Natural Value (1889)

by Friedrich von Wieser (1851-1926)

Book V: The Natural Cost Value of Products

Chapter IV
Conditions Under Which the Law of Cost Obtains

NV-V-4.1 It is unnecessary to say that products only come under the law of costs. The products which principally come under this law are those which are produced frequently, regularly, and in large amounts, and, in particular, those in the production of which cost-goods are exclusively employed. Products whose manufacture is strictly and narrowly limited by confessedly monopoly goods do not experience the influence of costs at all. All alterations in costs in such cases go, not to products, but to the monopoly factors of production; every dilution of costs raises, and every increase lowers, the value of these factors.1
NV-V-4.2 Such products too as are to be re-employed in production – i.e. all produced concrete forms of capital, or “capital goods,” as we may call them for convenience sake – come under the law of costs. Thus the valuation of capital becomes an exceedingly complicated matter. One has always to combine two things; – the return to the capital and its costs. Both amounts stand in mutual relation, and tend, so far as possible, towards equality. The greater the value of the return, the greater the costs that may be expended in producing it; and the greater will be the expenditure of costs, so far as is practicable and necessary: the smaller the requisite expenditure of costs, the smaller will finally be the value of the return, whether this result from the fact that production finally is correspondingly extended, or from the fact that the valuation of the utility is directly pressed down to the level of the costs. If a machine does very good work, that is a cause for valuing it highly; but if it can be cheaply produced, the machine itself, and, finally, its products also, will find a low value. The costs of producing capital transmit their effects right down to the fruits of the capital, however remote these may be, so long as they fall within the producer’s field of vision, and can be taken into consideration in the estimates of value.
NV-V-4.3 Products which come under the law of costs do not, however, come under it in all circumstances. To do so they must come under consideration as products, i.e. as dependent upon the elements from which they are formed. If they are estimated independently, if they are valued in isolation and for themselves, their own utility alone – or their marginal utility – will determine their value, without their productive marginal utility being taken into consideration at all.
NV-V-4.4 This is most clearly seen in the case of the immediate determination of value by costs. Why in this case is the valuation made according to costs? Because the products can always be obtained again at the sacrifice of the costs, and, just on that account, only when they can be obtained at this sacrifice. If the possibility of their reproduction be excluded through any circumstance whatever – say e.g. that the import of some article is stopped by a blockade, or that demand has increased so rapidly that production cannot keep pace with it, – the value will be estimated at the full amount of the utility (or marginal utility) which the products are expected to give. As a rule, there are such abundant supplies of all products – partly in the possession of private householders, partly in the larger stores of producers and merchants – that people are provided against the smaller increases in demand. Valuation by costs is suspended only in the case of large and permanent disturbance of production. If reproduction remains possible, although at a higher outlay than before, – not, however, coming up to the height of utility, – the law of costs will still obtain, only that the determining amount of costs will have risen. If demand decrease, or unforeseen supplies increase the stock, to such an extent that the marginal utility falls below the amount of costs, the law of costs will be suspended until marginal utility shall have so far risen as to render production again practicable.
NV-V-4.5 The same applies where costs do not directly determine value, but determine, in the first instance, only the extent of production. The influence of costs ceases so soon as, and so far as, the possibility of production ceases. Here again may be observed the same influence of accumulated stocks – that, through the medium of them, all smaller disturbances in the provision for want are equalised.2
NV-V-4.6 When the disturbances which caused the suspension or imitation of the law of costs are over, it again becomes active. So far as is at all possible, men try to conduct production according to a universal plan which embraces all the productions “cognate” at the time. Isolated production prevents complete utilisation of the means of production; it limits provisions for human want too greatly at certain points, while going too far in other directions, or, what is still worse, leaving production at certain points entirely alone. On this account there is always a tendency to return to the most comprehensive conditions of production, and thus, so far as is possible, to the valuation according to costs.
NV-V-4.7 If society were ever to arrive, in its economic life, at such perfection and control that no plan of production ever miscarried, that there was no interruption in exchange, that no unforeseen loss of goods happened, that all acquisitions of goods could be anticipated to the fullest extent and in the most exact degree, that, finally, the demands should never vary or, at least, that the variations should always be adequately anticipated: – in such circumstances the law of costs would be the only form in which the general law of value would appear as regards those goods in respect to which it holds. It is not to be expected that any disposition of affairs could bring social economy to such perfection. Even in the most perfect condition of society there will be changes, such as must for the moment limit or extend the sphere over which the law of costs holds sway.
NV-V-4.8 If the socialists expect that, in their future state, valuation by costs will be all-sufficient, they are in error, unless man is able to exert such mastery over the natural conditions of the life of goods, that no harvest shall ever fail, or, indeed, be overabundant; and, moreover, unless the national life can be assured of a perfectly peaceful course, such as can be conceived of only when war has ceased, when invention is no more, and when no new need ever emerges.

NV-V-4.n1.1 1 Thus in the cotton thread trade neither changes in wages nor in the price of raw material seem to affect prices; they only increase or decrease profits. – W.S.
NV-V-4.n2.1 2 Up to a certain point costs do – even in such cases as these – directly determine value. All goods that can be supplemented from stocks in warehouses and the like, which stocks again can be renewed through production, thereby appear to us directly as mere combinations of their productive elements. And to this extent it may be said that, on the whole, the cases where costs directly determine value predominate.

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