Front Page Titles (by Subject) CHAPTER X: the paradox of value - Natural Value
The Online Library of Liberty
A project of Liberty Fund, Inc.
Search this Title:
Also in the Library:
CHAPTER X: the paradox of value - Friedrich von Wieser, Natural Value 
Natural Value, edited with a Preface and Analysis by William Smart (London: Macmillan, 1893).
About Liberty Fund:
Liberty Fund, Inc. is a private, educational foundation established to encourage the study of the ideal of a society of free and responsible individuals.
The text is in the public domain.
Fair use statement:
This material is put online to further the educational goals of Liberty Fund, Inc. Unless otherwise stated in the Copyright Information section above, this material may be used freely for educational and academic purposes. It may not be used in any way for profit.
the paradox of value
Assume that a man owns one good, and that the employment of it gives a utility equal to 10; and suppose that his holding gradually increases up to 11 goods, in the course of which the marginal utility decreases proportionally down to 0. The value of the stock at each point will be as follows:—
Here a regular decrease of the marginal utility, and, therefore, of the value of the single good, is seen to take place along with an increase of the supply, and further explanation is unnecessary. Each additional good brings with it a diminished increment of utility, and must, therefore, bring only a diminished increment of value. It is otherwise when we consider the value of the whole stock, and follow its development from 10 up to 30, and back again from 30 down to 10 and 0. Judged from the standpoint of that aspect of value with which daily economical life impresses us, this scale seems completely paradoxical. Value is commonly regarded by us as a simple and absolutely desirable characteristic of goods, mathematically expressible as a positive amount. It corresponds with this view when the series shows an increase of value along with the first additions to the stock, but it entirely contradicts it when, towards the end of the series, every further addition to the stock is accompanied by a corresponding decrease in value, until, finally, when the point of superfluity is reached, value completely disappears. Whence comes this contradiction? How is it to be explained? The first half of the series appears to confirm the view that value is something desirable, something positive, while the second shows it as a negative quantity, something burdensome or evil. Which then is true? And how can both ever be brought to agree?
Very easily, so soon as one gives up the preconceived notion that value is a simple positive amount. Value (as marginal value) arises from a combination of two elements, the one positive, the other negative. It is a complex amount; or, more exactly, a residual amount. So soon as one distinguishes between these two elements in the formation of value, the series we have just drawn above explains itself in the simplest manner possible; and the semblance of irregularity, which must have proved insuperable for those who expected and sought a simple progression, disappears.
Both elements in the formation of value have been explained by what has already been said.
The positive element is the enjoyment in the use of goods. Every additional use which is furnished by a newly-acquired good is welcome. The good which is first acquired brings the largest increment of utility because it satisfies the most urgent stage of desire; every one that follows has a lesser utility because it meets a desire which has been already comparatively satisfied. And should the accretion of goods cross the margin of want, there will be no addition to the positive element in the formation of value. There will now be no employment for additional goods; they will not bring enjoyment to any one.
Taking the former figures, the increment of the positive element in value will be as follows:—
And the total amount of this positive element, calculated for the whole stock, will be as under:—
The negative element arises from the indifference with which men naturally regard goods. Only when forced to it, do we transfer our interest from the uses of goods to the goods themselves; and, in the process of transferring, we have to overcome a natural opposition which varies in strength according to the circumstances The greater the need, the more eager will we be to get possession and keep possession of goods; the smaller in this case will be the opposition. The opposition will be completely broken down where our need rises to extremity, for here we identify our destiny with that of the goods, and in their loss we see our own calamity. On the other hand, the opposition will be complete where everything is present in superfluity; here we can enjoy without any feeling of gratitude for, or interest in, the objects which procure for us the enjoyment. Between extremest need and superfluity the opposition is a graduated one; we bestow upon goods an amount of interest derived from the interest we have in the services they render us But we do not give them the whole of this interest; we make a certain reservation. That is to say, all the single items of a stock are considered only at the value of their marginal utility. The surplus value, that which goes beyond their marginal utility, is withheld from the goods. Here, then, is the numerical expression for the strength of this opposition: the negative element in the formation of value is equal to the subtracted surplus value. Making use once again of the foregoing figures, we find that, so long as we own only one good, there is no deduction in the formation of its value; the entire value of the use is transferred, un-diminished, to the good. With two goods, on the other hand, there will be a deduction of 1 from the value, as each of these is valued only according to its marginal utility 9, while the utilities of both added together amount to 10+9. Three goods have each a value only of 8, and their utility is equal to 10+9+8, the surplus value deducted being therefore 3. Reckoning further in the same way, we shall find the minus amount in the formation of value as follows:—
If we put together the plus and minus amounts we shall obtain the following as result:—
Thus we obtain the same scale as that which resulted from the multiplication of amount by marginal utility.
It is now seen that the apparent irregularity of the scale is really a consequence of the strict regularity of its conditions.
The value of a supply must increase with the increase of its items so long as the positive element preponderates; in other words, so long as the increment of value, furnished by the utility of the newly-acquired good, is greater than the value which is lost through the decrement of value which its addition causes to every good already in the stock This is the ascending branch of the movement of value, or, as we might call it, the “up grade” of value.
On the other hand, the value of a supply must decrease with its augmentation, whenever the negative element gains the ascendency. This is the descending branch of the movement of value, or the “down grade” of value.
Strange though it seems, the value must touch zero twice in the course of its development: in the one case, where we have nothing; in the other, where we have everything. If we possess nothing, there are no objects to value; if we possess everything, there is—just on account of the superfluity—no subjective inducement to an act of valuation. Only if we possess something—be it much or little—does the phenomenon of value appear; and between the two zero points, so different in their importance, it has its existence. It presents itself with the first goods that come into our possession, and increases up to a certain culminating point, from which it decreases, until, when superfluity is reached, interest is again completely withdrawn from the goods.
As a matter of fact, human economies move almost entirely in the ascending branch. In most things we are so far from having a superfluity that almost every multiplication of goods shows a corresponding increase in the total value The single good certainly falls in value as the stock increases, but as a rule we find that the loss in the items is outweighed by the gain on the whole. On this account we are accustomed to measure wealth and riches by the sum of value of their constituent parts, and regard it as a misfortune if the value of property and revenue goes down. And therefore it appears to us paradoxical when, at times, we are forced to notice that, although the amount of goods and of enjoyments, of wealth and well-being, has been augmented, their value has decreased. It may be that exceptionally favourable weather has resulted in an over-abundant harvest; or it may be the discovery of some new productive stratum of unsuspected fertility; or some sudden and enormous increase of returns through advance in technical processes: or it may be caused by some error on the part of the producer, who has been misled by greed of gain, or a mistaken and exaggerated estimate of demand, into too greatly enlarging his production. But it is always some unusual accident when individual branches of economy are transferred to the descending branch in the movement of value. It is improbable that our whole economic system will ever permanently come under such favourable conditions, and production be brought so near to superfluity, that the ascending movement of value will cease to be the dominant one. The example, however, of these few free goods which nature offers leaves us no room for doubt that value disappears whenever superfluity is reached; and this is really the best proof for our contention that value must begin to decrease whenever superfluity approaches. Even though experience shows the scale of value to have many gaps, yet it gives us sufficient facts to let us trace its ideal course from end to end.