Natural Value (1889)

by Friedrich von Wieser (1851-1926)

Book VI: Value in the Economy of the State

Chapter I

NV-VI-1.1 In the exchange transactions of private economies with one another, objective exchange value acts as the economical measure of goods, while, within individual private economies, this part is taken by subjective value as each individual owner estimates it, whether it be subjective exchange value in connection with objective exchange value, or use value independent of it. All these forms of value, reflecting with more or less truth their common prototype, go back to one original form, viz. that which we have indicated as natural value; natural value being, in the last resort, the resultant of two simple fundamental components, quantity of goods and utility of goods. Even such phenomena as land rent, interest on capital, costs, are natural phenomena of value which could be suppressed only by a force so powerful that it would at the same time injure economic life and action itself.
NV-VI-1.2 Besides private economies there exist a great many public economies. The question now is whether, in them also, the value of goods holds the same place, and whether in them it takes on any new and peculiar forms. I shall limit my inquiry to the most important of social economies, that of the state, and deal even with it only in the most general way. The theory of social economies is yet in its infancy, and it would be impossible to discuss value in them at all exhaustively without first having thoroughly gone into a great many other subjects. It, therefore, appears to me best to confine myself to an entirely general and comprehensive statement.
NV-VI-1.3 State economy divides itself into two great spheres, the economy of income or finance, and the economy of expenditure or administration. Administration, however, belongs to the economy of the state only in so far as it is determined by economical considerations. This is the case mainly where regard is had to the material interests of the people, that is to say, in the economic administration or the economic superintendence of the state; but there is no single form of national activity but must follow economic principles, if only in the second instance; viz. in regard to the careful and economical employment of its resources.
NV-VI-1.4 Up till quite recently economists have not, either in finance or administration, recognised in value that importance which, by analogy, might be suspected from its rôle in private economy. With regard, in particular, to finance, theory has managed to do almost entirely without value. The principles of taxation have been and are almost always stated without value being mentioned, or if mentioned it has been, at the most, only cursorily touched upon by way of comparison. Taxation gets its warrant in specific considerations, not in general economic ones. We speak of minimum of subsistence, ability to pay, sacrifice of taxation, progressive taxation and so on, almost entirely as if they were facts and conceptions belonging to a distinct sphere, while neither is the relation of this sphere to the fundamental phenomena of all economy made clear, nor is any attempt made to make it clear.
NV-VI-1.5 Adam Smith and his school treat the economic administration of the state also in a similar manner. They explain it simply by the necessities of national life, and value never enters into their consideration. Where they do make mention of it exchange value is always understood, – that being the only value which the school, as a rule, recognises. Any peculiar value pertaining to the economy of a state is never discussed, as in general all economic conceptions are borrowed entirely from the circumstances of private economies, and bear their characteristics. Connected with this – as cause and effect – there is a strong tendency to limit the sphere of state economy, and to extend that of private economy. Every theory formulates its conceptions in conformity with its fundamental tendencies, but it strengthens these fundamental tendencies in turn by the logical weight which the conceptions once constructed exert. A person who recognises no other value than exchange value will, wherever his common sense says that it is a question of value, generally allow exchange value to decide the matter in its one-sided way, or will, at all events, give to it too great a preponderance. The way in which Adam Smith rejects protection and argues for free trade may be regarded as typical of the school. The national income is to be measured by exchange value: but thus measured free trade will undoubtedly give the larger income in the near future: consequently, as it is always the income of the present that forms the capital of the future, free trade assures the greatest amount of well-being for all time to come.
NV-VI-1.6 In Germany this one-sidedness of the English school was early recognised. Many writers, as, for instance, Friedrich List, actively combated it. [Online editor’s note: Friedrich List (1789-1846), forerunner of the German Historical School. – RTL] List placed his “theory of productive forces” alongside of his “theory of value”: exchange value was to be the determining force in private economic relations, whereas, in the economy of the state, “productive force” was to take its place – an antithesis whose inadequacy is most clearly shown from the consideration that “productive forces” are themselves estimated according to exchange value. Most writers took a different course. They tried, gradually, and at first altogether academically, to broaden the private economic views of the English School, in such a way as to make them as far as possible applicable to all economic relations. As regards value in particular, exchange value was traced back to the general conception of use value, and then conceived of as national or social use value. Thus little by little the theory altered its formal character. It undoubtedly became more rounded, more plausible, more adaptable, but at the same time more indefinite and inexact. Without following accurately the further development of this theory, I may point out its most important fact: that the scientific discussion did finally give up its academic hesitation, and, in spite of the slightness of its theoretic foundation, laid down with success and decision principles for the practical formation of a state economy. Like the financial system of the European states, their economic politics were gradually reformed by the active assistance of theory, although theory itself had not completely accomplished its task, nor, indeed, was quite aware what that task was. The “theory” was a highly-developed technology, capable of giving right direction, although it did not succeed in finding its justification – and with that, of course, its limitation – in absolutely convincing clearness.
NV-VI-1.8 The lately published work of E. Sax (Grundlegung der Theoretischen Staatswirthschaft) is the first to complete the transition from technology to the theory of national economy, and has thus at last reached a goal aimed at by the German economists through a long and steady development. In the sphere of administration Sax has succeeded in indicating how public interests may have the widest play, while still maintaining a fixed economic conception which holds fast by the essentially economic. The economic is one and the same in all its forms, everywhere entirely distinct from the non-economic. Very important is the application of Sax’s work to the sphere of finance – all the more important that here he had almost no predecessors – and that the idea is thought out into details with great clearness. The whole system of imposts rests on value: this simple proposition makes the science of finance for the first time what it should always have been, a part of political economy. “Imposts of all kinds are examples of collective valuation which find their full explanation in the general nature of the phenomenon of value. The truth which finds expression in this formula is directly decisive for the theory of national economy, as a branch of the total theory of political economy, balancing that of private economy. The simplicity of the solution is a guarantee of its correctness. The apple falls from the tree and the stars describe their courses in obedience to one and the same law, that of gravitation. A Robinson Crusoe and a nation numbering a hundred million souls obey one and the same law in their economical transactions, that of value” (pp. 307-8).
NV-VI-1.9 The statement which follows is so general and so condensed that I have had but little chance of going into the rich contents of Sax’s book. In the interests of the statement I have, moreover, considered it wiser, even where I disagree with Sax, to refrain from the most part from any attempt to prove my divergences with any great exactitude, as, in this portion of my work, even more than in the former, I have neglected the literary aspect of the subject. Here, as formerly, my task has been to demonstrate, comprehensively and as a whole, what has hitherto been considered only in isolation, if at all. It appeared to me foreign to the plan of my work, and likely only to increase the difficulty of the task which chiefly concerned me, – that of affording a survey of the whole subject, – were I to let myself be carried away by criticism and polemic into detail which I should not have gone into for its own sake.

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