by any one respecting a commodity is based upon his subjective judgment of value. Price and exchange-value on the other hand furnish the general principles of exchange and of the calculus of production.
Theory has to examine both phenomena. I will restrict myself to showing why it may not neglect subjective values. The reason is, that it would thereby leave unexplained all individual decisions in economic matters, e.g. it would not even explain why any one buys. For by objective standards wares and prices have the same value; by objective standards we give equals for equals, for which we should have no motive. But further, exchange-value itself, considered objectively, can only find its explanation in the laws of subjective value, obeyed by buyer and seller in concluding a bargain. If commodities which are to be had in abundance fetch no price, this can only be owing to the fact that they have subjectively no value for anyone. The law, that in the same market equal portions of the same commodity are equal in price, could not hold, did not every owner always assign equal value to equal portions. Price follows marginal equivalent because subjective value follows marginal utility; it only adjusts itself to cost of production, because every producer subjectively for himself assigns a value to products as syntheses of their productive elements. Rent is paid for land, interest for capital, wages for labour, because in subjective valuation a share of the aggregate return is imputed to land, a share to capital, a share to labour; nor could any more precisely quantitative expression be found for price, were it not that subjective value, by its bearing on supply, number, and cost of production, already admitted of computation. Motives it is true are ever coming into play through the conflict of price, which are wanting in the personal calculus: on the other hand monopoly suppresses the effect of the influence of cost, and other such differences: nevertheless without the subjective influences of the estimation of values, no dealings in price would ultimately he conceivable, nor could the law of price be maintained.
I must abstain from any complete demonstration of this governing idea, and will pursue it a little further in one direction only. In reply to a passage in my book on Natural Value, Prof. Edgeworth[1] has said that the difference between the valuations under an Economic and those under a Socialistic régime is most briefly and appropriately expressed by the statement that in the
- ↑ Address to the Economic science and Statistics Section of the British Association, Newcastle-upon-Tyne, 1889, p. 26.
