The Ultimate Standard of Value [0]
The Ultimate Standard of Value Annals of the American Academy of Political and Social Science volume 5, (1894-95), pp. 149-208 by Eugen Bohm-Bawerk translated by C.W. Macfarlane
There are certain unsettled questions in economic theory that have been handed down as a sort of legacy from one generation to another. The discussion of these questions is revived twenty or it may be a hundred times in the course of a decade, and each time the disputants exhaust their intellectual resources in the endeavor to impress their views upon their contemporaries. Not unfrequently the discussion is carried far beyond the limits of weariness and satiety, so that it may well be regarded as an offence against good taste to again recur to so well-worn a theme. And yet these questions return again and again, like troubled spirits doomed restlessly to wander until the hour of their deliverance shall appear. It may be that since the last discussion of the question we have made some real or fancied discoveries in the science, and some may think that these throw new light upon the old question. Instantly the old strife breaks forth anew, with the same liveliness as if it possessed the charm of entire novelty, and so it continues year after year, and will continue, until the troubled spirit is at last set free. In this class we find the question -- What is the "ultimate standard of value," (dem letzten Bestimmgrunde des Wertes der Guter)? The content over this question began as early as the days of Say and Ricardo. More recently the German, Austrian, Danish and American, English and Italian Economists have taken it up, so that the contest has assumed an international character. The present generation has indeed some justification for again renewing the discussion. It cannot be denied that of late we have made some important additions to the sum of our knowledge in regard to the theory of value. This at first resulted in an increase in the number of conflicting opinions, but if we are not greatly mistaken, the present phase of this difference in opinion is due to a positive misunderstanding, which stands as a rock of offence in the path of explanation. I believe that this fatal misunderstanding may now be definitely and finally removed, by an investigation which need possess no other merits than those of care and exactness, and that this will result in permanently advancing the controversy by several pace. In this belief I venture upon a step which otherwise it would be difficult to justify, and propose to add yet another victim to the hecatombs already offered upon the altar of economic theory, though, owing to the necessity of pedantic thoroughness in such an investigation, it is a sacrifice which may not commend itself to some of our readers.
I. THE PROGRESS AND PRESENT POSITION OF OPINION.
Since the time when Economics first became a science, there have been two rivals for the honor of being considered the "ultimate standard of value", the utility that the goods afford, and the cost of their attainment. Any tyro who take up this question of the "value of goods" will invariably start out with the idea that we value goods because, and in the measure that, they are useful to us. He will, therefore, incline to the opinion that the ultimate cause of the value of goods is to be found in their utility. But this naive opinion is soon disturbed by a thousand practical experiences. It is not the most useful things, as air and water, but the most costly things that show the highest value. Again, in innumerable instance, it is undoubtedly true that value and price do accommodate themselves to cost of attainment, and so at the very outset the spirit of dissent was introduced into the theory of value, and has remained there until the present day. There was either this divergence of opinion, or a division of the field of value phenomena into two sections, that of utility and that of cost; or, finally, both domain and opinions were divided. The classical theory of value, as is well known, divided the domain of the phenomena
There are certain unsettled questions in economic theory that have been handed down as a sort of legacy from one generation to another. The discussion of these questions is revived twenty or it may be a hundred times in the course of a decade, and each time the disputants exhaust their intellectual resources in the endeavor to impress their views upon their contemporaries. Not unfrequently the discussion is carried far beyond the limits of weariness and satiety, so that it may well be regarded as an offence against good taste to again recur to so well-worn a theme. And yet these questions return again and again, like troubled spirits doomed restlessly to wander until the hour of their deliverance shall appear. It may be that since the last discussion of the question we have made some real or fancied discoveries in the science, and some may think that these throw new light upon the old question. Instantly the old strife breaks forth anew, with the same liveliness as if it possessed the charm of entire novelty, and so it continues year after year, and will continue, until the troubled spirit is at last set free. In this class we find the question -- What is the "ultimate standard of value," (dem letzten Bestimmgrunde des Wertes der Guter)? The content over this question began as early as the days of Say and Ricardo. More recently the German, Austrian, Danish and American, English and Italian Economists have taken it up, so that the contest has assumed an international character. The present generation has indeed some justification for again renewing the discussion. It cannot be denied that of late we have made some important additions to the sum of our knowledge in regard to the theory of value. This at first resulted in an increase in the number of conflicting opinions, but if we are not greatly mistaken, the present phase of this difference in opinion is due to a positive misunderstanding, which stands as a rock of offence in the path of explanation. I believe that this fatal misunderstanding may now be definitely and finally removed, by an investigation which need possess no other merits than those of care and exactness, and that this will result in permanently advancing the controversy by several pace. In this belief I venture upon a step which otherwise it would be difficult to justify, and propose to add yet another victim to the hecatombs already offered upon the altar of economic theory, though, owing to the necessity of pedantic thoroughness in such an investigation, it is a sacrifice which may not commend itself to some of our readers.
I. THE PROGRESS AND PRESENT POSITION OF OPINION.
Since the time when Economics first became a science, there have been two rivals for the honor of being considered the "ultimate standard of value", the utility that the goods afford, and the cost of their attainment. Any tyro who take up this question of the "value of goods" will invariably start out with the idea that we value goods because, and in the measure that, they are useful to us. He will, therefore, incline to the opinion that the ultimate cause of the value of goods is to be found in their utility. But this naive opinion is soon disturbed by a thousand practical experiences. It is not the most useful things, as air and water, but the most costly things that show the highest value. Again, in innumerable instance, it is undoubtedly true that value and price do accommodate themselves to cost of attainment, and so at the very outset the spirit of dissent was introduced into the theory of value, and has remained there until the present day. There was either this divergence of opinion, or a division of the field of value phenomena into two sections, that of utility and that of cost; or, finally, both domain and opinions were divided. The classical theory of value, as is well known, divided the domain of the phenomena