things in general and concrete units. It is one thing to speak of the value of bread in general; it is another thing to speak of the value of a loaf of bread. It is one thing to speak of the value, or the lack of value, of air in general, and another thing to speak of the value, or lack of value, of a given cubic yard of air. If one will look around and see what is going on, one will notice that men are not exchanging things in general, but only concrete units or quantities of things; not wheat in general, but a given number of bushels of wheat of a given grade; not money in general, but a given number of dollars, francs, or pounds; and even if air or water were exchanged, it would not be air or water in general, but some cubic yards or gallons in definite numbers. This distinction between things in general and concrete units or quantities will eliminate forever the confusion that sometimes results when that distinction is not made. For example, we are sometimes told that air is of immeasurable utility, and yet it has no power in exchange. If a man will think, however, not of air in general but of a definite cubic yard of air which may be boxed up (it might even be offered for sale), and then if he will ask himself how much he cares for that particular cubic yard of air or how much use it is to him, he will find that he does not care for it at all or that it is of no use to him whatever. If it were of any use to him (that is, if he would be any better off with it than without it) he would be willing to give something in exchange for it; it would then possess value, or power in exchange. Total utility and final, or marginal, utility. In other words, there are two distinct ideas of utility: one is total utility, and the other is sometimes called specific, sometimes final, and sometimes marginal utility. We gain an impression of the total utility of air when we think what would happen to us if all the air in existence were suddenly annihilated or if we, individually, were shut off from access to air. From this point of view the total utility of air is incalculable. But if we were to consider what would happen if a definite cubic yard were annihilated or if we were shut off from access to it, we get a very different impression. As a matter of fact, it would make no difference to anybody, because there would be enough left to satisfy completely every desire for air. In this world of adjustment, improvement, and progress, or of maladjustment and retrogression, the problem of having more or of having less of various things is always the important problem. How desirable is it that there should be more air than there is, or how undesirable is it that there should be less air than there is? Apparently this is a matter of indifference when one is out of doors. In certain close rooms it becomes a matter of importance, and air has some value in these cases. It is for this reason that in a practical, workaday world, where we are trying to improve our condition or to prevent it from becoming worse, we place a value on only those things which we desire to see increased. No social utility would be promoted by increasing the supply of air in any outdoor situation or by offering a price for increasing it. There is, therefore, no social or individual reason why it should possess any value or any power in exchange. On the other hand, if you think of an article of which you can say that you would be better off if you had a little more of it, or worse off if you had a little less than you have, you have a perfectly good individual reason for increasing your possession. Or if the community can say that it would be better off if it had more of it, or worse off if it had less, then the community would have a perfectly good reason for desiring to increase the supply. This is the case with everything which has value. The functional theory of value. A moral philosopher might conclude otherwise; that is, he might think that the desires of the people were vicious and that they would be worse off if they had more of a certain article, whereas they themselves think they would be better off if they had more of it. It is the desires of the multitude rather than the conclusions of the moral philosopher which determine market value. This may be called a functional theory of value. The function of value in a society is to induce producers to produce. It is a symptom that more of the article possessing value is wanted. It is, at the same time, a means of getting more; that is, if people will offer desirable things in exchange for an object someone may be persuaded to produce it. CHAPTER XXV WHAT DETERMINES THE VALUE OF A THING Commodities and specific units thereof. We saw in the last chapter that a definite, concrete thing, such as a loaf of bread or an egg, has value only because someone desires it, and that a general commodity, such as bread or eggs, has value only because someone desires more of it than he possesses. We saw also that in either case the more intense the desire for the thing or the commodity, the more value it will have, provided those who desire it have something to give in exchange for it or are able to exert themselves in the way of getting it. The next question is, What determines how intensely a concrete thing is desired or how intensely the people desire more of a commodity than they possess? It is obvious that something depends upon how much of the commodity they already possess. If everyone not only has quite enough for the present but foresees no scarcity in the future, it is obvious that he will have no desire for more of the commodity, nor would he have any desire for any concrete unit of it that you might offer him. If everyone is in that situation, no one will give anything in exchange for it. If, however, everyone has almost enough or thinks that he will always have almost enough of the commodity in question, his desire for more will not be very intense, nor will he give very much in exchange for it. But if he lacks a great deal of having enough or thinks that he is likely to lack it, he will give a great deal to get a little more. In this case each unit of the commodity will have high value. In short, the abundance or scarcity of a commodity has a great deal to do in determining the intensity with which each unit of it is desired and with its power in exchange. Demand and supply. The foregoing remarks are only another way of saying that the value of a commodity is determined by the demand for it and the supply of it. This is well known as the law of demand and supply. This law, however, is not a mere convention of the market; it is based upon certain physical and physiological facts, which are as true under one system of society as under another. First, let us understand how it works on an ordinary market; that is, where a number of buyers desire to buy, and different sellers desire to sell, varying quantities of the same commodity. Not all the buyers are equally anxious to buy, nor do they all have equal quantities of other goods to give in exchange. Therefore they will not all be willing to pay the same price for equal quantities of the commodity in question. Let us assume, for the sake of an illustration, that there are eleven possible buyers ready to buy at as many different prices. One is willing to pay, let us say, as high as a dollar for a pound of the commodity if he cannot get it more cheaply. Another is willing to pay ninety-five cents, another ninety, another eighty-five, and so on, the eleventh not being willing to pay more than fifty cents. The prices at which these buyers are willing to buy are listed in the following table, under what is called the "demand schedule." DEMAND Schedule Ist buyer would pay $1.00 2d buyer would pay $0.95 3d buyer would pay $0.90 4th buyer would pay $0.85 5th buyer would pay $0.80 6th buyer would pay $0.75 7th buyer would pay $0.70 8th buyer would pay $0.65 9th buyer would pay $0.60 10th buyer would pay $0.55 11th buyer would pay $0.50 SUPPLY SCHedule $0.50 is 1st seller's lowest price In order to simplify our illustration let us assume an equal number of sellers on the market, no two of whom are equally |