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Author: 
 
 Green, David I. 
 
 Title: 
 
 Wieser's Natural value 
 
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 WlESER*S NATURAI. VALUE. 
 
 53 
 
 WIESER'S NATURAlv VALUE. 
 
 The long expected translation oi^'Der Natiirliche IVerfk'* 
 has appeared, and finds a comparatively large public ready- 
 to welcome it. The older English and American economists, 
 while recognizing that the Austrians have done careful and 
 suggestive work in economic theory, do not seem to have 
 been turned to any great extent from their former ways of 
 thinking; but it is a significant fact that the young men 
 whose ideas upon economic theory have been formed since 
 the Austrian writings became accessible have quite generally 
 adopted the leading conceptions and nomenclature of the 
 Austrian school. This does not mean that the young men 
 consider the older theories altogether wrong or the new 
 theories altogether correct and complete, but it does indicate 
 that an important influence has been brought to bear upon 
 economic thought. The extent of this influence cannot yet 
 be told, but it is not too early to form at least an opinion as 
 to what Austrian conceptions are likely to become permanent 
 factors of economic theory. 
 
 It is inevitable that such independent thinkers as Menger, 
 Wieser, Bohm-Bawerk, and Sax should differ from each 
 other as well as from the theorists of other schools. But 
 Wieser's work on Natural Value, more than any other pro- 
 duction of the Austrian economists, presents clearly and 
 fully, the fundamental ideas which the different members of 
 the school hold in common. A review of that work nat- 
 urally involves a criticism of what has come to be known as 
 the Austrian theory of value. 
 
 By far the most prominent characteristic of the Austrian } 
 theory of value is its complete dependence upon the principle 
 of marginal utility. A man having an income of $1000, 
 spends part of it for necessities which are of immeasurable 
 utility to him, other portions are used for the gratification of 
 
 [512] 
 
 k^ 
 
 ly 
 
 desires of less and less intensity. The satisfaction which 
 would in that case depend upon the possession of the last 
 dollar of the income would measure the marginal utility (or, 
 as the Austrians would say, the value) of a dollar to the 
 man in question. Of course the principle applies to stocks 
 of other goods as well as to dollars. 
 
 As is well known, this principle of the decreasing utility 
 of duplicated goods is by no means new to economic theory 
 or to the English literature of the subject. Senior* men- 
 tioned it as early as 1836 and Robert Jennings f in 1855 set 
 it forth as ** the foundation of the changes of money price, 
 which valuable objects command in times of varied scarcity 
 and abundance.*' Passing by numerous French and German 
 writers who enunciated the principle with more or less clear- 
 ness, we find that Jevons preceded the Austrian economists 
 in developing the theory that marginal ('* final") utility 
 rather than cost of production is the basis for the ratios of 
 exchange. Professor J. B. Clark J also approached the Aus- 
 trian conception in making value * * the measure of effective 
 utility. " It is for the systematic and thorough development 
 of the theory of marginal utility rather than for the theory 
 itself that wc are indebted to the Austriati school. While 
 the conception is older, the term itself, marginal utility 
 {Grenzmitzen) , was first introduced by Wieser in his ** Ur- 
 sprung des Wertkes,'' 1884. It is now generally accepted 
 by economic writers. § 
 
 Although Jevons and the Austrians agree in considering 
 marginal utility the basis of value, we find an important dif- 
 ference in regard to the fundamental meaning of the word 
 value. Cairnes opens his political economy with this state- 
 ment: **The sense proper to value in economic discussion 
 
 ♦In a treatise on Political Kconomy, contributed to the "Encyclopedia Metro- 
 politaua,** p. 12 of the second (cabinet) edition. Quoted by Jevons in the "The- 
 ory of Political Economy,'* p. 53. 
 
 t Quoted by Jevons, p. 55. 
 
 X New Englander, July, 1881. 
 
 I See Marshall's " Principles of Economics/* second edition, p. 14, note. 
 
 [5 1 3] 
 
 ■V. 
 
 m 
 
54 
 
 Annai^ of the; Amkrican Acadkmy. 
 
 Wieskr's Naturai, Vai,ue. 
 
 55 
 
 may, I think, be said to be universally agreed upon by econo- 
 mists, and I may, therefore, at once define it as expressing 
 the ratio in which commodities in open market are exchanged 
 against each other." Jevons accepted this concept, but felt 
 obliged to avoid the use of the word value, because he recog- 
 nized that popular usage did not agree with the definition of 
 the economists. The Austrians, on the other hand, follow 
 Menger in defining value of goods as * * the importance which 
 concrete goods, or quantities of goods, receive for us from the 
 fact that we are conscious of being dependent on our disposal 
 over them for the satisfaction of our wants."* The differ-/ 
 ence must not be overlooked. On one side value is regarded! 
 as a ratio between commodities, on the other as importance) 
 for human well-being. One conception is objective, the other 
 subjective. In English theory value is a relation between 
 commodities, in Austrian theory it is primarily a relation of 
 commodities to human wants. According to the English 
 definition no commodity could rise in value unless the other 
 commodities with which it was compared fell to a corre- 
 sponding extent. From the Austrian standpoint a commod- 
 ity may, through scarcity or increased need, increase in value 
 without regard to other commodities. 
 
 Although the English-speaking public has long been 
 drilled in the ratio concept of value, there can be no doubt 
 that common usage is much more in keeping with the Aus- 
 trian view. The ratio concept is more simple from a theo- 
 retic standpoint, but it may well be hoped that the great 
 problems of economic policy can be more satisfactorily solved 
 when the fundamental concept of the science becomes ' * im- 
 portance for well-being" instead of "a relation between 
 
 commodities. ' ' 
 
 But here again we are indebted to the Austrian economists 
 for systematic and convincing exposition rather than for dis- 
 covery. In spite of their definitions English economists 
 from Adam Smith down have occasionally spoken of the 
 
 pj 
 
 ♦ •• Natural Value," p. 21. 
 
 [514] 
 
 time and trouble required for obtaining anything as the 
 measure of its value.* Jevons f thought that value in ordi- 
 nary parlance was identical with final utility, and Professor 
 Clark I not only recognized but adopted the subjective con- 
 cept. It seems to be largely through Austrian influence, 
 however, that recent contributions to economic theory have 
 generally accepted the subjective concept as the primary 
 meaning of value and used the phrase, ** objective value," (or 
 more exactly ''objective exchange value,") to designate the 
 power of commodities to command each other in exchange. 
 
 The Austrians, as Menger's definition indicates, consider 
 value as primarily an individual matter. The value of a 
 dollar will vary from individual to individual, according to 
 the amount and intensity of their wants, and in inverse ratio 
 to their respective incomes. As the value of a dollar varies 
 among individuals, so will the value of the commodities for 
 which the dollar is exchangeable. The rich man's trifle is 
 the poor man's fortune. Even when the subject of exchange 
 is taken up, the personal valuation is maintained. The ex- 
 change value (^TaiischwertK) of a commodity is the subjec- 
 tive importance of the goods for which the commodity will 
 exchange. Thus it is only when two men are in the same 
 economic condition that even the (subjective) exchange 
 value of a commodity is the same to both of them. 
 
 Yet Wieser § recognizes that " when we speak generally of 
 the value of goods we mean the economic rank given them 
 by their prices,'' and thus is introduced a phase of value 
 which is practically the same as the ' * power in exchange ' ' 
 of the English writers. This objective exchange value is 
 designated Verkehrswerth by Wieser, to distinguish it from 
 the subjective Taiischwerih, and the translator has yielded 
 somewhat to English usage in rendering the former term by 
 
 ♦In such expressions value denotes subjective importance, though viewed from 
 the side of cost instead of utility, 
 t" Theory of Political Economy," pp. 80 and 162, 
 X "Philosophy of Wealth," V. 
 ) "Natural Value," p. 51. 
 
 [515] 
 
 
 f 
 
56 
 
 Annai^s of the American Academy. 
 
 the phrase " exchange value'' without qualification. The 
 relationship between subjective value and market price has 
 been treated more fully by Bohm-Bawerk,* but Wieser's 
 brief statement gives the essential thought. Every one before 
 making a purchase forms some mental estimate of the impor- 
 tance of the article to him, this importance depending of 
 course upon his present supply and need, in accordance with 
 the principle of marginal utility ; but before making a 
 rational purchase one must also form a mental estimate of 
 the value of the dollar to him, lest in making one purchase 
 he may spend money required for other purchases of more 
 importance. In other words, everyone must enter the 
 market with all personal valuations expressed in terms of 
 the monetary unit, however much the value of this unit 
 may vary between individuals. A stock of goods placed 
 upon the market does not go to the persons who value them 
 most, but to those whose subjective valuations are expressed 
 in the largest number of dollars and cents. The price then 
 is not fixed by the marginal want which the stock is suffi- 
 cient to supply but by the marginal money equivalent of these 
 subjective wants. The price does not represent a definite 
 degree of want but simply the amount of money or other 
 commodity which the marginal buyer is willing to give. 
 
 Having once shown that prices are developed from the 
 action of personal valuations in the market, the Austrians 
 abandon the subjective standpoint for the time and like the 
 English economists treat exchange value as a relation 
 between commodities, f 
 
 ♦ " Grundzuge der Theorie des Werthschafllichen Guterwerths,'' in Conrad*8 
 JahrbxUher^ vol. xiil, 1886. Sec '* Positive Theory of Capital," p. 129. 
 
 t *' Subjective value represents a distinct feeling ; that of being dependent upon 
 the possession of a good for the satisfaction of a want, — a distinct degree of per- 
 gonal interest in goods. Objective value, on the other hand, merely represents a 
 definite price ; a definite amount of payment which is expected or required in 
 buj'ing or selling. The former has its measure in the different gradations of 
 desire, the latter in the quantities of coin,— in the figures of the price." *' Natural 
 Value,** p. 51. 
 
 "l^change value is the capacity of a good to obtain in exchange a quantity of 
 other goods. Price is that other quantity of goods" ** Positive Theory of Cap- 
 ital." p. 132. 
 
 [516] 
 
 Usf* 
 
 WiESKR^s Natural Value. 57 
 
 This relapse from the subjective standpoint, whether neces- 
 sary or not, seems at least unfortunate. The Austrians 
 have given us the vision of a theorj^ of value resting upon 
 the substantial basis of importance to human weU-being, but 
 in the field of exchange value where we have the greatest 
 need for some substantial basis, we are left with the old idea 
 that value is an expression of quantity of goods rather than 
 of subjective importance— a relation of goods to each other 
 mstead of their relation to human welfare. Looking at 
 economic life from the individualistic standpoint, they have 
 failed to conceive the idea of social utility* as applicable to 
 our present condition of inequality among individuals. The 
 fact that dijffereuces in wealth regularly cause goods to pass 
 by the urgent needs of the poor in order to satisfy the 
 slightest wish of the rich has seemed to the Austrians an 
 insuperable barrier to the maintenance of the subjective 
 standpoint in dealing with the exchange value that now 
 governs industrial economy. f 
 
 Wieser avoids this difficulty of applying the principles of 
 subjective value to a society where inequality of wealth pre- 
 vails by imagining a communistic state where private prop- 
 erty does not exist and the use of goods is distributed 
 according to needs. The distorting effect of differences in 
 ability to pay is thus removed, as well as the disturbances 
 of ''error, fraud, force and chance.*' 
 
 The communistic society, like the person in the individual 
 economy, is supposed to so utilize its goods as to satisfy all 
 wants down to the lowest degree that the total supply of the 
 commodity will cover. The importance of a unit of a com- 
 modity, a bushel of wheat for example, may now be accu- 
 rately gauged by the marginal utility of the supply of that 
 commodity. In such a state every means for the satisfaction 
 of human want would be valued according to the degree of 
 want which would be dependent for its satisfaction upon the 
 
 ♦ Professor Clark, for example, looks upon value as a social fact—the measure 
 of final utility to society. See Yale Revieiv, Novemt)er, 1892. 
 t ** Natural Value," bk. ii, III. 
 
 [517] 
 
58 
 
 Annai^ of thk American Academy. 
 
 Wieser's Naturai, Value. 
 
 59 
 
 particular article in question. It would have what Wieser 
 calls its natural value. 
 
 This concept of natural value is introduced toward the end 
 of the second book of Wieser's work and becomes the main 
 theme of the remaining books, which are entitled respect- 
 ively: *' The Natural Imputation of the Return from Produc- 
 tion/* ''The Natural Value of Land, Capital and Labor," 
 *'The Natural Cost Value of Products,'* and ** Value in the 
 Economy of the State." The fact that the supposition of a 
 communistic state underlies the discussion must not lead the 
 reader to think that the work is a treatise upon socialism. 
 The object of the work is to elucidate the fundamental prin- 
 ciples of value and distribution, and to this end the fiction of 
 an ideal communistic state serves two purposes: it eliminates 
 many complications and disturbances which might other- 
 wise detract the student from a clear insight into the underly- 
 ing principles which are the basis of all value relations, and 
 it also serves to give the student a clearer idea of the real 
 nature of the services for which rent, interest, and extra 
 wages are paid through the consideration of the question, 
 whether or not these services would retain their value in a 
 communistic state. The chief difference between natural 
 value and exchange value has already been indicated: the 
 former expresses what would be the marginal utility of goods- 
 if they were distributed according to needs, the latter is the 
 marginal valuation when goods are distributed according to 
 the amounts offered in exchange for them. The conceptions 
 have much in common and Wieser constantly indicates the 
 changes which must be made in passing from the realm of 
 natural value to existing conditions. 
 
 Our author next takes up the subject of '* imputation.*' 
 When several factors co-operate in the satisfaction of a single 
 want, how is the economic importance of the several factors 
 to be determined ? Upon what principle is the value of a | 
 service to be imputed, in an economic sense, to the various 
 contributing elements ? It is evident that the solution of this 
 
 [518] 
 
 problem involves an explanation of the relation between value 
 and cost of production. It is for the extended treatment of 
 the costs of production that Wieser's work stands pre-em- 
 inent among the Austrian writings. 
 
 As is well known, the prevailing economic theory makes 
 cost of production the determinant of the normal value of 
 products, while the Austrian economists claim that the 
 amount of the costs is really determined by the value of the 
 products. Does cost determine value or value determine 
 cost ? Stated in this way the case appears to be one of direct 
 opposition and Bohm-Bawerk says of it : '' That is a ques- 
 tion as fundamental for political economy as the question 
 between the Ptolemaic and Copernican systems was for as- 
 tronomy.' ' * Close study, however, will show that the oppo- 
 sition between the two schools is by no means direct. The 
 Austrians do not disprove, nor even reject, the classical tenet 
 that the values of goods regularly produced under free com- 
 petition tend to conform to their costs of production. They 
 have simply taken one step back of the English point of 
 view and there perceive that the values of the elements 
 which enter into and make up the costs of production are 
 themselves derived from the utility and scarcity of the vari- 
 ous elements. If the Austrians would state their case in this 
 simple form, instead of declaring a revolution, they could 
 hardly be opposed, f 
 
 It is to be noted in passing that the Austrian idea of cost; 
 is entirely independent of the painfulness of labor which 
 English economists have sometimes vaguely imagined to 
 be the basis of their theory that cost determines value. No 
 one who studies modern social conditions can claim that 
 labor is paid or even tends to be paid in proportion to its 
 painfulness, and furthermore, many items of cost, such as 
 
 ^> ♦"The Austrian Economists,'* Annals, vol. i, p. 37ijanuary, 1891. 
 
 t Since this paper was written the relationship between cost and value and the 
 
 real nature of the cost which regulates value have been treated by Bohm-Bawerk : 
 
 y'*J)tr LttzU Masstabdes Guterwertes,'' Zeitschrifl fur Volkswirtschaft, SocialpoHtik 
 
 ^nnd Verwaltung. Dritter Band, II. Heft. *' The Ultimate Standard of Value.'* 
 
 Annals, vol. v, p. 149, September, 1894. 
 
 [519] 
 
^ Annals of thk American Academy. 
 
 minerals and the use of land, are not produced by labor at 
 all. Cost from the Austrian standpoint is the sacrifice of a 
 utility and unless an equal or greater utility results from! 
 any outlay in question, the outlay is not economic This' 
 may not be the idea of cost which best expresses human 
 progress and welfare, but it may well be conceded that it is 
 this form of cost which determines exchange values * 
 
 Instead of treating the value of an element of production 
 tis a simple case of value determined by the marginal utility 
 of the element in question, both Wieser and Bohm-Bawerk 
 have chosen to explain cost values as a manifestation of the 
 principle of complementary goods. Menger had proposed to 
 ascertam the value of any good by considering the amount 
 of loss that would result from its annihilation. Upon this 
 pnnciple a single glove carries with it the value of the pair 
 and each horse of a perfectly matched span is valued at more 
 than half the value of the span, for if either horse should die 
 more than half the value would be lost. In like manner, if 
 a half dozen elements co-operate in forming a desirable 
 product— say a loaf of bread— the lack of any one ingredient 
 might seriously impair the usefulness of the others. So 
 Wieser criticises thepositionof his predecessor on the ground 
 that were the elements of production valued in this way the 
 sum of their values would exceed the value of the product 
 which is made from them, and the manifest absurdity would 
 be reached that all production is carried on at a loss. Wieser 
 thereupon brings forward his concept of the '* productive 
 contribution- {Bettrag). -The deciding element is not 
 that portion of the return which is lost through the loss of 
 the good, but that which is secured by its possession.**! 
 
 In order to arrive at the amount which each element con- 
 tributes to the value of the product the algebraic method of 
 solution by equations is proposed. Let x, y, z, etc., stand 
 
 ♦ For a fuller development of this line of thought, the reader is referred to an 
 article by the present writer entitled " Pain-cost and Opportunity<ost," in the 
 Qnarterly Journal of Economics, January, 1894. 
 
 t " Natural Value/' p. 85. 
 
 [520] 
 
 WiKSER^s Naturai. Vai,ue. 
 
 6r 
 
 W 
 
 for units of the productive elements, such as materials, labor 
 of dijQFerent grades, and the use of capital. The same pro- 
 ductive elements enter into various products in various pro- 
 portions. By observing the values and composition of the 
 products (these values being fixed by the marginal utility of 
 the products) , we would discover equations after the manner 
 
 of the following : 
 
 X -\- y^=^ 100 
 
 2 X -\-2, ^ = 290 
 4^^ + 5 '2' = 590 
 
 from which the unknown values may be determined. Of 
 course, in actual economic life the number of productive 
 elements is almost unlimited, but the number of combina- 
 tions which would give independent equations is fully as 
 large. Solved in this way, the sum of the productive con- 
 tributions of the elements is bound to equal the value of the 
 product. The productive contribution which is everywhere 
 assignable to a given element of production is the cause and 
 measure of its value. An increase in the supply of an 
 element would extend it to uses of less importance and so 
 reduce the productive contribution that could be imputed to 
 it. The productive contribution of a given clement must be 
 uniform in its different uses for othen\'ise the element would 
 be transferred from one use to the other. 
 
 Wieser's method of solving the problem of the imputation 
 of value to cost goods is stated here somewhat fully be- 
 cause he seems to regard it as an important contribution to 
 economic theory, and constantly refers to it as the basis of 
 his subsequent arguments. This method of solution is, I 
 believe, peculiar to Wieser among the Austrian writers, and 
 I venture to call it the weakest point in his theory of value. 
 Several points of criticism will be briefly stated: 
 
 (i) The problem of imputation is to ascertain, not what 
 are the values of the elements of production, but what forces 
 make those values what they are. Wieser's equations might 
 give us the values, but they could never explain the values^ 
 
 [521] 
 
^2 
 
 Annai<s of thk American Academy. 
 
 (2) Weiser's method can give us no rules for the appor- 
 tionment of an element to its different uses, for unless the 
 apportionment is already perfect an element will be given a 
 greater value in one use than in another, the different equa- 
 tions will not be simultaneous, and the solution will be im- 
 possible. 
 
 (3) The criticism of Menger is not well founded. Wieser, 
 in common with other writers, has failed to distinguish 
 between special and general values. General values are 
 those which prevail in the market where all goods that are 
 precisely alike have the same value. Here the action of the 
 marginal law is apparent. Special values attach to individ- 
 ual articles under special circumstances. The value of a 
 loaded revolver to the waylaid traveler, the value of a mastiff 
 to its fond master and the value of a lost glove when its mate 
 is in possession, are examples of special values. In fact 
 almost every article, when in actual use has in addition to 
 the general (market) value some special value on account 
 of its special adaptation or on account of the delays and in- 
 conveniences which are in the way of replacement. Goods 
 ordinarily sell at their general values, a dealer can secure 
 special values only through extortion. General values 
 usually correspond with costs of production, but special cir- 
 cumstances may give a five cent iron bolt the value of thou- 
 sands of dollars. 
 
 Now it will be noticed that in criticising Menger' s method 
 of estimating values through loss, Wieser always bases his 
 objections upon special values, and does not notice that his 
 own method of solving through equations would fail com- 
 pletely in the same cases. Add together the special values 
 which attach to every piece of metal in an engine in service 
 and the sum would far exceed the value of the engine. It 
 does not matter. The parts are not bought and sold at their 
 special values. Again let us suppose that bread made with- 
 out salt would be worthless. Would Menger' s formula then 
 assign to the salt a value equal to that of the bread ? Only 
 
 C522] 
 
 Wieser's Natural Value. 
 
 63 
 
 in' 
 
 tmder the strict condition that no more salt could be obtained. 
 Complementary goods are especially subject to an extra 
 special valuation, but they do not attain this extra valuation 
 in a general market. The fact that salt is an indispensable 
 ingredient of many valuable foods has no effect upon its 
 value so long as the supply is sufficient to satisfy also its less 
 important uses. Menger's principle, when rightly used, is 
 quite correct. The value of anything may be estimated 
 through the loss that would result from its annihilation. 
 But a serious error would be involved should w^e undertake 
 to derive the general value of a commodity from the loss 
 that might occur under special circumstances. 
 
 (4) In maintaining the importance of the principle of com- 
 plementary goods, Wieser seems to overlook the distinction, 
 which he elsewhere well observes, between the value of a 
 commodity taken as a whole and the value of some small 
 quantity of the commodity. General values have to do with 
 the small portions that are bought and sold at a time. The 
 value of salt, taken as a whole, is indefinitely great, for we 
 •could hardly live without it, but the small quantities that 
 are bought and sold at a time have no such importance. It 
 is customary to estimate the value of the world's supply of a 
 <X)mmodity as the product of the quantity and marginal 
 value, but if an inhabitant of a neighboring planet should / 
 offer to buy the whole supply at the marginal rate we could 
 hy no means afford to accept the offer.* There is seldom 
 any cause, however, for estimating the value of a total sup- 
 ply. General values have to do with the small portions that 
 are bought and sold in single transactions. These portions 
 of a commodity have comparatively small value because, if a 
 portion were lost, it could be replaced by simply withhold- 
 ing some of the commodity from its marginal uses. Wieser 
 refers the values of capital and labor to the principle of com- 
 |plementary goods, on the ground that each is indispensable 
 
 • Professor Ross has brought out this limitation to marginal utility value in ** The 
 "Total Utility Standard of Deferred Payments,'' Annals vol. iv, p. 425, Nov., 1893. 
 
 [523] 
 
 
64 
 
 Annals op the Amkrican Academy. 
 
 for the frititfiilness of the other. It is trite that capital and 
 labor as a whole arc thus nmlually dcpctulciil, but labor and 
 capital do not bargain with each other as a whole. The use 
 of either capital or labor is valued in the open market accord- 
 ing to its marginal uses, no less truly than it would be if 
 their activities were quite independent of each other. 
 
 (5) Menger's division of economic goods into ranks is an 
 impediment rather than a help to a clear understanding of 
 the process of value formation. Menger's conception is 
 adopted by the other Austrians and Is well known. Goods 
 of the first rank are those ready for consumption, such as 
 bread and clothing. Their utility is the source of all value 
 and is reflected back to goods of the second rank, such as 
 flour and cloth, and so on to goods of more remote ranks as 
 wheat, laud, plows, iron. It is evident that the series colild 
 be extended back quite indefinitely. This division into ranks 
 would doubtless be a very important matter if it were only 
 true that each commodity belonged to some particular rank 
 but as a matter of fact there is hardly a conmiodity in gen- 
 eral trade but what has difierent uses which would make it 
 belong at the same time to an indefinite number of ranks 
 The effect upon the price of salt is exactly the saine whether 
 a given demand is for direct consumption, for use in cook- 
 ing, or for use in some remote manufacturing process In 
 every case, so far as economic life is well organized, the use 
 of a commodity is extended in all ranks till the common 
 marginal utility is reached.* 
 
 To sum up the criticism of Wieser's theory of imputation 
 I should say that he has introduced many perplexing and 
 useless complications in an attempt to explain a process which 
 m Its outlme is simple and easily understood. The essential 
 fact that lies at the bottom of Wieser's arguments has already 
 
 •I would not underestimate the importance of Menger's observation that all 
 
 .■lo^u^S wh'^^^'arrr *T; 7""^ '""^ '-^ ™"-'"P"°" ^oods ^7 «.e"co!'su„i 
 tion uses which are expected from them. • That observation is essential to an un^ 
 derstanding of economic life, but the supposed arrangement of good, TnZnL 
 only makes .t more difficult to apply the theory of valuf to actual co^itions 
 
 [524] 
 
 Wieser's Natural Value. g. 
 
 been given. The general values of the elements of produc- 
 tion are derived from the utility of the elements amU ^ to 
 equal their respective marginal utilities. It natur^Hy fo lows 
 under a system of private property and free competitLn th^ 
 
 supply many services or services which have a high marginal 
 
 In applynig his theory of imputation to the leading factors 
 of production-land, labor and capital-Wieser brfngs ouj 
 mny interestnig distinctions and offers some valuablfcriti 
 cisms. His treatment of capital demands attention on ac 
 count of Its relation to Bohm-Bawerk's more extended work 
 D scarding the idea that the average man desires to priv S; 
 
 find tLT" 1 "" ''^P""^ '' «^^ ^"*"-- Wieser seems to 
 find the cause of mterest in the productivity of capital Bv 
 
 ^aginmg a number of cases of the use of capital in vTrying 
 i Z^JH -loosing the contribution duel> capital to 2 
 K ascertained by solving the equations which the different cases 
 
 furnished, our author concludes that when the co-operatfou 
 
 ttt « " '" \' ^"P"^^^ *° «- "- of the capital and 
 
 that the amount to be so imputed will vaiy directly with the 
 
 I ainount of capital involved and the perioLf time^ llj^^ 
 t L ''.'"',^''^^;^ ^'■^"^ other uses. That the use of capital 
 pdo^ yield such a surplus value no one can doubt. It"^^ 
 , ody be regretted that Wieser has not done more to show u^ 
 
 IwhLl '' '*'■ ^°'' "°* '"^^^"^^^ *h^ «'"^Pl« feet that 
 
 |6tmence frdm present consumption is limited by the preiure 
 l^t wa^ so that the mai^inal utility^f .^^^ 
 
 W^' Tt.^ ^^^'"-B^^'^'-k differ in their methods of ap- 
 
 Cf T?-. '"*''■''! P'"^^'"^ '''^'' than in the solution 
 Cl, fw"" Woaches the problem through the observa- 
 
 C r f f '"'P''^' ^ ^^^^"^"^^ "> ^^I"« between present 
 
 [and futm-e goods. He seems to think that, as a rule, future 
 
 ^ [525] 
 
66 
 
 Annai^ of th« American Academy. 
 
 wants also are discounted in the present. The former prop- 
 osition cannot be doubted, but the latter is denied by Wieser 
 and is certainly open to question; furthermore, it is by no 
 means essential to Bohm's theory. While holding present 
 and future wants in equal estimation one may assign a higher 
 value to present goods * on account of the increase which 
 could be obtained from them, or as Bohm would say, on 
 account of the technical superiority of present goods. Though 
 a hundred dollars' worth of enjoyment next year or this year 
 were equally desired, one would undoubtedly prefer to have 
 the hundred dollars at once, because as a matter of fact we 
 know that the hundred dollars could be so invested as to 
 yield an extra five dollars by next year. The difference in 
 value between present and future goods is a necessary feature 
 but not an explanation of interest payments. Both Bohm 
 and Wieser depend for their solutions of the interest problem 
 upon the service of capital in industry. Bohm thus ao 
 counts for the higher value of present goods, w^hile Wieser 
 considers the productive contribution imputable to capital as 
 the direct cause of interest. 
 
 Having expounded his method of imputing the return 
 from production to the different contributing services, Wieser 
 next takes up the relation between the value of the services 
 of permanent goods, such as land and fixed capital, and the 
 value of the goods themselves. The ordinary principle of 
 capitalization is found to be correct. 
 
 The book entitled ''The Natural Cost Value of Products," 
 is especially strong and acquits the Austrians of the frequent 
 charge that they do not recognize the influence of cost upon 
 the value of products. Unlike the classical economists, how- 
 ever, Wieser takes the ground that when all the costs are^ 
 reckoned they equal, under natural conditions, the value of 
 the product. The difference between the two views is a' 
 
 ♦ By present goods I mean goods at hand as contrasted with goods to be had In 
 the future. The use of the term present goods to denote goods ready for con- 
 Jiumption in contrast with production goods is confusing. 
 
 [526] 
 
 
 WiESER's Natural Value. 67 
 
 matter of terminology. There is no agrceincJit between 
 economists or business men as to where the line shall be 
 drawn between costs and profits. Hired labor is perhaps 
 always included in cost, but the entrepreneur's services, the 
 use of capital and the use of valuable land and other natural 
 resources are, as a rule, altogether or in part omitted. Wieser 
 includes all such services under costs and thus leaves for 
 profits only the fortuitous and temporary gains that arise from 
 economic changes. He recognizes that the available supply 
 of capital, of exceptional talent, of rich mines, or of favor- 
 ably located land is limited; and if the best results are to be 
 obtained from our productive forces, whether we take the 
 social or the individual standpoint, the use of these produc- 
 tive powers must not be wasted. They must not be assigned 
 to a given line of action without counting the cost. The 
 whole discussion is replete with valuable suggestions. 
 
 One other point is made so prominent that it ought not to 
 be overlooked here; namely, that while the recognition of the 
 services of land and capital as a part of the cost of produc- 
 tion, refutes the socialist's claim that value is due to labor 
 alone, and accounts for rent and interest, it does not prove any- 
 thing cither for or against the j uslice or expediency of allow- 
 ing these sources of value to become sources of private income. 
 The last few pages of Wieser's book contain a very brief 
 application of the theory of subjective value to the economy 
 of the State. Taxation in proportion to wealth condition is 
 justified on the ground that every one thus would contribute 
 an equal amount of subjective value. Yet Wieser maintains. 
 ■ In opposition to Sax, that a more strictly economic distribution 
 of the burdens of taxation would place them all upon the rich, 
 for thus the total sacrifice would be reduced to a minimum.' ' 
 
 In respect to amount of taxation or of expenditure through 
 the State, the principle is taken from Sax that the line 
 should be drawn at the point of greatest return. " If the 
 State should claim too much, it diminishes value by ex- 
 pending goods for purposes of State economy which would 
 
 [527] 
 
Kvvr 
 
 "^— ^•\ 
 
 68 
 
 Annals of the American Academy. 
 
 WiESER's Natural Value. 
 
 69 
 
 have a higher vakie if employed in private economy. If it 
 claims too lillle, value is again diminished — as in tliis case 
 also the entire importance of the goods is not realized/** 
 The special field for State activity, however, is found along 
 three lines: (i) when only collective action would guarantee 
 sufficient power; (2) when the benefits of an enterprise 
 would be so diffused that it would prove unprofitable in 
 private hands; and (3) in enterprises which are natural 
 monopolies carrying with them powers that would not be 
 safely vested in private hands. 
 
 On closing Wieser*^ book which has "attempted to ex- 
 haust the entire sphere of the phenomena of value, ' ' one 
 naturally pauses to consider whether any important phase 
 of the subject has been passed without notice. There is little 
 difficulty in finding such omissions. 
 
 The treatment of value as a development from utility 
 naturally throws emphasis upon demand, and thus contrasts 
 with the cost theory, which finds the decisive element in 
 value formation upon the side of supply. Wieser's extended 
 treatment of the efiect of cost of production upon the supply 
 and through supply upon the value of products frees the 
 Austrians from the charge of having neglected the considera- 
 tion of supply. Yet it will be noticed that Wieser only 
 attempts to account for the supply of products. The impor- 
 tant question that the Austrians have neglected is, — What are 
 the forces which fix the supply of the elements of production ? 
 Granting that we have a definite supply of the elements of 
 production, the Austrian theory gives us the best method of 
 accounting for the value of goods, but it will not do to take 
 this supply for granted. The supply of none of these ele- 
 ments is fixed independently of man*s volition. The amount 
 of available land might be increased by migration or by 
 transportation facilities. The supply of labor of all grades 
 could be increased, for the time at least, by working harder, 
 and labor could be transferred from one grade to another by 
 
 ft 
 
 
 
 • " Natural Value," p. 235. 
 
 [528] 
 
 education. Capital could be increased by saving more. The 
 principles which determine the supply of these elements of 
 production must form a part of any complete theory of value. 
 A second field of inquiry, important to the theory of value 
 but neglected by our author, is that which embraces the pro- 
 ducts and services of monopolies. In drawing a contrast 
 between monopoly goods and cost goods Wieser thus de- 
 scribes the former class: * 
 
 Characteristic of this group is the comparative rarity of such goods 
 « compared with the demand for them, or, it may be, the compara- 
 tively small quantity that can be produced. As examples of goods 
 ■which have pronouncedly the character o'f monopoly may be men- 
 tioned the following: Scarce raw materials, land exceptionally situated 
 the work of one peculiariy gifted-particularly an artist or scientific 
 worker of the highest rank,— a secret and at the same time successful 
 process (or, more exactly, the exclusive knowledge of such a process, 
 whereby the persons who have it obtain a preference over others), andl 
 finally, works of human hands, which, on account of their size, or on 
 account of technical difficulties, cannot be repeated. 
 
 We can hardly say that Wieser is wrong in the definition 
 of monopoly which this passage gives, for there is no agree- 
 ment among economic writers in the use of the term, but it 
 seems at least more appropriate to use the word monopoly to 
 designate an iiKluslry or the condition of an industry which 
 is under a single management to such, an extent that the 
 amount of the output or the price of the product or service 
 is not subject to the forces of competition. Under free com- 
 petition the amount and the price of the product is closely 
 
 •limited by the competitive forces, but under monopoly the 
 
 ^output and the price are, within comparatively wide limits, 
 
 Sunder the dictation of the management, f 
 
 In this sense there is no general monopoly of land or of 
 
 skill, for land-owners compete with each other, and so do 
 
 •"Natural Value," p. to8. 
 
 F^ *.i" r*/ ^°^'''-^^^ that monopoly is > matter of degrees. No enterprise U 
 f. «ntirely free from the limitations of competition, and every form of private prop- 
 f erty has an element of monopoly. As with all natnral groups the lines of division 
 cinnot be definitely drawn between monopolies and competitive Industries, yet 
 , we general characteristics of the two groups are evident. 
 
 [529] 
 
 \ 
 
 -■ft 
 
■««! 
 
 70 
 
 Annals of thk American Academy. 
 
 skilled laborers. Rents and wages are fixed for the most 
 part by competitive forces, while the prices of such common 
 and cheap products as sugar and petroleum seem to be largely 
 under the dictation of monopolies. Wieser's treatment of 
 monopoly goods corresponds with his definition. He accounts 
 for the high value of goods that are useful and scarce through 
 the principle of marginal utility, but he fails to consider the 
 real monopolies. It is not the marginal utility of car rides 
 that fixes the fare at five cents, nor is it the marginal utility 
 of a patented invention that determines its selling price. 
 Where a product or a service is controlled by a strict mo- 
 nopoly either the supply is limited arbitrarily or the price is 
 established first and then the use of the article is extended till 
 the marginal utility reaches the arbitrary price. In such 
 cases the price determines the margin of use instead of the 
 marginal utility determining the price. The Austrian for- 
 mula certainly does not apply here, but the action of monop- 
 olies is not without system and the rules which prevail in 
 the establishment of monopoly prices are of increasing im- 
 portance to the theory of value. 
 
 A third shortcoming in the work of the Austrian econo- 
 mists lies in the fact that economic theory is not to be con- 
 fined to an explanation of values. Professor Macvane* 
 justly complains that they seem to have no idea of subjec- 
 tive cost. A clear and correct theory of value is a matter of 
 immense practical importance, but after all the end of econ- 
 omic action is utility rather than value, and the success of a 
 nation's economy is to be found, not in the value of its pos- 
 sessions, but in their utility, in the privileges for enjoyment 
 and development compared with the discomforts required for 
 securing these privileges. Pain-cost must be compared with 
 total utility, rules must be formed for increasing the surplus 
 of utility, and the forces which determine the distribution of 
 this surplus must be made clear to the end that the progress 
 of the race may be promoted. 
 
 Hartford School of Sociology. 
 
 I 
 
 • Quar terly Journal of Economics t April, 1893; and Annals, vol. iv, p. 348, Nov. iSqj^ 
 
 David I. Green. 
 
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