Natural Value (1889)

by Friedrich von Wieser (1851-1926)

Book V: The Natural Cost Value of Products

Chapter VIII
The Cost Theories

NV-V-8.1 I have hitherto almost entirely refrained from criticising outside theories of value. Up to this point, the subject of costs, none of these contains any foreign element whatever. What renders them inadequate is chiefly their inadequate explanation of the true elements of value. Should I have succeeded – as I scarcely dare hope – in proving beyond dispute the theory to which I have given my adhesion, all other theories in themselves are thereby confuted, inasmuch as it completes what they began. Where they have said only half, the whole has been said; where they have only approximated to truth, the truth itself has been found. But it is otherwise – though of course only in the case of some of them, – with those theories which derive the value of goods from costs. They appeal to a foreign element which does not lie in the path I have chosen to follow, and must therefore be dealt with, as it were, on a bye-path of criticism. At the same time, it must be said that this foreign element contains so much that is plausible, that there would be a presumption against any one who passed it by without remark, and a suspicion that his statement did not embrace the entire truth.
NV-V-8.2 As I said, it is only some of the theories of costs with which we are here concerned.
NV-V-8.3 All such theories have this one point in common, that they place costs and utility in opposition to each other, and explain them as dissimilar principles of value. They differ, however, in their manner of treating the principle of costs. Some limit themselves to collating the individual elements of costs, and showing their influence upon value, without answering, or even bringing up, the essential and fundamental question as to what costs really are, and whence they obtain their influence and economic importance. Criticism of these theories is superfluous. They contain no error to criticise. Their fault lies in their silence; in their stopping short at the very heart of the subject.
NV-V-8.4 The rest of the cost theories must be judged differently. They give to the idea of costs an entirely distinct meaning; a meaning which is certainly – taking it all in all – incorrect; but one which, in view of the largeness of its theoretic intention, may be pardoned, and even regarded with some recognition and respect. This division of the cost theories may be marked by the title of Labour Theories, as the element of labour forms their theoretic starting-point. Ricardo’s system indicates the high-water mark of the labour theory; the socialist system is its final consequence. Many writers who reject both of these systems, nevertheless take the fundamental motive of the labour theory into their own systems. In fact, there are very few writers who have kept entirely free from it. The critic has consequently a large task before him. I make no secret of it that to do battle with those views, as developed by economic writers, seems to me a matter of considerably more importance that they arise, in the last instance, from popular opinions widely held. The fundamental idea of the labour theory is foreign to no one; everybody has frequently enough had practical occasion to apply it. But for this, Ricardo’s system would never have obtained its great hold, and this circumstance may prepare us to expect in the future ever new formulations of the labour theory, should it not be possible meantime to purify theoretically the popular view, and lead it back from its exaggerations, which are easily traceable to the imperfection of popular reasoning, into its true and incontestable form.1

NV-V-8.n1.1 1 In his Werththeorien und Werthgesetz, in Conrad’s Jahrbücher for 1888, W. Scharling, one of the latest writers upon the theory of value, has again traced it to the fundamental motive of the labour theory, although with considerable amplification and modification. He derives value from the difficulty of attainment, or, more exactly, from the amount of effort which he who wishes to acquire an object is spared by attaining his end through exchange. I shall not at this point dwell on Scharling’s positive work, but rather refer the reader, in regard to his fundamental motif, to the succeeding chapter. Only, in passing, I may note that, among the efforts which are to give the standard to price, Scharling includes that (p. 558) “which it costs (at an auction) to distance other bidders,” or what it costs “to overcome an owner’s disinclination to part from his goods.” Both of these efforts have their origin in nothing else than the payment of that very price whose standard they are supposed to explain. In this sense there might be included among the difficulties of attainment the fact that thing must be paid for with money, while people are bound to be economical with money. His views on the theory of marginal utility are given, in an illustration cited by Böhm-Bawerk, of a boy to whom “the pleasure of eating an apple is more than seven times but less than eight times that of eating a plum.” “Let us suppose” continues Scharling “that the father comes and says to his boy: ‘Our neighbour has given you permission to pull as many apples from his garden as you wish’; the boy will at once alter his opinion as to the relation between apples and plums, although his taste for and his enjoyment in consuming the fruit remains unchanged. But the effort which the possession of one apple saves him from putting forth, is no longer the same.” To my mind this illustration, which Scharling advances in opposition to the theory of marginal utility, is really a proof of that theory. In what way has the situation changed after the father’s speech? Clearly that the boy may now have as many apples as he will, while formerly he had only one, i.e. the available supply has been increased to superfluity. And thus the result is attained which the theory of marginal utility demands; the valuation of the apples is entirely altered. Scharling’s opposition would be justified if it were directed against a theory which made value depend simply upon utility and not on marginal utility. In our theory, along with utility, all the influences are weighed which determine the degree of utilisation, and of estimation of utility, by the supply; indeed, even those influences which determine the amount of supply by the conditions of production.

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