Menger proceeds with his unintended revolution of classical economics, working readers through the implications of subjective value.

Editor’s Note

Anthony Comegna, PhD

Assistant Editor for Intellectual History

After establishing the subjective nature of value, Menger moves to describe and explain the variety of implications that result. Remember, Menger is a causal realist, meaning that he begins his explanations of economics from the earliest apparent causes and within the constraints of what we might call “obvious reality.” Because each economic actor experiences the world exclusively from their subjective point of view, and the subjective, individual experience generates all economic value, any analysis of value satisfaction requires the economist to take subjective values as given. It is not for us to ascribe particular numerical values to the subjective experiences of others—objective, interpersonal units do not even make sense here. In reality, all the economist has to go on is the subjective valuations reported by individual actors, whose preferences are only revealed in their actions. Rather than valuing things in precise util amounts, economizing actors arrange valuations ordinally according to the urgency of the perceived want. In general, a person’s base needs for survival have the greatest import and value, but because complex societies solve most of these needs with relative ease, other demands take precedence and command greater subjective economic value. In a town where cheap housing and food abound, the greatest demand might be for a music hall, and singers may command greater pay than several farming families’ wealth put together. In the Classical Economist’s world of ideal situations and logic puzzles, food and shelter should always command supreme prices; but reality only conforms to this model where people live on the margins of survival. In fact, people are constantly shifting their value scales in literally unpredictable ways and according to at least partially unknowable information, with subjective calculations performed at the margins of economic life.

But not all things about value are subjective—only the actual valuation part. Valuation is a process individuals perform when considering the quantity of goods available to them to satisfy their demands, and 2) the value ranking placed on any given unit of that good. Where those two factors meet, there was Menger’s incipient revolution and the beginning of the Austrian School.

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By Carl Menger

Principles of Economics

Trans. James Dingwall and Bert F. Hoselitz. Institute for Humane Studies. 1976. Originally Published: 1871.

Chapter III. The Theory of Value

2. The Original Measure of Value

A. Differences in the magnitude of importance of different satisfactions (subjective factor).

As concerns the differences in the importance that different satisfactions have for us, it is above all a fact of the most common experience that the satisfactions of greatest importance to men are usually those on which the maintenance of life depends, and that other satisfactions are graduated in magnitude of importance according to the degree (duration and intensity) of pleasure dependent upon them. Thus if economizing men must choose between the satisfaction of a need on which the maintenance of their lives depends and another on which merely a greater or less degree of well‐​being is dependent, they will usually prefer the former. Similarly, they will usually prefer satisfactions on which a higher degree of their well‐​being depends. With the same intensity, they will prefer pleasures of longer duration to pleasures of shorter duration, and with the same duration, pleasures of greater intensity to pleasures of less intensity.

The maintenance of our lives depends on the satisfaction of our need for food, and also, in our climate, on clothing our bodies and having shelter at our disposal. But merely a higher degree of well‐​being depends on our having a coach, a chessboard, etc. Thus we observe that men fear the lack of food, clothing, and shelter much more than the lack of a coach, a chessboard, etc. They also attribute a substantially higher importance to securing satisfaction of the former needs than they attribute to the satisfaction of needs on which, as in the cases just mentioned, only a passing enjoyment or increased comfort (that is, merely a higher degree of their well‐​being) depends. But these satisfactions also have very different degrees of importance. The maintenance of life depends neither on having a comfortable bed nor on having a chessboard, but the use of these goods contributes, and certainly in very different degrees of importance. The maintenance of life depends neither on having a comfortable bed nor on having a chessboard, but the use of these goods contributes, and certainly in very different degrees, to the increase of our well‐​being. Hence there can also be no doubt that, when men have a choice between doing without a comfortable bed or doing without a chessboard, they will forgo the latter much more readily than the former.

We have thus seen that different satisfactions are very unequal in importance, since some are satisfactions that have the full importance to men of maintaining their lives, others are satisfactions that determine their well‐​being in a higher degree, still others in a less degree, and so on down to satisfactions on which some insignificant passing enjoyment depends. But careful examination of the phenomena of life shows that these differences in the importance of different satisfactions can be observed not only with the satisfaction of needs of different kinds but also with the more or less complete satisfaction of one and the same need.

The lives of men depend on satisfaction of their need for food in general. But it would be entirely erroneous to regard all the foods they consume as being necessary for the maintenance of their lives or even their health (that is, for their continuing well‐​being). Everyone knows how easy it is to skip one of the usual meals without endangering life or health. Indeed, experience shows that the quantities of food necessary to maintain life are only a small part of what well‐​to‐​do persons as a rule consume, and that men even take much more food and drink than is necessary for the full preservation of health. Men consume food for several reasons: above all, they take food to maintain life; beyond this, they take further quantities to preserve health, since a diet sufficient merely to maintain life is too sparing, as experience shows, to avoid organic disorders; finally, having already consumed quantities sufficient to maintain life and preserve health, men further partake of foods simply for the pleasure derived from their consumption.

The separate concrete acts of satisfying the need for food accordingly have very different degrees of importance. The satisfaction of every man’s need for food up to the point where his life is thereby assured has the full importance of the maintenance of his life. Consumption exceeding this amount, again up to a certain point, has the importance of preserving his health (that is, his continuing well‐​being). Consumption extending beyond even this point has merely the importance—as observation shows—of a progressively weaker pleasure, until it finally reaches a certain limit at which satisfaction of the need for food is so complete that every further intake of food contributes neither to the maintenance of life nor to the preservation of health—nor does it even give pleasure to the consumer, becoming first a matter of indifference to him, eventually to cause of pain, a danger to health, and finally a danger to life itself.

Similar observations can be made with respect to the more or less complete satisfaction of all other human needs. A room, or at least some place to sleep protected from the weather, is necessary in our climate for the maintenance of life, and reasonably spacious quarters for the preservation of health. In addition, however, men usually possess further accommodations, if they have the means, merely for purposes of pleasure (drawing rooms, ballrooms, playrooms, pavilions, hunting lodges, etc.). Thus it is not difficult to recognize that the separate concrete acts of satisfying the need for shelter have very different degrees of importance. Up to a certain point, our lives depend on satisfying our need for shelter. Beyond this, our health depends on a more complete satisfaction. And still further attempts to satisfy the same need will bring at first a greater and then a smaller enjoyment, until eventually a point can be conceived, for each person, at which the further employment of available accommodations would become a matter of complete indifference to him, and finally even burdensome.

It is possible, therefore, with respect to the more or less complete satisfaction of one and the same need, to make an observation similar to the one made earlier with respect to the different needs of men. We saw earlier that the different needs of men are very unequal in importance of satisfaction, being graduated from the importance of their lives down to the importance they attribute to a small passing enjoyment. We see now, in addition, that the satisfaction of any one specific need has, up to a certain degree of completeness, relatively the highest importance, until eventually a stage is reached at which a more complete satisfaction of that particular need is a matter of indifference. Ultimately a stage occurs at which every act having the external appearance of a satisfaction of this need not only has no further importance to the consumer but is rather a burden and a pain.

In order to restate the preceding argument numerically, to facilitate comprehension of the subsequent difficult investigation, I shall designate the importance of satisfactions on which life depends with 10, and the smaller importance of the other satisfactions successively with 9, 8, 7, 6, etc. In this way we obtain a scale of the importance of different satisfactions that begins with 10 and ends with 1.

Let us now, for each of these different satisfactions, give numerical expression to the additional importance, diminishing by degrees from the figure indicating the extent to which the particular need is already satisfied, or further acts of satisfaction of that particular need. For satisfactions on which, up to a certain point, our lives depend, and on which, beyond this point, a well‐​being is dependent that steadily decreases with the degree of completeness of the satisfaction already achieved, we obtain a scale that beings with 10 and ends with 0. Similarly, for satisfactions whose highest importance is 9, we obtain a scale that begins with this figure and also ends with 0, and so on….

Suppose that [a scale from 10 to 0] expresses the importance of some one individual of satisfaction of his need for food, this importance diminishing according to the degree of satisfaction already attained, and that [a scale from 6 to 0] expresses similarly the importance of his need for tobacco. It is evident that satisfaction of his need for food, up to a certain degree of completeness, has a decidedly higher importance to this individual than satisfaction of his need for tobacco. But if his need for food is already satisfied up to a certain degree of completeness (if, for example, a further satisfaction of his need for food has only the importance to him that we designated numerically by the figure 6), consumption of tobacco begins to have the same importance to him as further satisfaction of his need for food. The individual will therefore endeavor, from this point on, to bring the satisfaction of his need for tobacco into equilibrium with satisfaction of his need for tobacco into equilibrium with satisfaction of his need for food. Although satisfaction of his need for food in general has a substantially higher importance to the individual in question than satisfaction of his need for tobacco, with the progressive satisfaction of the former a stage nevertheless comes…at which further acts of satisfaction of his need for food have a smaller importance to him than the first acts of satisfying his need for tobacco, which although less important in general is at this stage still wholly unsatisfied.

By this reference to an ordinary phenomenon of life, I believe I have clarified…a difficult and previously unexplored field of psychology.

The varying importance of satisfaction of separate concrete needs has for men is not foreign to the consciousness of any economizing man, however little attention has hitherto been paid by scholars to the phenomena here treated. Wherever men live, and whatever level of civilization they occupy, we can observe how economizing individuals weigh the relative importance of satisfaction of their various needs in general, how they weigh especially the relative importance of the separate acts leading to the more of less complete satisfaction of each need, and how they are finally guided by the results of this comparison into activities directed to the fullest possible satisfaction of each need, and how they are finally guided by the results of this comparison into activities directed to the fullest possible satisfaction of their needs (economizing). Indeed, this weighing of the relative importance of needs—this choosing between needs that are to remain unsatisfied and needs that are, in accordance with the available means, to attain satisfaction, and determining the degree to which the latter are to be satisfied—is the very part of the economic activity of men that fills their minds more than any other, that has the most far‐​reaching influence on their economic efforts, and that is exercised almost continually by every economizing individual. But human knowledge of the different degrees of importance of satisfaction of different needs and of separate acts of satisfaction is also the first cause of differences in the value of goods.

B. The dependence of separate satisfactions on particular goods (objective factor).

If, opposite each particular concrete need of men, there was but a single available good, and that good was suitable exclusively for the satisfaction of the one need (so that, on the one side, satisfaction of the need would not take place if the particular good were not at our disposal, and on the other side, the good would be capable of serving for the satisfaction of that concrete need and no other) the determination of the value of the good would be very easy; it would be equal to the importance we attribute to satisfaction of that need. For it is evident that whenever we are dependent, in satisfying a given need, on the availability of a certain good (that is, whenever this satisfaction would not take place if we did not have the good at our disposal) and when that good is, at the same time, not suitable for any other useful purpose, it can attain the full but never any other importance than that which the given satisfaction has for us. Hence, according to whether the importance of the given satisfaction to us, in a case such as this, is greater or smaller, the value of the particular good to us will be greater or smaller. If, for instance, a myopic individual were cast away on a lonely island and found among the good he had salvaged just one pair of glasses correcting his myopia but no second pair, there is no doubt that these glasses would have the full importance to him that he attributes to corrected eye‐​sight, and just as certainly no greater importance, since the glasses would hardly be suitable for the satisfaction of other needs.

But in ordinary life the relationship between available good and our needs is generally much more complicated. Usually not a single good but a quantity of goods stands opposite not a single concrete need but a complex of such needs. Sometimes a larger and sometimes a smaller number of satisfactions, of very different degrees of importance, depends on our command of a given quantity of goods, and each one of the goods has the ability to produce these satisfactions differing so greatly in importance.

An isolated farmer, after a rich harvest, has more than two hundred bushels of wheat at his disposal. A portion of this secures him the maintenance of his own and his family’s lives until the next harvest, and another portion the preservation of health; a third portion assures him seed‐​grain for the next seeding; a fourth portion may be employed for the production of beer, whiskey, and other luxuries; and a fifth portion ay be used for the fattening of his cattle. Several remaining bushels, which he cannot use further for these more important satisfactions, he allots to the feeding of pets in order to make the balance of his grain in some way useful.

The farmer is, therefore, dependent upon the grain in his possession for satisfactions of very different degrees of importance. At first he secures with it his own and his family’s lives, and then his own and his family’s health. Beyond this, he secures with it the uninterrupted operation of his farm, an important foundation of his continuing welfare. Finally, he employs a portion of his grain for purposes of pleasure, and in so doing is again employing his grain for purposes that are of very different degrees of importance to him.

We are thus considering a case—one that is typical of ordinary life—in which satisfactions of very different degrees of importance depend on the availability of a quantity of goods that we shall assume, for the sake of greater simplicity, to be composed of completely homogeneous units. The question that now arises is: what, under the given conditions, is the value of a certain portion of the grain to our farmer? Will the bushels of grain that secure his own and his family’s lives have a higher value to him than the bushels that enable him to seed his fields? And will the latter bushels have a greater value to him than the bushels of grain he employs for purposes of pleasure?

No one will deny that the satisfactions that seem assured by the various portions of the available supply of grain are very unequal in importance, ranging from an importance of 10 to an importance of 1 in terms of our earlier designations. Yet no one will be able to maintain that some bushels of grain (those, for instance, with which the farmer will nourish himself and his family till the next harvest) will have a higher value to him than other bushels of the same quality (those, for instance, from which he will make luxury beverages).

In this and in every other case where satisfactions of different degrees of importance depend on command of a given quantity of goods, we are, above all, faced with the difficult question: which particular satisfaction is dependent on a particular portion of the quantity of goods in question?

The solution of this most important question of the theory of value follows from reflection upon human economy and the nature of value.