An Introduction to the Theory of Value

on the Lines of Menger, Wieser, and Böhm-Bawerk

First Edition – 1891

by William Smart (1853-1915)

Chapter IX
From Subjective to Objective Value

ITV-E1-9.1 Thus far we have spoken of each man’s wants as ranged on a scale; in correspondence with these wants each man attaches degrees of importance to the goods that come within his knowledge and control, and ranges goods also on a similar scale. We have seen that, owing to the infinite subjective differences in man on the one hand, and the effect of provision on the dependence of want on the other, every man’s scale is different from every other man’s. In other words, every man, subjectively, attaches his own valuation to goods. As no man, however, liveth to himself [Online editor’s note: Romans 14:7. – RTL], these valuations come together and are compared in every act of barter and exchange. The reflex influence of the valuations that each man meets in any market, however simple, is very great; constant contact of man with man in exchange assimilates the valuations of all, till, unconsciously, we come very much to regard the average valuation made by the people we meet as our own valuation. For instance, in buying an article, if we looked solely and entirely to what that article represented in life, pleasure, satisfaction, self-realisation – however we name our subjective centre – we should, perhaps, value it at 100. But if we meet everywhere with people who value that article, say, from 50 to 60, it is inevitable that our estimate should be strongly affected thereby. And this explains how that, notwithstanding the enormous differences in temperament, culture, and conditions, the valuations which meet on a market do not diverge so widely as one would expect. If we consider that, of three men who bid for a horse, the value of it to A may depend on his being a country doctor, to B, on his being a hunting man, and to C, on his having a sluggish liver, we could scarcely understand how these different values come to be assessed within a few pounds of each other, if it were not for this kind of arbitrage.
ITV-E1-9.2 When we say, then, that men who meet as exchangers of different goods put their own subjective valuations on the articles they bring to market, we must be understood to mean valuations that are not more subjective than man himself is. A man’s valuation can no more escape being to a great extent the valuations of other men, than he himself can escape being what other people “make” him.
ITV-E1-9.3 How it comes that each man can compare the importance he attaches to a commodity, as conditioning the satisfaction of want, with the importance of a piece of metal or paper whose only “use” is to pass on, belongs to a department of our science on which, happily, we do not require to enter. It is sufficient for us to say that, in the modern community, we measure “goods in general” by one good, and we grow up so familiarised with the current money scale that no one sees anything strange in valuing, say, a Bible, at thirty pence, or even its author at thirty pieces! In other words, if I enter the market as a buyer for a horse, with the figure of £50 in my mind as the limit of my bid, it is not from a judgment that the horse to me is equal to the satisfaction I could get from fifty gold sovereigns, but from a judgment that the enjoyment or use to be got from the horse is equal to the other personal satisfactions that fifty gold sovereigns represent – to all the current wants of my life which I measure, in my own mind, by that same scale, and count with £50. The money value is only the universal language in which we express our valuations generally. Thus through habit and education it comes that it is more definite and intelligible, either as regards ourselves or others, for us to say that a horse is worth fifty sovereigns, than to say it is worth so many quarters of corn or hundredweights of iron.

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