Note 241 — Chapter XI · THE ULTIMATE RELATION OF COST TO VALUE

A brief comparison of the Austrian concept of “marginal utility” with Clark’s concept of “effective utility” may be of interest. Many kinds of goods are divisible into parts without changing their economic nature. Grain is a good example. A piano is an example of the other kind of good, the unit good. When a given good is divisible into increments, the Austrians point out that the value of any or every increment depends purely upon the satisfaction afforded by the last used or least useful increment. Putting it in another way, they say the marginal utility of the good is the actual utility of the last increment, and value depends on marginal utility. The very essence of this principle is that the value of a thing, as for instance first increment, does not depend on its own exact utility. Professor Clark, developing his thought in his own way, and using a different terminology, goes further than the Austrians, but along the same line. The “effective” utility of a good is not its own utility, but is that other least utility produced by the same amount of labor. The Austrians state that the value of any bushel of wheat depends on the utility of the “last” bushel, because if any bushel is removed the result will be that the last bushel is really given up, or any bushel is in effect the last. Clark points out that among goods which are all freely reproducible, the value of the product of any unit of labor time depends on the utility of the least useful product produced by a unit of labor time, though this other least useful product be an entirely different kind of good and not an increment of the same kind of good. Many minute questions in this connection we may pass for lack of space.