Natural Value (1889)

by Friedrich von Wieser (1851-1926)

Book I: The Elementary Theory of Value

Chapter V
Marginal Utility

NV-I-5.1 Even where nature is most lavish with her gifts, there are but few kinds of goods with which she provides man in such superfluity that he can satisfy every, even the most insignificant, sensation of want. As a rule the supply of goods of which he can avail himself is so scanty that he must break off his satisfaction at a point on the scale short of complete satiation. This point – the smallest utility obtainable in the circumstances, assuming the most thorough possible utilisation of the goods – is of peculiar importance, both for the act of valuation and for economic life. To it refer the expressions, “Werth des letzten Atoms,” [Online editor’s note: “Value of the last atom.” – RTL] of Gossen, “Final degree of utility,” or “Terminal utility” of Jevons; and “Intensité du dernier besoin satisfait (rareté)” [Online editor’s note: “Intensity of the last satisfied need (scarcity).” – RTL] of Walras. Menger uses no particular designation. The name “Marginal Utility” was suggested by me (Ursprung des Werthes, p. 128), and has since been generally accepted.
NV-I-5.2 Where the supply of goods is too scanty to satisfy every sensation of desire, the necessary break must be so made that it will be felt as little as possible. This will be the case when we begin by satisfying the most intense sensations of want, and go on to extend to its utmost the compass of enjoyment; or, in other words, when we reach, in unbroken satisfaction, the lowest possible marginal point of enjoyment. Economic conduct requires that the marginal utility in this sense be placed as low as possible. The means by which to reach this end are, on the one hand, the utmost possible quantitative exploitation of goods, and, on the other hand, the utmost care in choosing how the goods are to be employed where there are several competing ways of employing them. Such a competition of employments may arise from two circumstances – first, where goods are capable of manifold and various uses, and, second, where supplies are accumulated and their consumption should be spread over periods of time. In the first case our concern must be to choose between the separate forms of employment, and to keep the economic balance even; in the second, to distribute the goods so as best to meet the wants of the whole period.
NV-I-5.3 The difference between the various satiation scales of wants comes into play in the case of goods of many-sided usefulness. Every different kind of employment has its own particular scale of satiation, with a culminating point peculiar to itself and a course of satisfaction peculiar to itself. On account of this the determination of the marginal utility in the given case becomes a very complicated matter. Its principle will be best explained by an example, and we need be at no loss for examples, as goods of manifold utility are numerous enough. The most important are found among the means of production. Who could count up the services which iron, wood, or coal is capable of rendering? Or those for which human labour is fitted? The most many-sided of all goods is, however, money; through exchange it can be turned into almost any other commodity, and thus made serviceable for the satisfaction of almost any want. From no other commodity can we obtain so clear a presentation of the idea of “marginal utility.” I therefore take it as example, although money is really useful only as a medium, and presupposes the existence of exchange, a phenomenon of which we shall not treat till the following book.
NV-I-5.4 The money income of the richest man is usually not sufficient to cover every outlay that he might desire. Acting economically therefore, so as to secure what Gossen calls the Grösste an Genuss, the greatest possible enjoyment, we shall distribute our expenditure so as to “make it go as far as possible,” from the satisfaction of the most urgent wants down to the most insignificant. The larger the income is, the farther it will go, and the longer will it be before we need to break off our satisfaction. But the Grösste an Genuss could not be reached if the separate branches of expenditure were not adequately weighed against each other. Nowhere must the boundary-line be overstepped, which is fixed by the general circumstances of our wealth. Every overstepping in one branch will have to be paid for in another, which other, as represented by a higher degree on the scale of wants, will impose a sacrifice greater than the enjoyment got from it. To this extent it is quite possible to speak of a “level of household expenditure,” of a general condition of life prescribed for every household by the peculiar amount of its demand and the peculiar amount of its means, and necessitating strict adherence to it in all its branches. It would, however, be a mistake to believe – as almost every writer who has occupied himself with this question has done, Jevons more than any other – that it is necessary to keep strictly in every branch of expenditure to the same degree of satisfaction, the same level, the same marginal utility. That is quite against the nature of wants, for wants have not each an equal but each a peculiar satiation scale. Were the “level of household expenditure” to be understood in this way, every addition to income would require to be laid out equally in corresponding enlargement of every branch of expenditure. As a matter of fact it is usually spent on a few individual branches, while the others remain as they were; or, if the additional income be so great as to allow of an improved condition of things all round, the extra expenditure is distributed in the most irregular manner. The satiation scales of wants are very diverse; the receptive power of one want is great, that of another comparatively small; that is to say, one is susceptible of a degree of intensity which another does not teach, or which it oversteps. The principle for the economic employment of goods of manifold usefulness is not, then, that we must, in every employment, obtain the same lowest possible marginal utility, but that in all employment as low a marginal utility be reached as is possible without necessitating the loss, in some other employment, of a higher utility.
NV-I-5.5 What has just been said applies as well to the economic management of supplies of goods destined to cover periods of time. Premature and extravagant indulgence should not impose unnecessary burdens on the future. It would be best to divide the enjoyment equally over the whole period, but this is frequently made impossible by the nature of goods, which does not allow of their being kept, as also by the uncertainty of providing for changes of value in the economy in question. The limit of employment should always be of such a sort as promises the greatest amount of utilisation on the whole.1
NV-I-5.6 A special question is here suggested: – Are present and future satisfactions to be estimated entirely alike? Is not precedence in time also precedence in degree of importance? Is it not right that enjoyments should be considered of less value the further they are in the darkness of the future? Jevons has answered this question in the affirmative, and since him many others, some with great positiveness, though, as I think, wrongly. We cannot avoid going into this matter more closely, even though it detains us a little from the attainment of our present object, the deduction of the elementary law of value.

NV-I-5.n1.1 1 See Ursprung des Werthes, p. 146, and Sax, p. 371.

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