref.10 Passing by those numerous pioneer works, we meet with no less than four authors who had worked out the same theory independently of each other, Gossen,2 Jevons,3 Menger,4 and Leon Walras.5 Gossen’s statement, in spite of many quite classical points of superiority, is, on the whole, the most imperfect. That of Walras, though admirable of its kind, suffers, to my mind, from the preponderance of the mathematical element. The laws which govern amounts of value undoubtedly allow of a mathematical expression; nay, the more complicated of these can be expressed exactly only by means of mathematics; and here certainly mathematics has a great task to fulfil. But in the value theory we have to do with something more than the expression of the laws of amounts. The obscure conception of value is to be made clear; all its manifold forms are to be described; the service of value in economic life is to be analysed; the connection of value with so many other economic phenomena is to be shown; in short, we have to give a philosophy of value which needs words, not numbers. And, besides all this, the empirical existence of the alleged facts is to be established.
NV-Pref.11 Finally, Jevons’s statement, in spite of its amazing wealth of observation and reflection, in spite of its finished expression, in spite of the catholic spirit which speaks from it, must be placed second to that of Menger. Menger goes more deeply into the subject, inasmuch as he starts from a more general conception of value. For this Menger is indebted to the German school of national economists with its patient untiring labour in formulating the general economic conceptions, and pressing forward from concrete phenomena to that height of abstraction from which the phenomena are to be logically arranged. It may be said that, in great part, the German school long ago formulated the conceptions, leaving for us only the task of filling them out by adequate observation. In this it has laid up a treasure from which all succeeding economic effort may draw indefinitely.
NV-Pref.12 Of Jevons’s system one part, the “theory of utility,” as he calls it, has passed into English literature. Among the works of Continental economists who adopted the new theory, may be mentioned the fine statements of Pierson,6 and Charles Gide7; and in Germany a work of Launhardt8 on the lines of Jevons and Walras. But it is in Austria, in the lineal succession to Menger, that the development of the new value theory is to be sought. I may be allowed to refer to my own Ursprung und Hauptgesetze des wirthschaftlichen Werthes [Online editor’s note: Origin and Principal Laws of Economic Value. – RTL], Vienna, 1884, in which I applied Menger’s theory to the phenomena of costs. On this followed a work by Böhm-Bawerk,9 which, independently of its extremely clear presentation and its careful and fruitful revision of many matters of detail, is particularly valuable from its treatment of the theory of objective value. Finally came a comprehensive work of E. Sax,10 extending the theory of value over entirely new material to which no previous writer had applied it – to public imposts, and thus giving the theory one of its richest applications.
NV-Pref.13 The ground-plan of the new theory is drawn, but much remains to be done; not only to widen its reach generally, but to complete it in itself. The following pages are an attempt to supplement what has already been done. In distinction from my earlier work I have not paused to discuss the assumptions of the value theory, but limited myself severely to the subject of value and its direct content. On the other hand I have attempted to exhaust the entire sphere of the phenomena of value without any exception, and, besides that, so far as my ability goes, to think out more exactly the subjects I had already treated of. The present work is on that account in no way a repetition of my former one, but an entirely new book, treating for the most part of entirely new matter, and having nothing more in common with it than the general fundamental propositions. I hope this time to have met the objection urged against the Ursprung des Werthes that I had omitted the connections – the “bridges,” as one critic called them – between the principles laid down and the concrete phenomena of value with which we are familiar. Whatever may be thought of its truth or correctness, I think I may venture to say that no value theory has ever yet been put forward more complete and exhaustive in external form and treatment.
NV-Pref.14 The very multitude of single matters which I had to touch on has compelled me to pass over almost every critical analysis that differed from mine, and indeed to leave out almost every appeal to economic authorities outside of those authors who belong to the same school, and from whom I directly took the propositions I had put forward. Similarly I have refrained from discussing any of the economic conceptions I had to employ outside of that of value. I shall very willingly put up with the reproach of being incomplete by reason of this if it should succeed in making any clearer the inner connection of the book. At the same time I should not like to be suspected of having done so from any undervaluing of the theoretical work of other economists – least of all, of those of Germany.
NV-Pref.15 I have just said how deeply indebted, in my opinion, every theoretical attempt of to-day is to the labours of German theory. And to it the new value theory stands most nearly related – it is in truth the fulfilment of what German theory had long demanded.

PRAG, September 1888.

NV-Pref.n1.1 1 Rau, too, with his “concrete Gebrauchswerth[Online editor’s note: “value in use,” “use-value.” – RTL] may be included. There is a notable treatise of the mathematician Daniel Bernoulli: Specimen theoriae novae de mensura sortis (Commentarii Academiae Scientiarum imperialis Petropolitanae, tomus V. Ad annos 1730 et 1731. Petropoli, 1738). [Online editor’s note: Specimen of a New Theory of the Measurement of Risk (Proceedings of the St. Petersburg Imperial Academy of Sciences, vol. 5, for the years 1730-1731. St. Petersburg, 1738.). – RTL] Bernoulli maintains that it is valde probabile, lucrulum quodvis semper emolumentum afferre summae bonorum reciproce proportionale. [Online editor’s note: “quite probable that every gain, no matter how small, yields a benefit inversely proportional to the total quantity of one’s goods.” – RTL] He is fully acquainted with the subjective character of value, as well as with the most important law of the change of value. His work is referred to by Jevons in an extract from another of his books. By the kindness of Professor Menger I have seen the original. Dupuit’s De l’influence des Péages [Online editor’s note: On the Influence of Tolls. – RTL], 1849, mentioned by Jevons, I have not been able to consult.
NV-Pref.n2.1 2 Entwicklung der Gesetze des menschlichen Verkehrs und der daraus fliessenden Regeln für das menschliche Handeln. [Online editor’s note: Development of the Laws of Human Commerce and the Rules for Human Trade Emanating Therefrom. – RTL] Braunschweig, 1854.
NV-Pref.n3.1 3 First in a paper before the British Association, 1862, then fully in the Theory of Political Economy, London, 1871; 2nd edit. 1879.
NV-Pref.n4.1 4 Grundsätze der Volkswirthschaftslehre [Online editor’s note: Principles of Economics. – RTL], Vienna, 1871.
NV-Pref.n5.1 5 Éléments d’économie politique pure ou Théorie de la richesse sociale. [Online editor’s note: Elements of Pure Political Economy or Theory of Social Wealth . – RTL] Lausanne, 1874-77. – Théorie mathématique de la richesse sociale. [Online editor’s note: Mathematical Theory of Social Wealth. – RTL] Lausanne, 1883. – Théorie de la Monnaie. [Online editor’s note: Theory of Money. – RTL] Lausanne, 1886.
NV-Pref.n6.1 6 Leerboek der staathuishoudkunde. [Online editor’s note: Textbook of Political Economy. – RTL] Haarlem, 1884.
NV-Pref.n7.1 7 Principes d’économie politique. [Online editor’s note: Principles of Political Economy. – RTL] Paris, 1884.
NV-Pref.n8.1 8 Mathematische Begründung der Volkswirthschaftslehre. [Online editor’s note: Mathematical Basis of Economics. – RTL] Leipzig, 1885.
NV-Pref.n9.1 9 Grundzüge der Theorie des wirthschaftlichen Güterwerths. [Online editor’s note: Fundamental Characteristics of the Theory of the Economic Value of Goods. – RTL] Conrad’s Jahrbücher, N.F. vol. xiii. Jena, 1886.
NV-Pref.n10.1 10 Grundlegung der theoretischen Staatswirthschaft. [Online editor’s note: Foundations of Theoretical Political Economy. – RTL] Vienna, 1887.

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