The Ultimate Standard of Value [2]
that free goods, no matter how useful they may be, have no value. The answer is, that since thee free goods exist in superabundant quantities, there is for us no utility dependent upon a concrete quantity of the same, as a single glass of water or a single cubic metre of air. Their marginal utility therefore is zero. Again, this theory of marginal utility gives us the basis for a new and vigorous attack upon the cost theory of value. Considered from one point of view, the cost that determines the value of any product represents nothing else than the value of the producers' goods. If now, as we are compelled to do in a scientific investigation, we inquire how we are to determine the value of these producers' goods, we find that this, too, in the last resort is determined by marginal utility. The cost therefore exercises, as it were, only a vice-regency. It cannot be denied that under certain circumstance it governs the value of certain products, but it is itself, at least in most cases, governed by a still higher ruler, namely, "marginal utility." Cost, therefore, is for the most part merely a province in the general kingdom of utility, and it is to this last that we must concede the position of the universal "ultimate standard of value." This proposition was first placed in opposition to the prevailing classical theory, in a bold and uncompromising way, by Jevons. "Value depends entirely upon utility", this writer emphatically declare in the very. beginning of his great work on "The Theory of Political Economy." This proposition has since found even clearer and more exact statement at the hands of the Austrian Economists, nor have we even yet entirely escaped from this newest phase of the old struggle between cost and utility as the ultimate determinants of value. The present contest is notable, not merely for the number and scientific rank of those who are parties to it, among whom may be found many of the ablest economists of all countries, but also because of the extraordinary variety of opinions advanced. Instead of two opposing conceptions, we find a whole series of separate and seemingly unrelated opinions, each of which is held with the greatest persistence. The most extreme opinion at one end of the series is that which finds statement in Jevons' proposition, that "value depends entirely upon utility." It must, however, be added that while Jevons occasionally give statement to this proposition in the above sweeping and uncompromising terms, yet the doctrine as expounded by him contains elements which necessarily lead to a limitation of this proposition. The addition of these necessary, though not highly important limitations, give us the doctrine as taught by the Austrian economists.(1*) They, therefore, stand next to Jevons in the series of opinions. Their position is that cost does not officiate as the original and ultimate determinant of value, except in a comparatively limited number of unimportant cases.(2*) The great majority of value phenomena are subject to the dominion of utility. This dominion is exercised in some cases directly, but in a still greater number of cases indirectly. When exercised indirectly the value is, of course, first determined by certain costs, but closer analysis shows that these costs are themselves determined by utility. At the other extreme end of the series, we find the eminent Danish economist, Scharling, who would establish cost (under the title of "difficulties of attainment") as the sole ruler over the entire domain of value; over value in use, as well as over value in exchange; over the value of freely reproducible goods, as well as over the value of scarcity goods.(3*) Quite close to Scharling, who is a very pronounced opponent of the theory of marginal utility, we find the acute American thinker, J.B. Clark, who is a no less decided adherent of that theory. This illustrates how strangely confused the controversy has become. Clark also make cost the general and ultimate "standard of value," though in a different sense from Scharling. According to Clark, the final