The Ultimate Standard of Value [22]
us. The self-evident proposition, that one bushel of wheat has the same value as another similar bushel of wheat, gives me no starting point from I which I can determine the value of both bushels. In the same way, in the cases described, the law of cost gives me no starting point from which I can determine the absolute height of the price line; to which, according to that law, the price of all products of equal origin are brought. When we take a certain limited view of the question we do seem to get an answer. As when we confine ourselves to a single branch of production and think of the amount of the cost as something that we determine independently of our problem. But we might just as well argue, in the case of our two bushels of wheat, that according to our proposition, one of these bushels has just the same value as the other. We also know that number one is worth one dollar, therefore, according to our proposition, number two is worth one dollar. But the value of number one is just as much a subject for investigation as the value of number two, and hence, our answer does not give us the value of either. This is true of the height of the cost in every branch of production. We must, in every case, go back of the apparent answers until we find the real answer. In the case of the two bushels of wheat this answer lies close at hand, but in the case of costs in general, we must survey the whole field of production and finally find our answer in the following elementary proposition: There is a certain limited quantity of productive power which at any given time, under the conditions set by the technical development of that time, can bring forth only a certain limited quantity of products. These products, through the action of certain leveling influences in the different branches of production, are disposed of in a regular order of succession, in each case, to the best paying purchaser. The satisfaction extends downward in the scale of wants until a certain equalization to the (money) marginal cost of production is attained, and it is this which decides the value of all goods that come under the dominion of that leveling influence. It determines the value of the products as well as the value of the productive power, which is represented by the cost. The representatives of the English theory have chosen the figure of the two blades of a pair of shears, in order to show the opposition between the English and Austrian conception of the law of cost. I gladly follow them in the use of this figure but with the conviction that the interpretation which my English colleague have given to it, must be supplemented as follows: In the case of freely reproducible goods, it is undoubtedly true that the price is fixed at that point where the money marginal utility of the commodity to those desiring to purchase it crosses the line of the costs. In our example, the last purchaser of wool will be the one whose valuation will correspond with the amount of the cost, or with eighty cents. In this case it is entirely correct to say that utility (relative marginal utility for those desiring to purchase) and cost operate together in the determination of price, like the two blade of a pair of shears. But now follows the unavoidable question: What determine the amount of this cost? The amount of the cost is identical with the value of the productive power, and, as a rule, is determined by the money marginal utility of this productive power. This, of course, has reference to the existing conditions of the demand for and supply of this productive power in the various branches of production. If in the above formula we substitute for "cost" this explanation of cost, we would have the following: "The price of a definite specie of freely reproducible goods fixes itself in the long run at that point where the money marginal utility, for those who desire to purchase these products, intersects the money marginal utility of all those who desire to purchase in the other communicating branches of production." The figure of the two blade of