AN INTRODUCTION TO THE THEORY OF VALUE

MACMILLAN AND CO., Limited

LONDON · BOMBAY · CALCUTTA · MADRAS MELBOURNE

THE MACMILLAN COMPANY

NEW YORK · BOSTON · CHICAGO DALLAS · SAN FRANCISCO

THE MACMILLAN CO. OF CANADA, Ltd.

TORONTO

AN INTRODUCTION TO THE THEORY OF VALUE

ON THE LINES OF MENGER, WIESER, AND BÖHM-BAWERK

BY WILLIAM SMART, M.A., D.Phil., LL.D.

ADAM SMITH PROFESSOR OF POLITICAL ECONOMY, UNIVERSITY OF GLASGOW

MACMILLAN AND CO., LIMITED ST. MARTIN’S STREET, LONDON 1920

COPYRIGHT.

First Edition 1891. Second Edition 1910. Third Edition 1914. Fourth Edition 1920.

GLASGOW: PRINTED AT THE UNIVERSITY PRESS BY ROBERT MACLEHOSE AND CO. LTD.

To W. S. H.

PREFACE TO THE SECOND EDITION, 1910

This little book was written in 1891, when I was fresh from my translations of Böhm-Bawerk and somewhat overborne, perhaps, by the ideas of his school. It has been out of print for many years, and, although often pressed to republish it, I refrained, for the reason that a busy life had prevented me returning to the later developments of that school. But I still feel, as I did when I wrote it, that my English-speaking colleagues have never given sufficient attention to that side of the one Theory of Value (for there is only one, however much individuals may emphasise the demand side or the supply side) which Jevons first laid stress on. Having now mortgaged my life to what seems to me the greater claim of writing the Economic Annals of the Nineteenth Century, the most I can do is to reprint the edition of 1891, with a few verbal alterations, submitting it as no more than it originally professed to be—an Introduction to the theory which lies at the centre of Political Economy, and must occupy the mind of the young economist for many years of his apprenticeship. The few who may be interested to know what place I give, after many years of teaching, to doctrines which had so great a part in forming my economic views, will find it suggested, perhaps, in Appendix II., entitled “Theory of Value: the Demand Side.” It is a summary of lectures, which I put into the hands of my students to be studied along with Book III. of the classic which has moulded modern economic thought, Professor Marshall’s Principles.

WILLIAM SMART.

University of Glasgow, November, 1910.

PREFACE TO THE FIRST EDITION

This book has few pretensions to originality. The theory is that enunciated by Menger and Jevons, and worked out by Wieser and Böhm-Bawerk. I have done little more than take it out of its German setting, and pass it through my own mind. As the translator of Böhm-Bawerk’s Capital and Interest and The Positive Theory of Capital, I may claim to have more than a superficial acquaintance with the work of the Austrian school, and this must form my credentials for the present Introduction. At the same time I must emphasise that it claims to be no more than an introduction. I do not consider that the last word on Value has been said by the Austrian school, but that seems to me no reason why the principles of the new theory should remain any longer beyond the reach of the ordinary English student. And in case it be said that I have stopped short of the most interesting part of the Natürlicher Werth, the application of the Value theory to the theory of Distribution, I may explain that, in justice to Professor Wieser, I have preferred to put the translation of that most brilliant and suggestive book into the capable hands of one of my students.

WILLIAM SMART.

Queen Margaret College, Glasgow.

CONTENTS

CHAP. PAGE

I. Introductory 1

II. The Analysis of Value 9

III. The Difference Between Utility and Value 13

IV. The Scale of Value 18

V. The Marginal Utility 29

VI. Difficulties and Explanations 35

VII. Complementary Goods 42

VIII. Subjective Exchange Value 47

IX. From Subjective to Objective Value 52

X. Price 55

XI. Subjective Valuations the Basis of Price 61

XII. Cost of Production 67

XIII. From Marginal Products to Cost of Production 74

XIV. From Cost of Production to Product 78

XV. Conclusion 84

Appendix I 87

Appendix II 91

Index 103

WRITERS AND BOOKS REFERRED TO

Carl Menger

(Professor in the University of Vienna),

Grundsätze der Volkswirthschaftslehre, Vienna, 1871.

Friedrich von Wieser

(Professor in the University of Prague),

Ueber den Ursprung und die Hauptgesetze des wirthschaftlichen

Werthes, Vienna, 1884.

Der natürliche Werth, Vienna, 1889,

translated as Natural Value, Macmillan & Co., 1893.

Eugen v. Böhm-Bawerk

(Honorary Professor in the University of Vienna),

Grundzüge der Theorie des wirthschaftlichen Güterwerths,

published in Conrad’s Jahrbücher, 1886.

Geschichte und Kritik der Kapitalzius-theoriem,

Innsbruck, 1884, translated as Capital and Interest,

Macmillan & Co., 1890.

Positive Theorie des Kapitales, Innsbruck, 1889,

translated as The Positive Theory of Capital,

Macmillan & Co., 1891.

W. Stanley Jevons

(Professor in University College, London),

The Theory of Political Economy, 2d edition,

Macmillan & Co., 1879.