[This article is excerpted from The Positive Theory of Capital,
book 3, chapter 2, "Nature and Origin of Subjective Value."]
All goods without exception — indeed according to the very conception of them
as "good" — possess a certain relation to human well-being. There
are, however, two essentially distinct grades of this relation. A good
belongs to the lower grade when it possesses the general capacity to
subserve human weal. The higher grade, on the other hand, demands that a good
should be more than merely a sufficient cause; it must be an indispensable condition
of human well-being — a condition of such a kind that some gratification
stands or falls with the having or wanting of the good. In the expressive
vocabulary of everyday life we find a separate designation for these grades.
The lower is called Usefulness, the higher Value. This distinction, already
recognized in common speech, we must try to make as clear and well-marked as
its fundamental importance for the whole theory of value deserves.
A man dwells beside a bubbling spring of water. He has filled his cup, and
the spring goes on pouring out enough to fill a hundred other cups every
minute. Another man is traveling in the desert. A long day's journey over
glowing sand still divides him from the nearest oasis, and he has come to his
last cup of water. What is the relation in each case between the cup of water
and the well-being of its owner?
A single glance shows us that the relation is very dissimilar; but wherein
lies the difference? Simply that, in the former case, we have only the lower
grade of the relation we call well-being, that of usefulness; in the latter
case we have the higher grade as well. In the first case, just as in the second,
the cup of water is useful, that is, capable of satisfying a want, and,
moreover, in exactly the same degree; for evidently the refreshing qualities
of the water — the qualities on which its capacity to quench thirst is based,
such as coolness, taste, etc. — are not in the least degree weakened by the
fact that other cups of water chance to possess similar properties; nor, in
the second case, are these refreshing qualities in the least augmented by the
accidental circumstance that there is no other water near. On the other hand,
the two cases become essentially distinct when considered with reference to
the second grade. Looking at the former case we must say that the possession
of the cup of water does not provide the man with one single satisfaction
more, nor its loss with one satisfaction less, than he could have obtained
without it. If he has that particular cup of water he can quench his thirst
with it; if he has not that cup — well, he can quench his thirst quite as
well with one of the hundred others which the spring puts freely at his
disposal every minute of the day. If he likes, therefore, he may make that
one cup the cause of his satisfaction by quenching his thirst with
it; an indispensable condition of his satisfaction it cannot be; for
his well-being it is dispensable, unimportant, indifferent.
It is quite otherwise in the second case. Here we must say that, if our
traveller had not that one last cup, he could not quench his thirst; he must
bear its pangs unassuaged, perhaps even succumb to them. In the cup of water
then, in this case, we see not merely a sufficient cause, but the
indispensable condition, the sine qua non of human well-being. Here
it is of consequence, even of urgency; it possesses importance for his
well-being.
Now it is not too much to say that the distinction here drawn is one of
the most fruitful and fundamental in the whole range of our science. It does
not owe its existence to the microscope nor to any hair-splitting
distinctions of the logician. It has its life in the world of men, who know
it and use it and take it as guide for their common attitude towards the
world of goods, not only as regards the intellectual estimate they apply to
these goods, but as regards their actual business transactions. About goods
which are only useful the practical business man is careless and indifferent.
The academic knowledge that a good may be "of use" cannot evoke any
efficient interest in the good, in face of the other knowledge that the same
use may be obtained without it. Such goods are practically naught as regards
our well-being, and we treat them as such; we are not put about when we lose
them, and we make no effort to gain them. Who would fret at, or make an
effort to prevent, the spilling of a cup of water at the spring, or the
escape of a cubic foot of atmospheric air? Where, on the other hand, the
sharpened glance of the economic man recognizes that some satisfaction,
well-being, gratification, is connected with a particular good, there the
effective interest which we take in our own well-being is transferred to the
good which we recognize as its condition; we see and value our own welfare in
it; we recognize its importance for us as value; and finally, we develop an
anxiety, proportioned to the greatness of that importance, to acquire and
hold the good.
Thus, formally defined, value is the importance which a good or complex of
goods possesses with respect to the well-being of a subject. Any addition to
this definition, regarding the kind and reason of the importance, is, strictly
speaking, not necessary, since goods can only have an effective importance
for human well-being in one way, viz. by being the indispensable condition,
the sine qua non, of some one utility which subserves it. In view of
the fact, however, that in other definitions of value it is very often
translated as an "importance," while the importance spoken of
rests, erroneously, on a simple capability of utility, or, not less
erroneously, on the necessity of expenditure of costs, or the like, we shall define it, un-ambiguously and
exactly, as: That importance which goods or complexes of goods acquire, as
the recognized condition of a utility which makes for the well-being of a
subject, and would not be obtained without them.
All goods have usefulness, but all goods have not value. For the emergence
of value there must be scarcity as well as usefulness — not absolute
scarcity, but scarcity relative to the demand for the particular class of
goods. To put it more exactly: goods acquire value when the whole available
stock of them is not sufficient to cover the wants depending on them for
satisfaction, or when the stock would not be sufficient without these
particular goods. On the other hand, those goods remain valueless which are
offered in such superfluity that all the wants which they are fitted to
satisfy are completely supplied, and when, beyond that, there is a surplus
which can find no further employment in the satisfaction of want, and which,
at the same time, is large enough to spare the goods or quantities of goods
that we are valuing without imperiling the satisfaction of any one want.
After what has been said as to the nature of value, it should not be very
difficult to prove these propositions. When the supply of goods is not
sufficient, and some of the wants which they are adapted to satisfy must
remain unsatisfied, it is clear that the loss of even a single good involves
the loss of a possible satisfaction, while the addition of a single good
involves the acquisition of a satisfaction otherwise impossible; and it is
clear, consequently, that some gratification or form of well-being depends on
the existence of that good. Conversely, it is quite as clear that, if goods of
any class are to be had in superfluity, there is no harm done if one of the
goods be lost — since it can be immediately replaced from the superfluous
stock, nor any utility got if another such good be added — since it cannot be
employed in any useful way. Suppose, for instance, that a peasant requires 10
gallons of water per day, and no more, for general purposes — say, for his
own drinking, for that of his family and servants, for watering his cattle,
for cleansing, flushing, etc. — and suppose that the only spring within reach
supplies no more than 8 gallons a day. It is quite evident that he cannot
spare 1 single gallon from his water-supply without suffering, to a more or
less sensible extent, as regards the wants and aims of his economy. Every
gallon in this case is the condition of a definite sphere of usefulness. Even
if the spring supplied just 10 gallons this would still be true. But if the
spring supplied 20 gallons per day, it is just as obvious that the loss of 1
gallon would not do the slightest injury to our peasant. He can only employ
10 gallons usefully, and he must let the other 10 gallons flow away unused.
If 1 gallon is spilled it is replaced from the overflow, and the only effect
is that now the unusable surplus is reduced from 10 gallons to 9.
Now as it is the insufficient, or the barely sufficient, goods that are
the objects of economical care — the goods we "economize" or
endeavour to acquire and keep — while such goods as are to be had in
superfluity are free to everybody, we may express the above propositions
shortly in the following form: All economical goods have value; all free
goods are valueless. In any case it must steadily be borne in mind
that it is only relations of quantity that decide whether any
particular good is merely capable of use, or is also the condition
of a utility for us.
