The Positive Theory of Capital

Eugen v. Böhm-Bawerk, from the Warren J. Samuels Portrait Collection
Böhm-Bawerk, Eugen v.
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William A. Smart, trans.
First Pub. Date
London: Macmillan and Co.
Pub. Date
18 of 55



Book III, Chapter I

The Two Conceptions of Value*1


In the science of Political Economy, as in ordinary speech, two very distinct things have usually been classed together under the one name of Value. From the first it could scarcely escape notice that there was a difference between them, but the full extent of the difference was certainly underrated. Instead of being recognised as phenomena belonging to entirely distinct categories of thought, they were, quite falsely, represented as members of one and the same group of phenomena, and, under the not very felicitous names of Use Value and Exchange Value, they were assumed to be sub-species of one universal conception of Value, and distinguished from each other as such. This distinction once made, however, the so-called Use Value was almost entirely dropped out of sight. Economists took no trouble to inquire any deeper into its nature, nor did they make any use of it in further investigations. They simply catalogued it, as it were, among the conceptions of political economy, and left it lying in a corner of their systems like a stone for which there was no use. It is only of very recent date that economical investigation has discovered in this "stone rejected of the builders" the basis and support of one of the most important conceptions of economics, and has awaked to the fact that on it depends a group of most notable laws—laws with consequences reaching far beyond the boundaries of the theory of value, and laws to which almost every branch of economic theory must go back for its root and spring.


But, first of all, it is important that we give right names to those things which tradition has handed down to us under the inadequate designations of Use Value and Exchange Value. The two groups of phenomena, to both of which popular usage has given the ambiguous name "Value," we shall distinguish as value in the Subjective and value in the Objective sense.*2


Value in the Subjective sense is the importance which a good, or a complex of goods, possesses with regard to the wellbeing of a subject. In this sense I should say of any particular good that it was valuable to me, if I recognised that my wellbeing was so associated with it that the possession of it satisfied some want, secured me a gratification or a feeling of pleasure which I should not have had without it, or saved me from a pain which, otherwise, I should have had to endure. In this case the existence of the good means my gain, the absence of it my loss, in wellbeing: to me it is a matter of importance, for me it has value.


By Objective value, on the other hand, is meant the Power or Capacity of a good to procure some one objective result. In this sense there are as many kinds of value as there are external results with which man may be connected. There is a nutritive value of food, a heating value of wood and coal, a fertilising value of manures, a blasting value of explosives, and so on. In any expressions of this kind all reference to the wellbeing or illbeing of a subject is excluded from the conception of value. If we affirm that beech has a superior heating value over pine, we only express the purely objective and, as it were, mechanical fact that with a definite weight of beech a greater amount of heat can be raised than with the same weight of pine. In the above connections, then, instead of the word "Value" we use, as entirely synonymous with it, the expressions "Power" or "Capacity"—expressions which themselves suggest a purely objective relation. Instead of "nutritive value," "heat value;" "explosive value," we use "nutritive power" or "nutritive capacity;" "heating power," "explosive power," and so on, as meaning exactly the same thing.


The varieties of Objective value just mentioned by way of illustration do not, however, belong to economical but to purely technical relations; and, however frequently they are referred to in economical text-books, they do not properly belong to political economy at all. It does not fall within the province of our science to expound the heating value of wood, nor, in explaining other economical phenomena, has it occasion to lay stress on this heating value any more than it does on any other physical or technical fact. I have given these illustrations purely as illustrations, with the intention of putting in clearer relief the very intimately related nature with the above of that branch of objective values which, of course, has the greatest possible importance for political economy, namely, the objective Exchange value of goods. By this expression I mean the objective worth of goods in exchange; or, in other words, the possibility of obtaining in exchange for them a quantity of other economical goods, this possibility being looked upon as a power or a property of the former goods. In this sense we say that a horse is worth £50, or a house worth £1000, if, in exchange for these, we can obtain, respectively, £50 or £1000.


Here, again, it must be noted that, as in the kindred expressions heating value and the like, we say nothing at all as to the influence which goods may exert on the wellbeing of any subject whatever; we simply indicate the objective relation that for a particular good a certain amount of other goods may be had in exchange. In this case also the characteristic phenomenon recurs, that the word "Value" can be, quite adequately, replaced by the word "Power," and is, indeed, so replaced in popular speech. Besides the expression "value in exchange" English economists use, quite indifferently, the expression "purchasing power," and we Germans are beginning in the same way to put in general use the term Tauschkraft.


The economical theory of value has, then, the double task of interpreting, on the one hand, the laws of Subjective Value, and, on the other, the laws of Objective Exchange Value, as from the economic point of view by far the most important branch of objective value. The first part of this task we shall take up in the present book, the second in the following book dealing with the theory of Price. It is true that the two conceptions, "Price" and "Exchange Value," are by no means identical. Exchange Value is the capacity of a good to obtain in exchange a quantity of other goods. Price is that other quantity of goods. But the laws of these two coincide. So far as the law of price explains that a good actually obtains such and such a price, and why it obtains it, it affords at the same time the explanation that the good is capable; and why it is capable, of obtaining a definite price. The law of Price, in fact, contains the law of Exchange Value.*3

Notes for this chapter

My views on the subject of Value have already been published at length in another place (Grundzüge der Theorie des Wirthschaftlichen Güterwerths, in Conrad's Jahrbücher für Nationalökonomie und Statistik, vol. xiii. 1886, pp. 1-86 and 477-541). Since then I have seen no reason to change them. What I have now to say on the same subject can, therefore, offer but few new features. On the whole, what follows is an extract from my former work adapted to the requirements of the theory of capital, and, in the composition of it, I have gone on principles suggested by the nature of my present task. Those fundamental ideas on which the understanding of the whole depends, and those lines of thought with which the theory of capital is specially connected, I have taken in all their detail from my other book; and, as a simple change of form would have been as troublesome as it was useless, I have taken them, for the most part, without change. I have omitted, on the other hand, all those explications, demonstrations, and so on, which were important for the Value theory, but seemed not altogether indispensable for the understanding of the theory of Capital. In place of these I have added a good deal of matter in which I have taken advantage of the newest literature on the subject, and have tried to give a still clearer formulation to several ideas, and, particularly, to develop with more exactitude special points where the value theory comes into more intimate connection with the theory of capital. The most important additions occur in chapter vii. of the present book, and at the end of chapter v, and in chapter vii. of the next book. Readers who are interested in the theory of value and price for its own sake, I should ask to consult the statement in Conrad's Jahrbücher, which is much more complete, and which I tried to make easier by numerous references.
I frankly confess that I would gladly exchange these pedantic and clumsy expressions for terms more euphonious and popular, if they could be got to indicate the opposition referred to with even approximate correctness. But I have not been able to find such expressions. The words Use Value and Exchange Value are not suitable at all, because, as we shall see, there is a Subjective exchange value.
The foundations of the modern value theory have been laid by three writers whose work is in substantial agreement—Carl Menger, Jevons, and Walras. Of these, in clearness and completeness, Menger's statement takes the first place. Twenty years before his time, several of the most weighty and fundamental ideas had been already propounded by Gossen in his remarkable book, Entwicklung der Gesetze des menschlichen Verkerhs und der daraus fliessenden Regeln für menschliches Handeln, Brunswick, 1854. Like the book itself, these ideas sank into complete but undeserved oblivion, and had to be rediscovered by the economists just mentioned. That this was done almost simultaneously by three different men, belonging to three different nations, and quite independently of each other, is a very remarkable coincidence, and is, at the same time, no small guarantee for the correctness of the principles on which all three were certainly agreed, although in thoroughness their statement of them was unequal. Since then these principles have had a notable development, and received wide acceptance. Not long ago, in the preface to his Theorie de la Monnaie (Lausanne, 1886), Walras could give an imposing list of writers as adherents of the new theory. Since then we may add the name of E. Sax (Grundlegung der theoretischen Staatswirthschaft, Vienna, 1887, p. 250),—with whom, however, I cannot agree in many particulars, particularly in those where he tries to establish original ideas that are not in harmony with those of his predecessors; and that of R. Meyer (Das Wesen des Einkommens, Berlin, 1887).

End of Notes

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