Richard von Strigl on Subjective Value
[This is an excerpt from Richard von Strigl's 1937 textbook Einführung in die Grundlagen der Nationalökonomie, as found in chapter 3, part 5: "Die Lehre vom wirtschaftlichen Werte." It is here presented in the English language for the first time. The translator, Pedro Almeida Jorge, from Instituto Mises Portugal, would like to thank Dr. Eduard Braun, from Technische Universitat Clausthal, for his very kind revision of a previous draft, comparing it to the original German edition. Other editions were consulted, namely in the French and Spanish languages.]
The exchange economy, as we know it today, is an historical circumstance; it was preceded in the past by an economy which knew little or no exchange at all. It is possible (although not very likely) that some day evolution may lead us to an economy completely devoid of exchanges. For two reasons, economic theory has attached renewed importance to the consideration of an economy without exchange, a consideration which has been more closely developed in the doctrine of economic value. First of all, because, as a result of the possibility to conceive of an economy without exchanges, the most general theory of the economy can only be one that includes within its scope all types of economic circumstances — meaning not only the exchange economy, but also the economy without trade. Furthermore, a second reason is that the development of the theory of economic value provides a more satisfactory basis for general economic postulates than that which is provided by the theory of prices. We shall hereby occupy ourselves in a brief summary of the theory of value with the aspects that are most relevant for the purpose of our study, postulating, in advance, that all we have previously said about the income structure must also be applicable to an economy without exchange.
1. Every economic agent faces an insufficient provision of means for the achievement his ends, which forces him to make a choice between the various ends that he can possibly achieve. This circumstance constitutes the economy, i.e., the necessity of economizing. Insofar as the means are completely sufficient (for example, the case of water, in normal times), these means are no longer "economic goods". The employment of a given type of means shall take place in such a way that the "most important" goals (i.e., those that the agent “prefers”) will be achieved "first". The employment will cease at the "least important" goal that can be achieved with the help of the available supply of means. Since that least important use is “dependent” upon a unit taken from a certain supply of similar goods, it is this “marginal employment” which will determine the value of any single unit ("Marginal value." — According to a very frequently adopted formulation: The utility provided by a particular unit taken from the available sum of similar goods, that is to say, its contribution to the "satisfaction of a need", is different in each situation. The minimum utility that can be reached with a certain supply, the "marginal utility", is decisive for the valuation of any single unit taken from the whole).
2. The value of a means of production is always and solely "derived” from the value of the product. The "imputation of value" is done by first calculating the share of the product which depends upon the use of that means of production (the marginal product). The value of the means of production is then equal to the value of the marginal product. (If only one means of production is used, its value is equal to the value of the product. A more difficult problem arises, however, when we consider the combined work of several "complementary” means of production, a situation we encounter in most production activities and with which we have dealt in our discussions on the theory of income.) Where a "means of production" is available in sufficient quantity, so that every envisaged enterprise is made possible (for example, under certain conditions, the case of water), no part of the income depends on this means, and it will, therefore, be deemed of no (“economic”) value — even though it could be “technically” indispensable for the production process. The distribution of the means of production between the various productive activities will be such that the value of the "marginal product" is the same in each employment.
3. From this imputation postulate, we can infer that the value of a means of production is independent of the costs previously incurred in order to acquire it. This fact will be of importance in our discussion of capital goods. Incidentally, it is also clear that the valuation of a finished product is not carried out according to the magnitude of the costs incurred (maybe under false suppositions), but instead only with regard to the possibility of "satisfying a need” with the given supply of goods.
4. The economic value of a good can only be understood as a "subjective value", that is to say, it is always related to and depends upon the effective ends of a determinate economic agent (even though the agent may, of course, take into account the interests of several individuals when setting his ends, as is, for example, the case of a family father). In the exchange economy, value may also depend on the possibility of acquiring another commodity by way of exchange, in which case we speak of “exchange value”. A formula that speaks of a "social value" (an economic estimate performed by society), on the other hand, cannot be useful in economic theory. The reason for this is that economic valuation, as such, is only meaningful when related to the possible employments of an economic good, and such employment can only be carried out by an "economic agent". (If we speak of the valuation carried out by the central administration, within the structure of a communist system, the principle of subjective value is still fully applicable, albeit with relation to the aims proposed by those who are in charge of such valuation.)