An essay on value, with a short account of American currency

Contents

PAGE.

I. Utility, 5

II. Use Value, 8

I. Utility

Utility has been defined as a capacity to satisfy a desire, or serve a purpose ; and wealth has been defined as utilities embodied in material objects. As thus defined, the utility of a thing is supposed to be inherent in it, and is a constant quantity ; for the potential capacity of a thing to satisfy a want or serve a purpose would exist and continue to be the same whether the want or purpose existed or not. A pound of iron, a bushel of grain, or a yard of cloth would contain as much utility at one time and place as at another ; as much in the hands of its producer as in those of a consumer, and, in fact, the same amount, whether there was a consumer at all or not ; the utility of coal would be no more increased by carrying it from than to Newcastle. A superfluity of anything- would contain as much utility, per unit of quantity, as a scarcity. A gallon of water would contain a certain quantity of utility, and a deluge an infinite quantity of it. The relative utility of any two commodities per units of quantity would be the same everywhere and to everybody ; the relative utility of grain and cloth would be the same in Dakota as in New England. In every exchange there would be a transfer of equal or unequal utilities ; in the first of which cases neither party would gain anything, and in the second, one party would gain and the other lose.

The same thing has a capacity to be injurious as well as useful. A small quantity of water will quench a man's thirst or suffocate him ; a small fire will warm him or burn him seriously. Where is the utility of water in floods, fire in a conflagration, or air in a cyclone ?

A capacity to satisfy a desire or serve a purpose implies the existence of the use or purpose and has a relation thereto ; even a potential utility has reference to a potential use or purpose. Since the actual utility '•of an object depends upon the existence of a demand for it, the degree of its utility, per unit of quantity, depends upon how much it is wanted ; therefore, actual utility is a variable and not a constant quantity ; and the relative utility of any two things, per units of quantity, varies from time to time and place to place, to the same person, and to different persons.

Using the word utility in a loose, general, and indefinite sense, it has been said that : " The utility of an object consists in its quality of being useful for human purposes generally, and the degree of its utility is to be measured by the importance of such purposes," and, therefore, " water, coal, or iron is more useful than alcohol, gold, or diamonds."

While this may be useful information, it is more important to everyone to determine from time to time the relative utility to him, per units of quantity, of any two commodities than to ascertain that one of them is more useful than the other for human purposes generally. In fact, everyone, in dealing with commodities, consults his own interest and acts on his own behalf; and to that end he estimates their relative utility to him for specific amounts of each at the time, and from time to time, and does not govern his conduct by any loose notions which he or others may entertain as to their general utility to mankind. If he had a hollow tooth, he would probably consider enough gold to fill it and preserve the tooth to be more useful to him for that purpose than a ton of water, coal, or iron ; or, if he required a certain quantity of alcohol for some purpose in the arts or in medicine, for which alcohol was suitable and water unsuitable, that alcohol was more useful to him for that purpose than water. A coat would evidently be more useful to a man who had none, especially in winter, than to a dealer in coats who had more than he could use or sell ; and a loaf of bread would be more useful to a hungry man than to a baker who had an overstock. So, also, a surplus of grain and provisions would be less useful to their producers than to others who lacked food and needed such supplies ; also, a surplus of cloth and hardware would be less useful to their producers than food and other things which they wanted. And if a person had more of those things which are called necessaries than he could use or consume before they would spoil or decay, he might justly consider a useless, cumbersome, and perishable superfluity of them to be of less utility to him than a comparatively small quantity of gold, or even an imperishable and brilliant diamond.

II. Use Value

Anything which can satisfy a man's desire, need, use, or purpose — that is to say, his want or wants — has value to him, or a use value ; which phrase is here employed to signify the value of a thing to one person only, or to each person separately. Value is not inherent in a thing, for the want is external to it. A want, as hunger or thirst, can exist in the absence of any means to satisfy it ; but in the absence of any want, use, or purpose to which a thing can be applied, it has no actual value, and any such quality which may be imputed to it is merely potential or imaginary. In fact, value exists only when there is a want and a means available to satisfy it. Treasure sunk in the ocean has no actual value ; to a man in a desert, water in the clouds or elsewhere has no actual value. The Garden of Eden had an actual value to Adam while he was in it, and only a potential value to him after he was put out of it.

A thing may have a use value for the purpose of satisfying an imaginary want ; quack medicines may cure imaginary ills, and furnish cheap substitutes for the bones and relics of the saints, holy shrines, pretended relics of the true cross, and the holy coat of Treves. Formerly the catacombs of Rome had nearly as great a value to the Church as her treasury of good works. If the owner of a gem finds that it is bogus, or of a picture that it is a copy, its value to him declines. When the turquoise ceases to be a talisman against the "evil eye," the stone will lose in use value to the Persian ; so, also, as to all fetiches, charms, and amulets.

The value of a thing to anyone includes all the uses and purposes to which it can be applied by him; e.g., grain has a use value for seed, food, manufacture, and also for the purpose of exchange for other things. Also, the same thing may have a value to different persons for different purposes. The value of a commodity to a merchant lies in the profit which he can obtain by dealing in it, while the value of opium, tobacco, coffins, or any other thing to its consumer is quite different. The product of one person may be the tools or raw material of another. A thing may have a present value for the purpose of satisfying a future want. A prudent man provides beforehand for his future wants, especially those which are recurrent and involuntary ; and, therefore, he stores away corn in his granary, food in his larder, and riches in his treasury, because of their value to him for consumption and exchange,, present and prospective.

Use value is a variable quantity : The supply and the demand are both variable.

The supply varies :

In quality — A good timepiece is more useful than a poor one ; cloth may be all wool or partly waste or shoddy. Nearly all commodities vary in quality. There are more than loo grades of wool ; the same fleece sorts into seven or more qualities. In the Chicago market there is red and white wheat, winter and spring, divided into about twenty grades ; of Indian corn there are ten grades; oats, six grades; barley, five grades; butter, six or more grades ; cattle of numerous grades.

In quantity — The supply may vary from nothing to a superabundance. There may be too much of such a useful thing as water. A person may have no food, or barely enough to sustain life, or more than he can consume before it will spoil. In some parts of the country, when newly settled, Indian corn has been used for fuel, and fruit so abundant as to be left to rot on the ground; the potato crop of 1895 was so abundant as not to be worth digging in places remote from market, being worth at Chicago, in the early spring of 1896, about 16 cents per bushel by the car load. Formerly, in Australia, the surplus carcasses of sheep were used for fuel and the ashes sold as a fertilizer ; and surplus cattle in South America had no value except for their hides and tallow. An excess of anything beyond what its owner can use or consume himself before it will spoil or decay, has no value to him except to exchange for something else which he wants or desires.

The deinand varies :

A person may be more hungry or thirsty at one time than at another, or want clothing more when it is cold than when it is warm. He usually wants any necessary, useful, or agreeable thing more when he has none of it than when he is partially supplied. Beyond the point of necessity, the intensity of his desire usually decreases as the supply increases up to the limit of extreme abundance.

Use Value, Its Existence and Degree.

Its existence depends solely upon a demand and an available supply, and not upon the source of the supply or its cost of production.

Cost is the sacrifice made to procure a thing- ; value is the benefit which can be derived from it, which is the same whether the thing costs much, little, or nothing. Water derived from the clouds or a living spring has the same value to quench thirst, or for any other purpose, as if the same water had been filtered or distilled out of some solution. A lump of gold has the same value to its finder as if he had obtained it after great labor. A coat will keep a man as warm if it be a gift as if it were acquired at great cost. Cloth woven on a hand-loom has no greater value than if the same cloth had been woven on a loom propelled by wind, water, or steam. No sensible person would consider the same thing to be of greater value to him merely because it was produced at great cost. If a thing is not wanted it has no actual value, whether its cost was much or little.

But a demand converts a potential into an actual supply. "The paving of the streets of London enabled the owners of some barren rocks on the coast of Scotland to draw a rent from what never afforded a rent before ; also, the forests of Norway found a market in Great Britain which they could not find at home ; also, the surplus wool of England found a market in Flanders, and, after the Union, the Highland cattle found a market in England ; those bred on the most uncultivated moors, in proportion to their weight and goodness, brought the same price as those raised upon the most improved land." (Wealth of Nations.)

The degree of the use value of a supply, per unit of quantity, depends solely upon its quality, and its quantity relative to the demand for it, increasing with its quality and decreasing as its quantity increases.

Quality may be due to soil and climate, as in fruits, cotton, coffee, etc.; or to lapse of time, which improves coffee, wine, and distilled liquors, and injures fruit, meat, and other things ; or to the care, skill, and honesty exercised in the production of a thing.

Scarcity and abundance have the same effect upon the degree of use value, whether the cause is natural or artificial, as a siege, blockade, or a corner in the article. In Egypt, during the years of plenty, food was of little worth ; but during the years of scarcity Pharaoh acquired all the property of the Egyptians and reduced them to slavery, although there was grain enough in Egypt to feed its people, and also to supply others.

Wants. Adam Smith said : "A man is rich or poor according to the degree in which he can afford the necessaries, conveniences, and amusements of human life."

A savage and a civilized man differ in their notions about wealth. To each of them food and drink of some kind are clearly necessaries ; clothing and shelter may not be, for a part of mankind go naked and lie on the ground. As a man acquires knowledge his views alter and his wants multiply. Knowledge discovers needs and wants, and also the means to satisfy them. The first hut was a luxury ; the first clothing, the first fire, the first salt, etc.

During " the ages of faith " those who aspired to be saints believed in mortifying the flesh. Some never washed themselves, nor disturbed the vermin with which they were infested ; so far as they caused pain they were increasing the stock of the aspirant's merits ; that treasure which he was laying up in heaven. Greater knowledge has caused piety to assume a more rational form. It is not now deemed essential to a saint that he should be dirty and lousy, or a nest of microbes and bacteria, nor that the temple of God should be a charnel house. Now the wise man prefers a good house well aired to a cave or a hole in the ground ; food in wholesome variety, well cooked, to raw fish or flesh ; suitable and clean clothes to dirty rags and skins ; and is glad if he can justly acquire the means to satisfy his voluntary and involuntary, natural and acquired, present and prospective, real and imaginary wants.

Cost and Use Value. If nature had supplied everything which is wanted, as a free gift, every want would find full satisfaction in a gratuitous supply. But when the acquisition of a thing involves cost, the demand for it becomes stinted towards the point where it would be as easy to endure the want, or so much of it as remained unsatisfied, as to gratify it. If a person feels a want, as hunger or thirst, it causes pain ; and if he has not the means at hand to satisfy it, the want impels him to undergo the sacrifice necessary to obtain the requisite supply. This sacrifice also causes pain. By labor a man is said to lay down a part of his ease, liberty, and happiness ; by outlay he parts with what cost him something to acquire, and deprives himself of the benefit which he might otherwise obtain from it. Every sensible person usually considers how great a sacrifice he must make in order to gratify his various wants, and as the price which he must pay seems to him to be greater or less than its reward he acts accordingly.

The sensations produced by a want, by its gratification, and by the cost of appeasing it, are not the same to every person, for men differ in their mental and physical powers, natural and acquired ; they differ not only in ability, but in their feelings, tastes, and inclinations. Even a future want renders an industrious and frugal man nervous and unhappy until he has made provision for it. He anticipates his future wants, and will not wait until the spur of necessity is actually applied ; for experience teaches him that it requires time as well as effort and sacrifice to obtain the requisite supply ; and he is unwilling to rely on chance, charity, or theft to supply his wants as they occur. Other persons can not restrain their desires, have no frugality, and live in poverty because of their wasteful extravagance. Others regard labor as a dreadful sacrifice, and will suffer for want of food, clothing, and shelter rather than undergo the great pain which they would vSuffer in order to satisfy their wants by their own industry. The Pilgrims landed among the rocks of New England in December, 1620; they were assisted to migrate, but by 1637, if not earlier, they were taxing themselves to support the poor, and afterwards indulged in expensive litigation as to which town ought to support some particular pauper. Nov/ he travels not only from one town to another, but from Maine to Oregon, having no use for a tract of wild land, unless for the scenery, although offered as a gift. In 1 894 crowds of tramps seized railroad trains and marched on Washington, feeding on the industry of the country by the way. At Chicago, during the winter of 1893-4, with bricklayers' wages at 50 cents an hour; carpenters', 35 cents an hour; common labor at $1.50 to $1.75 for an eight-hour day; patent flour at $4.50 per barrel; "bakers'" ditto at half that price, and thousands of dram shops, each paying a license of $500 per annum, the Relief and Aid Society called upon the charitable for about $2,300 per day to support the needy.

Formerly a very rich man said, the drunkard and the glutton come to poverty, and sloth clothes a man in rags and his family also.

It is asserted that wealth would yield the greatest amount of happiness if it were equally divided ; how often a redivision would be necessary in order to maintain the equality is not stated. But one might surmise that, if those who love industry and frugality the most were required to acquire the wealth, and those who derive the greatest enjoyment from its consumption and who love labor and frugality the least, were employed as consumers, a much greater sum of happiness might be realized. Heavy taxation of everybody who has anything renders this scheme quite feasible.

It is said that " the real price of everything, what everything costs to the man who wants to acquire it, is the toil and trouble of acquiring it." But neither this price nor the value of the thing when acquired is the same to everybody. One person may want a thing more than another, acquire it for less, and obtain a greater satisfaction from it. The same person does not always obtain the same thing at the same cost. A hunter or fisherman would undergo the same amount of toil and trouble whether he killed or caught anything or not ; so also with a miner whether he dug in rich or barren ground ; or a farmer whether his crop was good or poor. A person engaged in any occupation after a certain period of time would form his opinion whether his total reward compensated him for the total sacrifice; and whatever was the result he would adopt an easier or rilore lucrative occupation if he could find it. In some way satisfactory to himself he might strike an average, and thereupon say that in the ordinary state of his health, strength, and spirits, in the ordinary exercise of his skill and dexterity, and in the usual degree of hardship caused by the elements, the nature of the business and otherwise, he obtained an average reward for an average sacrifice. But the standard by which he measured and compared the two would not measure the same amount of cost or reward to others who were unlike him, each of whom would have an equal right to compare his sacrifices with his enjoyments and to act accordingl)'.

In the science of political economy it is assumed that all men are exactl}?- alike, or so near alike that any differences between them may be ignored. This fallacy makes the science unsound ; the subject may be thereby simplified and made easy for new beginners, but the reasoning founded upon this false assumption fails to apply to the facts as they exist.

Adam Smith said that the difference of natural talents in different men is in reality much less than we are aware of ; that the difference between a philosopher and a street porter, for example, seems to arise, not so much from nature as from habit, custom, and education ; that the two from nature are not half so different as a mastiff is from a greyhound, or it from a spaniel, or this last from a shepherd's dog. But since there is a material difference between an idiot and a Sir Isaac Newton, and between a Samson and one who has the rickets, with gradations between the two extremes, and a great difference between races or breeds of men, it is immaterial whether the difference from nature between men is less than it is between dogs. The difference between Napoleon and the generals he defeated was not due to custom, habit, and education ; the difference between General Grant and other generals who were total failures was a material and natural difference.

A person of equal authority with Adam Smith, to wit, the Pope, in his encyclical letter on the Condition of Labor, says it is impossible to reduce human society to a level, because there naturally exist among mankind innumerable differences of the most important kind; that people differ in capability, in diligence, in health, and in strength. This being manifestly true, the Pope, by his letter, knocked the " hypothetical economic man " in the head, and reduced every system of political economy which is founded on the tacit or express assumption that all men are exactly alike, to mere rubbish fit only for the dunghill.

Among mankind there naturally exist all sorts of men, including such as Cain, Esau, Canaan, Judas, the prodigal son, the wicked husbandmen, and the idle servant who hid in the earth the talent entrusted to him. Eternal happiness is offered to all, but many are unwilling to pay the price for it.

Much ingenuity has been expended in devising schemes whereby everyone will suffer an equal amount of sacrifice for an equal amount of satisfaction. Instead of allowing everyone to measure and compare the two for himself, it is to be done for him ; he must perform an allotted task for an allotted reward, whether he is willing or not. Socialism proposes to establish equality among unequal men by reducing them to the dead level of slavery. Society is to be reconstructed ; personal liberty abolished ; all land and capital put in the hands of the managers of the scheme, who will determine what things are " socially necessary," and by their subalterns compel everybody to perform the task assigned to him. The confiscation of all private property is the attractive bait held out by those who in the grand social upheaval expect to be on top. Robespierre, Marat, and the Jacobin Club professed to be great philanthropists. The central aim of socialism is said to be justice. Ignoring the difference which exists among men, sacrifice is to be measured by a unit of labor time, for which everyone is to receive the same wages. But if an hour's labor in one occupation ought to count for more than in another, the managers of the scheme will measure the difference, and not every person for himself. The things deemed " sociall}' necessary " having been determined by them, the laborers must do the work whether they are willing or not, for otherwise society would suffer. In a state of freedom, self interest is the goad, and every person can prick himself much or little ; in a state of slavery, the master and overseer apply the goad. Another method of accomplishing justice- is to compel the production of those things deemed "socially necessary," and to divide the net proceeds among consumers in proportion to their reasonable needs, or in proportion to consumptive instead of productive power, the managers of the scheme, however, to determine what are reasonable needs. By some people freedom is highly esteemed ; but the Israelites, although fed from heaven, wept when they remembered the fish, cucumbers, melons, leeks, onions, and garlic on which thev were fed by their masters in Egypt.

If society is to be regimented, and everybody compelled to work under overseers, it would seem to be good economy to vest the management of the scheme in the priesthood ; for then every person's eternal and temporal welfare would be secured by the same piece of machinery. Then everyone might find a subsistence somewhere about the soup kitchen of the national workhouse and at the same time feel assured of being at least a small angel in the world to come.

Although it may be true, since the Pope says

SO in his letter, that in a state of innocence everybody would practice industry as their free choice and delight, yet in the present state of depravity labor among the thorns and thistles is unequally arduous. When labor became a cause of sorrow it fell heaviest on ignorance and stupidity. Those who could do mental labor soon employed beasts to perform physical toil, and thereafter harnessed the forces of inanimate nature. These are now doing labor more and more ; mental labor causes the senseless machine to become automatic. The chief source of wealth is mental, not manual labor, A social organism would be a strange sort of an octopus, all legs and arms, and no head.

III. Relative Value

The essence of value being satisfaction, the use values of different things are of the same nature, and may be compared with each other as to quantity. Such comparison brings into view their relative use value. Commodities of a uniform grade or quality are usually measured as to their quantity by units of number, length, area, bulk, weight, etc. If at any time and place a certain number of units of one commodity had an equal value to a person with a certain other number of units of some other commodity the ratio of the relative value of the two quantities to him at such time and place would be unity; if he considered the two quantities to be of equal value to him, no reason would exist why he would prefer the one to other.

Relative value is variable. The use value of every commodity per unit of quantity being variable, their relative value is also variable, varying from time to time and from place to place.

To the same person; for if he had more food than he could consume and no clothes, their relative value to him would be different from what it would be if he had a superfluity of clothes and no food.

As between different persons; for if one were hungry and the other thirsty, the relative value of food and drink would not be the same to each of them ; at some other time their condition as to the two things might be reversed.

IV. Exchange Value

When different things are exchanged between their respective owners such things are said to have exchange value.

The existence of this quality depends upon a difference in the relative value of the things exchanged to the respective parties and their right to make the transfer. Every person estimates for himself the relative pressure of his wants and the relative value to him of the means necessary for their satisfaction. Market value is the combined result of the individual opinions of the buyers and sellers.

In every exchange each party gives what he considers to be the comparatively superfluous for the comparatively necessary, and expects to gain in value to him by the exchange ; for otherwise he would act without a motive. If a person has more of anything than he requires for his own use, and is in want of something else, some of the former may well be of less value to him than some of the latter. By an exchange the owner of a thing, although it may be a useless superfluity to him, can make it worth to him as much as what he can obtain in exchange for it ; how much this will be depends on his trading capacity and value sense. Fraud, deceit, a lack or mistake of judgment may cause a loss where a gain was expected. A person may pay too much for his whistle, too much for green spectacles, or even sell his birthright for a mess of pottage. But everyone who is at all competent to take care of himself usually gains more or less by an exchange. If he thinks a surplus m bushels of grain are of less value to him than n yards of cloth, he is usually correct in his opinion.

Neither party is satisfied with a mere balance of relative value to him, but strives to give the least and get the most possible. Hence, an exchange is usually preceded by a negotiation.

during which each party has the benefit of the other's opinion as to the quality of the articles and their value ; when each party believes that he has reached the best terms he can make for himself, and that he can do no better by dealing with some other person, a bargain is struck upon a basis finally agreed upon. It is naught, it is naught, saith the buyer ; but when he is gone his way then he boasteth.