Appendix A1

Goods and “Relationships”

Aristotle (Politics i. 4. 1253b, 23–25) calls the means of life and well-being of men “goods.” The predominantly ethical standpoint from which the, peoples of antiquity regarded human relationships is reflected in the views of ancient writers on the nature of utility and the nature of goods, just as the religious standpoint predominates in medieval writings. Ambrosius says “nihil utile, nisi quod ad vitae illius eternae prosit gratiam,”2 and even Louis Thomassin, whose economic views belong to the middle ages, writes in his Traité du négoce et de l’usure (Paris, 1697, p. 22), that “l’utilité même se mesure par les considérations de la vie éternelle.”3 Among more recent writers, François V. de Forbonnais defines goods (biens) as “les propriétés qui ne rendent pas une production annuelle, telles que les meubles précieux, les fruits destinés à la consommation.”4 (Principes économiques in E. Daire [ed.], Mélanges d’économie politique, Paris, 1847, I, 174–175), and contrasts them with “richesses” (goods that yield a revenue). A similar distinction, in a different sense, is also made by Du Pont (Physiocratie, Leyden, 1768, p. cxviii).

The word “good,” in the special meaning of present day science, was already used by Guillaume F. Le Trosne (De l’intdérêt social, Paris, 1777, pp. 5–6) who contrasts needs with the means for their satisfaction and calls the latter goods (biens). See also Jacques Necker, Sur la législation et le commerce des grains, Paris, 1775, pp. 17–24. Jean Baptiste Say (Cours complet d’économze politique pratique, Paris, 1840, I, 65) defines goods (biens) as “les moyens que nous avons de satisfaire [nos besoins].”

The development of the theory of the good in Germany can be seen from what follows: Julius v. Soden (Die Nazional-Oekonomie, Leipzig, 1805, I, 39–40) defined a good as an article of consumption; L.H. v. Jakob (Grundsätzeder National-Oekonomie, Halle, 1825, p. 30) defined a good as “was zur Befriedigung menschlicher Bedürfinsse geschickt ist”;5 Gottlieb Hufeland (Neue Grundlegung der Staatswirthschaftskunst, Wien, 1815, I, 15) defined it as “jedes Mittel zu einem Zwecke eines Menschen”;6 Henri Storch (Cours d’économie politique, St. Petersbourg, 1815, I, 56–57) said: “L’arrêt que notre jugement porte sur l’utilité des choses . . . en fait des biens.”7 From these beginnings, Friedrich Carl Fulda (Grundsätze der ökonomisch-politischen oder Kameralwissenschaften, Tübingen, 1816, p. 2) defines goods as “diejenige [Sachen], welche der Mensch zu diesem Zweck [Befriedigung geistiger und physicher Bedürfnisse] als Mittel anerkennt”8 (cf., however, Hufeland, op. cit., I, 22ff.). Wilhelm Roscher (Grundlagen der Nationalökonomie, Twentieth edition, Stuttgart, 1892, p. 2) defines them as “alles dasjenige was zur. . . . Befriedigung eines wahren menschlichen Bedürfnisses anerkannt brauchbar ist.”9

Sir James Steuart, in An Inquiry into the Principles of Political Oeconomy (London, 1767, I, 360ff.), had already divided goods into things, personal services, and rights. In the category of rights he even included marketable privileges or immunities (p. 370). Say (op. cit., pp. 530–531) counted a law practice, the goodwill enjoyed by a merchant, newspaper enterprises, and even the reputation of a military leader as goods (biens). Friedrich v. Hermann (Staatswirthschaftliche Untersuchungen, München, 1874, pp. 103ff.) includes a large number of relationships under the concept of external goods (relationships of hospitality, love, family, gainful employment, etc.) and distinguishes them from material goods and personal services as a special category of goods. Roscher (op. cit., p. 8) counts the state among “relationships,” whereas Albert E.F. Schäffle (Die nationalökonomische Theorie der ausschliessenden Absazverhältnisse, Tübingen, 1867, p. 12) confines the concept “relationships” to “übertragbare, durch private Beherrschung des Absatzes und durch Verdrängung der Concurrenz ausschliessend gemachte Renten.”10 In this passage Schäffle uses the term “rent” in a sense peculiar to himself. (See Schäffle, Das gesellschaftliche System der menschlichen Wirtschaft, Tübingen, 1873, I, 208ff.; also Soden, op. cit., I, 25ff.; and Hufeland, op. cit., I, 30.)

Appendix B1


Investigations of the nature of economic goods began with attempts to define the concept wealth in the economy of an individual. Adam Smith barely touched upon the question, but the suggestions he made have had the most far-reaching effects on theories of wealth. “After the division of labour has once thoroughly taken place,” he says, “. . . a man . . . must be rich or poor according to the quantity of that labour which he can command or which he can afford to purchase.” (Wealth of Nations, Modern Library Edition, New York, 1937, p. 30.) From this it may be concluded as a consistent extension of the Smithian theory that whether or not a good provides us with command of labor (or, which is the same thing as far as Smith is concerned, whether or not it has exchange value) is the criterion by which its character as an object of wealth (in the economy of an individual) is to be judged. Say also follows this line of reasoning. In his Traité d’économie politique (Paris, 1803, p. 2), he separates goods that have exchange value from goods that do not, and excludes the latter from wealth. (“Ce qui n’a point de valeur, ne saurait être une richesse. Ces choses ne sont pas du domaine d’économie politique.”2) In his Principles of Political Economy and Taxation (ed. by E.C.K. Gonner, London, 1891, p. 258), Ricardo also distinguishes between value and goods (“riches”), and differs from his predecessors only in that he employs the word “riches” in a markedly different sense than that in which Say uses the word “richesse.” Following Adam Smith (op. cit., pp. 314ff.), Malthus sought the criterion of the wealth-character of goods in whether or not they are tangible objects (Principles of Political Economy, London, 1820, p. 28), and in his later writings as well, he confines the concept wealth to material goods. Among German writers, this same opinion is held by H. Storch (Cours d’économie politique, St. Petersbourg, 1815, I, 108ff.); F.C. Fulda (Grundsätze der ökonomisch-politischen oder Kameralwissenschaften, Tübingen, 1816, p. 2); J.A. Oberndorfer (System der Nationalökonomie, Landshut, 1822, pp. 64–65); K.H. Rau (Grundsätzeder Volkswirthschazftslehre, Heidelberg, 1847, p. 1); J.F.E. Lotz (Handbuch der Staatswirthschaftslehre, Erlangen, 1837, I, 19); and Theodor Bernhardi (Versuch einer Kritikder Gründe die für grosses und kleines Grundeigenthum angeführt werden, St. Petersburg, 1849, pp. 134ff., and especially pp. 143ff.).

Writers who have argued against the exclusion of immaterial goods are: J.B. Say (Cours complet d’économie politique pratique, Paris, 1840, I, 89), J.R. McCulloch (Principles of Political Economy, London, 1830, pp. 6ff.), F. v. Hermann (Staatswirthschaftliche Untersuchungen, München, 1874, pp. 21ff.), and Wilhelm Roscher (Grundlagen der Nationalökonomie, Twentieth edition, Stuttgart, 1892, p. 16). Malthus had already recognized that the concept of wealth cannot be correctly defined by limiting it to material goods (Principles of Political Economy, Second Edition, London, 1836, p. 34), but I shall have occasion at a later point to discuss his shifting attempts to provide a definition of wealth.

The most recent representatives of political economy in England tie the concept of wealth almost exclusively to objects having exchange value. See, for example, McCulloch (op. cit., p. 6); J.S. Mill (Principles of Political Economy, ed. by Sir W.J. Ashley, London, 1909, p. 9); and N.W. Senior (An Outline of the Science of Political Economy, London, 1836, p. 6). Among the recent French writers, Ambroise Clément and Auguste Walras (De la nature de la richesse et de l’originede la valeur, ed. by Gaëtan Pirou, Paris, 1938, pp. 146ff.) in particular hold this view.

Whereas the English and French economists merely distinguish between goods that are wealth and goods that are not, Hermann (op. cit., p. 12) goes much deeper, since he contrasts economic goods (objects of economizing) with free goods. This distinction has since been maintained in German economics with few exceptions. But Hermann defines the concept economic goods too narrowly. For he says that an economic good is “was nur gegen bestimmte Aufopferung, durch Arbeit oder Vergeltung hergestellt werden kann.”3 He thus makes the economic character of goods depend on labor or on trade between men (ibid., p. 18). But are not the fruits that an isolated individual can gather without labor from trees economic goods for him if they are available to him in smaller quantities than his requirements for them? And is not spring water that is also available to him without labor and in quantities exceeding his requirements a non-economic good?

Roscher who had defined economic goods in his Grundriss zu Vorlesungen über die Staatswirthschaft (Göttingen, 1843, p. 3) as goods “die in den Verkehr kommen,” and who defined them in the earlier editions of his System der Volkswirthschaft (Edition of 1857, p. 3) as “Güter, welche des Verkehrs fähig sind, oder wenigstens denselben fördern können,”4 defines them in the more recent editions of his major work (Grundlagen der Nationalökonomie, Twentieth edition, Stuttgart, 1892, p. 4) as “Zwecke und Mittel der Wirthschaft.”5 This definition is merely a paraphrase of the concept to be defined, and shows that the eminent scholar considers the question of the criteria for distinguishing between economic and non-economic goods as still open. See also Schäffle’s Das gesellschaftliche System der menschlichen Wirthschaft (Tübingen, 1873, I, 66ff.), and his “Die ethische Seite der nationalökonomischen Lehre vom Werthe” (originally published in Tübingen Universitätsschriften, 1862, and reprinted in A.E.F. Schäffle, Gesammelte Aufsätze Tübingen, 1885, I, 184–195).

That the difficulties non-German economists have had in attempting to define the concept “wealth” stem from the fact that they do not know the concept “economic good” is most clearly illustrated by the writings of Malthus. In the first edition of his Principles of Political Economy, which was published in 1820, he defines wealth as “those material objects which are necessary, useful, or agreeable to mankind” (p. 28). Since this definition includes all (material) goods in the concept “wealth,” it includes even non-economic goods, and is entirely too broad for this reason. In his Definitions in Political Economy, which appeared seven years later, he defines wealth as “the material objects necessary, useful or agreeable to man, which have required some portion of human exertion to appropriate or produce” (p. 234.) In the second edition of his Principles (London, 1836, pp. 33–34, note) he explains that “the latter part was added, in order to exclude air, light, rain, etc.” But he recognizes that even this definition is untenable and says (ibid.) that “there is some objection to the introduction of the term industry or labour into the definition, because an object might be considered as wealth which has had no labour employed upon it.” Finally, in the text of the second (1836) edition of the Principles (p. 33) he comes to the following definition of the concept: “I should define wealth to be the material objects, necessary, useful, or agreeable to man, which are voluntarily appropriated by individuals or nations.” Thus he falls into a new error by making the fact that a good is the property of an economizing individual the source of its wealth-character (i.e., of its economic character).

We find similar shifting attempts to arrive at a definition of wealth in the writings of J.B. Say. In his Traité d’économie politique (Paris, 1803, p. 2), he makes value (exchange value) the source of the wealth-character of goods. He says that “ce qui n’a point de valeur, ne saurait être une richesse.” This view was attacked by R. Torrens (An Essay on the Production of Wealth, London, 1821, p. 7), and Say then shifted in his Cours complet d’économie politique pratique (Paris, 1840, I, 66), to the following description of goods that constitute wealth: “Nous sommes forcés d’acheter, pour ainsi dire, ces . . . biens par des travaux, des économies, des privations; en un mot, par de véritables sacrifices.”6 In this passage, Say takes essentially the same position as that expressed by Malthus in his Definitions in Political Economy. But a little further on (Cours complet, p. 66) he says, “On ne peut pas séparer de ces biens l’idée de la propriété. Ils n’existeraient pas si la possession exclusive n’en était assurée à celui qui les a acquis. . . . D’un autre côté, la propriété suppose une société quelconque, des conventions, des lois. On peut en conséquence nommer les richesses ainsi acquises, des richesses socials.”7

Appendix C1

The Nature of Value

Attempts to determine the factors common to all forms of the value of goods, and thus to formulate the general concept of “value,” can be found in the works of all recent German authors who have independently treated the theory of value. Moreover, they have all tried to distinguish the use value of goods from mere utility.

Friedländer (“Theorie des Werthes,” Dorpater Universitäts Program, 1852, p. 48)2 defines value as “das im menschlichen Urtheil erkannte Verhältniss, wornach ein Ding Mittel für die Erfüllung eines erstrebenswerthen Zweckes sein kann.”3 (See also H. Storch, Cours d’économie politique, St. Petersbourg, 1815, I, 36.) Since the relationship described by Friedländer (provided that the end desired is the satisfaction of a human need or an end that is causally connected with the satisfaction of a human need) is what is responsible for the utility of a thing, his definition is identical with one in which the value of a good is conceived to consist in its recognized fitness for attaining an end, or as the recognized utility of a thing. But utility is a general prerequisite of goods character and Friedländer’s definition is therefore too broad, quite apart from the fact that it does not touch upon the nature of value. Indeed, Friedländer comes to the conclusion (op. cit., p. 50) that non-economic goods are just as much objects of human valuation as economic goods.

Like many of his predecessors, Karl Knies (“Die nationalökonomische Lehre vom Werth,” Zeitschrift für die gesammte Stattswissenschaft, XI [1855], 423) sees in value the degree of suitability of a good for serving human ends. (See also the earlier editions of Wilhelm Roscher’s Die Grundlagen der Nationalökonomie, e.g., the Fourth Edition, Stuttgart, 1861, p. 5.) I cannot concur in this view, because although value is a magnitude that can be measured, the measure of value belongs as little to the nature of value as the measure of space or time to the nature of space or time. In fact, Knies himself senses the difficulties to which his conception of value ultimately leads, since he also acknowledges usefulness, utility, and even goods-character as definitions of value and remarks that “die Werttheorie . . . [ist] . . . an einzelnen Stellen thatsächlich im Ganzen auf die Combination beider Bedeutungen des Wortes Werth aufgebaut”4 (ibid., pp. 423–424). He does not, therefore, reach any uniform principle of value.

A.E.F. Schäffle (“Die ethische Seite der nationalökonomischen Lehre vom Werthe” originally published in Akademisches Programm zur Feier des Geburtsfestes Sr. Majestät des Königs Wilhelm, Tübingen, 1862, and reprinted in A.E.F. Schäffle Gesammelte Aufsätze Tübingen, 1885, I, 184–195) proceeds from the view that “eine potentielle oder actuelle vom Menschen mit bewusstem Willen gestaltete Beziehung zwischen Person und unpersönlichen Aussendingen ist also stets erforderlich, wenn vom Wirthschaften und von wirthschaftlichen Gütern soll die Rede sein können. Diese Beziehung lässt sich nun sowohl von Seite des wirthschaftlichen Objectes als von Seite des wirthschaftlichen Subjectes auffassen. Objectiv ist sie die Brauchbarkeit, subjectiv der Werth des Gutes. Brauchbarkeit (Dienlichkeit, Nützlichkeit) ist die Tauglichkeit der Sache, einem menschlichen Zwecke . . . zu dienen. Werth aber ist die Bedeutung, welche das Gut vermöge seiner Brauchbarkeit für das ökonomische Zweckbewusstsein der wirthschaftlichen Persönlichkeit hat.”5 (Ibid., p. 186). But Schäffie himself shows that this definition of value is certainly too broad when, in his later writings (e.g., Das gesellschaftliche System der menschlichen Wirthschaft, Tübingen, 1873, I, 162) he defines value as “die Bedeutung eines Gutes, um der dafür zu bringenden Opfer.”6 His earlier definition is too broad because non-economic goods also have utility and may be consciously applied to the purposes of men even though they have no value. It does not, therefore, confine value to economic goods, although Schäffie, a penetrating scholar, is fully aware of the fact that value is never attributed to non-economic goods (Gesammelte Aufsätze, p. 187). His more recent definition, on the other hand, is clearly too narrow, for nothing is more certain than that there are numerous economic goods that come into the command of men without the least sacrifice (alluvial land, for instance), and still other economic goods that cannot be attained by any economic sacrifice at all (inborn talents, for example). But Schäffle nevertheless placed an important factor for the deeper understanding of the nature of value in the clearest possible light. For according to him it is not the objective suitability of a good in itself (ibid., p. 186), nor the degree of its utility (ibid., pp. 191–192), but the importance of a good to an economizing individual that constitutes the essence of its value.

An interesting contribution to the correct conception of value has been made by H. Roesler (“Zur Theorie des Werthes,” Jahrbücher für Nationalökonomie und Statistik, XI [1868], 279–313 and 406–419). Roesler comes to the conclusion that “die herkömmliche Unterscheidung zwischen Gebrauchs- und Tauschwert unrichtig sei und mit dem Moment des nützlichen Gebrauchs der Dinge der Begriff des Werthes absolut nicht verbunden werden könne; dass vielmehr der Begriff des Werthes nur ein einheitlicher sei, die Vermögensqualität der Dinge bezeichne und durch Realisirung der Vermögensrechtsordnung zur concreten Erscheinung komme.” (Ibid., p. 406.)7 Roesler’s peculiar point of view is evident in this passage, but so also is the fact that his conception is a forward step. For he correctly delimits the sphere of objects that constitute wealth and strictly s.eparates the utility of goods from their value. But I cannot agree with Roesler if he makes the wealth-character of a good the determining principle of its value, since both a good’s wealth-character and its value are consequences of the same quantitative relationship (the relationship described in the text above). Moreover, Roesler’s conception of wealth character seems questionable to me because it was borrowed from jurisprudence (see ibid., pp. 295 and 302ff., and also Christian von Schlözer, Anfangsgründe der Staatswirthschaft, Riga, 1805, p. 14). Like their economic character the value of goods is independent of social economy, of the legal order and even of the existence of human society itself. For value can be observed in an isolated economy, and cannot therefore be founded upon the legal order.

Among earlier attempts to define the general concept of value I wish also to mention those of: Geminiano Montanari (Della moneta, in Scrittori classici Italiani di economia politica, Milano, 1803–5, II, 43); A.R.J. Turgot (“Valeurs et Monnaies” in Oeuvres de Turgot, ed. by G. Schelle, Paris, 1913–23, III, 79ff.); E.B. de Condillac (Le commerce et le gouvernement, reprinted in E. Daire, [ed.] Mélanges d’économie politique, Paris, 1847, I, 251ff.); G. Gamier (in the Preface to his French translation of A. Smith’s Wealth of Nations under the title La Richesse des Nations, Paris, 1843, I, xlviff.); and H. Storch (op. cit., I, 56ff.) Among these, it is Condillac’s definition of value in particular that bears no small resemblance to the recent developments of the theory of value in Germany.

Appendix D1

The Measure of Value

As early as Aristotle we find an attempt to discover a measure of the use value of goods and to represent use value as the foundation of exchange value. In the Ethica Nicomachea (v. 5. 1133a, 26–1133b, 10) he says that “there must be something that can be the measure of all goods. . . . This measure is, in reality, nothing other than need, which compares all goods. For if men desire nothing or if they desire all goods in the same way, there would be no trade in goods.”2 In the same spirit Ferdinando Galiani (Della moneta in Scrittori classici Italiani di economia politica, Milano, 1803–5, X, 58) writes “ch’essendo varie le disposizioni degli animi umani e varj i bisogni, vario è il valor delle cose.”3

A.R.J. Turgot deals with this problem in an essay of which only a fragment survives (“Valeurs et Monnaies” in Oeuvres de Turgot, ed. by G. Schelle, Paris, 1913–23, III, 79–98). He explains (pp. 85ff.) that when human civilization has reached a certain stage man begins to compare his needs one with another, in order to adjust his efforts in procuring different goods to the degree of necessity and utility of these goods (besoins, a word used frequently in this sense by the Physiocrats). In evaluating goods man also takes into account the greater or less difficulty of procuring them, and Turgot thus comes to the conclusion that “la valeur estimative d’un objet, pour l’homme isolé, est précisément la portion du total de ses facultés qui répond au désir qu’il a de cet objet, ou celle qu’il veut employer à satisfaire ce désir.”4 (Ibid., p. 88.)

E.B. de Condillac comes to another result. In his Le commerce et le gouvernement (published originally in 1777 and reprinted in E. Daire [ed.], Mélanges d’économie politique, Paris, 1843, I, 247–445) he says: “On dit qu’une chose est utile, lorsqu’elle sert à quelques-uns de nos besoins; . . . D’après cette utilité, nous l’estimons plus ou moms; . . . Or cette estime est ce que nous appellons valeur.”5 (Ibid., pp. 250–251.) Whereas Turgot makes the effort a person employs in procuring a good the measure of its use value, Condillac contends that its utility is the measure of its use value. These two fundamental views have frequently reappeared since that time in the writings of English and French economists.

A deeper treatment of the problem of the measure of use value is to be found only among the German writers. In an often quoted passage, refuting Proudhon’s arguments against the prevailing theory of value, Bruno Hildebrand (Die Nationalökonomie der Gegenwart und Zukunft, Frankfurt, 1848, pp. 318ff.) says: “Da der Nutzwerth immer eine Relation der Sache zum Menschen ist, so hat jede Gütergattung das Mass ihres Nutzwerthes an der Summe und Rangordnung der menschlichen Bedürfnisse, welche sie befriedigt, und wo keine Menschen und keine Bedürfnisse existiren, dort giebt es auch keinen Nutzwerth. Die Summe des Nutzwerthes, welche jede Gütergattung besitzt, bleibt daher, sobald sich nicht die Bedürfnisse der menschlichen Gesellschaft ändern, unveränderlich, und vertheilt sich auf die einzelnen Stücke der Gattung, je nach der Quantität derselben. Je mehr die Summe der Stücke vergrössert, desto geringer wird der Antheil, welcher jedem Stücke vom Nutzwerthe der Gattung zufällt und umgekehrt.”6 Hildebrand’s treatment gave an incomparable impetus to investigation, but it suffered from two shortcomings, which were felt (as we shall see) by later students of the theory who endeavored to eliminate them. In the passage quoted, the only thing that the value of a given “species of goods” can possibly mean is the value to human society of the total available quantity of all goods of that one kind. This value, however, has no real existence. It cannot anywhere be observed in the real world. For value arises only for an individual and for him only with respect to concrete quantities of a good (see p. 116 of the text). And even if we were to overlook this inaccuracy and conceive of Hildebrand’s “value of the species” as the sum of value of all concrete goods of a given kind for the different members of society possessing them, his statement would still be unacceptable, since it is clear that a different distribution of these goods, and even more a change in the quantity of them available, would change the “value of the species” in this sense, and in certain circumstances, reduce it completely to zero. If the term is taken literally, therefore, the “value of a species of goods” has no real nature and does not exist, unless “utility,” “recognized utility,” or the “degree of utility” is confounded with “value.” On the other hand, the value of a species of goods, in the sense of the sum of the value to the various members of society of all concrete goods of a given kind, is not an unchanging magnitude, even if the needs of the various members of society remain unchanged. The foundation upon which Hildebrand builds his calculus is therefore contestable. To this must be added the fact that Hildebrand does not consider differences in the degree of importance of satisfaction of the various concrete needs of men, if he attributes the “value of a species” to the various units of the species according to quantity. (See already the essay by Karl Knies, “Die nationalökonomische Lehre vom Werth,” Zeitschrift für die gesammte Staatswissenschaft, XI [1855], 463ff.) The correct element in Hildebrand’s theory lies in the acute and universally valid observation that the use value of goods increases when their available quantity is diminished, and vice versa. But he definitely goes too far in assuming that there is always a strict proportionality between the two.

Friedländer (“Die Theorie des Werthes,” Dorpater Universitäts Schrift, 1852, pp. 60ff.)7 adopts a different approach in his attempt to solve the problem, and comes to the conclusion that “die durchschnittliche concrete Bedürfnisseinheit (das Mittel der innerhalb der verschiedenen Classen der Gesellschaft gefundenen besonderen Bedürfnisseinheiten) der allgemeine Ausdruck für den objectiven volkswirthschaftlichen Gebrauchswerth sei, und der Bruch, welcher die Quoten ausdrückt, welche die einzelnen Brauchlichkeiten zur Bedürfnisseinheit beitragen und das Werthverhältniss derselben zur mittleren concreten Bedürfnisseinheit anzeigt, das Mass für den objectiven Werth der einzelnen Brauchlichkeiten abgebe.”8 I believe that this solution of the problem is vulnerable, above all, in that it involves a complete misunderstanding of the subjective character of value if an “average man” with “average needs” is posited. For the use value of one and the same good is usually very different for two different individuals, since it depends upon the requirements of and quantities available to each of them. The “determination of the use value to the average man” does not, therefore, really solve the problem, since we are interested in a measure of the use value of goods that can be observed in real cases and with respect to specific persons. Friedländer therefore arrives merely at the definition of a measure of the “objective value” of different goods (ibid., p. 68), although a measure of this sort does not, in reality, exist.

Karl Knies too has made a penetrating attempt to solve the problem in the essay to which I have already referred. He says quite correctly on p. 429 that “die Bedingungen für die Abschätzung des Gebrauchswerthes der Güter können in nichts Anderem als in den wesentlichen Elementen für den Begriff des Gebrauchswerthes gefunden werden.”9 But the fact that Knies does not circumscribe the concept of use value narrowly enough (as we have seen earlier in Appendix C, p. 293) leads him to several doubtful conclusions about the determination of the measure of value. Knies continues: “Sonach hängt die Grösse des Gebrauchswerthes der Güter ab (a) von der Intensivität des menschlichen Bedürfnisses, welches sie befriedigen, (b) von der Intensivität, in welcher sie em menschliches Bedürfniss befriedigen. . . . Hiernach stellt sich eine Classification und Stufenleiter der menschlichen Bedürfnisse ein, mit welcher eine Classification und Stufenleiter der Gütergattungen correspondirt.”10 But the need for water is one of the most intense of human needs, since our lives depend on its satisfaction, and no one will deny that fresh spring water satisfies this need most adequately. Hence, if Knies’ principle of the measure of value were correct, fresh spring water would occupy one of the highest points on the scale of species of goods. But concrete quantities of this good normally have no value, and species of goods cannot have value at all, as I already have shown. Although, in the course of his article, after an extensive examination of the measure of the “abstract value of goods,” Knies also touches upon the use value of concrete goods in the economy of a single individual (ibid., p. 461) he does so only in order to elucidate the difference between the “value of a species of goods” (really “utility”) and the value of concrete goods, thus very correctly formulating the proposition that the measure of the utility of a thing is something fundamentally different from the measure of its value. But Knies does not succeed in formulating a principle for determining the magnitude of use value in its concrete form, although he comes very close to it at one point (ibid., p. 441) in his richly suggestive essay.

A.E.F. Schäffle has approached the solution of the problem from another standpoint (“Die ethische Seite der nationalökonomischen Lehre vom Werthe,” in Gesammelte Aufsätze, Tübingen, 1885, I, 184–195). This penetrating scholar writes: “Die Thätigkeit des Wirthschaftens wird um so energischer in Anregung kommen, je dringender das persönliche Bedürfniss für ein Gut, und je schwieriger das diesem Bedürfniss entsprechende Gut zu beschaffen ist. Je mehr diese beiden Factoren: Intensivität des Begehrens und Intensivität der Schwierigkeit des Erlangens, auf einander wirken, desto stärker tritt die Bedeutung des Gutes in das die wirthschaftliche Thätigkeit leitende Bewusstsein. Auf dieses Grundverhältniss führen alle Sätze über Mass und Bewegung des Werthes zurück.”11 I fully agree with Schäffle when he says that the more pressing one’s need for a good the more energetic will be one’s economizing activity whenever it is necessary to procure the good in question. But it is just as certain that many goods for which we experience the most urgent needs (water, for instance) ordinarily have no value, while other goods that are only suitable for the satisfaction of needs of much less importance (hunting lodges, artificial duck ponds, etc.) have a considerable value to us. The urgency of the needs a good can satisfy cannot therefore by itself be the determining factor of the value of that good, even if we were to overlook the fact that most goods are suited to the satisfaction of several different needs that differ in intensity. Hence in this proposition, since the determining magnitude is not established with certainty, the very thing that was in question remains in doubt. But it is equally certain that the degree of difficulty of procuring a good is not, by itself, a measure of its value. Goods of very little value can often be procured only with the greatest difficulty, and it is not true that the economizing activity of men becomes more energetic the greater the difficulty. On the contrary, men always direct their economizing activity toward the procurement of those goods which, given equal urgency of the needs for them, can be acquired with the least difficulty. Neither the one nor the other part of Schäffle’s two-horned principle provides, by itself, the determining principle for the measure of value. Although he says that the more these two factors (intensity of desire and difficulty of procurement) operate upon one another, the more strongly does the importance of the good enter into the consciousness that guides the economic activity, and even if we assume, as Schäffle explicitly does, that economizing activity is “mit Bewusstsein gerichtet auf die allseitige Erfüllung der sittlich vernünftigen Lebenszwecke,”12 (ibid., p. 185) (that is, in other words, even if we assume goods to be in the hands of rational economizing individuals, a fact that constitutes, as Schäffle quite correctly sees, an essential factor for the resolution of his dilemma) the question how these two factors influence each other, and how in consequence of this mutual influence each good attains a definite magnitude of importance for economizing men, still remains unsolved.

Among the most recent economists who have treated the theory of the measure of value as parts of their systems, L. v. Stein must be mentioned in particular because of his original treatment of the subject. Stein defines value as “das Verhältniss des Masses eines be stimmten Gutes zum Leben der Güter uberhaupt.”13 (System der Staatswissenschaft, Stuttgart, 1852, I, 169–170.) On page 171 he arrives at the following formula for the determination of the measure of value: “Das wirkliche Wertmass eines Gutes wird daher gefunden, indem die Masse der übrigen Güter mit der Masse des fraglichen Gutes dividirt wird. Um dieses aber zu können, muss zuerst für die gesammte Gütermasse ein gleichnamiger Nenner gefunden werden. Dieser gleichartige Nennner oder die Gleichartigkeit der Güter ist für sie aber nur gegeben in ihrem gleichartigen Wesen; darin dass alles wirkliche Gut wieder aus den sechs Elementen des Stoffes, der Arbeit, des Erzeugnisses, des Bedürfnisses, der Verwendung und der wirklichen Consumtion besteht, indem, wo eins dieser Elemente wegfällt, das Objekt ein Gut zu sein aufhört. Diese Elemente eines jeden wirklichen Gutes sind nun in diesem Gute wieder in bestimmtem Masse enthalten, und das Mass dieser Elemente bestimmt das Mass des einzelnen, wirklichen Gutes für sich. Daraus folgt, dass das Massenverhältniss aller einzelnen Güter untereinander, oder ihr allgemeines Wertmass gegeben ist in dem Verhältniss der Güterelemente und ihrer Masse innerhalb des einen Gutes zu demjenigen innerhalb des andern. Und die Bestimmung und Berechnung dieses Verhältnisses ist mithin die Bestimmung des wirklichen Wertmasses.”14 (See also ibid., pp. 181ff. for a formula of the value equation.)

Appendix E1

The Concept of Capital

The most frequent mistake that is made not only in the classification but also in the definition of capital, consists in the stress laid on the technical instead of the economic standpoint. (Against this practice see also J.F.E. Lotz, Handbuch der Staatswirthschaftslehre Erlangen, 1837, I, 60ff., and F.B.W. v. Hermann, Staatswirthschaftliche Untersuchungen München, 1874, pp. 221ff.) The classification of goods into means of production and consumption goods (goods of higher order and goods of first order) is scientifically justified, but does not coincide with a classification of wealth into capital and non-capital. The opinion of those who use the term “capital” to refer to all items of wealth that yield a permanent income seems to me to be equally untenable. For if the concept of wealth is stretched to include labor power, and if the concept of income is extended to include the services of consumption goods to their owners (see Hermann, op. cit., pp. 582ff. and G. v. Schmoller, “Die Lehre vom Einkommen in ihrem Zusammenhang mit den Grundprincipien der Steuerlehre,” Zeitschrift für die gesammte Staatswissenschaft, XIX (1863), 53ff. and 76ff.), a consistent extension of this doctrine leads one to the proposition that labor power (see already N.F. Canard, Principes d’économie politique Paris, 1801, p. 9, and J.B. Say, Cours complet d’économie politique pratique Paris, 1840, p. 144), land (see Ehrenberg, Die Staatswirthschaft nach Naturgesetzen, Leipzig 1819, p. 13; J.A. Oberndorfer, System der Nationalökonomie Landshut, 1822, p. 207; “Lord Lauderdale on Public Wealth,” The Edinburgh Review, IV, no. 8, [July, 1804], 364; Hermann, op. cit., pp. 221ff.; and L. v. Hasner, System der politischen Oekonornie Prague, 1860, p. 294), and finally also all consumption goods of any durability (Hermann, op. cit., pp. 225–226) must all be called capital.

Correctly understood, however, capital consists only of those quantities of economic goods that are available to us in the present for future periods of time and are capable of being applied to uses whose nature and economic character I have discussed at length in the text of the present work (p. 152). This means that the following conditions must be met simultaneously: (1) the time period during which an economizing individual has command of the necessary quantities of economic goods must be long enough to permit a production process (in the economic sense of the term, p. 157) to take place; and (2) the amounts and kinds of the available quantities of goods must be such that through them, the economizing individual has either direct or indirect command of the complementary goods of higher order that are necessary for the production of goods of lower order. Hence quantities of economic goods that are at the command of economizing individuals for such short time periods or in such amounts, kinds, or forms that their productivity is lost are not capital.

The most important difference between capital on the one hand and items of wealth that yield an income (land, buildings, etc.) on the other is that the later are concrete durable goods whose services themselves have both goods character and economic character, whereas capital represents, directly or indirectly, a combination of economic goods of higher order (i.e., complementary quantities of these goods) whose services also have economic character and therefore yield income, but whose productivity is of an essentially different nature than that of durable wealth that is not capital. Almost all the theoretical difficulties that have arisen in the theory of capital can be traced to the linguistic confusion involved in including both of the above sources of income in the concept capital.

The fact that under developed trading conditions capital is usually reckoned in terms of money and also most frequently offered in the convenient form of money to persons requiring it, has resulted in capital generally being interpreted in ordinary life as a sum of money. It is plain that this concept of capital is much too narrow, and that a particular form of capital has been elevated to the status of the genus itself. On the other hand, the opposite error has been made by those who do not regard money capital as true capital at all, but only as representing it. The first of the two views is analogous to that of the mercantilists who regarded only money as “wealth,” while the latter view is that of a number of opponents of mercantilism who have gone too far in their opposition and do not even accord sums of money the status of true wealth. (Among more recent writers, see, above all, Michel Chevalier, Cours d’économie politique Paris, 1866, III, 584ff., and H.C. Carey, Principles of Social Science Philadelphia, 1858, II, 337.) In reality, money capital is only one convenient form of capital that is especially suitable for use under advanced trading conditions. (See H. Brocher, “Zwei Worte über Kapital und Geld,” Jahrbücher für Nationalökonomie und Statistik, VII (1866), 33–37.) Karl Knies emphasizes this fact most effectively in his Die politische Oekonomie vom Standpunkte der geschichtlichen Methode (Braunschweig, 1853, p. 87): “Wir finden bei allen einzelnen Nationen in sofern eine Analogie der Entwicklung, als überall das Capital seine wirthschaftliche Kraft erst nach der Einführung und der verbreiteteren Anwendung des Metallgeldes stärker entwickeln, seine ausgedehntere Macht erst auf den höheren Culturstufen entfalten kann.”2 Money does, of course, facilitate the transfer of capital from one hand to another, and especially also the transfer of capital goods and the transformation of capital into any desired form (its application to any desired use), but the concept of money is entirely foreign to the concept of capital. (See E. Dühring, “Kritik des Kapitalbegriffs und seiner Rolle in der Volkswirthschaftslehre,” Jahrbücher für Nationalökonomie und Statistik, V [1865], 318–343, and F. Kleinwächter, “Beitrag zur Lehre vom Kapitale,” ibid., IX [1867], 369–421).

Appendix F1

Equivalence in Exchange

The error of regarding the quantities of goods in an exchange as equivalents was made as early as Aristotle, who says: “To have more than one’s own is called gaining and to have less than one’s original share is called losing, e.g., in buying and selling . . . but when they get neither more nor less but just what belongs to themselves, they say that they have their own and that they neither lose nor gain.” (Ethica Nicomachea, v. 5. 1132b, 13–18.) Continuing, he says: “If, then, first there is proportionate equality of goods, and then reciprocal action takes place, the result we mention will be effected. And this proportion will not be effected unless the goods are somehow equal.” (Ibid., 1133a, 10–26.) A similar view is expressed by Geminiano Montanari (Della moneta, in Scittori classici Italiani di economia politica, Milano, 1803–5, III, 119f.). François Quesnay (Dialogue sur les travaux des artisans, reprinted in E. Daire (ed.), Physiocrates, Paris, 1846, p. 196) says that “le commerce n’est qu’un échange de valeur pour valeur égale” See also A.R.J. Turgot, Réflexions sur la formation et la distribution des richesses, reprinted in Oeuvres de Turgot, ed. by G. Schelle, Paris, 1913–23, II, 555; G.F. Le Trosne, De l’intérêt social, Paris, 1777, p. 33; Adam Smith, An Inquiry into the Nature and Causes of the Wealth of Nations, Modern Library Edition, New York, 1937, p. 33; David Ricardo, Principles of Political Economy and Taxation, ed. by E.C.K. Gonner, London, 1891, p. 11; and J.B. Say, Cours complet d’économie politique pratique, Paris, 1840, I, 303ff.

As early as 1776, we find E.B. de Condillac opposing this view, although his reasons were one-sided (Le commerce et le gouvernement, reprinted in E. Daire (ed.), Mélanges d’économie politique, Paris, 1847, I, 267). The objections that Say advances against Condillac (Say, op. cit., pp. 305-306) rest on a confusion between use value, which Condillac has in mind (Condillac, op. cit., p. 250), and exchange value in the sense of an equivalence between goods, which Say has in mind. The confusion seems to be due, however, to an improper use of the word “valeur” on the part of Condillac. Theodor Bernhardi has presented a penetrating criticism of English price theories (Versuch einer Kritik der Gründe die für grosses und kleines Grundeigenthum angeführt werden, St. Petersburg, 1849, pp. 67–236). Recently, the earlier price theories have been criticized exhaustively by H. Roesler (“Zur Theorie des Preises,” Jahrbücher für Nationalökonomie und Statistik, XII [1869], 81–138) and Johann Komorzynski (“Ist auf Grundlage den bisherigen wissenschaftlichen Forschung die Bestimmung den natürlichen Höhe der Güterpreise moglich?,” Zeitschrift für die gesammte Staatswissenschaft, XXV [1869], 189–238). (See also Karl Knies, “Die nationalökonomische Lehre vom Werth,” Zeitschrift für die gesammte Staatswissenschaft, XI [1855], 467.)

Appendix G1

Use Value and Exchange Value

Theodor Bernhardi (Versuch einer Kritik der Gründe die für grosses und kleines Grundeigenthum angeführt werden, St. Petersburg, 1849, p. 79) says that it has frequently been noted in recent times that Aristotle had already mentioned the difference between use value and exchange value in his Politics (i. 6.), and that Adam Smith distinguished between the two concepts independently of the Greek philosopher. Against this, it must be said that the greater part of Adam Smith’s famous passage (An Inquiry into the Nature and Causes of the Wealth of Nations, Modern Library Edition, New York, 1937, p. 28) coincides almost word for word with a passage in John Law’s Money and Trade Considered, London, 1720, p. 4. Moreover, A.R.J. Turgot (“Valeurs et Monnaies” in Oeuvres de Turgot, ed. by G. Schelle, Paris, 1913–23, III, 86–93) not only makes a sharp distinction between use value and exchange value (valeur estimative and valeur échangeable) but goes into the matter in considerable detail. Also of interest for the history of doctrine is a passage in the work of the Scottish moral philosopher Francis Hutcheson, the famous teacher of Adam Smith, in which a differentiation between use value and exchange value can be found, although not in the terminology employed by Smith (F. Hutcheson, A System of Moral Philosophy, London, 1755, II, 53ff.; see also John Locke, “Some Considerations of the Consequences of lowering the Interest and raising the Value of Money,” in The Works of John Locke, London, 1823, V, 34ff.; and G.F. Le Trosne, De l’intérêt social, Paris, 1777, pp. 7–8).

More recently, several writers mentioned in Appendix D (pp. 298)—Friedländer, Knies, Schäffle, Roesler—who have made the theory of value their special subject, have dealt at length with the difference between use value and exchange value. Others that should be mentioned are Otto Michaelis, “Das Kapitel vom Werthe,” Vierteljahrschrift für Volkswirthschaft und Culturgeschichte, I (1863), 1–28; A. Lindwurm, “Die Theorie des Werthes,” Jahrbücher für Nationalökonomie und Statistik, IV (1865), 165–218; Julius v. Soden, Die Nazional-Oekonomie, Leipzig, 1805–10, I, 38ff. and IV, 23ff.; Gottlieb Hufeland, Neue Grundlegung der Staatswirthschaftkunst, Wien, 1815, I, 95ff.; Henri Storch, Cours d’économie politique, St. Petersbourg, 1815, I, 57ff.; J.F.E. Lotz, Handbuch der Staatswirthschaftslehre, Erlangen, 1837, I, 21ff.; Karl Rau, Grundsätze der Volkswirthschaftslehre, Heidelberg, 1847, pp. 73ff.; Theodor Bernhardi, op. cit., pp. 67ff.; Wilhelm Roscher, Grundlagen der Nationalökonomie, Twentieth Edition, Stuttgart, 1892, pp. 9–16; Karl Thomas, Theorie des Verkehrs, Berlin, 1841, p. 11; and L. Stein, System der Staatswissenschaft, Stuttgart, 1852, I, 168ff.

Perhaps nothing reveals the German tendency toward philosophical penetration of economics and the practical sense of the English better than a comparison of the treatments given the theory of value by German and English writers. Like Adam Smith, David Ricardo (Principles of Political Economy and Taxation, ed. by E.C.K. Gonner, London, 1891, pp. 361–369), Thomas Robert Malthus (Principles of Political Economy, London, 1820, p. 51, and Definitions in Political Economy, London, 1827, p. 234), and John Stuart Mill (Principles of Political Economy, ed. by W.J. Ashley, London, 1909, pp. 436–437) employ “value in use” as synonymous with “utility.” Indeed, Robert Torrens (An Essay on the Production of Wealth, London, 1821, p. 8) and J.R. McCulloch (The Principles of Political Economy, London, 1830, p. 4) even employ the term “utility” instead of “value in use.” Among recent French writers, the same thing is done by Frédéric Bastiat (Harmonies économiques, in Oeuvres complétes de Frédéric Bastiat, Paris, 1893, VI, 141). Lord Lauderdale (An Inquiry into the Nature and Origin of Public Wealth, Edinburgh, 1804, p. 12) and N.W. Senior (An Outline of the Science of Political Economy, London, 1836, pp. 6ff.) recognize utility as a prerequisite of exchange value, but not as use value, which is a concept they repudiate altogether. What is understood in England by the concept exchange value is best illustrated by the following passage from John Stuart Mill (op. cit., p. 437): “The words Value and Price were used as synonymous by the early political economists, and are not always discriminated even by Ricardo. But the most accurate modern writers, to avoid the wasteful expenditure of two good scientific terms on a single idea, have employed Price to express the value of a thing in relation to money; the quantity of money for which it will exchange . . . the value or exchange value of a thing, [we shall, therefore, understand] its general power of purchasing; the command which its possession gives over purchaseable commodities in general.”

Appendix H1

The Commodity Concept

Even in the German commercial code the term “commodity” is employed in the popular and not in the technical sense. Thus one sometimes finds “good” (Articles 365, 366, and 367), “object” (Articles 349 and 359), or “movable thing” (Articles 272, 301, and 342) used in place of the word “commodity.” Article 271 refers to “Commodities, or other movable things, or securities destined for trade . . .” Real estate and labor services are never considered to be commodities in the German commercial code. Firms are not included either. According to Article 23, firms, just like all other “res extra commercium,” cannot be commodities at all in a legal sense apart from the business bearing the firm name. In German commercial law, ships are not considered to be commodities (Article 67), but in several other codes they are looked upon as “movable things” and able to attain commodity character (see L. Goldschmidt, Handbuch des Handelsrechts, Erlangen, 1868, I, 527). Goldschmidt discusses the legal literature on the commodity concept (ibid., p. 525), but his own definition of the term is too narrow from the legal standpoint since he excludes goods kept ready for sale by producers (ibid., I, 298). In Roman legal sources, “merx,” “res promercalis,” “mercatura,” etc., are used sometimes in the narrower sense of objects of trade and sometimes in the wider sense of things that are offered for sale (L. 73, §4, Dig. de legat. 32,3; L. 32, §4, Dig. de aur. arg. 34,2; L. 1, pr. §1, Dig. de cont. emt. 18,1; L. 42, Dig. de fidejus. 46,1). The Austrian Civil Code distinguishes commodities from claims of debt (Article 991).

With few exceptions, the theory of the commodity has not been independently treated by English, French, and Italian writers. The words “goods,” “marchandises,” “merci,” etc., are almost always used, not in the technical sense, but in the popular meanings of “articles of trade,” “purchasable goods,” etc., and in an extremely heterodox manner. Commodities have often been opposed to labor services and money (Jacques Necker, Sur la législation et le commerce des grains, Paris, 1775, pp. 52–53; Antonio Genovesi, Lezioni di economia civile, in Scrittori classici Italiani di economia politica, Milano, 1803–5, XV, 294). They have regularly been contrasted with immovable goods (Horace Say, “Marchandises,” in Ch. Coquelin and Guillaumin, eds., Dictionnaire de l’économie politique, Paris, 1873, II, 131), and have sometimes been pictured as products of industry in opposition to raw materials (François Quesnay, Maximes générales du gouvernement économique d’un royaume agricole, reprinted in E. Daire, ed., Physiocrates, Paris, 1846, p. 98) or to consumption goods (denrées), (Dutot, Réflexions politiques sur les finances et le commerce, ed. by Paul Harsin, Paris 1935, I, 72). On the other hand, Montesquieu uses the term “marchandises” in the sense of “denrées” (De l’esprit des lois, in Oeuvres complètes de Montesquieu, ed. by E. Laboulaye, Paris, 1877, V. 12.) Lewes Roberts, a contemporary of Thomas Mun, defines “the things wherewith the merchants negotiate and traffick” as “merchandises,” and divides “merchandises” into “wares” and “money” (The Merchants Map of Commerce, Third ed., London, 1677, pp. 6–7). The Dictionary of the French Academy (Institut de France, Dictionnaire de l’Académie Française, Sixth ed., Paris, 1835, II, 165) defines “commodities” as “ce qui se vend, se débite, soit en gros, soit en détail, dans les boutiques, magasins, foires, marchés, etc.”2

On such occasions as a need for designating commodities in the wider scientific sense of the term has arisen, circumlocutions like the following are used: “Quantité à vendre” (Necker), “superflu autant qu’il peut être échangé” (Forbonnais), “things which have not reached the hands of those who are finally to use them” (Adam Smith), and “cio que soprabonda in alcuni per sussistere essi stessi, e ch’essi passano ad altri”3 (Ortes). Yet as early as 1776, E.B. de Condillac (Le commerce et le gouvernement, reprinted in E. Daire, ed., Mélanges d’économie politique, Paris, 1847, I, 261) defined “marchandises” as “ces choses qu’on offre d’échanger,” thereby becoming a precursor of Henri Storch who (writing in French) gives the following definition: “Les choses destinées à l’échange se nomment marchandises.” (Cours d’économie politique, St. Petersbourg, 1815, I, 82.)

Among the German writers, Justi, Büsch, Sonnenfels, and Jakob still employ the word “commodity,” in its popular meaning. Julius v. Soden defines “commodities” as “all production materials” (Die Nazional-Oekonomie, Leipzig, 1810, IV, 96), and understands all raw materials and manufactured products to be included under “production materials” (ibid., p. 17). Gottlieb Hufeland’s definition is also too broad: “Waare [ist] alles . . . was . . . weggegeben, besonders für etwas anderes weggegeben, werden kann.”4 (Neue Grundlegung der Staatswirthschaftskunst, Wien, 1815, II, 15). Karl H. Rau adopts the definition given by Storch when he defines commodities as “Vorräthe von Gütern, welche zum Tausche bereit liegen”5 (Grundsätze der Volkswirthschaftslehre, Heidelberg, 1847, p. 164). He adds that land can be a commodity, and that although money is not a commodity as such, the materials of which it is made are commodities (ibid., p. 336 and p. 537). From Rau’s general view of the concept “good,” it is clear that he regards only material goods as commodities. Almost parallel with the views of Rau are those of Karl Murhard (Theorie des Handels, Göttingen, 1831, p. 22). Karl S. Zachariä (Vierzig Bücher vom Staate, Heidelberg, 1832, V, part I, 2) also extends the concept of commodity to include land, whereas Eduard Baumstark (Kameralistische Encyclopädie, Heidelberg, 1835, p. 450) confines the concept again to movable goods and furthermore demands that a good have a certain degree of marketability to be classed as a commodity. Thus he approaches the popular concept of a commodity which again becomes dominant in the works of Fulda, Lotz, Schön, and Hermann.

A.F. Riedel and Wilhelm Roscher reestablish the scientific concept of commodity. Riedel defines a commodity as “die zum Tausch oder Verkauf bereit liegenden Güter”6 (Nationalöconomie, Berlin, 1838, p. 336). Roscher says that a commodity is “jedes zum Vertauschen bestimmte Gut,”7 but means “economic good” (Grundlagen der Nationalökonomie, Stuttgart, 1892, p. 227 and p. 4). The lead of these two authors is followed by H. v. Mangoldt (Grundriss der Volkswirthschaftslehre, Stuttgart, n.d., p. 45); by Karl Knies (“Ueber die Geldentwerthung und die mit ihr in Verbindung gebrachten Erscheinungen,” Zeitschrift für die gesammte Staatswissenschaft, XIV, 1858, 266) who defines commodities as “für den Verkehr überschüssige Gütern”;8 by H. Rentzsch (Article “Waare” in Handwörterbuch der Volkswirthschaftslehre, Leipzig, 1870, p. 1042) who defines them as “Tauschwerthe und zum Tausch bestimmte Güter”;9 and in the main also by Leopold v. Hasner who elaborates the concept of “abstract trading stocks” which he divides into two chief subgroups, “commodity stocks” and “cash funds” (System der politischen Oekonomie, Prag, 1860, pp. 288 and 302ff.).

Among recent writers who adhere to the idea that commodities are products must be mentioned: J.C. Glaser, who defines a commodity as “jedes Product welches in den Handel kommt” (Die allgemeine Wirthschaftslehre, Berlin, 1858, p. 115); Hermann Roesler who defines commodities as “die für den Umlauf bestimmten oder im Umlauf befindlichen Producte”10 (Grundsätze der Volkswirthschaftslehre, Rostock, 1864, p. 217); and H. v. Scheel, who applies the term commodities to “die einzelnen zum Tausch bestimmten Produkte”11 (“Der Begriff des Geldes in seiner historisch-ökonomischen Entwickelung,” Jahrbücher für Nationalökonomie und Statistik, VI [1866], 15).

L. v. Stein also uses the term commodity to mean “das einzelne Product der Unternehmung, als selbstständiges Gut dargestellt”12 (Lehrbuch der Volkswirthschaft, Wien, 1858, p. 152). Currently, a considerable number of very respected scholars have returned to the use of the word commodity in its popular meaning. Among others are Bruno Hildebrand and A.E.F. Schäffle who contrast commodities with services (Bruno Hildebrand, “Naturalwirthschaft, Geldwirthschaft, und Creditwirthschaft,” Jahrbücher für Nationalökonomie und Statistik, II [1864], 14, and A.E.F. Schäffle, Das gesellschaftliche System der menschlichen Wirthschaft, Tübingen, 1873, II, 124–126). But the scientific concept of the commodity has not been lost. Schäffie sharply distinguishes between commodities in the popular sense and commodities in the scientific sense, and calls the latter “exchangeable material goods” (ibid., II, 142 and passim).

Like many of his other theories, T.A.H. Schmalz’s doctrine of commodities is also very peculiar. Because of an erroneous conception of the relationship between money and commodities, he confuses commodities with consumption goods in the narrow sense of the term, and therefore arrives (Staatswirthschaftslehre in Briefen, Berlin, 1818, I, 63f.) at precisely the opposite of the scientific definition of commodity given in the present work.

Appendix I1

Designations for Money

In high old German, the term “scaz” generally takes the place of our word money. In Gothic the word “skatts” is employed, although Ulpilas translates the word αργψριον (which appears in Mark, 14, 11, where it refers to money in general) by “faihu” (cattle, money). The Old High German word “gelt” can be found in a tenth century glossary to the Bible with the meaning of “payment,” “ransom,” or “fine,” as a translation of the Latin word “aes.” In Old Norse, on the other hand, the word “giald” was already commonly used in the sense of our present-day term money. In Middle High German the term “gelt” was customarily used to designate “payment” (kind and object of payment), “wealth,” or “income,” but was also frequently used with the present-day meaning of “money”—by Hugo von Langenstein, for example, in Martina (ed. by Adelbert von Keller, Bibliothek des Litterarischen Vereins in Stuttgart, Stuttgart, 1856, XXXVIII, 543) where he employs the form “ze gelte keren” (to measure in money); and by Peter Suchenwirt, Werke (ed. by Alois Primisser, Wien, 1827, pp. 29, 115 and passim, esp. p. 329). (See E.G. Graff, Althochdeutscher Sprachschatz, Berlin, 1838, IV, 191; G.F. Benecke and Wilhelm Müller, Mittelhochdeutsches Wörterbuch, Leipzig, 1854, I, 522ff.; Lorenz Diefenbach, Vergleichendes Wörterbuch der gothischen Sprache, Frankfurt am Main, 1851, II, 403.)

It is interesting to consider how other peoples designate money. The Greeks, the Hebrews, and in one manner of speech the Romans as well, used the word silver (αργψριον, keseph, argentum) for money. The French do so today (argent). The English, Spaniards and Portuguese, and in another manner of speech, the Hebrews, Greeks and French also, employ words meaning coin to designate money (money, moneda, moeda, maoth, νομισμα, monnaie). The Italians and Russians speak of pieces of monetary metal (denars) if they wish to designate money in general (danaro, dengi) and the same is true of the Spanish and Portuguese in an alternative manner of speech. The Poles, Czechs, and Slovenes designate money by pennies, i.e., pieces of monetary metal (pienadze, penize, penize), and the Croatians, Bosnians, and Dalmatians do the same. The Danes, Swedes, and Magyars also speak of pieces of monetary metal, i.e., pennies, when they wish to designate money (penge, penningar, penz). The Arabs do the same, since their word for money, “fulus,” really means “coins.” In the language of the Bari, who live on the upper Nile, the word “naglia” means glass beads as well as money (Friedrich Müller, “Die Sprache der Bari,” Sitzungsberichte der Kaiserlichen Akademie der Wissenschaften zu Wien, Philosophisch-Historische Classe, XLV [1864], 117). Among the Nubians, metallic money is called “shongir” which means lettered shell (i.e., a cowrie shell with letters imprinted on it—coinage!).

There is a connection between the designations for money and cattle, the earliest medium of exchange, in most languages. In Old Norse the word “naut” means both cow and money, and in Old Frisian the word “sket” means both cattle and money. The Gothic “faihu,” the Anglo-Saxon “feoh,” the Northumbrian “feh” and corresponding expressions in all the other Germanic dialects were used interchangeably to designate cattle, wealth, money, etc. (See Wilh. Wackernagel, “Gewerbe, Handel und Schifffahrt der Germanen,” Zeitschrift für deutsches Alterthum, IX 1853, 549, note 101; Diefenbach, op. cit., I, 350ff. and II, 758; and the interesting note in Richard C. Trench, A Select Glossary of English Words Used formerly in Senses Different from their Present, London, 1873, p. 30.) In the Lex Frisionum, Additio Sapientium, Tit. X, (in Monumenta Germaniae Historica, Hannover, 1863, XV, 695) we read “equum . . . vel quamlibet aliam pecuniam”;2 and in the Glossa Cassellanae we read “pecunia fihu” (in Johann Georg Eckhart, Commentarii de Rebus Franciae Orientalis et Episcopatus Wirceburgensis, Frankfurt, 1729, I, 853-855). The Old Slavic word “skotum,” meaning “cattle” is used in its Lithuanian diminutive form, “skatikas” or “skatiks,” in the meaning of groat (see Georg H.F. Nesselmann, Wörterbuch der littauischen Sprache, Königsberg, 1850). The derivation of the Latin words pecunia, peculium, etc., from the word pecus (cattle) has frequently been pointed out. Similarly, a legend mentioned by Julius Pollux has often been cited, since according to it the earliest money of the Athenians was called βουζ a designation which is said to have been preserved in the proverb βουζ επιγλωττζ. The terms dekaboion, tesseraboion and hekatomboion are also known to have served as designations for amounts of money. The view that these terms came, not from cattle money which was once in existence, but from the earliest metallic money that bore an animal sign, can be found already in the writings of Pollux and Plutarch, and has been revived more recently by Beulé and others. But I am inclined to consider as more correct the alternative view that with the gradual transition from a customary cattle standard to a metallic standard, the value of an animal in terms of metal originally constituted the principal denomination of the new currency, and hence that term that designated quantities of animals was transferred to metallic coins and to amounts of such coins.

The concepts cattle and money are also related in Arabic. There is evidence of this in the fact that the word “mâl” means property, or cattle in the singular, and wealth or money (amwâl) in the plural. (See Georg W. Freytag, Lexicon Arabico-Latinum, Halle, 1837, IV, 221; and Maninski, p. 4225.3)

Appendix J1

History of Theories of the Origin of Money

The great thinkers of antiquity, and following them a long series of the most eminent scholars of later times up to the present day, have been more concerned than with any other problem of our science with the explanation of the strange fact that a number of goods (gold and silver in the form of coin, as civilization develops) are readily accepted by everyone in exchange for all other commodities, even by persons who have no direct requirements for them or whose requirements have already been fully met. A person of the most ordinary intelligence realizes that the owner of a good will give it in exchange for one that is more useful to him. But that every economizing individual of an entire society should be eager to exchange his commodities for small discs of metal, which ordinarily only a few men can use directly, is something that is so contradictory to the ordinary course of events that we cannot be surprised that it appears “mysterious” to even so brilliant a thinker as F.K. v. Savigny (Das Obligationenrecht als Theil des heutigen römischen Rechts, Berlin, 1851–53, II, 406). The problem that science must solve is thus the explanation of human behavior that is general and whose motives do not lie clearly upon the surface. Considering these two features of the problem it is easy to understand why the idea arose of attributing the behavior in question to an agreement between men or to the expression of their collective will (the law), especially with respect to money in its minted form. Plato and Aristotle take this position. Plato calls money a “token for purposes of exchange” (Republic, II. 371; see B. Jowett, trans. & ed., The Dialogues of Plato, London, Oxford University Press, 1892, III, 52), and Aristotle, in a much quoted passage, says that money originated by convention, not by nature but by law (Ethica Nicomachea, v. 5, 1133a, 29–32). He expresses this view even more distinctly in his Politics, where he says that “men agreed to employ in their dealings with each other something . . . for example iron, silver, and the like,” and offers this as his explanation of the origin of money (i. 9. 1257a, 36–40).

The Roman jurist Paulus, whose views on the origin of money have been preserved in Justinian’s code (L. 1. Dig. de contr. emt. 18, 1), solves the problem in a way similar to that of the Greek philosophers. He points to the difficulties involved in pure barter and gives it as his opinion that these difficulties were removed by a public institution (money). Paulus writes that “A substance was selected whose public evaluation exempted it from the fluctuations of the other commodities, thus giving it an always stable external (nominal) value. A mark (of its external value) was stamped upon this substance by society. Hence its exchange value is based, not upon the substance itself, but upon its nominal value.” Thus Paulus also attributes the origin of money to public authority.

Alongside the views just described, we can also discern attempts of the writers of antiquity to trace the special position occupied by the precious metals as compared with the rest of commodities back to special qualities of the former. Aristotle points to the ease with which they can be handled and transported (Politics, i. 9. 1257a, 39–41) and in another place to their relative stability of price (Ethica Nicomachea, v. 5. 1133b, 13–15). Xenophon even observes the wide quantitative limits within which the precious metals, chiefly silver, can be marketed. He argues that if the products of smiths or coppersmiths, or even wine or grain were to arrive on a market in unusually large quantities, they would severely fall in price, whereas silver, and to a smaller extent gold also, always could be exchanged at profitable prices (Ways and Means: A Pamphlet of Revenues, in H.K. Dakyns, translator, The Works of Xenophon, London, Macmillan Co., 1892, II, 335–336). The durability and indestructibility of the precious metals, particularly of gold, was already stressed by Pliny (The Natural History, translated by John Bostock and H.T. Riley, London: H.G. Bohn, 1857, VI, 96–97 and 111–112).

The extremely fertile literature of the middle ages and the sixteenth century was carefully collected by Philipp Labbé (Bibliotheca nummaria, ex Theologis, Juris consultis, Medicis, ac Philologis concinnata, etc., Rouen, 1672). The collections of René Budel (De monetis et re nummaria, Cologne, 1591) and of Marquard Freher (De re monetaria veterum Romanorum et hodierni apud Germanos Imperii, Lyons, 1605), contain many noteworthy publications of that period (including the tracts of Nicolaus Oresmius and Gabriel Biel). Roscher has discussed several of them in his Grundlagen der Nationalökonomie (Stuttgart, 1892, pp. 301–302, note 6) with great scholarly industry. These tracts were chiefly concerned with the practical problems of coinage, especially with the question of the existence and the limits of the right of princes to change the metallic content of coins, and with the consequences of these changes on public wealth. This problem had become important because of frequent abuses of the coinage by government. In this context, several authors also take the opportunity of discussing the problem of the origin of money, which they solve on the basis of the findings of the writers of antiquity, with regular reference to Aristotle. See Nicolaus Oresmius (Nicole Oresme) (died 1383), Tractatus de origine, natura, jure et mutationibus monetarum (ed. with a translation by L. Wolowski, Paris, 1864, p. ix and p. xciv); Gabriel Biel (died 1495), De monetarum potestate et utilitate libellus (in Gaspar Antonius Thesaurus, De monetarum augmento variatione et diminutione, Torino, 1609, p. 1, also in an English translation, Treatise on the Power and Utility of Moneys, translated and edited by R.B. Burke, Philadelphia, 1930, p. 19); Carolus Molinaeus, De mutatione monetarum quaestiones duo (in R. Budel, ed., De monetis et re nummaria, p. 485); Didacus Covarruvias, Veterum numismatum collatio, in ibid., p. 648; Jacobus Menochius, Consilium XLIX, in ibid., p. 705; René Budel, De monetis et re nummaria, in ibid., p. 10; and Jehan de Malestroit, Les Paradoxes, written in 1566 (reprinted in L. Einaudi, editor, Paradoxes inédits du seigneur de Malestroit, Torino, 1937, p. 97).

Summarizing the course followed by the investigations of these writers, they almost always begin by showing the difficulties to trade arising from pure barter. They next show how it is possible to remove these difficulties by the introduction of money. In the further course of their arguments, they stress the special suitability of the precious metals for serving as money, and finally, citing Aristotle, they reach the conclusion that the precious metals actually became money by the legislation of men. (Oresmius says that money is an “instrumentum artificialiter adinventum,” op. cit., p. xliv; Biel says that it is “vel ex sui natura vel hominum instituto,”2 op. cit., p. 2; and Molinaeus says that “inventio et institutio monetae . . . est de iure gentium,”3 op. cit., p. 486.) However meritorious the service of many of these writers in opposing abuses of the coinage on the part of princes, they did not therefore improve upon the views of antiquity so far as the question of the origin of money is concerned.

The early Italian and English writers are no exception. Bernardo Davanzati, writing in 1588, strictly follows the views of Aristotle and Paulus, and traces the origin of money back to the authority of the state (“per legge accordata,” see his Lezione delle monete in Scittori classici Italiani di economia politica, Milano, 1803–05, II, 24). Geminiano Montanari (d. 1687), does the same (Della moneta, in ibid., III, 17, 32, and 118). And Lewes Roberts, whose widely read The Merchants Map of Commerce was first published in 1638, represents the economic views of England of the seventeenth century more accurately than any other work of that age, traces the origin of money to the same source (see p. 15 of the Third Edition, London, 1677).

Among the monetary writers of the first half of the eighteenth century John Law is preeminent for his researches into the origin of money. His contemporary, Boizard, was still attributing the origin of money to public authority, and Vauban (Projet d’une dixme royale, written 1707, republished in E. Daire [ed.], Economistes financiers du XVIIIe siècle, Paris, 1843, p. 51), as well as Pierre Boisguillebert (Dissertation sur la nature des richesses, de l’argent, et des tributs, in ibid., pp. 396–398) did not go beyond stressing the necessity of money as a means of facilitating commerce. Law, on the contrary, most decidedly repudiates the contractual theory, and recognizing, as no author before him, the special position of the precious metals among other commodities, he derives the genesis of the money character of the precious metals from their special characteristics. Thus he is the founder of the correct theory of the origin of money (see his Money and Trade Considered, London, 1720, pp. 4ff.; also his Mémoire sur l’usage des monnaies, written 1706–07, reprinted in Paul Harsin, ed., John Law: Oeuvres complétes, Paris, 1934, p. 167). Law is followed, in his opposition to the theory that traces the origin of money to a contract between men, by Antonio Genovesi (Lezioni di economia civile, in Scrittori classici Italiani di economia politica, Milano, 1803–05, VIII, 291–313), and A.R.J. Turgot (Réflexions sur la formation et la distribution des richesses, written in 1766, and reprinted in G. Schelle, ed., Oeuvres de Turgot, Paris, 1913–23, II, 558–560). Law’s attempt to explain the genesis of the money character of the precious metals from their special nature, was taken up and admirably accomplished in part by Cesare Beccaria (Elementi di economia publica, in Scrittori classici Italiani di economia politica, Milano, 1803–05, XIX, 10–18); Pietro Verri (Meditazioni sulla economia politica, in ibid., XXII, 13–19; and Sulle leggi vincolanti principalmente nel commercio de ‘grani riflessioni, in ibid., XXIII, 21); Turgot (op. cit., II, 558–560; and “Deuxième lettre á l’abbé de Cicé” in ibid., I, 143ff.); Adam Smith (An Inquiry into the/ Nature and Causes of the Wealth of Nations, Modern Library Edition, New York, 1937, pp. 22–29); and J.G. Busch Abhandlung von dem Geldsumlauf, Hamburg, 1780, pp. 279ff.).

Among more recent writers in the same tradition are: T.R. Malthus (Principles of Political Economy, Second edition, London, 1836, pp. 50–60); J.R. McCulloch (The Principles of Political Economy, Second edition, London, 1830, pp. 129–136); John Stuart Mill (Principles of Political Economy, Edited by Sir W.J. Ashley, London, 1909, pp. 483–488); Melchiorre Gioja (Nuovo prospetto delle scienze economiche, Milano, 1815, I, 118ff.); M.H. Baudrillart (Manuel d’économie politique, Fourth edition, Paris, 1878, pp. 252–262); Joseph Garnier (Traité d’économie politique, Seventh edition, Paris, 1873, pp. 309ff.); and two German economists, Ch. J. Kraus (Staatswirthschaft, Koenigsberg, 1808, I, 61ff.), and Aug. Fr. Lueder (National-Industrie und Staatswirthschaft, Berlin, 1800–04, I, 48ff.).

Other German economists of the first decades of the nineteenth century show little interest in historical research, and the problem of the origin of money was almost completely neglected in the works of Johann A. Oberndorfer, Karl H.L. Pölitz, J.F.E. Lotz, Karl S. Zachariä, and F.B.W. v. Hermann. This situation continued until, with the reawakening of historical research in the field of our science, the question of the origin of money was again taken up by Karl H. Rau, Johann F.G. Eiselen, Wilhelm Roscher, Bruno Hildebrand and Karl Knies, as well as Karl Murhard somewhat earlier.

The monographs thus far published have furthered the investigation but little. Adam Muller discusses the desire of men for the state and thinks that the precious metals bring about this union, giving this as his theory of the origin of money (Versuche einer neuen Theorie des Geldes, Reprint Edition, Wien, 1922, pp. 78ff.). Johann G. Hoffmann (Die Lehre vom Gelde, Berlin, 1838, p. 10) attributes the origin of money again to a contract between men. Michel Chevalier (La monnaie, in Cours d’économie politique, Paris, 1866, III, 5) does the same thing. Samuel Oppenheim’s monograph, Die Natur des Geldes, (Mainz, 1855), is of greater interest, although its importance does not consist so much in a special view of the first origin of money (pp. 4ff.), as in an exposition of the process by which a commodity that has become a means of exchange loses its original commodity character and eventually becomes a mere token of value. Although I must emphatically contradict this opinion, I nevertheless find a clearly expressed thought (or rather an observation) in Oppenheim’s argument which sufficiently explains why we encounter this mistake in the writings of many eminent economists. I refer to the observation that the character of money as an industrial metal often completely disappears from the consciousness of economizing men because of the smoothness of operation of our trading mechanism, and that men therefore only notice its character as a means of exchange. The force of custom is so strong that the ability of a metal used as money to continue in this role is assured even when men are not directly aware of its character as an industrial metal. This observation is entirely correct. But it is also quite evident that the ability of a material to serve as money, as well as the custom on which this ability is founded, would disappear immediately, if the character of money as a material applicable to industrial purposes were destroyed by some accident. I am ready to admit that, under highly developed conditions of trade, money is regarded by many economizing men only as a token. But it is quite certain that this illusion would immediately be dispelled if the character of coins as quantities of industrial raw materials were lost.



1To Chapter I. See notes 2 and 8 of Chapter I.—TR.

2“nothing is useful but what serves to the salvation of one’s eternal life.”

3“utility itself is measured by considerations of eternal life.”

4“possessions that do not yield an annual product, such as precious objects, products destined for consumption.”

5“what is suited to the satisfaction of human needs.”

6“every means to a purpose of a man.”

7“the judgment we pass upon the utility of things . . . makes goods of them.”

8“those [things) which man recognizes as means to this end [satisfaction of psychological and physical needs].”

9“all that is recognized as being applicable to the satisfaction of a true human need” (Menger’s italics).

10“transferable rents made exclusive by private control of supply and elimination of competition.”

1To Chapter II. See notes 9 and 14 of Chapter II.—TR.

2“That which has no value cannot be wealth. These things are not within the domain of political economy.”

3“what can be obtained only for a definite sacrifice in the form of labor or monetary consideration.”

4“that are capable of being traded, or that, at least, facilitate trade.”

5“ends and means of economizing.”

6We are forced, so to speak, to buy these . . . goods by labor, economy, abstinence,—in a word by real sacrifices.”

7“One cannot separate the idea of property from these goods. They would not exist if exclusive possession of them were not assured to the person who has acquired them. . . . On the other hand, property presupposes some form of society, contracts, and laws. Hence wealth so acquired may be called social wealth.”

1To Chapter III, Section 1. See note 1 of Chapter III.—TR.

2We were unable to locate this item. We suspect, however, that Menger’s reference is to the following work: Dorpat, Kaiserliche Universität, Facultätsschriften der Kaiserlichen Universität Dorpat, dargebracht zur Feier ihres funfzigjährigen Bestehens, etc. Dorpat, 1852, (see Catalogue of the Printed Books in the Library of the British Museum, London, 1881–1900, I, 202).—TR.

3“the relationship recognized by human judgment that a thing can be a means to the fulfilment of some desired end.”

4“in a number of instances, the theory of value . . . [is] . . . actually erected entirely on a combination of the two meanings of the word value.”

5“in order to be able to speak of economizing or of economic goods, a potential or actual relationship between persons and impersonal external objects consciously established by men must always exist. This relationship can be considered with reference to the economic object or from the standpoint of the economizing individual. Looked at objectively itis the utility of the good. Looked at subjectively itis the value of the good. Utility (serviceability, usefulness) is the suitability of a thing to serve a human purpose. . . . But value is the importance the good has, because of its utility, for the conscious economic purposes of the economizing individual.”

6“the importance of a good because of the sacrifices made in obtaining it.”

7“the traditional distinction between use value and exchange value is incorrect, and the concept of value cannot by any means be tied to the factor of things having useful employments. On the contrary, the concept of value is uniform, designating the wealth-character of things, and becoming a concrete phenomenon as a result of the institution of laws with respect to property.” (The italics in the quotation were added by Menger).—TR.

1To Chapter III, Section 2. See note 11 of Chapter III.—TR.

2The passage from Aristotle given here is a literal English translation of the German translation offered by Menger. In the standard English translation by W. D. Ross (The Works of Aristotle, London, Oxford University Press, 1925, Vol. IX), the passage runs as follows: “all goods must therefore be measured by some one thing. . . . That demand holds things together as a single unit is shown by the fact that when men do not need one another . . . they do not exchange, as we do when someone wants what one has oneself.”—TR.

3“since the dispositions of human minds vary, the value of things varies.”

4“the esteem value of an object, for an isolated individual, is precisely equal to the portion of his total faculties [labor] that answers his desire for the object or that he wishes to employ for its satisfaction.”

5“A thing is said to be useful when it serves for one of our needs; . . . according to this utility we esteem it more or less. . . . Now, this esteem is what we call value.”

6“Since use value is always a relation of a thing to man, the use value of every species of goods is determined by the magnitude and rank of the human needs the species of goods satisfies. Where there are no men and no needs, no use value exists. The total use value of any species of goods remains unchanged, therefore, as long as the needs of human society remain unchanged, and the use value of a single unit of the species is equal to this total use value divided by the number of units. Hence the larger the total number of units, the smaller becomes the portion of use value attributed to each unit from the total use value of the species and vice versa.”

7See note 2 of Appendix C concerning this work.—TR.

8The average concrete need-unit (the average of all the separate need-units found among the various classes of society) is the general expression for objective economic use value. The fraction that expresses the shares that the various useful things contribute toward [satisfaction of] the need-unit, and that indicates their value relationship to the average concrete need-unit, furnishes the measure for the objective value of the various useful things.

9“the requisites for the estimation of the use value of goods cannot be found anywhere but in the fundamental elements of the concept of use value itself.”

10“Thus the magnitudes of the use value of goods depend (a) on the intensity of the human needs they satisfy, and (b) on the intensity with which they satisfy these human needs. . . . Hence we find a classification and scale of human needs to which corresponds a classification and scale of species of goods.”

11“Economic activity will be engaged in more energetically the more urgent a person’s need for a good and the more difficult it is to procure the good corresponding to that need. The more these two factors (intensity of desire and degree of difficulty of procurement) operate upon one another, the more strongly does the importance of the good enter into the consciousness that guides economic activity. All propositions about the magnitude of value and its changes are reducible to this fundamental relationship.” This passage could not be located in the reprinted edition of Schäffle’s essay, which alone was available to us. It is likely that the reprint constitutes only an incomplete version of Schäffle’s original article. But whether or not this is the case, it is quite clear from Schäffle’s other writings, for example, Das gesellschaftliche System der menschlichen Wirthschaft (Tübingen, 1873, I, 172), that Menger’s quotation accurately represents Schäffle’s thought.—TR.

12“consciously directed to the all-around fulfilment of ethically rational purposes of life.”

13“The relationship of the measure of a given good to the run of goods in general.”

14“The true measure of the value of a good is found by dividing the magnitude of the good in question into the magnitudes of other goods. In order to be able to do this a common denominator for the magnitudes of all goods must be found. But this common denominator, or homogeneous element in goods can be found only in their homogeneous nature—that is, in the fact that all true goods originate from the six elements, matter, labor, production, need, usefulness, and true consumability, since if one of these elements disappears, an object ceases to be a good. These elements are contained in a given good only to a particular degree, and their magnitude determines the measure of each true good taken separately. From this it follows that the quantitative relationship of all the separate goods to one another, or the general measure of their value, is given by the ratio between these component elements of goods and their magnitude in one good relative to another. To determine and calculate this relationship is therefore to determine the true measure of value.”

1To Chapter III, Section 3. See note 15 of Chapter III.—TR.

2“We find that the development of all nations was analogous to this extent, that capital was everywhere able to develop its economic power strongly only after the introduction and widespread use of metallic money and to reveal its more extensive power only at higher levels of civilization.”

1To Chapter V See note 1 of Chapter V.—TR

1To Chapter VI. See note 2 of Chapter VI.—TR.

1To Chapter VII. See notes 3 and 4 of Chapter VII.—TR.

2“what is sold or supplied, wholesale or retail, in shops, stores, at fairs, markets, etc.”

3“what is superfluous to a person for his support and which he passes on to others.”

4“A commodity is anything . . . that . . . can be given to someone else, especially in exchange for something else.”

5“stocks of goods that are kept ready for exchange.”

6“goods kept ready for exchange or sale.”

7“every good intended for sale.”

8“surplus goods intended for trade.”

9“valuables and goods destined for sale.”

10“products that circulate or are destined for circulation.”

11“the various products intended for trade.”

12“each product of an enterprise appearing as an independent good.”

1To Chapter VIII, Section 1. See note 5 of Chapter VIII—TR.

2“a horse . . . or some other monetary payment.”

3We were unable to verify this reference.—TR.

1To Chapter VIII, Section 1. See note 5 of Chapter VIII.—TR.

2“either from its own nature or from man’s design” (see Gabriel Biel, Treatise on the Power and Utility of Moneys, translated and edited by R.B. Burke, Philadelphia, 1930, pp. 20–21).

3“the invention and institution of money . . . comes from the law of nations.”