whereas utility can be expressed only by a sum which contains as numerous and as various amounts as the stock contains items. The utility, for instance, of a harvest of a million quarters can be represented only by an almost inexhaustible description of all the benefits accruing from it, from its greatest effects down to those of the least important employments economically permissible in the circumstances of the case. The value of this same harvest is easily and shortly ascertained by multiplying the utility of the marginal employments by the whole amount. mathematically expressed, the formula for expressing the utility of a stock of 50 items, the most intense use of which -- that of the first item -- reaches the figure of 100, if we assume a regular decrease in intensity for every successive item, will run: 100 + 99 + 98 +... 51. But the value formula will be simply: -- 50 x 51.(1*)The simplification of economic calculation by the use of a value instead of a utility measurement is noticeable in proportion to the economic state of development. While the utility formula becomes continually more wearisome and less clear, the value formula becomes more comprehensive and uniform, particularly through the entrance of costs, -- which we shall discuss later. Where money is the medium of exchange everything is measured equally, for purposes of trade, according to its money value; all utility in its illimitable variety is reckoned by the value of coin, the separate items of which are all equal to each other, and the amounts of which appear in the calculations as multiples of one and the same unit.
It is the possibility of calculating utility in terms of value which first puts us in a position to draw out exact economic plans and foresee their necessary limitation. Thus value comes to be the controlling power in economic life.
NOTES:
1. The value formula is an abridged utility formula. Only that part is left out which, on the one hand, renders calculation more difficult, and, on the other hand, is really unnecessary as an adequate motive to economic actions; viz. that surplus utility which is above the marginal utility. Economic actions which have value (in the up grade) for their motive, are not only approximately, but completely and exactly weighed and limited.
The greater utility is always reached when the greater value is aimed at.
It may be interesting to go more into detail regarding this.
There are two occasions on which economic goods become objects of valuation; first, when we wish to acquire goods, and to measure the amount of the acquisition; and, second, when we wish to part with goods in order to devote them to some given end, and to measure the amount of the service which they thus will render. On the one side, then, we have to measure results in goods, and, on the other, outlays in goods. It may be remarked in passing that, without some such end in view, goods are never valued: they are never valued for valuing's sake. At most, goods are valued in advance to be ready for any contingency; but value never plays the role so readily ascribed to it by, theory; -- it never acts simply as the means of valuing wealth. Wealth may be valued in all sorts of ways, according to the purpose which it is intended to serve. The rules of valuation which are actually followed have their origin in the fact that they serve towards the ends of economic life, whatever these may be. Value is adapted to its economic environment, and can only be understood through it.
First, as to the measurement of results in goods. All acquisitions of goods which increase value are profitable. Of two acquisitions, between which one may choose, that one will be chosen which gives the greater amount of value, because it also gives the greater utility. Augmentations of value arising from intentional destruction of goods are unprofitable, and, in consideration of utility -- which is the stronger consideration wherever there is a collision between it and value -- are forbidden. Acquisitions of goods which, inasmuch as they follow the "down grade" of value, diminish the amount of value, are nevertheless profitable.
An increase of value occasioned by increased necessity, and unaccompanied by any change in the amount of goods, must not be described as an economical result. It is not created by any economical act. Once created, however, it naturally influences economic action, etc., through the fact that it changes the value of goods used as outlay.
Second, as to the measurement of "outlay" in goods -- whether in purchase of other goods, or in production, or in mere satisfaction of personal want. In every appropriation of goods to a particular purpose the value of the sacrifice involved must be estimated an compared with the expected result. The greater the sacrifice of value, -- if we disregard the circumstances of the "down grade," -- the greater the sacrifice of utility, and it must be justified and made good by the obtaining of a higher result. It is different to show this as regards consumption. The employment of goods towards the satisfaction of personal wants must also be guided by the value of goods. But how can marginal value serve this end? Would not that require that only marginal wants be satisfied? The difficulty solves itself whenever we give up the old and deep-rooted but erroneous belief that consumption as such is an economical act. Consumption as such does not arise from any economical considerations. It is only economising in consumption that is economical (see Ursprung des Werthes, p.
133). The demands of economising are, however, exactly met when we keep to the marginal utility. In other words, value does not control consumption: it only forbids uneconomical consumption;that, namely, which would not assure uninterrupted satisfaction down to the lowest attainable utility. This prohibition and nothing else is expressed in marginal value; no employment of goods which goes below the margin drawn can be allowed. Through the fact that want on its side is active and demands satisfaction, economic satisfaction is reached by a combination of claims and refusals. Whoever possesses 1000 items of the value of 10, may permit himself every enjoyment which has an intensity of 10 or more. Whoever possesses 2000 items of the value of 8 may go further, and allow himself all enjoyments which have at least an intensity of 8, two thousand times. This is the true meaning of that estimate of the value of supplies of consumption goods, to which we generally give the more material formulation, that the first possesses 1000 x 10 = 10,000, and the second possesses 2000 x 8 = 16,000 units of value.
See, upon the calculation of value my Ursprung des Werthes, p. 180, and Bohm-Bawerk's Werth, p. 46; further, on the service of value, Book II, chaps. iv and v and Book V, chap. xiii below.
