PURE ECONOMICS
PUKE ECONOMICS
BY
PKOFESSOR MAFFEO PANTALEONI
TRANSLATED BY
T. BOSTON BEUCE, ESQ.
OF THE MIDDLE TEMPLE ; BARRISTER- AT-LAW
N
iLontion MACMILLAN AND CO., LIMITED
NEW YORK : THE MACMILLAN COMPANY 1898
All rights reserved
H6
TEANSLATOR'S PEEFACE
PROFESSOR PANTALEONI'S Manuale di Economia Pura has met with general acceptance at the hands of Italian students of economics. It has been translated in the hope that it may meet, on the part of English readers, with the recognition to which its comprehensive grasp and lucid exposition of the fundamental principles underlying economic questions entitle it.
The English edition embodies additions and alterations by the author, necessitated by the contributions that have been made to this subject by many writers since the original Italian edition appeared in 1889.
The translator desires to acknowledge the kindness and courtesy of Professor A. Marshall of Cambridge in giving him access to some of his unpublished writings, to which reference is made in the text.
T. B. B.
PEEFACE
THIS manual is intended as a succinct statement of the fundamental definitions, theorems and classifications that constitute economic science, properly so called, or Pure Economics. Thus all questions pertaining to economic art, or Political Economy, are beyond its scope. This is a departure from the lines on which text-books of economic science are usually prepared, their authors' object being to equip the reader forthwith for the discussion of the most important economic problems presented by everyday life. The reasons of this departure are twofold. In the first place, it appears to me that the discussion of problems of economic art is altogether superficial and inconclusive, if not based ultimately on theorems of Pure Economics. In the second place, I do not share the view that Pure Economics is not susceptible of plain exposition, requiring no greater intellectual effort for its comprehension than many other branches of study that form part of a university curriculum. ; My experience in the class-room has convinced me that all that is necessary on the part of the lecturer is that he should enunciate his pro- positions in a rigorously logical order of sequence, explain and illustrate their contents and bearing with copious detail, and enhance the mnemonic effect of his prelection by occasionally repeating the same things in a different form.
In yet another point I have departed from the general practice of text-writers. To each theorem and each classifica- tion I have given the name of the economist to whom we are
viii PREFACE
chiefly indebted for it. The selection of these names was a matter of some difficulty, in view of the conflicting claims that may be advanced on behalf of the economist who first dis- covered a theorem, or the one who first analysed it minutely, or who co-ordinated it with other theorems, or who popularised it, or rediscovered it after it had been forgotten. The principle on which I have proceeded is to mention the author whom the student may consult with most profit to himself. This method facilitates the recollection of theorems, conduces to the study of the sources, and presents a small repertory of the latter methodically classified.
MAFFEO PANTALEONI.
CONTENTS
PAGE
TRANSLATOR'S PREFACE v
PREFACE vii
PAET I. — THE THEOKY OF UTILITY
CHAPTER I
OF THE SUBJECT-MATTER OF ECONOMIC SCIENCE ... 3
CHAPTER II
OF THE HEDONIC PRINCIPLE
§ 1. Meaning of the Hedonic Principle and its Correspondence with the
Psychological Reality ......... 9
§ 2. Of the Principle of the Relativity of Sensations of Pleasure and Pain 17
§ 3. Of Individual and Tribal Egoism 20
§ 4. Of the Commensurability of Pleasures and Pains .... 23
§ 5. Of the Fundamental Law of our Sensibility 28
§ 6. Gossen's Two Theorems of the Hedonic Maxima .... 31
CHAPTER III
OF WANTS
§ 1. That Economic Actions are such as are caused by the Existence of a
Want 39
§ 2. Of Hedonic Mensuration applied to the various Degrees of Intensity of a single Want, and to the Comparison of the Degrees of Intensity of Simultaneous Wants . 40
x PURE ECONOMICS
PAGE
§ 3. Of an Absolute Scale of Intensity and of the Law of the Elasticity of
Wants 48
§ 4. Of the Variety and Progression of Wants 55
§ 5. Of some Classifications of Wants in respect of their Qualities . . 56
CHAPTER IV
OF UTILITY AND THE CLASSIFICATION OF COMMODITIES
§ 1. How Commodities are commonly Characterised .... 58 §2. Of the Essentials of the Conception "Commodity" . ... 60 § 3. Of the Degree of Utility and of the Total Utility of Commodities ;
of the Initial Degree of Utility of one or more Commodities, and
of the Final Degree of Utility 70
§ 4. Of Positive and Negative Utility, and the Division of Things into
Positive and Negative Commodities . . . . . . 79
§ 5. Of Direct, Complementary, and Instrumental Utility according to
Gosseii, and of a corresponding Division of Commodities into
Direct, Complementary, and Instrumental 81
§ 6. Of Actual and Prospective Utility, and of an Analogous Classification
of Things as Actual and Prospective Commodities ... 86 § 7. Of Economic Equivalents and of Genetic Groups of Commodities . 93 § 8. Jennings's Classification of Commodities as Primary and Secondary,
and Laws based thereon ........ 94
§ 9. Of Commodities, the Available Quantity of which is more or less
than the Demand 96
§ 10. Of Cost 101
CHAPTER V
OF WEALTH AND THE METHODS OF ESTIMATING IT
§ 1. Wherein the Wealth of Individuals consists ; how it is estimated ;
and why it is no Criterion of their Comfort . . . . .110
§ 2. Of the Wealth of a Group of Individuals, or of a Nation, considered
at a given Time and Place 112
§ 3. Of the Difficulty of Comparing the Wealth of two or more Indi- viduals, or of two Nations at a given Period . . . .115
§ 4. Of the Difficulty of Comparing the Wealth possessed at different
Times or Places by two or more Persons or by two Nations . . 117
CONTENTS
PART II. — THE THEORY OF VALUE
CHAPTER I
OF VALUE ; HOW DEFINED ; ITS CAUSES AND WITHIN WHAT LIMITS IT is ARBITRARY
PAGE
§ 1. Definition of Value 123
§ 2. Various Uses of the Term " Value " ...... 128
§ 3. Of the Causes of Value, or the Conditions of every Exchange . . 129 § 4. Of the Maximum and Minimum Limits of Value in Isolated Eco- nomics and in the Economics of Exchange 137
CHAPTEE II
DETERMINATION OF THE RATE OF INTERCHANGE IN THE RESPECTIVE CASES OF MONOPOLY AND OF FREE COMPETITION
1. Determination of the Rate of Interchange of Monopolised Com-
modities and Distribution of the Latter amongst Competitors . 147
2. Determination of the Rate of Interchange of a Commodity exchanged
under Conditions of Free Competition, and of the Distribution of
the Mass sold among the Competitors 159
CHAPTER III THE LAW OF DEMAND AND SUPPLY
1. Of the Remote Factors that determine the Curve of Degrees of
Utility and the Disposable Quantity of a Commodity . . .164
2. Of the Identity of the Cost of Production and Final Degree of Utility
of Commodities and of some of the Principal Deductions from this Theorem 170
3. Of an Erroneous Meaning attributed to Cost of Production, and of
some consequent Erroneous Propositions 179
4. That the Value of Commodities consumed in the Production of another
Commodity cannot be the cause of its Value. Wieser's Law . . 181
5. That Cost and its Remuneration are Antithetical Conceptions . . 185
6. Of the Law of Variation in the Productiveness of Cost . . . 186
PURE ECONOMICS
PAGE
Of the Influence of Cost on the Rate of Interchange under Conditions of Free Competition. Theorems of Ricardo and Marshall. Stable and Unstable Equilibrium of the Quantitative Index . . .188
Of the Reciprocal Demand between Close Markets. Professor Mar- shall's Proposition respecting the Forms of Reciprocal Demand Curves and the Stable and Unstable Equilibria they constitute : —
A. Laws of the Curves of Reciprocal Demand . . .197
B. Theory of the Stable and Unstable Equilibria of the Rates
of Interchange ........ 205
PART III. — APPLICATION OF THE GENERAL THEORY OF VALUE TO DETERMINATE CATEGORIES OF COMMODITIES
CHAPTER I
OF THE UTILITY AND VALUE OF INSTRUMENTAL COMMODITIES IN GENERAL, AND OF THE GENERAL PRINCIPLES OF THE DISTRIBUTION OF WEALTH 213
CHAPTER II OF THE VALUE OF MONEY
§ 1. Money an Instrument of Exchanges ...... 221
§ 2. Money a Common Denominator of Values 224
§ 3. Of other Contingent Functions of Money 225
§ 4. Of the Value of Money 227
§ 5. That Money may be a Commodity destitute of all direct Utility . 231
§ 6. Of Gresham's Law 233
§ 7. Of the International Distribution of Money 233
§ 8. Of Discount in Relation to the Value of Money .... 235
§ 9. Of the Cost of Metallic Money 238
§ 10. Of the Value of Instruments of Credit functioning as Money . . 239
CHAPTER III
OF THE VALUE OF CAPITAL
§ 1. Definition of Capital and Interest 243
§ 2. Capital— A Complementary- Instrumental Commodity . . . 248 § 3. That the Origin of Interest is not the Difference between the Value
of Present and Prospective Commodities . . . . .252
CONTENTS xiii
PAGE
§ 4. Of the Factors that Determine the Kate of Interest .... 255 § 5. Of the Capitalisation and Uniformity of the Rate of Interest among
Open Markets 259
§ 6. Of the Tendency of the Rate of Interest to Stability . . .261
§ 7. Of Interest in connection with the Value of Money and Discount . 262
CHAPTER IV
OF THE VALUE OF NATURAL AGENTS
§ 1. Of the Value of Land 264
§ 2. The Statical Theory of Ricardo's Law of Rent 265
§ 3. The Dynamic Theory of Ricardo's Law of Rent . . . 275
§ 4. Historic Theory of Ricardo's Law of Rent 277
§ 5. Of Profits as Rent— Mr. F. Walker's Theory 278
CHAPTER V
OP THE VALUE OF LABOUR
§ 1. The Premisses of the Theory of Wages 284
§ 2. Determination of the Rate of Wages in Isolated Economics . . 287 § 3. That Wages do not vary in Proportion to the Productiveness of
Labour and are not independent of the disposable Capital . . 295 § 4. Determination of the Rate of Wages under Conditions of Economic
Statics 301
§ 5. Some unfounded Objections to the Wage-Fund Theory . . . 304 § 6. Determination of the Rate of Wages under Conditions of Economic
Dynamics 306
INDEX OF AUTHORS 309
INDEX OF SUBJECTS 313
PART I
THE THEORY OF UTILITY
rx
CHAPTER I
OF THE SUBJECT-MATTER OF ECONOMIC SCIENCE
ECONOMIC science consists of the laws of wealth systematically deduced from the hypothesis that men are actuated exclusively by the desire to realise the fullest possible satisfaction of their wants, with the least possible individual sacrifice. This hypothesis is appropriately termed the hedonic premiss of economics, inasmuch as every economic theorem may be ex- pressed in the form of the conclusion of a syllogism, having for its major or minor premiss the hedonic hypothesis, and for its other premiss some matter of fact, which may be a truth borrowed from some other science, or ascertained inductively by the economist himself. Naturally, this reduction of any one economic theorem to its simplest form cannot, for the most part, be effected immediately ; the theorem in question must be successively resolved into others more proximate to itself and less remote from the fountain-head of all economic science. The category of premisses of fact comprises chiefly the more or less complex technological data utilised by economic science, consisting of the mechanical and chemical laws of those bodies which in economics are regarded as commodities, and of the biological, psychological and sociological laws that govern man and other organic beings.1 The demonstration of the truth of these premisses pertains to the science to which they respectively belong : economic science can only accept
1 P. Geddes, An Analysis of the Principles of Economics, part i. Williams and Norgate, 1885, London.
4 THE THEORY OF UTILITY PART i
them, until they are modified, or their accuracy is impugned, by the science which originated them. Thus, for instance, the theory of the factors determining the magnitude of markets, rests, if we utilise it for a classification of all products, upon data derived from commercial technology ; whilst the Kicardian theory of rent presupposes data derived from agrarian tech- nology. Sometimes economics requires a groundwork of facts which other sciences, owing to their special nature or trend, omit to investigate ; in which case it proceeds itself to ascertain these facts by the induction and generalisation of typical data. These researches after premisses for economic theorems are however, though often necessary, and always useful, never- theless mere prolegomena, or even digressions, from the economist's point of view ; thus for instance, considered under this aspect, the greater part of Malthus's celebrated work on the Principles of Population is a digression.
Lastly, it may be convenient to assume, as a hypothesis, the existence or non-existence (as the case may be) of one or more facts, without any inductive examination as to their truth. Well-known instances of hypotheses that frequently occur in economics are : the existence of perfect industrial or commercial competition, the existence of a close market, of non- competing groups, and other such conditions. More especially it may be necessary, owing to the impossibility of having recourse to experiments, to make use of hypotheses whenever we want to determine the isolated effect of a moral or physical force, that is manifested only in conjunction with concomitant forces, in cases falling within the scope of historic observation. This is done by supposing a market to be in equilibrium, by supposing a new force to come into existence, by calculating or determining then the new state of equilibrium, and comparing it with the preceding one. Of course the properties of a market supposed to be in equilibrium must be, and are, known to students of economics.
It is a mistake to give the name of economic laws, as is occasionally done, to some of the premisses of which we have been speaking; for though they are indeed laws, inasmuch aa they are constant uniformities of nature expressed in the form of propositions of co-existence, succession, and equality or in- equality, yet they are not economic in their nature. This
CHAP, i ECONOMIC SCIENCE 5
mistake is most commonly made with reference to those data which economists have sought out for themselves, owing to their not having been supplied by any other science. Thus, for instance, it is a misnomer to speak of the economic, law of decreasing productivity, or of the economic law of definite pro- portions ; not that they are untrue, nor that they are not of capital importance to the economist ; but because they pertain to other branches of science, or will certainly do so some day ; as has indeed happened with the law of natural selection, which was perceived and utilised by the economists long before its bearing and importance were realised by the naturalists.
It follows from what has been stated that the advancement of economic science can be furthered only in two ways, viz. : by the discovery of new premisses pregnant with inferences, or by the discovery of new conclusions drawn from known premisses.
It is easy to understand how the fullest satisfaction of his wants, at the least possible cost, has come to be regarded as the specific characteristic of the homo ceconomicus ; inasmuch as an economic problem, in a broad sense, presents itself when- ever it is desired to obtain a given result with the smallest comparative means; or, conversely, to obtain any maximum result with any given means. Economic problems, in a broad sense, are, e.g. those which constitute the mathematical doctrine known by the generic name : de maximis et minimis. Thus the problem of inscribing in a given triangle a rectangle of maximum dimensions, or that of circumscribing a given sphere with a minimum cone, or yet again that of determining the case in which the sum of two variable quantities having a constant product is least, are problems of mathematical economics ; the object being always to obtain a given result with the minimum quantity of means of a determinate kind. In the same way, there are problems of mechanical economics in which the aim is to obtain maxima of energy, velocity, or resistance, with minima of cdst, friction, weight, volume, etc. In the same way, too, we speak of an economy of nature, or of a " law of the minimum of action," wherever she reveals to us organic or inorganic phenomena produced with the minimum amount of energy required for the purpose.1
1 The so-called ' ' law of the minimum of action, "due originally to Maupertuis
6 THE THEORY OF UTILITY PART i
Economic science, strictly so called, or political economy, is not therefore defined in the most appropriate manner, when it is termed simply the science of the laws of wealth, or of the production, consumption, circulation and distribution of the same; for many other sciences and arts also treat of tine phenomena or subjects. Economics, for instance, lays down no precepts for the cultivation of land, or the manufacture of industrial products, nor yet does it concern itself with the physiological phenomena of nutrition. Attempts have been made to get over the difficulty presented by the distinction between economic and technological phenomena and the other analogous, but more general, difficulty presented by the dis- tinction between economics and those sciences which apparently deal with the same subject-matter, by observing that if certain sciences are distinguished from each other by the difference of their subjects, — as is for instance the case with mineralogy and botany — others instead are distinguished from each other by the different aspects under which they consider the same subject ; and that this is precisely the case as regards economics and the numerous other branches of knowledge which, like it,
(1746), must be stripped of the teleological conceptions that coloured it down to the time of Lagrange. There is no proof that nature ever acts with any intent, or in conformity with any purpose, or to realise any aims ; her processes are all causal. The principle of the minimum of action signifies simply that the motion of a system of forces, howsoever composed, is disturbed only in proportion to the magnitude of the disturbing forces ; so that any disturbance in excess of that proportion would be without a cause. In other words, the motion follows, as nearly as circumstances admit, the course it would pursue if it were un- impeded. For a brief history of this principle, see H. v. Helmholtz, Wisscn- schaftliche Abhandlungen, vol. iii. No. cxxi. pp. 240-268, Leipzig, Barth, 1895. Perfectly analogous is the view taken by economists of the hedonic principle, and accordingly a series of writers, and among them — to quote one of the earliest and one of the latest — Briganti and Jevons, have called economics the mechanics of pleasure, or of hedonism. See Filippo Briganti, Esame economico del sistcma civile, cap.i. §5, p. 19, Collezione Custodi ; W. S. Jevons, The Theory of Political Economy, 2nd ed. 1879, Macmillan, London, Pref. p. vii., Introduction, p. 23. Indeed, even Maupertuis compared the desire for maximum pleasures to the law of the minimum of action ; and Verri and Ortes appear to me to have been influenced by him in adopting, as the basis of theoretical economics, the "cal- culus of pleasures and pains." On teleology and the rationale of pain, see Regalia E., Rivista di Filosofia Scicntifica, Anno III. No. 2, Sept. Oct. 1883, p. 187, in which the view is combated that in the economy of nature pain has a purpose, and is, in this respect, a punishment.
CHAP, i ECONOMIC SCIENCE 7
treat of labour, capital, natural agents, cost, rent, exchanges, industries, consumption, commodities, personal services, etc. Now this explanation must be regarded as a popular, and not very accurate, form of expressing a very simple truth, viz. that, strictly speaking, differences in the aspect, or point of view, con- stitute different subjects; for any two sciences which appar- ently treat of the same subject or phenomenon, but from different points of view, contemplate different properties of such subject or phenomenon ; and these different properties, which engage the several attention of the two sciences, constitute in fact different subject-matters.1 Whilst therefore it does not appear that economics treats of phenomena peculiar to itself, and distinct from those contemplated, at least incidentally, by moral philosophy, jurisprudence, physiology, and a hundred other sciences and technical arts, which, like it, treat of man, his actions and their causes, the objects he pursues, shuns, transforms, etc. ; on the other hand no room for confusion is left, if we note that economic science considers, in all the processes connected with wealth, only the workings of the law of the minimum of action ; that is : it either recognises in these processes the realisation of the hedonic hypothesis, or supposes that they take place under the operation of the hedonic postulate.2
1 "La science 6tudie, non les corps, mais les faits dont les corps sont le theatre. Les corps passent, les faits demeurent. Des faits, leurs rapports et leurs lois, tel est 1'objet de toute 6tude scientifique. D'ailleurs, les sciences ne peuvent differer qu'en raison de la difference de leurs objets ou des fairs qu'elles etudient. Ainsi, pour differencier les sciences, il faut differencier les faits." L. Walras, fiUments d'econ. pol. pure, 2e ed. 1889 ; 2e le?on, § 16, p. 38.
2 F. Y. Edgeworth, Mathematical Psychics, Kegan, London, 1881. "Now, it is remarkable that the principal inquiries in Social Science may be viewed as maximum problems. For economics investigates the arrangements between agents, each tending to his own maximum utility ; and politics and utilitarian ethics investigate the arrangements which conduce to the maximum sum total of utility" (p. 6). "The economical calculus investigates the equilibrium of a system of hedonic forces each tending to maximum individual utility ; the utilitarian calculus, the equilibrium of a system in which each and all tend to maximum universal utility " (p. 16). Economics has no method of investiga- tion peculiar to itself, i.e. no logical methods of its own. There is not a single species of logical argumentation which may not, in some instance, be turned to account. Consequently the best training in logic for students of economics is supplied by such works as those of A. de Morgan, E. Schroder, J. Venn, W. S. Jevons, A. Bain, W. Wundt, M. W. Drobisch, J. N. Keynes, etc. But
8 THE THEORY OF UTILITY PART i
By analysing the hedonic principle, we shall find that for this definition of economic science we may substitute another, equivalent to it, but briefer and clearer, viz. the Science of Value.
numerous methodological books have been written by economists with special reference to economics, and of these some may be read with great profit, not so much for their logical, as for their economic, contents. Such are : J. E. Cairnes, Character and Logical Method of Political Economy ; W. Bagehot, Economic Studies; C. Menger, Untersuchungcn uber die Methode der Social- icissenschaften ; and J. N. Keynes, TJie Scope and Method of Political Economy.
CHAPTEK II
OF THE HEDONIC PRINCIPLE
§ 1. Meaning of the Hedonic Principle and its Correspondence with the Psychological Reality
THE economic hypothesis according to which men are actuated in the production, consumption, distribution and circulation of wealth, exclusively by the desire to obtain the maximum satisfaction of their wants that circumstances admit of, with the least possible individual sacrifice, may be accepted as the postulate of a condition of fact, concerning which it would be irrelevant to inquire whether it accords more or less closely with real life. In other words, whether and to what extent the hypothesis of psychological hedonism, — from which every economic truth is deduced, — is in harmony or at variance with the motives that really determine human actions, — either generally, or more particularly as regards the acquisition and disposal of wealth, — is not a question that need be solved before we can decide as to the truth or accuracy of the economic theorems that flow from it. Suppose, indeed, that we refrain from examining the correspondence between the hypothesis of psychologic hedonism and actual fact, and that we regard that hypothesis as non-subsistent, or as subsistent in an unknown degree ; then provided the economic theorems are rigorously deduced from the premisses, they will none the less be incon- testable truths, within the limits of the hypothesis ; that is, they will be hypothetical truths, and will reveal to us what the action of egoism, or of individual interest, would be, in the most varied environments, were that motive to be exclusively
10 THE THEORY OF UTILITY PART i
and universally operative. If, however, the non-existence were demonstrated of the force whose effects it is the business of economics to study, the latter would in that case be an idle science, though a true one, inasmuch as it could never form the basis of any art or preceptive discipline ; though indeed even this conclusion might be inaccurate ; for if in this case it were further demonstrated that the opposite of the pos- tulated force, i.e. altruism, existed, then, inasmuch as the latter would, if universal and isolated, produce the same effects as egoism, it would probably be convenient to work out the problems relating to it in terms of egoism, just as it is some- times convenient to invert the signs of an equation in order to solve it.1 If, on the other hand, the non-existence of egoism as the mainspring of human action is not proved, but the extent to which the hedonic hypothesis corresponds with psychological fact is only doubtful, as not having been sufficiently investigated, it is obvious that the economic theorems must, a priori, be deemed valid, as regards the world of fact, to the extent of the said correspondence ; and that they will form the groundwork of a preceptive discipline, which need only be on its guard against omitting to examine the correspondence between the circumstances of actual cases and the conditions postulated by the theory. This is precisely the present situation as regards this question ; so that pend- ing the positive demonstration of the existence of that force which the economist postulates, three different opinions are advanced as to the accordance of the hedonic hypothesis with what appears to be the psychological reality. By some it is held that the hedonic hypothesis exhibits a typical trait in tli e human character, which admits of the concurrent action of other moral forces. In this case, economics, instead of study- ing all the causes of human activity, — supposed or ascertained to be of diverse natures, — would fix its attention on one alone, making entire abstraction of every other, and having resolved
1 In fact, altruism, if supposed to be universal, neutralises itself. Titius, e.g., from altruistic motives, asks much less than the current rate of interest for the capital he lends. In that case, Cains will, from similar motives, feel bound to offer much more than the current rate. Titius is willing to work gratis as a labourer, and Cains is constrained by altruism to pay him hand- somely. Moreover, in order to realise the maximum altruistic effect, one would have to act in accordance with the most downright egoism.
CHAP, ii OF THE HEDONIC PRINCIPLE 11
a complex phenomenon into its elements, would make that the isolated subject of its study, revealing only one aspect of the empiric world, but that with perfect accuracy.1 Other writers hold that the hedonic hypothesis contains the entire truth concerning the human character, and excludes the concurrent action of other moral forces, in certain departments of social life ; that is, in certain places, at certain times, and in certain social groups ; and that, within these limits, the hedonic hypothesis is in complete accord with empiric reality.2 Finally, others hold that the only existent psychic force is egoism ; and that every other apparently different force may be ultimately reduced to this one; so that the hedonic hypothesis is in absolute correspondence with universal empiric reality.3
The proof of the existence of the force postulated by economics is supplied both by self-observation and by obser- vation of the motives from which other men act. In fact, the observation that egoism or self-interest is one of the most frequent and general causes of human actions, has been con- stantly made on so vast a scale, and may be so easily repeated by every one, that it may be doubted whether any one ques- tions its accuracy ; in any case it cannot be denied that in it economics possesses a more solid basis of fact than most other sciences can lay claim to. Above all, it is evident that commercial or industrial activity, or the activity (whatever its nature may be) displayed by men in the pursuit of what is commonly termed wealth, has no other motive than egoism.
1 J. S. Mill, Essays on some Unsettled Questions of Political Economy ; J. E. Cairnes, The Character and Logical Method of Political Economy, Lecture II. §§ 2 and 3. On the function of statistics with regard to economic theorems, see W. Lexis, Zur Theorie der MassenerscJieinungen, 1877, ed. Wagner, Freiburg, book i. pp. 2, 3.
2 W. Bagehot, The Postulates of English Political Economy, p. 5 ; The Pre- liminaries of Political Economy, p. 79; Economic Studies, London, 1888.
8 Ch. Adr. Helvetius, Traite de r esprit, Tome I. Disc. II. chap. ii. p. 50, ed. Bibliotheque Nationale, Paris : "Si 1'univers physique est soumis aux lois du mouvement, l'univers moral ne Test pas moins a celles de 1'interet." Ant. Genovesi, Lezioni di economia civile, part i. chap. ii. § 5, p. 33, Collez. Custodi : "Now, nothing should be clearer to us than that, as was said above, pain and pain only, in the sense already explained, is the motor principle of all human actions and non-actions." § 6, p. 34 : "If the allaying of pain and solicitude are termed interest — as indeed they are,— then it is clear that man acts naturally only from motives of interest."
12 THE THEORY OF UTILITY PART i
This does not imply that, because they are actuated by egoism, men must necessarily achieve their purpose of realis- ing the satisfaction of their wants in the best manner, that is : at the least cost or in the fullest measure, subject to the condition that the utility of the last addition to their stock should be equal to the utility of the last increment of labour with which it is purchased ; for they may be misled by ignorance of the means available for that purpose, and of the properties of such means ; or else their efforts may be thwarted by external compulsion of various kinds. Nor does it exclude the possibility of their acting in conformity with customs, or with the dictates of morality, or with any other rules of conduct, even the most absurd or vicious, if they consider these to be in accordance with the dictates of egoism. The very terms of the hedonic postulate exclude any such construction.1 If from the proposition that " men, in addition possibly to other motives that are held to be non-egoistic, are actuated chiefly by personal interest " ; or from the alternative that, " in certain spheres of human activity, the sole motive consists in the desire to obtain the maximum satisfaction of one's wants," we pass to the proposition that the sole motive of every action is the hedonic impulse, the demonstration becomes more arduous, or at least more subtle, if not absolutely impossible. In the first place, it may seem necessary to eliminate all unconscious actions, and next all such as, though forming part of our consciousness, are reflex. These are neither few, nor of secondary importance, even in the case of an adult in the full enjoyment of his faculties ; whilst, during the first months of an infant's life, they probably absorb the whole of his activity.2 This excep- tion must be borne in mind at all events so long as the hedonic postulate is formulated in Bentham's terms, viz. that, with refer- ence to each act, every human being inclines to that course of conduct which, in his estimate of the conditions of the moment, will contribute in the comparatively highest degree to promote his happiness. In the second place, we must be on our guard
1 Religions, customs, morals and laws are explained by some writers as rules of egoism, or utilitarianism, become partially obsolete. See A. de Johannis, SulV universality e prccmincnza dei fenomeni economici, 1882, Dumolard, Milan. A. Loria, Lcs bases tconomiques de la constitution sociale. Alcan, Paris, 1893, 2nd ed.
2 See infra, part i. chap. iii. § 1.
CHAP, ii OF THE HEDONIC PRINCIPLE 13
against accepting the demonstration most commonly offered of the foregoing thesis. This demonstration, which appears to date back to Socrates, is, according as its form varies, now tautological, now a petitio principii, now a vcrrepov Trporepov, always a paralogism. The following is a sample of it : — Any person who resolves to do something that is apparently not egoistic, and is, in the common acceptation of the term, virtuous, as, for instance, giving away half his substance to the poor, or ministering gratuitously to the sick, is actuated by motives of vanity, piety, or zeal for the welfare of his fellow-men that outweigh all considerations of any advan- tage to be derived from a different course of conduct ; or else he cherishes the hope of a future reward, or experiences some inward satisfaction ; in brief, he acts in accordance with some interest of his own, but for which he would not act as we have assumed. In other words, no one does what is right unless he finds his happiness in so doing, or unless he thereby ex- periences less pain than he would by pursuing the opposite course of conduct ; and though human actions will not always be determined by the immediate interest of the agent, but some- times by the tribal interest, it will still be true, — even apart from the fact that the tribal interest is only a derivative of in- dividual interest, — that man acts in the sense that pleases him best.1 The paralogism involved in this argument becomes apparent, if we reflect, that it is not disputed that the actions of which we are conscious, and which are not reflex, but willed, are determined ~by motives; but that the controverted proposition is : that the motive in every case is to procure a pleasure or to shun a pain ; in other words, to promote one's self-interest to the utmost. Now, by way of proving this proposition, on the one hand stress is laid on the fact that, for an action to have taken place, the agent must have been determined by a pre- ponderating motive, — which was granted ; — and on the other hand it is assumed that the motive which so influenced him to act in one sense rather than in another was,/o?* that very reason, an individual interest, i.e. a present or prospective pleasure or pain. This is simply to beg the question.2
1 Gabelli, L'uomo e le scienze morali, 2nd ed. Florence, Le Monnier, 1871, chap. v. pp. 142-149. .
2 In the same way we say : " The desire for one's own welfare, or the instinct
14 THE THEORY OF UTILITY PART i
To avoid doing so, we should be obliged to admit the possi- bility of certain desires, volitions and actions being prompted, not by pleasures and pains, but by one or more categories of different sensations. In other words, either the correspond- ence between the hedonic hypothesis and psychological fact is not established otherwise than by a petitio principii, or else we must admit the possible existence of other motives than plea- sures and pains,1 and undertake at the same time to prove that such other motives are never, or at least not generally, opera- tive ;2 which proposition, equally with its opposite, appears to be incapable of proof.3 There is however a series of con- siderations, which, if it does not prove that the sole motive of every human action is the desire to procure some pleasure or to shun some pain, proves at all events that this motive is, not only universal and most powerful, but likewise so multi- form, that motives apparently most diverse from, are really reducible to, it. In fact, if (in accordance with the tauto- logical definition given by Maupertuis, for no other can be given of a simple state of mind) we take " pleasures " to mean those sensations which incite to acts calculated to perpetuate
of self-preservation, makes one act along the Hue of the least resistance, or of the greatest traction. What is the line of the least resistance or of the greatest traction, only appears, however, from the direction actually taken ; and to explain the direction taken by the line of the least resistance, and the line of the least resistance by the direction taken, is to argue in a circle."
1 Ex. (jr. Von Kirchmann maintains that the ultimate motives of all wilful actions do not consist exclusively of sensations, actual or foreseen, of pleasure or pain ; but that for an entire series of actions the determining motive is a feeling of respect or reverence for some authority (Achtungsgcfilhl] ; arid that these two mainsprings of action are irreducible inter se. As this demonstration rests ultimately on its authors self-observation, it is at once inconclusive and irrefutable. See Von Kirchmann, Die Grundbegriffc dcs Ecchts und der Moral, and by the same author, Kcdechismus der Philosophic, Leipzig, Weber, 1877, Theil ii. chap. i. p. 141 et seq. In the same connection see Cogliolo's Filosofia del diritto private, Manual! Barbera, p. 36. For a masterly discussion of this subject, see H. Sidgwick, The Methods of Ethics, 3rd ed. 1884, Macmillan, book i. chap. vi. and book ii. A good epitome for students is A. Baker, Outlines of Logic, Psychology, and Ethics, London, 1891, p. 123 et seq. For a history of ethical doctrines, see W. Wundt, Ethik, Enke, Stutt- gart, 1886, p. 332 ct seq.
2 J. S. Mill, System of Logic, book vi. ch. viii. § 3, p. 580, people's ed. 1884, Longmans, London. H. Sidgwick, I.e. book i. chap. iv. § 2, pp. 42-44 ; Austin, The Province of Jurisprudence Determined, 2nd ed. 1861, Murray, London, vol. i. pp. 103-107.
z A. Bain, Logic, 2nd ed. 1873, Longmans, London, part ii. book v. p. 315.
CHAP, ii OF THE HE DO NIC PRINCIPLE 15
any pleasurable sensations that are present to our conscious- ness, or to procure such sensations if they are only represented in our consciousness ; and if we take " pains " to mean those sensations which incite to acts intended to remove or prevent them, we see at once that the former must be concomitants of acts tending to the preservation of the organism, whilst the latter must be concomitants of acts that are prejudicial to it. For if the reverse were the case : if on the one hand pleasur- able sensations were the concomitants of acts detrimental to the organism, and on the other hand, painful sensations wTere the concomitants of acts beneficial to the organism, so that the former would be sought after and the latter shunned, then the speedy result would be the disappearance of the organism so constituted, owing to its persistence in selecting conditions unfavourable to its development and preservation, and to its repugnance to subsist under favourable conditions.1 As therefore only those species can survive in which pleasurable sensations accompany acts conducive to the preservation of the organism, and in which painful sensations accompany acts directly or indirectly injurious to it, it follows that to say that man seeks to maximise his happiness and to minimise his pain, is tantamount to saying that he desires to promote his preservation to the utmost. The observation that there are pleasures that are noxious, and pains that are salutary, does not refute this proposition ; for it must be borne in mind that, frequently, specific and immediate pleasures are to be renounced, in favour of greater pleasures that are generic and compara- tively remote ; and further, that if pleasures are not always reliable criteria of conduct, the reason is that the conditions of existence, in the case of nearly all species, have undergone and are undergoing a gradual change ; whence have arisen, and
1 H. Spencer, The Data of Ethics, 2nd ed. London, 1879, chap. vi. § 33, pp. 79 and following: "Sentient existence can evolve only on condition that pleasure- giving acts are life-sustaining acts," p. 83. This theory coincides with that of Verri, according to whom, pain is the laceration or violent irritation of our physical frame, or the anticipation or apprehension of such laceration. Pleasure is always a rapid diminution or cessation of pain. To set forth his theory in detail would be tedious and unnecessary ; suffice it to point out that here too we have the concomitancy of painful sensations with the impairing of vitality, § 6, p. 37, and § 7, p. 42, Discorso sulV indole del piacere e del dolorc, Collezione Custodi. See Melchiorre Gioja, Teleologia, part vi. § 2,':p. 5, ed. 1837.
16 THE THEORY OF UTILITY PART i
are continually arising, partial discrepancies between pleasur- able sensations and life-sustaining acts, discrepancies occasion- ing a process of readjustment that necessarily and certainly takes place, but is often not completed within the period required to effect a change in the environment of the organisms. Having thus ascertained the equivalence of the instinct of self-preservation and the hedonic postulate, it may be doubted whether the former is not the more fundamental principle of the two ; for whilst it may be argued that we care for our life, only inasmuch as it affords us more pleasures than pains, and that we should put an end to it — as indeed some men do — as soon as that ceased to be the case, nevertheless it seems more probable, having regard to what has been set forth above, that things and actions appear pleasing or painful to us, according as they are, or are not, conducive to our self- preservation ; and that the latter in turn requires that we should retain the environment amid which we have come into existence.1 In other words, the order of genetic sequence of the principles in question would seem to be the following : the chemical composition and physical structure of organic beings are determined by the environment in which they are bred and exist ; the substances essential to their preservation are those constituting the environment in which they origin- ated and to which they owe their existence, whilst the acts that conduce to their preservation are those that tend to maintain their original environment ; their wants are the results of variations in their composition, and are directed to the substances constituting the environment ; in beings suscep- tible of pleasurable and painful sensations, natural selection causes sensations of pleasure to accompany acts that conduce to the preservation of the species, through the elimination of individuals for whom life-sustaining acts are not productive of pleasure, and in whom acts prejudicial to life occasion no pain.
1 P. Mougeolle, Stcdiquc des civiliscdions, p. 417, Paris, Leroux, 1883. Genetic priority is assigned by economists, sometimes to the instinct of self- preservation, sometimes to the hedonic postulate ; but without any discussion of their comparative claims to priority, and indeed suppressing all considerations respecting the principle to which the preference is not accorded. See < Hermann, Staatsw. Untcrsuchuiujcn, 2nd ed. Munich, 1S74; Ackermann, § 4, p. 9 ; and Hearn's Plutology, London, 1864, p. 12, chap. i. § 1.
CHAP, ii OF THE HEDONIC PRINCIPLE 17
§ 2. Of the Principle of the Relativity of Sensations of Pleasure and Pain
From the above theory we might deduce that of the relativity of sensations of pleasure and pain, were we unable to found it on an independent basis of observations. It is in fact obvious that nothing is intrinsically pleasurable or dis- agreeable ; on the one hand, we do not in the least know whether things really are such as we perceive them to be, and on the other, their perception by means of our senses procures us sensations that are pleasing or painful, according to our frame, and to the condition it happens to be in. Now, if tastes are relative to the structure of the organism, and if that structure is due to the environment in which the organism has been evolved, it follows that tastes, — that is the pleasur- ableness or painfulness of all things — come to be what the environment has made them under the influence of natural selection. Whilst the correspondence between the painfulness of certain forces and the tendency of the latter to impair the vitality of the organism, is common to all creatures, the painful effect of a force of a given quantity and intensity varies considerably with the size, the structure and the condition of the organism subjected to the shock ; and the same observation applies to the pleasantness of determinate forces. Tastes differ, not only as between one race and another, or as between one individual and another, but even the same individual is differently affected by the same objects, according to his age and state of health, and also as the quantity of such objects and his environment vary.1
The relativity of sensations of pleasure and pain is an economic fact of the greatest importance. We shall see further on that a long series of economic theorems is based upon it ; but already it possesses an interest for us, owing to the relation in which it stands to the hedonic postulate. Suppose a multitude of people all bent exclusively on maxim- ising their pleasures and minimising their pains : if no other actual or hypothetical condition supervenes to qualify the hedonic postulate, the supposed multitude may even consist of
1 Spencer, The Data of Ethics, cliap. x. pp. 174-186. C
18 THE THEORY OF UTILITY PART i
ascetics, or it may comprise groups of ascetics and groups of individuals who are insensible to the attractions of remote and (in their view) uncertain pleasures ; at the same time there is room in it for perfect altruists and for every conceiv- able gradation between them and absolute egoists. In fact each of these groups would conform 'precisely to the hedonic postulate, seeking after its greatest happiness, in accordance with its own conception of what happiness is, which conception is supposed to le different from the conceptions of happiness of the several other groups. Now, it is obvious that if we thus divest the hedonic postulate of all material contents, it becomes absolutely sterile, and does not yield us even the simplest deduction. If, for instance, a contractor offers a workman a certain amount of remuneration per hour for a certain kind of work, whilst another contractor offers him twice as much for the same kind of work, it is not certain, or even probable, that the workman will prefer to work for the one who offers him the better terms, unless the hedonic hypothesis is qualified by the fact, or ulterior hypothesis, that every workman regards work as a pain, and remuneration as a pleasure, In the same way, we cannot have laws of the value of exchange, if one of the parties is egoistic and the other altruistic in an unknown or variable degree ; and still less if the tastes of both parties differ so much from the normal standard of mankind as to compel us to regard them as insane. On the supposition of an indefinite heterogeneity of structure, and therefore of tastes, among the members of a society, there is an end to all economic laws. Any one, for instance, who wished to enunciate the economic law, that the rate of discount and the purchasing power of money tend to vary in opposite directions} and to state in addition the law of two exceptions to the more general law, referable, the first to the purchasing power of money measured exclusively in so-called securities, and the second to a particular cause of the rise or fall of the discount, viz. a sudden influx or efflux of coin, could not deduce these laws from the hedonic postulate otherwise than by supposing a society of individuals who regard as pleasures and pains those things which are so considered by the persons who frequent the Stock Exchange and the Markets. And if
1 Sidgwick's Principles, p. 260.
CHAP, ii OF THE HEDONIC PRINCIPLE 19
he were to demonstrate his theory by a series of observations, he would be forced to deduce from these the inapplicability of the hypothesis of an indefinite diversity of structure to the environment that yielded him this inductive result; and to admit instead, within certain limits, however wide, the exist- ence of a certain analogy of structure.
Now what is the reason of this apparent airopLa ? Simply this: that the hedonic postulate is by no means void of material contents, these being supplied to it both by its assimilation to the desire of self-preservation, and by matters of fact which are sometimes implied in the argument, and sometimes stated explicitly. The identification of the hedonic principle with the desire of self-preservation involves our not considering as pleasures and pains, qud the hedonic principle, any sensations of either kind experienced by the deformed organs or vitiated functions of individuals who are destined to be eliminated by natural selection; and, on the contrary, our considering as pleasures those sensations that sustain, and as pains those that impair, the organism. Judgments at variance with this standard, concerning things that are causes of pleasant or painful sensations, are classed as anti-economic, and are not subjects of our study, save in so far as they are causes of deviation in the working of economic laws. Thus, for instance, the judgments and acts of the anchorite are anti-economic, as also the preference of a lower remuneration to a higher ; and many forms of altruism are also anti-economic. A vast and some- times variable content is supplied to the hedonic postulate by matters of fact, or by what observation ascertains concerning the pleasantness or painfulness of determinate things, under determinate conditions. Thus it is a fact that labour is painful, and that aversion to it increases with its duration and intensity. Thus too it is a fact that successive increments of any commodity, beyond a certain point, produce a decreasing gratification. It is also a fact that people care for money and for the things which are to be had for money. In an environment in which these propositions were not facts, — and there are environments in which certain kinds of labour are pleasurable, or in which money is of no concern — a large portion of the laws of economics would not be true, and prob- ably in lieu of them we should have a series of propositions
20 THE THEORY OF UTILITY PART i
expressing constant uniformities of chronological or causal sequence, of coexistence in space, or of attributes of equality and inequality, which at present are wholly erroneous.
§ 3. Of Individual and Tribal Egoism
In most instances the qualifications of the hedonic postulate are tacit and implied, being either self-evident or shown by the context ; sometimes however they require to be specifically stated. This is more particularly the case whenever it might otherwise be doubtful whether individual or tribal egoism is intended, and what differences may result from the reciprocal substitution of these two hypotheses, each of which corresponds, though in an unequal degree, with the hedonic postulate. This will be made clear if we examine successively these two forms of egoism, or of economic interest.
Let us first suppose an egoist whose every act tends exclusively to maximise his happiness, regardless of that of others. All acts conducing to his individual preservation will probably be performed by him, since we may assume that, as a rule, they will coincide with acts tending to maximise his pleasures and minimise his pains ; but even this is not certain, as it is also possible that they may not so coincide. As for acts conducing to the preserva- tion of his species, it is evident that none of them will be performed by him, unless they coincide with acts he would in any event have performed, as being conformable to his own restricted hedonism. Now, inasmuch as acts conducive to the preservation of the species may be, at least as probably, and hence at least as often, acts entailing sacrifices that are not compensated during the lifetime of the agent, as acts con- formable to individual hedonism, it is clear that many acts that conduce to the preservation of the species will be left undone ; and it is further certain that the vitality of the species will eventually — perhaps after a series of generations of such egoists — become gravely impaired.
Let us now suppose an egoist so constituted as to identify his own maximum happiness with that of his species : an egoist whose every act tends to procure for his species the maximum amount of happiness and minimum amount of pain.
CHAP, ii OF THE HEDONIC PRINCIPLE 21
Self-preservation will be the paramount rule of his conduct until he has ensured the existence of the species ; thence- forward it may well happen that the welfare of the species will impose on him acts of self-sacrifice, or what others would deem such, though to him they must still appear to be fraught with happiness to himself. Each act tending to the preserva- tion of the species will be performed by him, regardless of the views of others as to its pleasurableness or painfulness.
Given these two types of egoists, it is clear that, in the long run, they will be unable to subsist simultaneously in the same environment, and that the former will be eliminated by natural selection. Hence, after a certain lapse of time, only the second species of egoists will remain, whilst together with the former type will have disappeared the ideas they entertained concerning the hedonic maxima and minima, as also the sensations produced in them by the accidents of the environment ; whilst on the other hand habits of thought and sensation of the opposite character will have become confirmed and strengthened. Hence this must be regarded as a more complete, intense and perfect form of egoism, as the more egoistical of the two, since it yields a sum of pleasures in- finitely greater than the other, because of indefinite duration. Notwithstanding the substantial differences between individual and tribal egoism, — which latter may indeed be regarded as a qualified form of altruism, — it frequently happens that the conduct of the homo ceconomicus, when actuated by individual egoism, does not differ from his conduct when actuated by tribal egoism.1 It happens, namely, that many problems regarding the latter may be worked out as if they referred exclusively to the former ; and this owing to a circumstance already mentioned, but which it may be well to emphasise by repetition. Tribal egoism presupposes a conditioned individual
1 As an instance of the difference between the conduct of the individual and that of the tribal egoist, it may be mentioned that the former will in all prob- ability limit his offspring as much as possible, and even refrain from having any, in order not to compromise his self-preservation, or diminish his pleasures, through the sacrifices incidental to the rearing of offspring. If large masses of persons are actuated by individual egoism, this phenomenon may assume the alarming proportions it has attained in France. The tribal egoist on the contrary will indulge his desire for offspring within such limits as are necessary to keep it from deteriorating in quality.
22 THE THEORY OF UTILITY PART i
egoism, inasmuch as it is impossible to realise the ends of tribal egoism unless a large part of the ends of individual egoism have first been realised ; in other words, it is necessary that the homo ceconomicus actuated by tribal egoism should first make sure of his own preservation and more perfect development, before he can benefit the species, or contribute to its happiness in the highest degree that circumstances admit of.1 Hence economic problems may be worked out just as easily and correctly by taking as our rule the hypothesis of a homo ceconomicus actuated by individual egoism, who, with regard to each act, weighs the increase of vitality it is calcu- lated to procure him against the diminution of vitality it will cost him, — provided always that this hypothesis be qualified or conditioned in particular cases, — as by having recourse ex- clusively to the wider hypothesis, — wider inasmuch as it com- prises the former, — of a homo ceconomicus actuated by tribal egoism, who with regard to each act will compare the expected increase of tribal happiness or vitality with the apprehended diminution of his individual happiness.
It must be observed, however, that the second hypothesis is the simpler and truer one, and that by its means the scope of ordinary economic problems is extended to comprise those also which are usually classified separately as forming part of a special class of problems of State economics. It is commonly held that, for the State, all knowledge relating to future events possesses an incomparably greater importance than for in- dividuals, provided always that such knowledge falls within the sphere of interests common to both ; in other words, it is considered that, in the sphere of State interests, those relating to the future are much more numerous and weighty than is the case in the sphere of private interests. Hence the old adage, that the interests of the State are of a prospective character ; from which it would follow that the principles of sciences treating of the State likewise partake of such character in a predominant degree. Now the fact is simply this : — Both the State and the individual have in the first place present interests; that is, they are benefited or prejudiced by certain present situations of fact, and they act in conformity with this first series of interests. In the second place, both are interested
1 H. Spencer, op. cit. chap. xi. § 68, pp. 187 and following.
CHAP, ii OF THE HEDONIC PRINCIPLE 23
in the future, and consequently act in accordance with a second series of interests, bringing it into harmony with the first, according to certain very complex psychological laws. But those who hold that the State is in its nature more essentially and characteristically prospective than individuals, argue that the life of the State, being more protracted than that of the individual, is more richly endowed with elements of prospective interest, even on the hypothesis of an original equality ; and it is, above all, this distinctive feature that has given rise to a series of singular doctrines as to the ethical nature of the State itself. Now, from what has been set forth respecting individual and tribal egoism, it is clear that if the State, as it is contended, safeguards all its prospective interests, giving them the weight that is necessary to ensure its own preservation for an indefinite period, in so doing it is only actuated by tribal egoism ; and slight reflection will suffice to show that the State can only exist so long as the members animated by the same tribal egoism predominate over those who are animated by individual egoism.
§ 4. Of the Commensur ability of Pleasures and Pains
The practice of the hedonic principle presupposes that sensations of pleasure and pain are susceptible of commensura- tion,1 whichever formula of the principle may be preferred. Whether an individual seeks by his every act the maximum satisfaction of his needs with the least possible self-sacrifice, or at the least possible cost ; or whether he desires the largest possible measure of wellbeing, which implies that he desires to attain it, if circumstances do not admit of his doing so without effort, at all events with the least possible degree of personal inconvenience ; or yet again whether he acts in conformity with his own interest, or in the sense most con- ducive to his own preservation, or maximising his pleasures and minimising his pains; — in each of these cases it is supposed that a hedonic or egoistic calculus is effected, consisting of the commensuration of the good and evil, the pleasures and pains, the increments and diminutions of vitality, the greater and lesser interests, the satisfactions and the sacrifices that are 1 Verri, loc, cit. § 14, pp. 83-85.
24 THE THEORY OF UTILITY PART i
compared with each other, or among which a choice is made. This calculus may apply to four different combinations of pleasures and pains ; for we have to consider whether it is worth while either : 1st, incurring a pain " a " in order to obtain a pleasure " A -f AA " ; or 2nd, incurring a pain " a " in order to avoid another " a -f- Aa " ; or 3rd, forgoing a pleasure " A " in order to obtain another " A + AA " ; or 4th, forgoing a pleasure " A " in order to avoid a pain " a + Aa." l In each of these cases there figures as COST, either the pain that is endured to obtain a pleasure, or the lesser pain incurred in order to avoid a greater pain, or the lesser pleasure that is renounced in order to obtain a greater, or the pleasure that is renounced in order to shun a pain; and as GAIN or KEMUNEBATION what is obtained by such means.2 We may also imagine the case of the possession of a good being conditioned disjunctively, either by a pain to be borne, or by a pleasure (inferior to the one inherent in the attainment of the good in question) to be renounced. In that case, the cost must be expressed by that of the two pains, or of the two discomforts, which is least ; because that will be the only one suffered by the hedonist. If, on the contrary, the possession of a good is conditioned cumulatively by a pain that must be incurred and by a pleasure that must be renounced, the cost of the good is the sum of the two pains. If, finally, the possession of a good is conditioned by submission to a pain, which would otherwise have availed to procure us some other good, or to avert some other pain, and if the attainment of such other good, or the avoidance of such other pain, outweighs the first-mentioned pain, then the cost of the first-mentioned good is expressed by the other good we have had to forgo, or the other pain we have had to endure, since that is the full extent of the sacrifice made.8 Now, we call VALUE the
1 By A we denote an increment ; by a a quantity of pain ; by A a quantity of pleasure equivalent to a of pain.
2 Verri, loc. cit. : "If therefore in practice men constantly compare pains and pleasures, we must conclude that they are two proximately comparable quantities. Our every action resembles a sale : we give money to obtain a thing ; parting with the money is in itself an evil ; but when we buy we consider that the tiling we want is a greater good than that evil. In whatever condition he is placed, even on the throne, man is forced to perform a number of arduous, inconvenient and toilsome acts, in order to procure himself pleasures."
3 The following are instances of the various cases : (1) To procure a pleasure
CHAP, ii OF THE HEDONIC PRINCIPLE 25
ratio of cost to remuneration, whether in the case of the direct trucking of one commodity against another by two persons, or in that of a single person who undergoes some labour in order to obtain some good, the fruit of such labour, or who submits to some pain in order to obtain a pleasure. To put it in the words of Francesco Ferrara, we have the phenomenon of value in individual economics, no less than in the economics of ex- change; and the hedonic calculus consists of JUDGMENTS ON VALUE.1 The question now arises whether the com- parisons referred to between costs and rewards do not some- times occur with reference to incommensurable quantities, and are not therefore paralogistic.
As we have already seen, no definition properly so called can be given of what constitutes a pleasure or a pain, because these are elementary conditions of our perceptive faculty or consciousness.2 On the other hand, genetic and teleological definitions are barren, constituting, as they do, a mutatio elenchi as regards the problem. The hedonic calculus supposes that they are opposite, but homogeneous, sensations, and therefore susceptible of treatment as negative and positive quantities.
worth 11 involves working 9 or spending 10 : here the cost is 9 ; (2) to procure a pleasure worth 20 involves working 9 and spending 10 : here the cost is 19 ; (3) to procure a pleasure worth 12 involves working 10, but this labour would procure a pleasure worth 1 1 if not employed in procuring the one that is worth 12 : here the cost will be 11.
1 Biblioteca dell' economista, vol. v. p. 51. Introduction to Senior, and vol. xiii. Carey, chap. ii. p. 335. The hedonic postulate, both in isolated and in social economics, may be briefly formulated as the precept to maximise always the value of one's stock ; but this formula, which has been repeatedly pro- posed, requires the term " value " to be taken in the sense of residual utility or consumer's rent (see part i. chap. iv. § 3), which is not done by us in this work. Value signifies here only the ratio of two hedonic quantities.
2 This is the opinion of Verri, loc. cit. § 11, pp. 68, 69 : "In fact a sensation supposes a change of state in the organ that experiences it, i.e. either an increased or a diminished tension : if the organ was in a perfect state, the first sensation removes it therefrom, and is consequently a disorder and a pain ; if, on the contrary, the organ was vitiated, either by excessive tension or by excessive relaxation, the first action of external bodies may prove remedial, but it will be preceded by the pain produced by organic derangement ; and thus it follows that the first sensation must necessarily be painful. . . . The essence of sensibility therefore involves the priority of pain, for either the action affecting our organs is painful, or it applies a remedy to the pained organism, or it is ineffectual, neutral and null. Pain is an action ; pleasure is a rapid cessation of such action. Man is thus set to live in the midst of suffering." Ortes took a similar view. See Calcolo de' piaceri e de' dolori della vita umana, § 4, p. 307, vol. iv. ed. Custodi, tome xxiv.
26 THE THEORY OF UTILITY PART i
It is however a moot point whether pleasures are only diminutions or negations of painful sensations, or whether they are qualitatively distinct and opposite sensations. The former opinion appears to be most in keeping with the results of self-observation, since we experience painful or pleasurable sensations only with respect to a certain antecedent emotional condition. If this doctrine were more certain, the greatest obstacle to the commensuration of pleasures and pains would be removed. Since pleasures are differentiated from pains, cceteris paribus, by their duration, and, their duration being equal, by their intensity, it follows that the more lasting pleasure appears to be the greater when the degree of in- tensity is the same, and that the intenser pleasure appears to be the greater when the duration is equal ; and no quantitative difference is any obstacle to commensuration, as we can always set off the greater intensity of one pleasure against the longer duration of another. This holds good however only in theory, for, in practice, the shortness of human life would frequently prevent our setting off against very intense pleasures others less intense of adequate duration.1 Moreover, pleasures like pains may be either presently felt, or only anticipated ; and pleasures as well as pains, that are only anticipated, may be certain or uncertain, and more or less proximate or remote. JSTow, some doubt may exist as to the method of estimating or weighing pleasures or pains which, their duration and in- tensity being equal, differ in this, that some are present and thus certain and infinitely proximate, whilst the others are only anticipated, and either certain or uncertain, and in either case are subdivided into proximate and remote. These five modes of being of our sensations of pleasure or pain give rise to ten binary combinations, as to each of which the hedonic theory requires that commensuration should be possible. It has indeed been doubted whether the nearness or remoteness of an expected pleasure or pain can affect the hedonic calculus, independently of the uncertainty of the event which remote- ness for the most part implies; and it has been contended that a remote pleasure or pain, if supposed to be absolutely certain,
1 Verri, loc. cit. § 10, p. 61. A singular error in valuation that is sometimes committed is also pointed out there : preference is given to " the lesser intensity over the lesser duration of a pain."
CHAP, ii OF THE HEDONIC PRINCIPLE 27
must, other conditions being equal, be of equal weight with a proximate pleasure or pain. This is perfectly correct, and acts determined by a different view, if we had any instance of them, must be considered anti-hedonic or anti-economic. But remoteness must be construed as a form of uncertainty affecting both the probability of the occurrence of the pleasurable or painful event, and the probability that the individual con- cerned will be agreeably or painfully affected by it when it actually happens.1 Given this explanation of the conception of remoteness or propinquity of anticipated pleasures and pains, the further criticism to which we may subject it becomes a simple question of words. But, even if that were not the case, the complexity and nicety of hedonic valuations of these elements would warrant the suspicion that, in the majority of instances, these valuations are carried out with only approxi- mate correctness. This is tantamount to saying that error is a principal source of anti-economic acts, and operates in this sense on a vast scale (confer post, chap. iv. §6). The commen- suration of pleasures and pains is however rendered still more difficult in a special instance. The tribal hedonist, as we have briefly designated him, has frequently to estimate his own pleasures as compared with those of others, i.e. with those of his species, and it is difficult to understand how this can be done without error, compatibly with the law of the relativity of sensations of pleasure and pain.2 The fact remains that these hedonic valuations are constantly made by all ; but with what admixture of error, we do not know.
1 An individual interested in a future, but certain, pleasurable or painful event, may, for instance, doubt whether he will still be alive when it actually comes to pass. It would be erroneous to cite, as an instance impugning the doctrine according to which a remote, but certain, event should, c&teris paribus, be taken to be equal to a proximate event, the fact that death, the most certain of events for every individual, preoccupies the mind much less when it is believed to be distant than when it is thought to be near. For it is clear that the prospect of death, as a motive of our actions, must have greater weight if it is believed to be near, than if it is thought to be distant ; because when it does happen, all the pleasures of life come to an end, and hence its nearness, or remoteness, curtails, or prolongs, the series of these pleasures. Thus, it is not the near or distant prospect of death that supplies the motive of our actions, but the varying quantity of pleasures or pains we look forward to during our lifetime ; which is quite a different matter.
2 Respecting the commensuration of pleasures and pains, see contra : H. Sidg- wick, op. cit. p. 115 ; pro : Spencer, op. cit. chap. ix. pp. 150 and following.
28 THE THEORY OF UTILITY PARTI
§ 5. Of the Fundamental Law of our Sensibility
Our aptitude to receive pleasurable impressions is subject to two factual laws possessing fundamental importance as economic premisses. These laws are revealed by our daily experience, and in psychology they have been known since the time of Aristotle. They are thus formulated by Gossen : — *
1st. Every enjoyment, as it is 'prolonged, decreases, and at length ceases altogether.
2nd. An enjoyment has, when repeated, a lesser initial intensity and a shorter duration than it had before ; and its intensity and duration decrease the more, the shorter the intervals at which it is repeated.
It is obvious, for instance, that to a hungry man the first portion of food he partakes of affords an intenser pleasure than the second, and the second than the third, and so on till the point of satiety, or even of nausea, is reached. It is likewise obvious that, given the same kind of food, its repeated use for the purpose of appeasing the cravings of hunger, affords a decreasing pleasure. This explains, for instance, the reason why a meat diet is relished much more by those who only partake of it on exceptional occasions than by those who are accustomed to its daily use ; and why those who are accustomed to eat bread every day derive a keener enjoyment from this food when they have been obliged to abstain from it for some days. The law of the decrease of protracted enjoyments applies to every kind of enjoyment or consumption of commodities. Daily observation will confirm to every one the rigorous ex- actness of Jennings's contention, that by dint of gazing at an
1 Hermann Heinrich Gossen, Entwickelung der Gcsetze dcs menschlichen Verkchrs unddcr daraus fliesscndcn Regeln fur menschliclies Handeln, Brunswick, Vieweg, 1854 ; now Berlin, Prager, pp. 4-9, although not a new edition. See also Richard Jennings, Natural Elements of Political Economy, Longmans, London, 1855, book i. chap. i. pp. 96-99, § 7, Law of the Variation of Sensations. This author has analysed even more minutely and subtly than Gossen the law of the decrease of protracted enjoyments, as we shall see in ch. iii. § 3. Before both these authors, in 1844 and again in 1849, J. Dupuit expounded the same laws, but with numerical indices, instead of curves, Annalcs dcs ponts d <•/> torn. xxv. 2nd series, pp. 170-248, Me"moire, No. 207, 1849, Paris, Carillan- Gceury.
CHAP. II
OF THE HEDONIC PRINCIPLE
29
object, we end by ceasing to perceive it ; by dint of listening to a sound, we cease to hear it ; that, in the same way, our sense of smell becomes exhausted, and that the pleasures of the palate end in nausea, or are transformed into painful sensations. In view of their importance, it is worth while examining the graphic expression of these laws devised by Gossen.
Let a straight horizontal line OX (diagrams I.-IIL), which we shall briefly term the abscissa, express the time a sensation lasts : each point of the line corresponding with an instant of
m
O a b c
DIAGRAM I.
time, and each part of the line, Oa, ab, be, etc., corresponding with intervals of time that are in the same proportion to each other, and to the entire duration, as the said parts of the line are to each other and to the whole line.
Let a series of straight lines .OY, aav bbv ccp etc., which we shall briefly term the ordinates (and which form known angles with OX, — let us say for the sake of simplicity, right angles, so that they are vertical with respect to OX), be in the same proportion to each other as the intensities of enjoyment corresponding with the moments indicated on OX are to each other. Thus OY^a comes to signify, for instance, the intensity of the gratification experienced by a thirsty man during the first interval Oa in which he is drinking ; aa^b the intensity
30
THE THEORY OF UTILITY
PART I
during the second interval ab ; 11^^ the intensity during the third interval be, and so forth. By connecting the extremities of the ordinates, i.e. by drawing the line Ya^c^ etc., we shall have the curve of the intensities of enjoyment. This curve may follow the most varied course, according to the nature of the enjoyment we have to deal with and the individual to whom it relates. It may, for instance, as in diagram I., begin high up (i.e. the initial ordinates may be long), and descend gradually till it reaches, or sinks below, OX (i.e. the successive ordinates may go on shortening down to zero), and then become negative ; or it may begin, as in diagram II., at a
DIAGRAM II.
moderate height from OX, and gradually ascend till it attains a maximum height, after which it declines like the curve in diagram I. ; in which case we say it is constituted by increas- ing ordinates till a maximum is reached, and then by decreasing ones. But what is characteristic of it, and limits its possible variations, is the more or less rapid and saltatory, but always certain, ultimate decrease of the ordinates, until they are reduced at some point on OX to zero. If we suppose the enjoyment protracted beyond this point, the ordinates become negative and increasing, that is, they must be expressed by straight lines perpendicular to OX as before, but drawn in an opposite direction and increasing successively, since they express painful intensities. Let such be, for instance, the ordinates mm^ nnv
CHAP. II
OF THE HEDONIC PRINCIPLE
31
etc. As in most cases we know next to nothing of the rapidity with which real hedonic curves decline, or of their particular shapes whilst declining, Gossen is perfectly right in operating exclusively with the simplest of curves, i.e. with straight lines, as in diagram III. The reader must imagine Oa, db, ~bc, cd to be the diameters of contiguous points on OX, looked at under a microscope, which should so expand them. The area OYa^i is to be imagined as a thick perpendicular line seen through a strong magni- fying glass, the area aelfi is the next per- pendicular line similarly magnified, and so on as regards the areas Ifc^ and cgdjl. If these thick perpendicular lines are only close enough to each other, their upper extremities will form a continuous line MXN, which Gossen supposes to be a straight line as in diagram III. The operation with straight lines can easily be translated into numerical examples. This method has been adopted success- fully by Menger and his followers, and it dispenses with the use of higher mathematics ; but the use of curves is necessary for some of the nicer problems, and is extremely suggestive. Before leaving this subject, it must still be noticed that, although economics presupposes nearly always declining hedonic curves, there are cases in which the fact must be taken into consideration that we are concerned with their ascending segments ; a circumstance conducing to so-called positions of unstable equilibrium, as we shall see later on.
§ 6. Gossen' }s Two Theorems of the Hedonic Maxima l
From the factual law respecting the decrease of protracted or repeated enjoyments, and from the hedonic postulate,
1 Gossen, op. cit. pp. 11, 12,
32 THE THEORY OF UTILITY PART i
certain theorems are derived concerning hedonic maxima which go by the names of Gossen, of Walras, or of Jevons, i.e. of those who first, and independently of each other, enunciated and demonstrated them, and made them the groundwork of all further economic exposition.
Gossen's first theorem runs as follows: —
Every enjoyment may be indulged in with such frequency that a greater or a lesser frequency will yield inferior hedonic results. In fact, an enjoyment protracted throughout a duration OX (see any one of the preceding diagrams) ceases at X to give pleasure; protracting it still further, the hedonic ordinates become negative, that is, the enjoyment is trans- formed into pain. In other words, the uninterrupted con- tinuance in the use of what causes us pleasure ceases, after a certain time, to increase the amount of pleasure afforded to us. On the other hand, after an interval in the use of the thing which afforded us gratification, our sensibility generally revives, and its renewed use may again give us pleasure. Now, if the interval between the first and second occasions of our using a thing were of infinite duration, evidently the sum of pleasure afforded to us would be merely that derived from its use on the first occasion. Therefore between the extreme of our obtaining only the amount of pleasure that a thing is capable of affording us, if used without interruption to the point of satiety, and the other extreme of our obtain- ing this same amount by not repeating for an indefinite time, notwithstanding our revived sensibility, the use of the thing capable of affording us pleasure, there exists a hedonic maximum dependent on the frequency of the repetition of the enjoyment in question.
Gossen's second theorem is also an immediate consequence of the law of decreasing enjoyments. It is formulated as follows : —
Given the option of several pleasures, and a time so limited as not to suffice for enjoying them all to the point of extinction, we obtain a hedonic maximum by enjoying each pleasure in such measure, that its intensity at the moment when the period of fruition expires is equal to that of every other plea In other words : The final degrees of intensity of pleasures must be equal at the instant when the given time expires, what-
CHAP. II
OF THE HEDONIC PRINCIPLE
33
c d & f DIAGRAM IY.
ever may have been the initial intensity of each kind of pleasure.
In fact, given two pleasures of equal initial intensity and which during equal periods of time decrease equally, it is obvious that if we wish to utilise to the best ad- vantage a limited time, it Y is expedient to divide it equally between the two pleasures. If the whole of it is spent in the en- joyment of the first plea- sure, then at the moment when the time expires, much lower degrees of intensity of sensation of the first pleasure will have been reached than the degrees of intensity of sensation of the second pleasure that remains un- tasted; and vice versd, if the time available is wholly allotted to the enjoyment of the second pleasure. Now, the initial degrees of intensity of the two pleasures being equal, as also the respective scales of their decreasing intensity, it is evident that the hedonic maximum is obtained by apportioning equal periods of time between the two enjoyments, and thus obtaining equal degrees of intensity in the last sensations experienced before the expiry of the time allotted. Graphically the problem is presented thus : — Let the total enjoyments and the decreasing scale of enjoyments that may be derived from the fruition of the first pleasure to the point of satiety, be expressed by diagram IV., and those of the second pleasure by the identical diagram V. Let OX in the first diagram express the time it would take to produce satiety with respect to the first pleasure, and 01X1 in
D
DIAGRAM V.
34
THE THEORY OF UTILITY
PART I
the second diagram, the time requisite to exhaust the second pleasure. Let the time allowed for the enjoyment of one or other, or both pleasures, be equal to O/ in the case of the first pleasure, and to 0^ in the case of the second pleasure ; that is, it consists of six equal units. Now, if the time limited is spent wholly in the enjoyment of the first pleasure, the sum total of enjoyment will be expressed by the area 0/raY, and the ultimate degree of enjoyment will have the dimensions of the ordinate fm. But the area 0/raY is much smaller than the sum of the two other areas which we obtain, as the expres- sion of the amount of pleasure enjoyed, if the time limited is apportioned equally between the enjoyment of the first and second pleasures. In this case the line en in diagram IV. and the line c^ in diagram Y. denote the last degrees of enjoyment obtained, and the totality of such enjoyment is expressed by the areas OcnY + OlclnlY1 ; and comparing the area OfmY with the sum of the areas OcnY + O^^Y^ we perceive at once that the area OcnY is common to both, and that the comparison is therefore limited to the areas cfmn and Olc1n1Yr Now, whilst the abscissa is equal in both areas, cfssOjCj, the smaller ordinate of the second area, viz. c^, is equal to the larger ordinate of the first area, viz. en ; and con- sequently against the decreasing ordinates of the latter we can set off an equal number of increasing ordinates of the former. Let us now suppose the more complex, but more natural,
DIAGRAM VI.
case of two pleasures presenting different initial degrees of enjoyment, and different scales of the decrease of enjoyment during equal periods of time. Let OXY (diagram VI.) denote
CHAP. II
OF THE HEDONIC PRINCIPLE
35
1 DIAGRAM VII.
the magnitude of a first pleasure, and OjX^ the magnitude of the second pleasure (diagram VII.). The pleasure the hedonist will taste first will be the one possessing the greater initial intensity, viz. OY; and he will continue to indulge in it until its intensity is so far reduced as to be equal to the initial intensity of the second pleasure. Let us suppose this to happen when the first pleasure has been enjoyed for a period equal to Oa, so that the ordinate am, which denotes the in- tensity of the enjoyment afforded by the first pleasure at the moment a, must be deemed equal to the ordinate OjYp which denotes the initial enjoyment afforded by the second pleasure. If the time avail- able is equal to Oa, or less, it will be entirely spent in the first enjoyment ; if it is greater, its ulterior allotment must always be such that, at the moment it expires, there remains no unexhausted degree of intensity of either pleasure superior to the last degree of intensity that has been enjoyed ; for if that be the case, the apportion- ment of the time will not have been so effected as to obtain, in the given time, the maximum possible sum of pleasure. Let us suppose, for instance, that the time suffices to extin- guish the first want ; evidently the hedonic maximum does not consist in so using it ; for if the time, Ob, is allotted to the first pleasure, the intensity of enjoyment is so reduced as to be equal to the fruition of the second pleasure from Oj to &p the ordinate, In, being equal to the ordinate 51?i1. Therefore we obtain the hedonic maximum by dividing the time available in such proportions that the final degrees of enjoyment in both pleasures always remain equal.1
We shall find this theorem of Gossen again shortly, only modified in form, in the theory of wants, and repeatedly further on under analogous forms. We obtain, indeed, the same problem if, instead of supposing the time for enjoyment to be limited, we suppose the limit to apply to the stock of commodities, or to the labour that serves to satisfy various
1 It is very easy to solve this problem graphically. Let the smaller triangle
36
THE THEORY OF UTILITY
PART I
wants indiscriminately ; l and it is still the same problem, only more complex, that presents itself if we have to indicate the distribution of a limited stock of means of satisfaction in a variable period of time, according to a given scale of probabilities.2
A first corollary of this second theorem is that, if several pleasures are available, and the time is insufficient to admit of their all being enjoyed to the point of satiety, the least of these pleasures should be partially enjoyed before it can be profitable to enjoy the greatest of them to the point of satiety. In fact, it is clear that the ordinates which express the intensity of enjoyment of the greatest pleasure become, at the point of satiety, less than the initial ordinates of the least pleasure. Now, as the final degrees of enjoyment must be equal in order to obtain a hedonic maximum, it is clear that some portion of the disposable time must be allotted to the least pleasure before the point of satiety of the greatest pleasure
OiXjYJbe^superposed on the larger "OXY, as in diagram VIII., so that 0^ is measured off on OY, and OjXj on OX. Then let a new curve be drawn, gener-
Si
Xi I Ri
DIAGRAM VIII.
ated by adding together the abscissae of the two triangles. OX will be pro- duced, by the addition of OiXj, to X2 ; BD will be produced, by the addition of EC, to E ; Fn, by the addition of Fnlt to G, and so on. Thus we obtain the curve ?ftGEX2. The disposable time is now measured along OXX2. Thus, suppose an interval OX is disposable. Let an ordinate be drawn through X, up to the intersection with the new curve, at P. From P let a parallel be drawn to OXX2. This parallel will intersect Y?n?iDX in R, and Y^CXi in S. Then the ordinates SSi and RRi will bisect the axis of the abscissae, and OS1? ORi will be the portions wanted. (See Wicksteed's Alphabet of Economics, London, 1888, pp. 59, 60, and 128.)
1 Jevons, op. cit. p. 63, Distribution of a Commodity in different Uses.
2 Jevons, op. cit. p. 77, Distribution of a Commodity in Time.
OF THE HEDONIC PRINCIPLE
37
is reached.1 This corollary is of paramount importance for the right comprehension of the law that regulates values in international exchanges.2 Graphically expressed, the demon- stration is self-evident. Let A be a great pleasure and B a
DIAGRAM X.
DIAGRAM IX.
small one (diagrams IX. and X.). The ordinates of A, e.g. those erected in a, b, c, etc., become smaller and smaller in the direction of X; therefore before X is reached, there must be a point at which one of them is equal to the initial ordinate of B, viz. OjYj, whilst the succes- sive ones are less than 0^, however small the pleasure B may be. When this point of satiety is reached for A, the time disposable must be apportioned between A and B,
1 Indeed it is impossible that, of several present pleasures, one should be entirely exhausted, unless all are so ; for the last portion of time or means destined to the enjoyment of a pleasure might be expended more profitably on some other pleasure further removed from the point of satiety.
2 Ricardo's theorem : Each nation pays its foreign debt solely by the ex- portation of the commodity in the production of which it is most efficient, until the decrease in the value of such commodity in the foreign country renders it equally profitable to send another commodity, in the production of which it is efficient in^ a secondary degree ; and of Jthis commodity together with the former one it continues to send as much as is necessary until the reduction in value of the same renders equally profitable the exportation of a third commodity, in the production of which its efficiency is only third in degree ; and so on until the equation of the mutual demands is attained. ^ (See infra, part ii. chap, iii. §§ 3, 7, 8.)
38 THE THEORY OF UTILITY PART i
instead of exhausting the enjoyments afforded by the plea- sure A.1
A second corollary of Gossen's second theorem is that: the possibility of increasing the sum of enjoyments is con- ditioned by the possibility of discovering a new pleasure, however small it may be, or by that of perfecting one already in existence; and this whether its intensity increases each moment, or only at certain moments, and whether or not the period of enjoyment may be prolonged as the rate of decreasing intensity is slackened.
1 This proposition should, strictly speaking, instead of appearing as a corollary of Gossen's second theorem, precede it, as an autonomous proposition, since it constitutes an implicit premiss of such theorem. I have not ventured to alter the order preferred by the master.
CHAPTER III
OF WANTS
8 1. That Economic Actions are such as are caused by the Existence of a Want
IN the course of the foregoing discussion of the hedonic principle, we have implicitly assumed a fact which must now be verified, viz. that economic science is by no means concerned with every kind of human actions. In the first place, in economics, those actions are disregarded which are due directly, and without any intervention of the human will, to the mechanic influence of the environment. A man who falls from a fifth story does not, qud his fall, act economically. Indeed, in vulgar parlance, the fall would not be considered as his act. Still the transition from motions effected under the influence of physical laws to movements that are acts adjusted to a preconceived end, is so gradual, that no well-defined line of demarcation can be drawn between them. Besides actions of this kind, we must exclude those that are unconscious, such as most of the organic processes and reflex acts. The human body performs a great number of acts that tend to adapt it to new conditions in the environment : inspiration is followed spontaneously by expiration ; the pulsations of the heart and the digestive processes are accomplished unconsciously, and are independent of our will, even when they cause us pain.
The reason why these two kinds of actions are outside the range of economic subjects, is that the psychological law of the minimum of action, or hedonic postulate, cannot be manifested in them. Only those actions accordingly are economic which are
40 THE THEORY OF UTILITY PART i
due to the desire to rid oneself of pain, or to lessen or avoid pain, and which are the fruit of our consciousness and will. This sphere of human activity, which is certainly very limited, and possibly altogether non-existent, in the earliest stage of infancy,1 and scantily developed in savage populations, widens out enor- mously with every progressive step in civilisation, and with every intellectual and emotional advance in the individual ; so that the duration and intensity of individual and collective life are increased by the perfected and multiplied adjustment of acts to ends.
The sphere of economic actions is however still too broadly defined when we so designate all actions that are due to the actual or prospective existence of a pleasure or pain ; for in reality that sphere comprises only one species of this kind of actions, viz. such as are caused ly the existence of some want. Now a want2 is the desire to dispose of means deemed to le adapted to remove a painful sensation, or to guard against it, or to excite or prolong a pleasurable sensation. If we say that Titius wants to eat, we mean : that he feels a certain pain called hunger ; that he believes in the existence of means fitted to remove that pain, viz. food ; and that he desires to avail him- self of such means.
It is a mistake to identify, as is often done, the want which is the desire for an instrument or means, with the painful sensation which is only one of its causes. In order to constitute a want, the prior existence actual or prospective of a pain is certainly necessary ; but that alone does not suffice : another condition must concur, viz. belief in the existence of means of alleviation. A painful sensation which we were convinced that no means could alleviate, would give rise to no want ; nor would the conception of some pleasure which we believed to be reserved to some other species of beings than ourselves. A want implies therefore the con-
1 Many physiologists doubt, for instance, whether a newly-born infant is susceptible of feeling pleasure or pain, owing to the imperfection of its nervous system ; those of its acts which seem to us indications of pain are reflex.
2 "Want " is the nearest English equivalent of the term used by the author : bisogno. But, owing to the ambiguousness of "want," which, besides the desire for something needed, expresses also the mere conception of its absence or deficiency, I have been sometimes obliged to render bisogno, in this chapter and elsewhere throughout this treatise, by "need" or "desire." — Tn.
CHAP, in OF WANTS 41
currence of at least two conditions : 1st, some pain must exist in our consciousness,1 no matter whether such pain be reason- able or unreasonable in the opinion of others, or whether it may seem real or imaginary to them ; 2nd, there must be the knowledge of some means or instrument, the use of which would diminish or suppress the pain in question; or at all events there must be the belief, even though erroneous in the opinion of others, that such means or instrument does exist. Given these conditions, there is begotten the want of such means or instrument, i.e. the desire to dispose, or avail oneself, of it. This is an elementary mode of being of the mind, which cannot therefore be denned. It is in its turn the cause of a series of acts intended to satisfy it, and it is these acts alone that form the subject-matter of economic science ; inas- much as by egoistic individuals (or by the homo ceconomicus) they are performed in accordance with the hedonic principle, that is, at the minimum possible cost that circumstances admit of.2 Just as the want must not be confounded with the pain, which is one of its causes, so too we must avoid confusing the satisfaction of a want with the pleasure (or cessation of pain) which is its effect. This is mentioned, not as a warning against speaking elliptically, but in order that the ellipsis, being noted, may not induce any misapprehension.
§ 2. Of Hedonic Mensuration applied to the various Degrees of Intensity of a single Want, and to the Comparison of the Degrees of Intensity of several Simultaneous Wants.
Although our wants are neither pleasures nor pains, but have pleasures as their effects, if satisfied, and are begotten by
1 It is a contradiction in terms to talk of "unconscious wants," or "uncon- scious pains," for the sensation of pain is of the very essence of consciousness (A. Bain, The Emotions and the Will, 3rd ed. 1880, Longmans, p. 540).
2 Instead of " egoistic individuals," we may also say : "individuals who act in conformity with their self-preservation " ; since this end is gained by not applying to the satisfaction of a want more labour than it requires ; by not satisfying it at all if it is not hedonically worth while doing so ; and by preferring, in the case of several wants, to satisfy the one that is hedonically paramount. The labour required for the satisfaction of a want is a consumption of vitality, and therefore, cceteris paribus, a lesser development awaits him who spends more effort or labour for the sake of equal satisfactions, and natural selection eliminates him in the long run, as a being that realises fewer conditions of vitality.
42 THE THEORY OF UTILITY PART i
pains, nevertheless we can apply the hedonimetry we have already investigated, in its completeness, to wants. Nothing has hitherto been effected by any other means. The attempt has been made to find a quantitative standard of wants in the metric quantities1 of the several commodities, of every sort or kind, which are consumed by an individual or by a nation, within a given time. Let us call this quantity the requirement of an individual, or exceptionally, his demand? as an equivalent of the German Bedarf, or of the Italian fablisogno. We shall therefore understand by requirement the metric quantity of the objects consumed, in a given time, by an individual, or their money value. His annual expenditure is divided into so many pounds for bread, so many for meat, and so many for clothing, house rent, etc.
Now what these data are supposed to render possible, is the measurement of the intensity of our wants. If a man spends £175 on food, £50 on clothing, £45 on his lodgings, £37: 10s. on firing, and £20 on drinks, it is supposed that the intensities of these several wants are to each other in the proportion of 175:50:45:37-|-:20. This, however, is not the case, because the amount spent, say, on food depends, not only on the price of food, but also on the price of every other commodity the man buys ; nay even on the prices of those objects he abstains from buying because, for the time being, they are too expensive. A case in which the know- ledge of our requirements might be of use to us in other respects, would exist if all the commodities we consume were obtainable gratuitously. In this case our requirement would coincide with our demand, at a price equal to zero. We should then be acquainted with a most important point of the demand curve of every individual, i.e. of the quantity of commodities he would appropriate, if he had nothing to do but to take them ; but we should still be unable to gauge the comparative intensity of his desire, say, for meat and for beer ; we should only know that he consumes so many pounds of meat and so many gallons of beer, in a certain time.
1 e.g. by Hermann, op. cit. ii. pp. 80, 81 ; iii. pp. 107, 108.
2 The term demand possesses in economics the special meaning of the t/i'ftiiftfy of a given commodity that is required at a given price, and consists therefore of the quantity of the commodity offered by way of price. "We shall return to this subject in the sequel (part ii. chap.'ii. § 1, note, and chap. iii. § 1).
CHAP, in OF WANTS 43
Hedonimetry, however imperfect, carries us a step further. We must distinguish between the quantitative variations of one and the same want, and the quantitative differences that exist between several distinct wants. In fact, on the one hand, in respect of one and the same want, we may distinguish various degrees of strength, as a greater or lesser desire for any given satisfaction, such as a greater or less desire for water, or warm clothes, etc. On the other hand we may compare the various degrees of strength with which different wants make themselves felt at a given moment, or in a series of moments, in the same individual ; as for instance the craving for food with the need of sleep, the need of recreation, etc. Now, the quantitative differences between the degrees of one and the same want are measured in accordance with the quantitative differences in the sensation of pain which is the cause thereof, until they are satisfied; or in the sensation of pleasure which is the effect thereof, when they are extinguished. Thus, for instance, we conceive the magni- tude of the several degrees of the desire for food to be propor- tionable to the magnitude of the several degrees of the feelings of hunger which are the cause thereof, or of the several degrees of the pleasure afforded by their appeasement. Consequently we may now apply to wants the reasoning set forth with reference to pleasures and pains (chap. ii. §§ 5, 6). Supposing any given want, having at a given moment and for a determinate individual, any determinate initial strength, it is a fact supplied by daily observation that, before being ex- tinguished by possession of the commodity which was its object, it passes more or less rapidly through a series of indefinite gradations of decreasing strength, corresponding with the decreasing variations of its cause. If the original strength or magnitude of a want is expressed, as in diagram XL, by an arbitrary numerical index, say 10, or graphically by an ordinate of arbitrary length (A101), the successive partial assuagements of this same want will cause it to assume successively the dimensions designated by 9, 8, 7 ... to zero, and denoted graphically by ordinates decreasing until they coincide with the abscissa (A202, A303, . . . AnOn). The various strength of several wants is expressed in exactly the same manner. A number of such wants may be ordered
44
THE THEORY OF UTILITY
PART I
in accordance with the strength they possess, at a given moment, for any determinate individual. This scale of the urgency of wants will be founded ultimately on the scale
10
Ai
|
9 |
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|
8 |
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|
AL> |
7 |
||||||||||
|
Ai |
6 |
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|
A., |
5 |
||||||||||
|
Aa |
4 Af n As |
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|
JL |
|||||||||||
|
Oi O2 O3 O4 O5 Os O7 Os |
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|
DIAGRAM XL |
O9 Oi
constituted by the pains that beget the wants, or that would have to be suffered if the wants remained unsatisfied. Let us express, as in diagram XII., by any index, say 10, or by any ordinate, say Afl^ the urgency of the first want in this
|
Ai |
10 |
|||||||||||||
|
As |
B |
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|
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s |
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|
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7 |
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|
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8 |
c. |
c |
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8 |
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|
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r |
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|
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' |
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|
|
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37 |
t |
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:{ |
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8 |
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|
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1 |
Bs B. |
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-j- |
Es E;; |
1 |
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8 1 |
G;; G; |
•J- |
H2jjLihl K, iju-niL HIM |
DIAGRAM XII.
scale, viz. the amount of pain that must be suffered if it be not satisfied.1 The aliquot parts of this ordinate, viz. the A, A. T^T. etc., thereof (AtOl, Af01, AtOv . . . A^) will be equivalent to the successive intensities of the want in question, consequent on its progressive satisfaction. Let the initial urgency of the second want be expressed by a second
1 The axis of the abscissae is to be considered as designated once for all by OX, even if in some diagrams these letters are omitted, and tin- a.\i> of the ordinates by OY. In diagram XII. at foot of the columns of A, B, C, etc., 01( O2, 03, etc., are omitted.
CHAP, in OF WANTS 45
ordinate having 9 as its index (BjOJ, and divided into aliquot parts likewise equivalent to the successive intensities of this want. In the same way, let a third want be expressed by a third ordinate (C103) having 8 as its index, and divided into aliquot parts with decreasing indices (C003, C3O3, . . . Cg03). And let this process be carried on to the representation of a tenth want (L1010) having as its index 1, and consequently supposed to be of such magnitude as to be satisfied with what will diminish any one of the preceding wants by one degree of intensity. The ordinate (M00n), having zero as its index, is non-existent, and expresses a want already satisfied, or not yet felt. Given this scheme of the various degrees of intensity that every want passes through before it is ex- tinguished, and of the scale of intensity of several wants at a given moment, it follows that if an individual has at his disposal a determinate quantity of means of satisfaction which can be applied to several uses (for instance a certain amount of money),1 he will take care to extinguish first the most urgent want (the want A of diagram XII.) and will direct to this end the employment of the means at his disposal. How- ever, he will not care to extinguish this most urgent want completely, before providing for the satisfaction of the second and ulterior wants ; for the first want is not more urgent than the second, except within determinate limits, and more precisely until the first degree, denoted by A in diagram XII., and having 10 as its index, is satisfied. In fact, as soon as the first want is satisfied to this extent, the second becomes equally urgent ; so that if the means still available were employed exclusively in satisfying it, so as to reduce it to an intensity of, say, 8 degrees (at A3), there would remain unsatisfied a want now surpassing it in urgency, viz. the second, having 9 as its index (at BX) ; so that the hedonic postulate would have been transgressed. Therefore when the first want A is reduced by the employment of a portion of the available means to an intensity equal to that of the second (A2 = BX), so that both come to have the index 9, the hedonist, or homo ceconomicus, must apply his means in equal measure to the satisfaction of the first two wants.
1 Here, for a first approximation, abstraction is made from the final degree of utility of money, i.e. the unitary prices are considered as being all the same.
46 THE THEORY OF UTILITY PART i
However even then he will not persevere in this to the complete extinction of such wants ; for when the first two are reduced to the intensity indicated by the index 8, i.e. the first by two degrees (A^ and A2) and the second by one degree (B^, the third want will equal them in intensity (C1), and must thenceforward be satisfied pari passu with them, for the same reason that previously called for the simultaneous satisfaction of the second want. If the means that are still disposable suffice, the first three wants will be satisfied until they are reduced to the intensity denoted by the index 7 (A4 = B3 = C2), when the fourth want (Dx) will claim attention ; and so on.1
It follows, that at whatever moment the disposable means are exhausted, the wants that have been satisfied therewith have all Equal Degrees of Intensity, and that these are the Greatest experienced by the individual at that moment. In this proposi- tion we have an economic theorem which is nothing more than a formal variation of Gossen's second theorem of hedonic maxima. In this shape however — which is the more common one — it goes by the name of Gossen's or Jevons's theorem of final degrees of utility.2 In order to avoid misapprehension, it may be expedient to paraphrase, and to add a few comments on, it. It is clear that it could also be formulated by the proposition : that the wants that remain unsatisfied after any given quantity of means has been employed in appeasing them, possess either equal or inferior degrees of intensity. If the unsatisfied wants are among those which have been partially appeased, their degrees of intensity are now equal ; if, on the other hand, they are such as had not yet been taken into consideration, their degrees of intensity are in- ferior to the minimum degree of intensity that the dis- posable quantity of means sufficed to satisfy in the case of the other wants. The scale formed by the intensities of the
1 The method of using numerical indices instead of curves is due to Menger, and is extremely useful to all who are puzzled by geometrical diagrams or analytical expressions. It can be adapted to nearly any purpose that is sub- served by curves.
2 Gossen, op. cit. p. 33: " Wenn (des Menschen) Krafte nicht ausreichen alle moglichen Genussmittel sich vollaus zu verschaffen, muss der Menscli sich ein jedes soweit verschaffen dass die letzten Atome bei einem jeden noch fur ihn gleichen Werth haben." Jevons, op. cit. p. 65: "The final degrees of utility in two (or more) uses of the same commodity must be equal."
CHAP. Ill
OF WANTS
47
various wants, arranged in order of decreasing initial magni- tude, will never present in reality the symmetry shown in diagram XII. We may suppose that a first want has 10 as its index, a second 6, and that successive wants have still lower indices, say between three and one. By marking only the upper extremities of the ordinates corresponding to these indices, and joining them by a line, we shall have the curve AL of diagram XIII. It may be that the means disposable will only suffice to satisfy the first and second wants as far as the fifth degree (line MN). Both these wants will then have equal degrees of intensity ; whilst the others, which have not been even partially satisfied, continue to have degrees of intensity (between 5 and 1) inferior to the lowest degree
DIAGRAM XIII.
(6) that the mass of disposable means sufficed to satisfy. We might also have supposed this mass to be so small as to suffice only for the extinction of a couple of degrees of the first want. The theorem might still be expressed in the same way ; only then the equal degrees of intensity would be the eighth degree of the first want, which is equal to itself. As the satisfaction of several wants is always effected in such a manner as to equalise the degrees of intensity of those wants which, though not extinguished, are partially satisfied, it may be said to proceed in accordance with equal indices, or with lines parallel to the abscissa.
If the mass of disposable means sufficed to extinguish completely all the wants existing at a given moment, then also the degrees of intensity of all remaining wants would be equal, for those degrees would be zero in all cases alike.
48 THE THEORY OF UTILITY PART i
§3. Of an Absolute Scale of Intensity and of the Law of the Elasticity of Wants
The scale of wants we have hitherto considered is relative to any given moment and any given individual ; in other words, according to the moment and to the individual, the first place, i.e. the greatest intensity, may be attributed to any one want, and the last place to any other.
We have now to inquire whether there exists any scale of the absolute urgency 1 of wants. All that can be stated with certainty on this point is, that for a few groups of wants there is a scale of precedence, in the sense that, until certain wants have been satisfied, no others make themselves felt. Whilst the scale we have considered above applies to the intensity of wants existing simultaneously, the one we now refer to applies to the genetic succession of wants. Sociological history reveals to us a few degrees of that scale, and so does the study of statistics. As usual, psychological analysis and the data of physiology carry us further. On this basis Jennings has suc- ceeded in formulating a law almost as important as that of the decrease of protracted enjoyments. Let us distinguish two series of sensations : let us place on one side those received by us through the medium of the so-called five senses, and on the other those we receive through the medium of the nerves pertaining to other parts of the body, and let us call the former special sensations, and the latter common sensations. To the category of common sensations will belong in particular those of weight, resistance, temperature, hunger, thirst, stimula- tion, etc. Now, in conformity with this division of human
1 The term "absolute scale " signifies, that the scale we are now considering exists, making abstraction of a greater or lesser part of the conditions to which the former is subject. The absoluteness is therefore relative. The former scale was relative to a given individual, i.e. to a subject the logical content of which is maximum, while the sphere is minimum. The scale we are at present dealing with makes abstraction of the conditions either of time, or of social position and civilisation, or of individual idiosyncrasies, or perhaps even, according to the opinion of some, of those of sex and age of the individual ; i.e. it relates to a subject having a lesser logical content than the former, but a larger sphere. A number of errors arise owing to its not being always perceived : (1) That the term "absolute" is only the negation of a determinate relativity, so that it must be stated with reference to what condition the absoluteness is predicated or postulated ; (2) that there may be infinite degrees of absoluteness.
CHAP, in OF WANTS 49
sensations, we shall have a division of wants and of things that are the objects of such wants, and we shall designate as primary wants those corresponding to common sensations, and as secondary wants those corresponding to special sensations. This classification will coincide in the majority of cases with the one usually adopted, — but which lacks any rational basis, — of necessary wants and luxurious wants ; whilst, according to our classification, no doubt can ever arise as to the category to which any satisfaction, and the object that is instrumental in producing it, belong. The following principles are deduced from the said classification : —
1st. Primary wants (corresponding with common sensa- tions) may be satisfied without any hedonic loss, even when the secondary wants are not satisfied ; on the contrary, no enjoyment is derived from the satisfaction of secondary wants, or the latter are not even realised, or the enjoyment is much less than it otherwise would be, if the primary wants are not satisfied in large measure, or completely. For instance, every one is dis- posed to satisfy his hunger, or thirst, or to rest, or to move, etc., even without the concomitant satisfaction of the senses of hearing, smelling, or seeing ; on the other hand, the desire to gaze on statuary or flowers soon vanishes under the influence of hunger, thirst, cold, excessive heat, or sickness. In other words, the satisfaction of the common senses must precede the satisfaction of the special senses.1
2nd. The law of the decrease of protracted enjoyments differs somewhat, according as we have to do with primary or secondary enjoyments ; for the satisfaction of secondary wants is less affected by quantitative variations in the objects causing satisfaction than is the satisfaction of primary wants. With regard to primary wants, one might apportion the quantities of primary commodities according to the respective purposes they subserve, with the same exactness in the case of man, as in the case of animals that are reared for determinate pur- poses; but this does not hold good with regard to any secondary satisfactions.
1 This explains, e.g., why the liberal professions are poorly paid in countries where the number of persons is limited who possess a competency for the satis- faction of their primary wants, and vice versa. Owing to Jennings's law, this fact becomes an excellent semeiologic criterion of the national wealth.
E
50 THE THEORY OF UTILITY FART i
3rd. TJie satisfaction of one primary want cannot, as a rule, compensate for the non-satisfaction of another primary want. An increased ration of food will not quench thirst, nor make up for the want of rest, or coolness, or warmth, and vice versd. On the other hand, the satisfaction of one special sense often compensates for the non-satisfaction of another, to the extent of making us forget it : for instance, the enjoyment of music may make up for the want of some other artistic enjoyment.1
Probably, however, what so far is known with most certainty in this connection is that the absolute scale of wants obtained by induction is very different from what, a priori, we should expect it to be. Thus for instance, a priori, most people would probably assign a comparatively remote place in the scale of wants to the desire for ornaments, which appears to us a form of luxury, and that of a moral or intellectual order. Instead of this however, facts seem to demonstrate that this want precedes by a long way certain others, the satisfaction of which is much more conducive to the preservation of the individual and of the race. That an absolute scale of wants does exist, albeit its nature is very imperfectly known to us, appears from a very simple consideration : suppose, in fact, an individual at any given moment, whose wants accordingly constitute a determinate curve ; and let his first want in the scale of intensity be a, the next b, and so on. If we now suppose that this individual lacks the means of satisfying some one of these wants, after a longer or shorter series of moments, the curve of intensity of his wants will have been sensibly modi- fied. The first want will no longer be a, nor the second I. The longer the series of these moments is supposed to be, the more will the curve, through its successive modifications, tend to assume a shape approximately uniform for every individual, being constituted by few elements similarly graduated. Prob- ably the first places will be occupied by the want of food, drink, heat : in a word, by the series of wants relating to the preservation of the human organism ; probably, too, a large
1 Jennings, op. cit. pp. 100-104. Within certain limits, however, primary commodities may also be substituted for one another : more food may to some extent make up for less warmth and less sleep. In the Franco-German War of 1870 the German soldiers were always commanded by their officers, when halt- ing, to eat first, and to sleep afterwards if any spare time remained.
CHAP, in OF WANTS 51
series of wants that existed before will have entirely dis- appeared, as the painfulness of the non-satisfaction of some other wants is so great as to render us insensible to the pain- fulness of these.
The hypothesis we have suggested actually occurs in the case of besieged cities and wrecked vessels. It seems however that the absolute or fundamental curve of wants contains only a few items, and that as soon as the means suffice to satisfy them, the original or natural curve, as we might justly call it, is differentiated into as many diverse curves as there are in- dividuals. Possibly, between the original curve common to all, and the multiform individual curves, there exist inter- mediate curves that are common as regards a particular race, or sex, or age, or with respect to some other particular prin- ciple.1 There is only one way of conceiving absolute differ- ences of magnitude in our wants ; and though it cannot be expounded without reference to matters which will be discussed in the sequel, it may be advisable to indicate it at this stage.
Suppose an individual expends an equal quantity of labour in the production of each commodity he requires. Such unit of labour will yield determinate quantitative results as regards the several commodities, for instance : m of food, n of clothing, o of shelter, and so on. Supposing the unit of labour to be very small, we shall call the corresponding quantity of com- modity obtained thereby, the marginal efficiency of a unit of pain or toil ; or speaking elliptically, we call these diverse quantities of commodity units of commodity. Now, each of these various units of commodity has a final degree of utility ; and the magnitude of these degrees of utility is the exact measure of the magnitude of each want. Graphically, we may imagine equal segments of an abscissa, denoting equal portions of labour, as regards their painfulness for the same individual, and applied to the production of different com- modities. On each segment of the abscissa is drawn per- pendicularly a rectangle proportionable to the utility yielded
1 With few exceptions, the wants of a child cannot be the same as those of an adult ; hence, too, the scales relating to classes of youthful and adult individuals, i.e. the comparatively absolute scales, must vary considerably. The same applies to every other class scale.
52 THE THEORY OF UTILITY PART i
by the quantity of commodity resulting from a unit of labour. If the segments of the abscissa are shortened, the rectangles are reduced until they become ordinates. Of these some will be infinitely long, others again will be short. The scale they form will be the one we are seeking.
The fact is that we have hardly any definite knowledge on the subject, with the exception of the above-mentioned law of Jennings ; and that Block's so-called law of abstention, according to which, " given a reduction of the available means of satisfaction, we dispense first with the satisfaction of the less urgent wants, and then with that of the more urgent ones," constitutes a vicious circle; inasmuch as we cannot construct an absolute scale of the urgency of wants, since the criterion for determining whether a want is more or less urgent is furnished by the fact that we dispense with its satisfaction sooner or later.1
The practical importance of studies that should reveal to us what wants are satisfied in a lesser measure than before, and what other wants are no longer satisfied at all, when the means of satisfaction are reduced; and on the other hand what wants are satisfied in a fuller measure than before, and what new wants are superadded, in the converse case of an increase in the means of satisfaction, would be incalculable ; for we should then possess the key to all the fundamental questions connected with the theory of imposts on articles of consumption ; in other words, we should have a law of the elasticity of wants.
1 Our statement that Block's law of abstention implies a petitio principii, is intended, not as a stricture, but as an explanation of its meaning. In fact, if it expresses a truth derived from the observation of facts, and does not therefore relate to the future, if, i.e., a scale of wants has been framed as the result of historical study and statistical observation, it is clear that it does not constitute a vicious circle. As regards the future, it applies only, if and when it has been ascertained A POSTERIORI, that an individual, or a people, in view of the restriction of the means of satisfaction, has dispensed with the satisfaction of the want m or n. In that case we are entitled to say, that in the hedonic estimation of the said individual or people, the wants m and n are less urgent than the others a and b. Moreover, within the limits of the data so ascertained, we may say that, all the other conditions remaining unchanged within a given period, if the means increase, we shall resume the gratification of the wants m and n in the inverse order to that in which it was retrenched, and that if at a future period the means should be again reduced, we may predict a diminished consumption of the commodities that satisfy the wants m and n.
CHAP, in OF WANTS 53
What we are able to say at present, on the basis of in- ductive studies, is the following : l —
1st. Suppose that in a country, not being a close market (that is, possessing extensive commercial relations with other countries), the means of payment increase2 in such measure as greatly to extend the limits set to the satisfaction of wants in the solvency of purchasers, and to render possible an increase in the demand for commodities, although their prices remain stationary, or even undergo a rise ; in that case a determinate series of wants will be satisfied in a larger measure than before, and a new series of wants will claim and receive satisfaction ; i.e. we shall have an expansion of wants according to a determinate order. Suppose, on the contrary, a diminution of the means of payment, so that the limits set to the satisfaction of wants in the solvency of pur- chasers are restricted, and the demand for commodities is reduced ; in that case a determinate series of wants, differing from the previous series, will be satisfied in a lesser measure than before ; i.e. there will be a compression of ivants, or a cur- tailment of their satisfaction, according to a determinate order differing from the previous one. In other words : The positive expansion of wants is, as a matter of fact, different from the negative expansion. Whether this would be so even in the case of the homo ceconomicus, cannot be deduced from the researches hitherto made, owing to the manner in which they have been carried on ; but it seems probable that it would not be so.3
1 Viertelj. f. Volksw. u. Kulturg., 1868, vol. iii. pp. 127-165 ; vol. iv. p. 121, "Wahrung und Preise, Julius Faucher.
2 If the country is a close market, we may suppose the efficiency of labour to have been increased by new methods of organisation, by the growth of know- ledge, or by technical progress ; or else to have deteriorated by reason of some accident of the environment, say a deviation of the gulf-stream.
3 At first sight it is incomprehensible how an expansion of wants can occur in a different order from the contraction of the same as regards a homo ceconornicus, if, as we must do, we exclude the hypothesis of error in his hedonic calculations when he extends his enjoyments in a certain order, as his means increase. The explanation of the contradiction between the historical, or statistical, or other- wise inductive, fact, and the conclusions of the a priori calculation or reasoning, may be obtained in various ways : (1) The historical, statistical, or otherwise inductive observation may be vitiated by error. This may easily be the case, for as yet the subject has been scantily investigated. (2) It may be that the process of observation is extended to men in whom the characteristics of the
54 THE THEORY OF UTILITY PART i
2nd. The empiric scale of positive elasticity for categories of wants seems to be, in an increasing series, the following : the desire for nourishment has a lesser capacity for expansion than the desire for clothing, and the latter has a lesser force of expansion than the desire for shelter.
3rd. In the first category the increasing series presents the following order : salt, grains and common vegetables, fruit and fine vegetables, meat, dairy produce, eggs, salt meat, fish, stimulating beverages, groceries, tobacco. Negative expansion is different, presenting minimum degrees for salt and tobacco ; in the decreasing order of negative expansion follow alcoholic drinks, coffee, sugar, groceries, vegetables, meat.
4th. In the category of desires for clothing, negative expan- sion is much less than in that of desires for nourishment. The conception of an absolute scale of wants, which is not without a certain amount of truth, has nevertheless, in its present imperfect condition, probably given rise to more economic errors than sound principles. More especially it has resulted in a distinction between necessary wants and superfluous wants, or luxuries, which is untenable in nearly every shape in which it has been presented. It is to be observed above all, that a want which might be deemed a luxury for one individual, is not necessarily such for another, since one individual differs from another even in his physiological conformation. Thus, for instance, the skin of a peasant or labourer is not, from a
homo ceconomicus are neutralised by other characteristics, so that the theory must be understood secundum quid, and the observation applies secundum aliud. (3) It may be that the theory of the homo ceconomicus is incomplete or erroneous. (4) It is possible to conceive of a reconciliation between theory and observation on these lines : Suppose that the scale of wants of the homo ceconomicus, at a given moment, is constituted in order of importance by the wants a, b, c, d, and that subsequently he is enabled to satisfy new wants, and does so in the order in which they stand, e, f, g, h. But now, since he has tasted the satisfactions c, f, g, h, and has become accustomed to them, his absolute scale of wants for the future may have been modified so as to be con- stituted by b, c, f, g, a, d, e, h. In other words, the commodities lie has con- sumed and the interval that has elapsed between the time when his means wnv less and the time when they became more, operate as alterative factors on the scale of importance of his wants. Now, suppose a diminution of his means to supervene : evidently he will act in accordance with the new hedonic sc<i!< in the retrenchment of his enjoyments. The divergence between theory and practice would therefore arise from the fact that the observations refer to different times, whilst the theory supposes the processes to be accomplished at the same moment.
CHAP, in OF WANTS 55
physiological point of view, the same as the skin of an indi- vidual belonging to the upper classes ; and the same remark applies to various organs whose functions furnish quantitative results so different, as to constitute qualitative differences both in the functions and in the organs. Whilst, for instance, the desire for intellectual or emotional recreation may be luxuries for the labourer, the same may be wants of the first order for the brain-worker ; so much so that to deprive him of them may be to unfit him for his wonted labours.
§ 4. Of the Variety and Progression of Wants
Observation furnishes us with a law of the indefinite variety and progression of wants, for which two causes may be assigned : 1st. Our organs are impaired by inactivity, and yet wasted by use : hence a series of painful sensations and a series of wants ; 2nd. The environment in which we live is constantly undergoing modifications which react on our sensi- bility, causing us pain and compelling us to a continual labour of adjustment. A state of satisfaction is incompatible with anything save a state of insensibility ; and thus, while life lasts, such a state can only be transitory and momentary. The satisfaction of grosser wants quickens our sensibility and gives rise to wants that are more refined. After having made provision for present wants, we begin to think of remoter ones. The progression of wants is therefore indefinite ; more especially as they are directed to the acquisition not only of direct means of satisfaction, but also of instruments for the more abundant, or speedy, or perfect production, at the same cost, of direct means of satisfaction ; and this species of wants has no other limits than those of the inventive capacity of the human mind.1 A consequence, or rather a paraphrase of the
1 H. Spencer, loc. cit. p. 158. Originally only the realisation of an end was pleas- ing; as however this usually necessitated the previous realisation of means, this in turn has come to be a pleasure, though it is often far removed from the ultimate object for which the means was realised. " During evolution there has been a superposing of new and more complex sets of means upon older and simpler sets of means ; and a superposing of pleasures accompanying the uses of these succes- sive sets of means ; with the result that each of these pleasures has itself eventually become an end." See the analysis of the instance given of the merchant who thinks of making money, and enjoys making it, though it is only a means for the satisfaction of other wants.
r.o THE THEORY OF UTILITY PART i
foregoing proposition, is that the means of satisfaction in general can never be superabundant, though a determinate kind may be so ; that is, the available quantity thereof may be in excess of the corresponding need.
§ 5. Of some Classifications of Wants in respect of their Qualities
Wants may be classified, in respect of quality, in an infinite number of ways ; and to each of such classifications of wants corresponds an identical classification of means of satisfaction. Whilst one of the most fruitful classifications of wants has just been indicated in the preceding section, that namely of wants having means of direct satisfaction as their objects, and wants having as their objects instruments for procuring such means of satisfaction, the great majority of the classes of wants and means of satisfaction thus obtained possess no economic importance. As, in the formation of such classes or categories, we have to do with laws of fact, which only subserve our purpose inasmuch as they supply premisses for economic theorems, we shall do well to ignore all such as do not do so. Such are above all the divisions of wants or means of satisfac- tion derived from jurisprudence or from ethics. Thus the division (derived from Eoman Law) of things into fungible and non- fungible, and the corresponding division of wants, are altogether irrelevant ; as is also the division of wants into public and private ; into individual and collective, singular, particular and universal ; into wants that are common in respect of place or time and wants that are common to society ; into human and animal wants ; and into positive and negative wants. If any one of these distinctions should at any time become relevant, it can then be drawn briefly; for all the above and a hundred other possible distinctions are comprehensible at once. At present, rather than to dwell on the commonest classifications of wants, it behoves us to be on our guard against some of them, the importation of which into economic discussions has given rise to grave errors. Thus, for instance, there is no such thing as the distinction between natural and artificial, or between real and imaginary wants, or as the correlative distinction between the corresponding means of
CHAP, in OF WANTS 57
satisfaction. In accordance with the usual practice we defer discussion as to which divisions are fallacious, and which are prolific of inductions, until we come to treat of the means for the satisfaction of wants ; for we shall then deal with those points in connection with the divisions that are proper only to such means.
CHAPTER IV
OF UTILITY AND THE CLASSIFICATION OF COMMODITIES
§ 1. How Commodities are commonly Characterised
THE means for satisfying our wants, whatever their nature may be, are termed commodities. Having already discussed at length the characteristics of the conception want, and having found that it presupposes : 1st, The existence of a pain present or prospective ; 2nd, the consciousness, whether warranted or erroneous, that there exists a means for alleviating it ; and 3rd, the desire to dispose of this means, we have now to determine the essentials of the conception commodity in economics. It is commonly held that the concurrence of four conditions of fact is necessary to constitute a thing a commodity, viz. : the existence of a want, the existence of a thing endowed with such properties as fit it to be the cause of the extinction of the want in question, the possession of the knowledge of these properties, and lastly the accessibility of the thing itself. In fact, it is evident that a thing can only be a means of satis- faction inasmuch as a want exists, and that the disappearance of the want involves the disappearance of the property of being a means of satisfaction previously attributed to the thing. It is also obvious, that if a thing possesses the property of extinguishing a want, that thing is a commodity for him who is aware of that property and who experiences the want. Finally, it cannot be doubted that substances contained in the stars, though they may possess the physico-chemical properties which would render them capable of satisfying human wants, are not commodities, because they are inaccessible, and that, in
CHAP, iv THE CLASSIFICATION OF COMMODITIES 59
the same way, all things situate beyond our control are not commodities.
But though, roughly speaking, the essentials which consti- tute a thing an economic commodity may be so stated, a much subtler definition of them must be given if we wish to speak with scientific accuracy. In fact, — only to point out two defects of the above definition, — we may remark with refer- ence to the second requisite, that besides the things that are commodities because they possess such physico-chemical qualities as are capable of modifying our painful sensations, there are a large number of commodities which do not possess, but are wrongly supposed to possess, such qualities. Moreover it must be observed that, regarding those four essentials as a whole, they are insufficient to constitute a thing a commodity. Thus, for instance, judged by this criterion, is drinking water a commodity, or is it not ? Given the existence of an individual who is thirsty and the accessibility of water, we must, in conformity with what has been predicated, reply affirmatively. Nevertheless it is obvious, that whilst that will be true, as regards the first, second or third pint, it is untrue of the one- millionth as regards the same individual. The same applies to heat, which is a commodity up to a certain degree, but beyond that becomes an evil, or discommodity, and to food, which is a commodity up to a given quantity, but which, partaken of in larger quantities, becomes useless, superfluous or hurtful.
It is obvious that the said four requisites are insufficient to determine the essentials which constitute a thing a commodity, if indeed we should not rather consider them as altogether erroneous, seeing that they do not solve the true difficulty of the question. The definition makes abstraction of the quantities of things as they exist, or as they are thought or spoken of, as also of the further fact that wants, in relation to which certain quantities of things are or are not commodities, likewise possess quantitative characteristics. It will therefore be well to depart somewhat from the received method of determining the essentials of a commodity, whilst seeking at the same time to adhere as nearly to it as possible.
60. THE THEORY OF UTILITY PARTI
§ 2. Of the Essentials of the Conception " Commodity "
Things are means for the satisfaction of wants, or in other words are commodities, when with reference to them there is realised a complex of conditions of fact, which may be regarded as a modality of the things themselves. In fact a thing has modalities of place, time, quality and quantity, that is to say, it may be situated in one place or in another, it may exist at one moment or at another, have certain structural and functional properties, or others, and it may exist, or be supposed to exist, in a variable quantity. When a thing satisfies an existing want in an individual who has a determinate want, at a given moment, and of a given magnitude, it is considered that the thing has determinate structural and functional properties. It follows that, as a general rule, the essentials that consti- tute a thing a commodity are : (a) the existence of a concrete want, which implies the existence of an individual who feels it in a certain measure and at a given moment ; (&) the existence of a thing ; (c) the opinion that this thing has determinate structural and functional properties ; (d) the presence or accessi- bility or availability of the said thing in a determinate quantity, in relation to which alone and exclusively the judg- ment is formulated that the thing is a commodity. Let us examine these requisites separately, adverting to some of the controversies to which they have given rise.
(a) It is necessary, in the first place, that there should exist a want with reference to which a thing may be a com- modity. A want exists when we are conscious of it ; there are no such things as unconscious wants, as we have already observed, for every state of need is a state of suffering, and this is the most direct manifestation of consciousness. It matters not whether the want be reasonable or unreasonable, commendable or ignoble. It is, as a rule, a matter of indiffer- ence whatever its quality may happen to be, or whatever our judgment concerning it, under any aspect, may be. What is alone sufficient, but necessary, is its simple existence. With every variation of our wants, the degree varies in which things are commodities, as also the group of things that have the property of being commodities. In fact, in the same measure
CHAP, iv THE CLASSIFICATION OF COMMODITIES 61
in which a thing satisfies a want, it is a commodity ; for a want the non-satisfaction of which is very painful, will make the thing that appeases it seem intensely pleasurable, and a want the non-satisfaction of which is slightly painful, or almost indifferent, will make the thing that extinguishes it seem of little or almost no significance. Hence, the quanti- tative variations of our wants are in a direct ratio to the variations of the degrees in which the things are commodities. It is obvious, a fortiori, that to the qualitative variations of our wants correspond variations (in the same direction) in the group of things that are commodities, and that therefore to the law of the progressive extension of our wants corresponds a law of the progressive extension of the group of things that are deemed commodities.
(6) and (c) It is necessary, in the second place, that there should exist a thing respecting which we entertain the OPINION that by its means we can satisfy the want in question. It is not necessary that the thing should actually possess the properties attributed to it, or the qualities it is considered to possess. Doubtless, in civilised times, the rule will be that the thing that is deemed a commodity does possess the pro- perties attributed to it, and that these properties have the virtue of appeasing the respective want. We esteem quinine e.g. to be a commodity in relation to the suffering produced by malarial infection, and as a matter of fact it possesses the property of preventing the recurrence of attacks of that species of fever. But this drug would still be a commodity in an economic sense, if the said property were purely imaginary, for human judgments and actions are adjusted to so much of objective reality as enters into our consciousness, and not to what remains outside it. Probably a large proportion of the medicines of to-day are commodities of a kind which a later generation, if more enlightened than ourselves, will pronounce to be imaginary. And, in the same way, many other classes of cognitions, or of objects to which they relate, as also entire groups of instruments, and various processes and institutions, would by minds more enlightened than our own as to the laws of nature and the actual properties of things, be deemed to be imaginary commodities. But, at any given moment, there is no distinction between imaginary and real commodities, for even
62 THE THEORY OF UTILITY PART i
the latter are commodities for us, only inasmuch as they too are imaginary, i.e. inasmuch as we conceive of them as possess- ing determinate properties.
A useless discussion has been carried on as to whether things capable of being commodities must be material, or whether they may also be immaterial. It is necessary to reflect * that a pain may be alleviated, or a pleasure procured, only through something acting QII our senses, or through its not so acting upon them, i.e. by their remaining in a given state; that, moreover, our senses, cannot be affected, or pre- served intact, otherwise than by the subsistence of some relation between them and material objects,2 that being im- plied in the very conception of a material object ; that con- sequently inasmuch as commodities are things that appease wants, i.e. remove pains or procure pleasures, they cannot but be of a material nature ; and finally, that inasmuch as our notions are derived from our sensations, we are not conscious of any other than material existences. If it were discovered in what manner a thing supposed to be immaterial can bene- ficially or prejudicially affect us, who are in communication with the outer world and with ourselves, only by our senses, then we could admit the existence of immaterial commodities.3 In the same way the question as to what the sphere of the conception commodity is, was solved more than thirty years ago by Francesco Ferrara. The moot point was, whether besides those objects arbitrarily designated as material, or things, the services which one individual can render to another are also commodities.
In this discussion the content and sphere of the concep- tion thing, or corporeal thing, or material commodity, were necessarily undefined, as were also the content and sphere of the conception service. The first terms meant such things as e.g. food, clothing, lands, houses, etc., the last referred to the
1 Franc. Ferrara, Prefazioni al Say, allo Starch e al Dunoyer in the Biblioteca delV economista. Tullio Martello, Appunti di E. P. Lezioni professate nella Scuola Superiore di Commercio in Venezia, Treviso, D'Auris, 1882 ; §§ 33-38, pp. 113-123 ; § 53, pp. 189-195.
2 A material object is an object that affects our senses.
3 Among foreign treatises on the materiality or immateriality of com- modities, the best is John B. Clark's The Philosophy of Wealth, Boston, 1887, chaps, i. and ii.
CHAP, iv THE CLASSIFICATION OF COMMODITIES 63
services e.g. of the physician, the lawyer, the actor, etc. It was debated whether labour must be embodied in any particular form in order to be deemed productive of an economic com- modity ; and a distinction was drawn between labour embodied in matter pertaining to the world external to man, and labour the effect of which is to modify man himself. Proceeding to analyse the conception of services, it was asked whether they do not include, for instance, the goodwill of a business (since this resolves itself ultimately into the fact that a number of persons are in the habit of performing one act rather than another, i.e. purchasing from one merchant rather than from another) ; an industrial patent (which also consists after all only of the right to restrain others from performing a certain series of acts, namely, manufacturing and selling a certain article, and to reserve to oneself the exclusive privilege of doing so) ; and in general every kind of action, or abstention from action, on the part of others, which an individual regards as conducive to the satisfaction of his wants. And just as among the so-called material things were included both objects calculated to satisfy a want directly, such as bread, a cloak, a house ; and objects calculated only to supply a want indirectly, i.e. instrumental with reference to the former, such as grain, wool, stones, lime, or (even more remotely) lands, plants and animals that produce textile materials, quarries, and tools or instruments of every description ; so too amongst services were reckoned not only such as minister directly to a want, e.g. the work of a surgeon who sets a dislocated limb, but such also as satisfy a want only indirectly, being instrumental with respect to the former, e.g. a knowledge of surgery, musical talent, etc.
A clean sweep may now be made of all these discussions.1 Their net result may be summed up in a few propositions, of which the first is this : Everything that affects our senses, whether it l)e a part of the external world in which men live, or a positive or negative act of one or more men with respect to another man, may be a commodity, i.e. it may satisfy a want, extinguish a painful sensation, or engender a pleasurable one.
1 Sax, Bb'hm-Bawerk, and some others still discuss this subject at length, being apparently unacquainted with the greater part of what has been written about it out of Germany. Vide Sax, Grundlcgung der theoretischen Staats- wirthschaft, Wien, 1887, A. Hoelder, part iv. § 33, p. 199 ; § 35, p. 209 ; § 38, p. 228.
64 THE THEORY OF UTILITY PART i
What is necessary is, that what we consider a commodity should be brought to our knowledge, by means either of our nerves of general sensibility, or of our specific nerves ; that is : it must either affect our sense of touch, appearing hard or soft, heavy or light, warm or cold ; or else our senses of taste, smell, sight or hearing. Hence we must regard as being equally commodities : bread, clothing, medical advice, the speech or pleadings of counsel, the credit embodied in a bill of ex- change or contract, the vocal performance of a prima donna, the resort of customers to a place of business, the abstention from competition on the part of manufacturers restrained by the exclusive patent rights of another, the abstention from bidding at an auction on the part of capitalists restrained by some (possibly altruistic) interest, and the discoveries of the scientific investigator. On the other hand, it must be borne in mind that whatever does not affect our senses is not, because it cannot be, a commodity ; and hence we must regard as being equally not commodities : all forces of nature of which we are still ignorant, all undiscovered substances or unknown processes, the thoughts of men that are unexpressed in any shape that can affect the senses of others, their unrevealed mental acquirements, and their sentiments that are not trans- lated into actions or into abstentions from determinate actions.1 It is immaterial whether the things (and things include actions, for actions are always movements of things) satisfy wants directly or indirectly. In the same way that a field is a commodity because it is productive of wheat, which may be transformed into flour, which in its turn supplies us with bread ; so, too, the written, or spoken, or otherwise manifested advice of the physician, which results in the administration of a- medicament, and the instrument of a surgeon who is called in to effect a beneficial modification of a pathological phenomenon, are likewise commodities.
A second point that must be borne in mind is the follow- ing : The effect of a commodity on a man is one thing ; the commodity itself is another; and the ultimate causes of the commodity are yet another. In fact, as regards the first point, every commodity produces psychological effects : the bread that is eaten produces ultimately a certain sensation ; and so do
1 Jennings, ubi supra, pp. 88, 89.
CHAP, iv THE CLASSIFICATION OF COMMODITIES 65
the clothes that are worn and the house that is occupied ; the same applies to the physician's advice, the surgeon's operation, the singer's voice, the acts of the customers at a place of business, and the abstention of bidders from an auction. The effect of every commodity is always ultimately a modification of an individual's state of sensibility, under the influence of a longer or shorter series of operative causes. On the other hand, passing on to the second point, the commodity itself is always the cause or instrument that produces the effect; and this sometimes directly, sometimes consequently on its trans- formation into some other instrument which has that effect, and sometimes as a factor in the production of such an in- strument. Finally, and this is the third point, a commodity exists as the result of determinate causes, which in so far as they are known, and therefore affect our senses, are instrumental commodities in relation to those that are derived from them, but which, in so far as they are unknown, or (which amounts to the same thing) do not affect our senses, are not commodities at all. Thus, for instance, we may ascend from the bread to one of its concomitant causes, flour,1 from the flour to the wheat,
1 Among the many causes that contribute to the production of a direct economic commodity, only some possess economic importance, and that in accordance with laws that are still somewhat imperfectly known to us, and which will be discussed in part ii. chap. iii. § 4, and in part iii. chap, i., in addition to what is contained on this subject in this part, chap. iv. § 5. At present it may suffice to indicate the nature of the problem, as expounded by Wieser, the economist to whom we are indebted for what we know with most certainty respecting it. If an economic commodity is due to the co-operation of several factors, i.e. if it is the effect of the simultaneous, or successive, operative con- currence of several causes, the question is not what part — still less which part — is physically due to each of the concomitant causes. As J. S. Mill observes, it is idle to attempt to decide which half of a pair of scissors has most to do in the act of cutting ; or which of the factors five and six contributes most to the production of thirty. — J. S. Mill, Principles of Political Economy, book i. chap, i. § 3, p. 17. Just as a question may be raised (though quaere whether it can be solved) as to the proportion in which each of several physical causes con- tributes to produce an effect, so a like question may be raised as to the relation between an effect and its causes, under a moral or a legal aspect. As Wieser points out, a murderer is only one of the contributory causes of his victim's death, if the lethal result be viewed with reference to its physical causation ; but he alone is the subject of legal imputability, nor can any part of it extend to the fact that the deceased was mortal, or that the knife was sharp. And in the same way that, in the problem of physical imputation, no account is taken of the principles that serve to determine moral or legal imputation, and vice versa, so, too, economic imputation constitutes an entirely distinct problem, and
F
66 THE THEORY OF UTILITY PART i
from the wheat to the soil, and from this to its chemical constituents ; and each of these factors of the ultimate product will be an instrumental commodity in relation to the preceding one ; but already in this series, — if we consider the forces of nature that are in operation — and all the more so were we to extend the series, we arrive at unknown causes with which, for that very reason, we are unable to deal. In the same way, from the medicament we may ascend to one of its contributory causes, the recipe, and from this to the action of the physician who wrote it down ; but the intellectual process which dictated it eludes our senses, nor do we know what, if any, chemico- physical action within his brain determined that process. To sum up what has been said, we have the following propositions of Professor Ferrara, consisting partly of defini- tions and partly of theorems : (a) those things are material which either directly or indirectly (i.e. by inference) affect our senses ; (6) for man only material things have any existence ; (c) any thing may be a commodity, provided it supplies a want ; (d) the effect of a commodity is always psychologic ; (e) the commodity and its effect are totally distinct phenomena ; (/) the causes of commodities are themselves commodities, in so far as they are material and, therefore, known to us ; whereas if they are immaterial, they are also unknown to us.
This being premised, there is no reason why, for the sake of convenience, we should not divide all things that are com- modities into two classes, viz. into objects pertaining to the external world, or things strictly so called, and services, or positive human actions, and abstentions from actions which would inconvenience any one, or, as Genovesi terms them, non- actions. Tropes and inaccurate distinctions may be extremely useful, provided they do not mislead us ; just as a defective tool may be serviceable if its defects are known.
(d) The third requisite is the availability of a thing in a determinate quantity. What, however, is meant here by the " availability (disponililitti) of a thing," is a complex of con- ditions which require to be exactly enumerated : —
requires that abstraction be made of those factors of the phenomenon which are its causes under a physical, moral, or legal aspect, and that attention should be directed exclusively to those factors which are its causes on hedonimctric principles. — Wieser, Dcr naturliche Wcrth, pp. 70-76 and 85-88.
CHAP, iv THE CLASSIFICATION OF COMMODITIES 67
(1) In the first place, it is obvious that a thing is not, strictly speaking, a commodity except at the moment it affects our senses, either directly by procuring for us a pleasurable sensation, or indirectly, by saving our senses from being noxiously affected by any cause whatever. Briefly, we may say that a thing is a commodity only at the moment when it is consumed, and because it is consumed.1 Food, clothes, means of enjoyment of every kind are not commodities for him who only sees them in the shop windows, but has no money to purchase them. Availability accordingly signifies, in the first place, the presence, of a thing in the shape and in the quantity that are requisite for the actual enjoyment thereof ly him who esteems it a commodity, and who is a determinate individual.
(2) If however, instead of regarding the matter from the point of view of a determinate individual, we regard it from the point of view of a group of individuals, we come to consider as commodities also those things which affect in a pleasurable manner the senses of any one of the individuals who compose the group, even though such things may be altogether indifferent to the other members, and we estimate the things as the group might, if considered as a person. Avail- ability means then the presence of the thing in such a manner that at least a section of a group of persons actually enjoys it ; whilst the quantity in which it is reputed to be present is indeterminate, and the forms in which it appears are various.
(3) But amplifying still further the meaning of the term availability, we proceed to observe that those things are com- modities which, by reason of the present condition of the technical arts, are accessible to any one who can and will take the series of steps that are necessary to acquire them, and that the property of being commodities is denied only to things that are inaccessible to mankind in general.
Accordingly, those things are not available, or are in- accessible, which cannot in any way pleasurably affect our senses, owing to their being beyond the range of the latter. For instance, fertile lands in regions we cannot penetrate, or mines hidden away in the bowels of the earth, are not commodities because they are inaccessible. Briefly, we may say that, in this
1 Confer part ii. chap. i. § 1.
68 THE THEORY OF UTILITY PART i
sense, the inaccessibility of a tiling is equivalent to its non-existence, or to its availability in a quantity equal to zero, and conversely, that its availability is equivalent to its presence in an in- determinate quantity for the benefit of an indeterminate number of consumers.
Having set forth these different meanings of the term availability, which is used, now in one sense and now in another, with reference to commodities,1 although only the first of such meanings is not vague and hazy, we must be on our guard against the supposition that the term availability implies any of the essentials pertaining to it in its legal acceptation.2 The availability required by the economist will at times be a legal right to dispose of a thing, but as often it will not be so. In order to elucidate the difference between the meaning of this term in economics and in law, we shall proceed to show how availability may exist for the economist in cases where it does not exist for the jurist, and even in cases where it is not easy to perceive the existence of any physical availability.
In civilised communities certain forms of the power of disposing, or availing oneself, of things are recognised and pro- tected by the law, such as ownership, possession, easements, etc., and as a rule economic and legal availability will coexist ; but a thing may be an economic commodity even where this is not the case. Thus a res furtiva is a commodity in the hands of the thief, whilst the right of ownership is not a commodity for the person despoiled of his property.3 Economic availability is any condition of fact that enables an individual to enjoy a thing, either conformably, or at variance, with the dictates of law and morality.
What circumstances of fact however constitute the kind of availability that entitles a thing to rank as a commodity, it is not always easy to determine. Thus, in the above-mentioned instance of the goodwill of a shop, what is available is the combination of circumstances that induces consumers of a certain product to purchase it of one person rather than of
1 See chap. v. of this part, § 2 and following.
2 The distinction here adverted to between the economic and the legal significance of the Italian " disponibilita," does not apply to "availability," by which, for want of a more exact equivalent, I have rendered that term.— Tn.
3 Fabio Besta, Corso di ragioneria, part i. book i. chap. i. art. ii. pp. 87-91.
CHAP, iv THE CLASSIFICATION OF COMMODITIES 69
another. Future objects may be commodities, nor are they unavailable. Take e.g. a future crop, or a bill at three months' date. The future crop may fail and the bill be dis- honoured ; but until this is known to be actually the case, the crop and the bill are uncertain future commodities. Neither the crop nor the amount due on the bill is available ; but already now is available, — in the form of an expectation based on knowledge of physical laws, in the case of the crop, and in the form of a contract, in the case of the bill — an object which satisfies our present desire to know, with a determinate degree of probability, that certain future wants of ours will be supplied. To apprehended pains there correspond expected commodities, and as those pains are present, so they are assuaged with objects which are likewise present, albeit their effects may only be realised at a future date.
Returning now to the various meanings that the term availability assumes in economics, according to circumstances, it remains for us to explain how and why it implies the presence of a thing in a determinate quantity.
We have seen that mere accessibility is only the negation of inaccessibility, which in its turn is the presence of the thing in a quantity equal to zero. Now what is required in order that a thing may be a commodity, is its accessibility or availability in one of the three significations aforementioned, in a determinate quantity above zero. We shall proceed to consider why this is the case, and how the quantity is determined in which it must be present.
According to the quantity in which a thing is present, it may come to be, not a commodity, but either a positive evil (discommodity), or an indifferent object. The determination of the quantity that renders a thing a commodity or a dis- commodity, depends on the magnitude of the want to which it relates. Thus, e.g., two tumblers of water may be a commodity to a thirsty man ; a third or fourth tumbler may already be fraught with inconvenience ; whilst a fifth or sixth tumbler would be altogether intolerable. The want designated " thirst " had a determinate magnitude which was reduced by the first and second tumblers ; the third and fourth effaced all trace of it ; so that the fifth and sixth were no longer commodities, owing to the absence of the prime requisite : the existence of
70 THE THEORY OF UTILITY PART i
a want.1 A determinate quantity of rain may be beneficial ; but supposing it to increase, a limit is reached beyond which it not only ceases to correspond with the need of agricultural irrigation, but becomes positively noxious, and has to be pro- vided against. There is no object of which, making abstrac- tion of any quantitative determination, it can be predicated that it is a commodity ; for only in so far as this determina- tion is not lacking, can it be said whether it does, or does not, correspond to a want which is itself endowed with dimensions. To speak of things as commodities, without referring to concrete and definite quantities of the same, with respect to wants of certain and limited magnitude, is precisely like speaking of the equality of a triangle, abstraction being made of its dimensions, with a parallelogram of definite magnitude.2
§ 3. Of the Degree of Utility and of the Total Utility of Commodities; of the Initial Degree of Utility of one or more Commodities, and of the Final Degree of Utility.
Commodities, for the very reason that they are commodities, are termed useful. Utility is therefore the abstract term denoting the pleasurable or hedonic effect produced by the complex of conditions which constitutes a thing a commodity. For the reasons above set forth, it cannot therefore be said that anything is useful without implicitly postulating : (1) the existence of a determinate want; (2) the existence of deter-
1 See ante, chap. iii. § 2.
2 With reference to this somewhat long and elaborate inquiry into the characteristics of the conception "commodity," it may perhaps be advisable to warn the reader against a mistake commonly made in seeking for definitions, and which is generally due to a habit contracted in literary pursuits. In each particular science, we are NEVER concerned to know what are the meanings attached to a term, either in vulgar parlance, or in any other science than the one under consideration, but only to expound and determine its contents in the latter exclusively, irrespectively of any other signification attached to the same term in any other connection. In literary studies, on the contrary, inquiry is often and properly directed towards the ascertainment of the various acceptations of a term, wherever it is met with. Let us therefore discard the baleful habit of perplexing economic discussions, and particularly those relating to definitions, with linguistic questions, and let us rather endeavour to ATTRIBUTE to every term the acceptation which renders it most fertile and useful, regardless of the associations it may possess, either for the vulgar, or for the votaries of other sciences.
CHAP, iv THE CLASSIFICATION OF COMMODITIES
71
minate properties in the thing, or the existence of the belief that it possesses determinate properties ; (3) the availability of the thing in a determinate quantity. The same may be said, mutatis mutandis, of the predicate of disutility. Whence it follows that, supposing a want to have a certain magnitude at a given moment, and the estimate as to the properties of a commodity to remain the same, the utility of each mininum increment of such thing will depend on the quantity that was previously available, since this will have modified the original
DIAGRAM XIV.
magnitude of the want. We shall call the utility of any increment of a commodity the degree of utility of that in- crement, and we shall express it graphically by means of an ordinate drawn to the segment of the abscissa that denotes the magnitude of the increment in question, and proportioned in length to the degree of utility we are concerned with, just as we expressed the several degrees of intensity of satisfaction due to successive increments of a means of satisfaction. See, e.g., qn, corresponding with the quantity On, in diagram XIV. In fact, what we have before called intensity of satisfaction, is nothing but what we now call degree of utility}'
1 Pareto proposes that the term ophelimity (from a>0A.i£ios) should be used instead of utility, and I agree with him. Many ambiguities would thus be avoided. In ordinary language, a thing is useful, if it is profitable to an individual, conducive to his wellbeing. Thus, medicine is useful in the case of a sick child ; but it is not ophelimous, i.e. it is not necessarily useful in the economic sense: so much so that the child will probably reject it. Alcohol is ophelimous for the drunkard, though by no means useful to him in the ordinary
72 THE THEORY OF UTILITY PART i
With respect to the degree of utility of the first portion of any commodity, some doubt may arise as to what its magnitude is, since there is no prior quantity available by which it may be determined ; but it is obvious that it is equal to the degree of pleasure occasioned to us by the partial extinction of the want, in the measure in which such extinction is due to the quantity of commodity constituting the first portion. This first ordinate will be called the initial degree, of utility.
If we suppose a first and infinitely small portion, the satisfaction we shall derive from it will be imperceptible, and will be expressed accordingly by a very short ordinate. We may therefore at once assume that every curve representing the degrees of utility of any commodity commences with zero, and rises rapidly to the culminating point, after which it declines more or less slowly, according to the nature of the commodity concerned. In diagram XIV. we have reproduced the exact form of the curve expressing the degrees of utility of any commodity, and have indicated increasing initial ordinates Op, intended to denote growing degrees of satis- faction until the quantity of commodity in question becomes an appreciable increment, Om. In future however, as we have indeed done in the preceding pages, we shall limit ourselves to considering and representing the part p~K. of the hedonic curve, and pm will therefore always be the ordinate denoting the initial degree of satisfaction.
In order to characterise with precision and brevity the nature of this curve, as of every other, a system of notation used by Professor Marshall will be found to be extremely convenient. Given a. system of co-ordinates OX and OY (diagram XV.), we shall describe the direction of a curve as positive, if the describ- ing point moves away from OX at the same time that it moves away from OY, i.e. if it moves as if subject to two forces, one drawing it in the direction Am and the other in the direction An, the forces being either equal or unequal. We shall, on the other hand, describe the direction of a curve as negative, if the describing point approaches OY, as it moves away from
sense, etc. See Pareto's Cours d' Economic politique, § 4. Useful is "conform- able to tribal hedonism " ; ophelinwus is "conformable to individual hedonism" ; and this is what is nearly always intended in economics. If I were rewriting this Manual, I should adopt the term.
CHAP, iv THE CLASSIFICATION OF COMMODITIES
73
OX, i.e. if it moves as if subject to two forces, one drawing it in the direction ATI, and the other in the direction Ao. We shall also describe as negative the curve whose describing point, whilst receding from OY, approaches OX, i.e. the motion of whose describing point is subject to two forces disposed as Am and Ap. Finally, we shall describe as positive the curve
4-
P
DIAGRAM XV.
which approaches simultaneously OY and OX, i.e. which is due to two forces acting in the directions Ao and Ap.
These terms being settled, it is clear that the characteristic of the curve of final degrees of utility is that it must be, at least ultimately, and as a rule entirely, negative and subject to forces following the directions Am and Ap ; that, however, the initial motion of the same for a brief space of time, or for very small quantities of commodity, may be positive, i.e. the effect of forces acting in the directions Am and An, the latter preponderating over the former.
We shall say further that the total positive utility of a commodity is equal to the sum of pleasure due to relief from the corresponding want, and we shall refer to such a quantity of a thing as will suffice to extinguish that want, or to such lesser quantity as is in question. Graphically, the total utility will be expressed, in the first case, by an area limited by an abscissa denoting the quantity of commodity in question ; by the ordinate denoting the initial degree of utility, and by the curve constituted by the extremities of successive ordinates until they coincide with the abscissa; such an area, for
74 THE THEORY OF UTILITY PART i
instance, as QpqX. in diagram XIV. In the second case the area will be limited by a final ordinate drawn to the point of the abscissa corresponding with the last increment of the thing in question, as e.g. the area Opqn. The total utility may, as Messedaglia proposes, be very appropriately termed, integral utility}
Negative utility, or disutility, will be expressed by the area exceeding the last, formed by negative ordinates ; and it will express the hedonic effect of ulterior quantities, i.e. their neutral or noxious properties, as regards the homo ceconomicus. If we suppose two or more commodities to be available in a quantity sufficient to extinguish the respective wants to which they refer, and if we consider proportional increments of each commodity, e.g. one -tenth of each of two commodities, the degrees of initial utility will be to each other as the import- ance we attach to the satisfaction in that measure of each of those two wants. We have already seen in chap. ii. § 6, diagrams VL-X. pp. 34-37, with reference to Gossen's second hedonic theorem, a graphic expression of ordinates of various degrees of initial utility. Let us treat here as quantity of available commodity what is there treated as quantity of available time.
Lastly, we have to note the final degree of utility. What- ever may be the available mass of commodity, the last and smallest increment thereof has a hedonic effect which will be positive or negative, that is either a pleasure or a pain. If the available quantity of a commodity is exactly sufficient completely to extinguish a want, it will be almost a matter of indifference whether we obtain the last and smallest portion, or not. Graphically therefore the ordinate that expresses the degree of satisfaction it occasions us will indeed still be positive, but almost zero, as e.g. that drawn to X in the diagrams I.-IV. (pp. 29, 30, 31, 33). Any further increment, however small, will occasion a negative final degree of utility, and will be expressed by a negative ordinate, as e.g. here mm^ ; and if the available quantity of the commodity in question falls far short of satisfying the want it corresponds to, as e.g. in diagram XIV. p. 71, the quantity On, the final degree of utility
1 A. Messedaglia, La inoneta ed il sistema monetario in generate. From the Archivio di statistica, Loescher, Rome, 1882, chap. ii. p. 28.
CHAP, iv THE CLASSIFICATION OF COMMODITIES. 75
will be the positive ordinate that denotes the intensity of the satisfaction occasioned by the last portion still available ; i.e. it is equivalent to the pain we should experience if we were deprived of it, and it will be expressed graphically by nq.
It may be well to observe that the final degree of utility of the last available increment of any commodity may be attributed to any one portion of the mass, considering it as the last. In other words : the order in which the successive increments of a commodity are disposed is perfectly arbitrary. Assuming, for instance, that a commodity is divided into three portions, designated respectively as a, /3, 7, these can be interchanged in six different ways. Graphically this must be
n
DIAGRAM XVI.
expressed as follows. Let O/, Im, mn, in diagram XVI. be three perfectly equal increments of the same commodity; let the degree of utility of a first increment (i.e. the initial utility) be measured by the ordinate Oa, that of any second increment by 0&, and that of a third increment (i.e. in this case the final degree of utility) by Oc. Now the final degree of utility Oc may be attributed to any one of the three increments, O/, Im, mn, supposing it to have been consumed last; which gives rise to the parallelogram formed by On x Oc if we want to express the total utility of the three increments, and suppose each increment to be the last. We may next imagine that any one of two increments out of three is consumed in penultimate order, i.e. either 01 and Im when mn is third, or 01 and mn when Im is third, or Im and mn when 01 is third.
76
THE THEORY OF UTILITY
PART I
Let us suppose that mn is last ; then the portions 01 and Im will both have a degree of utility Ob, and we shall have the figure Om x 06 superposed on the former one, expressing the total utility of these two increments both supposed to be second. But either of the two portions, 01 and Im, may be consumed first, and thus be characterised by the initial degree of utility Oct. Let 01 be the one selected : its degree of utility will then be designated by the area 01 x Oct.
If we imagine as infinitely small the increments into which a homogeneous mass of commodities On is divided, we
in DIAGRAM XVII.
shall have diagram XVII. We may thus formulate the principle, that of a homogeneous mass of commodities, On, each part may be the last increment, and may have the final degree of utility rn ; and we shall find it convenient to designate by a special term, e.g. residual utility,1 the utility we obtain by deducting from the total utility, Oa rn, that formed by attributing to each element of the mass a utility equal to the final degree rn, i.e. by deducting from Oa rn the area Oc rn, which leaves us the residual area car.
There is only one commodity which presents no residual utility, because its total utility is equal to its mass multiplied by its final degree of utility, which is constant. This com- modity is money, which thus forms an apparent exception to Gossen's or Jevons's law of the decrease of final degrees of
1 Consumer's rent in Professor A. Marshall, The Pure Theory of Domestic Values, chap. ii. p. 28. Vide part ii. chap. ii. § 1, and note.
CHAP, iv THE CLASSIFICATION OF COMMODITIES
77
utility. According to this law the degrees of utility of suc- cessive increments of any commodity decrease, and the total utility of increasing quantities of any commodity varies, according to a lower rate of progression than the increase in quantity. Now, in the case of money, we find that the degrees of utility of all the increments are equal, and that the total utility increases in the same ratio as the quantity.1 Graphically, the curve of the degrees of utility becomes a straight line cr, parallel to the abscissa Ox, and the total
C
DIAGRAM XVIII.
utility Oc rn is always denoted by rectangles (see diagram XVIII.). That this constitutes an apparent exception to Gossen's law is easily perceived if we reflect, that if a thing is exclusively destined to be used as money, or is considered exclusively as discharging this function, there is no painful or pleasurable sensation with reference to which it can be a means of gratification, and in respect of which there can be degrees of satiety determining degrees of utility. Strictly speaking, money is not a commodity, in the acceptation in which we have hitherto used the term, and is not therefore
1 A. Loria, La teoria del valore negli economisti italiana, 1882 ; Arckimo giuridico, p. 35, § 2 ; H. Sidgwick, The Principles of Political Economy, London, 1883, Macmillan, bk. i. chap. iii. pp. 77, 85 ; bk. ii. chap. v. p. 267 ; Launhardt, Abschn. I. § 13, p. 54. Money has, for its owner, a marginal utility. It is an instrumental commodity, susceptible of being transformed into direct com- modities by way of exchange. Hence it possesses the marginal utility which belongs to the last increments of direct commodities obtainable by its means. This marginal utility is reflex, like that of all instrumental commodities.
78 THE THEORY OF UTILITY PART i
subject to the law that applies to all commodities. Whether there be more or less of it, is altogether immaterial as regards the satisfaction of every possible human want ; and the monetary function of money is discharged equally well whether its mass be doubled or reduced to one-half. As we shall see farther on (part iii. chap, ii.), money possesses, strictly speaking, no utility, but only value, and for this reason its utility can only be expressed by the product of its mass multiplied by its final degree of utility, as seen in diagram XVIII.1
1 The theory of the final degree of utility, which is now recognised as the pivot of every economic and financial doctrine, only excited the general atten- tion of economists after the publication of Professor Je vons's work, The Theory of Political Economy, in 1871, and the publication of a paper read by L. "Walras at the Academy of Moral and Political Sciences in Paris, in 1873. This is strange, as the theory was at that time by no means new. Jevons had already expounded it in 1862, at the Congress of the British Association, and again in 1866. Professor Marshall taught the theory of final degrees of utility and that of residual utility, in the University of Cambridge, as far back as 1869. The father of L. Walras, in 1831 and in 1849, in two different writings (Le la nature de la richesse et de I'origine de la valeur and Theorie de la richesse socialc, etc. ) had explained the essential features of the question, and in 1854 Gossen had published his Laws of Human Commerce, in which the doctrine of the final degree of utility is set forth so perfectly that until now very little has been added to, or modified in, his exposition. Moreover in 1844 and in 1849 Dupuit had contributed to the Annales desponts et chaussees two papers entitled : De la mesure de I'utiliU des travaux publics, and De ^influence des plages sur Vutilite des voies de communication, which had attracted considerable attention among engineers, and which set forth with great clearness the theory of final degrees of utility, as also the conception of residual utility. In 1847, in the same review, M. Bordas, and in 1850 M. Minard, discussed the subject, which interested even the French Senate. M. Bordas indeed elicited the second work of M. Dupuit by attacking the first. In England, a year after Gossen, Jennings expounded the law of the decrease of protracted enjoyments, pointing out its economic value. Finally, we must observe that amongst mathematicians the theory of the final degree of utility was well known in connection with the problems dealing with probabilities. It is found in D. Bernouilli, Specimen theories novce de mensura sortis, 1738 ; in Buffon, Essai d'arithmdtique morale, in the thirteenth volume of his complete works translated by Boschi, Naples, 1877, p. 347 ; in Laplace, Theorie analytique des probability, 1812, and Essai philosophique sur la thtorie des probability's, 1840, and in Quetelet, Lettres sur la theorie des probability, 1846. In the economists of last century, such as Galiani, Genovesi, Condillac, Verri, and probably in several others as well (vide A. Loria, La teoria del valore negli^cconomisti italiani, Bologna, Fava, 1882), the idea of decreasing degrees of utility is already clearly conceived ; but it is not developed by them as it has been by more recent writers. Professor Walras has reminded us that this theory is to be found even in Bourlamaqui, 1694-1748. Ricardo, and Anderson before him, discovered and utilised a
CHAP, iv THE CLASSIFICATION OF COMMODITIES 79
S 4. Of Positive and Negative Utility, and the Division of Tilings into Positive and Negative Commodities
When a thing satisfies a want, it is termed a commodity, and is said to possess utility. This utility is positive, that is, it consists of a quantity of pleasure, or of absence of pain due to possession of the thing.
When a thing does not satisfy a want, or creates in us the desire to rid ourselves of it, it is said to be useless, and this quality is considered as a negative utility, inasmuch as it consists of a quantity of pleasure which is suppressed, or of pain which is occasioned, through the instrumentality of the thing, or of the conditions in which the thing is placed with respect to us.
Now, we have already seen that if we suppose a want — which must necessarily be of some given magnitude ; — and if we suppose the physico-chemical properties of a thing and our knowledge or opinion of such properties to be constant,
special instance of the general law of the decrease of final degrees of utility. For fuller details the reader may consult the Storia critica della teoria del valore in Italia, by Graziani, 1889, Hoepli, Milan, and R. Zuckerkandl's Zur Theorie des Preises, Leipzig, Humblot, 1889, both of which works are not free from partiality in the discussion of recent economists, but possess at the same time (particularly the first-named) considerable merit.
Among the best recent books on this subject we may name Wieser's two works : Ueber den Ur sprung und die Hauptgesetze des wirthscliaftlichen Werthes, 1884, and Der naturliche Werth, 1889, Holder, Vienna ; also Auspitz and Lieben's Untersuchungen iiber die Theorie des Preises, 1889, Dunker, Leipzig. Worthy of mention is also C. B. Antonelli's Sulla teoria matematica della ec. pol., 1886, Folehetto, Pisa. But Gossen's and Jevons's works remain the standard authorities on the subject, and deserve the closest study. Besides the paper above referred to, Professor Walras has published a treatise on pure economics worthy to rank beside that of Professor Jevons, and superior to it in some respects. I regret my inability to quote this treatise as often as it would be appropriate to do so, owing to the fact that it often presupposes on the reader's part a greater proficiency in mathematics than I can claim. At present this writer is bringing out a new and considerably enlarged edition of his fittments & economic, pure. He has also written Theorie de la monnaie, Lausanne, 1886,Corbaz, based on the same principle. I have expressed elsewhere my opinion on Monger's and Bbhm-Bawerk's works, and have confirmed it in another note.
Now we possess two works of capital importance, the study of which is indispensable to whoever would perfect himself in economics, viz. Prof. A. Marshall's Principles of Economics, and Signer V. Pareto's Cours d'economie politique, 2 vols. 1896, Lausanne, F. Rouge.
80 THE THEORY OF UTILITY PART i
then the utility of this thing is a function of its quantity, and, at first positive, ends by becoming negative. Every commodity may thus cease to be a commodity, and may become a thing of negative utility, or to put it more briefly than accurately, a negative commodity. But if, instead of the above-mentioned hypotheses, we suppose the available quantity of a thing to be a fixed quantity, whilst the magni- tude or nature of our want is instead variable ; or, supposing this also to be given, that the physico-chemical properties of the thing are variable, then we see at once that we can consider positive and negative utility as a function of one or other of these terms. In fact, as regards the variations in the magnitude of the want, it is self-evident that they are equiva- lent in their effects to the variations in the quantity of the thing, since the latter variations only give rise to various degrees of utility, inasmuch as the original dimension of the want is modified by each successive increment of commodity rendered available or appropriated. Moreover, changes in the nature of a want determine an instant transition from utility to disutility (and vice versd) in the quality of things: they are equivalent to variations in the employment of things, and transform positive into negative utility, and vice versd, as the case may be. There remain to be considered the variations of the physico-chemical properties and of our opinions of them. Now, it is clear that, speaking generally, in all things, together with the properties that qualify them to satisfy a want, there are an infinity of other properties that diminish this positive useful effect, or annul it altogether, unless they are removed. These latter properties are thus characterised by negative utility, and among them we may often reckon, e.g., the perish- ableness of commodities, their indivisibility, weight, volume, inseparableness from other substances, etc. It is also clear that, given the invariability of a determinate want and the invariability of a determinate quantity of a thing, the latter may pass from the condition of utility to that of disutility, or vice versd, solely in consequence of variations in its tempera- ture, composition, velocity, or of any other physico-chemical property.
The reason therefore for dwelling on the utility of things, only as a function of their quantity, and not also as a function
CHAP, iv THE CLASSIFICATION OF COMMODITIES 81
of our wants, or of their physico-chemical properties, consists exclusively in the greater fecundity of this conception.
The negative commodity par excellence is cost ; but this will be discussed in a separate section, in view of its para- mount importance.
§ 5. Of Direct, Complementary, and Instrumental Utility accord- ing to Gossen, and of a corresponding Division of Commo- dities into Direct, Complementary, and Instrumental.
The Law of Definite Proportions
Certain commodities (whether supplied by nature, or procured by means of labour is immaterial) are fitted to supply a want directly they are placed in contact with our senses ; and of these we say that they possess direct or immediate utility. Such commodities are, e.g., food prepared for consumption, a suit of clothes, a chair, a furnished house, a ripe fruit, drinking water, etc. The only commodities man ultimately wants or needs are such as are possessed of direct or immediate utility ; for what he really desires is the satis- faction of his wants, not the possession of things for their own sakes. Commodities belonging to this class have various names ; sometimes they are called direct or immediate com- modities, sometimes commodities of the first degree, sometimes consumalle commodities or consumer's wealth.1 The total utility of any such commodity is precisely equal to the sum of the pleasure it affords us.
There are moreover things (also supplied partly by nature, partly by human labour) which do not by themselves alone satisfy any want, but do so when combined with other things. A stove, for instance, requires fuel and fire, in order to give out heat ; a coach, in order to serve as a means of con- veyance, requires a motor force and a driver ; and a certain portion of hydrogen must be combined with a certain portion of oxygen, that we may have water. These things considered singly, and apart from any direct or immediate utility they may possess, are negative utilities ; but if combined with others, so as to produce, jointly with them, the satisfaction of some
1 On commodities fitted for direct use, see J. S. Mill's Principles of Political Economy, 1880, p. 19.
82 THE THEORY OF UTILITY PART I
want, they are termed complementary commodities, and possess a kind of utility which, in contradistinction from the former, is called complementary utility. Sometimes they are also called correlative commodities, and we speak of correlative utilities, or correlation of utilities, or auxiliary wealth.1
The total utility that complementary commodities are capable of producing, when combined with others in definite proportions, so as to satisfy an immediate want, is equal to the total utility of a direct commodity that would satisfy this same want. It is not easy to determine the proportions in which this total utility is distributed among the several complementary commodities that contribute to the satisfaction of a want, because it is only in so far as they are combined in definite proportions that they possess any utility. If however a person possesses all the complementary commodities, save one, required for the satisfaction of a want, and in the pro- portions required by the conditions of the technical art applicable to the case; or if he possesses also the final com- plementary commodity he requires, but in a proportion in- adequate to his purpose, then the total utility of this last complementary commodity, or of the quantity thereof that
1 Sidgwick, The Principles of Political Economy, book ii. chap. i. p. 164. Strictly speaking, every direct commodity may be considered as a combination of complementary commodities, and this under a twofold aspect. First, from a physico-chemical point of view it is a combination of many elements, which may be regarded as the joint factors of its production. Secondly, the useful- ness of a direct commodity to the consumer is a function, not only of its own quantity, but also of that of all the other commodities he consumes together with it, of those he has consumed previously, and even of a portion, at least, of those he expects to consume later. Indeed the utility of a commodity depends further on the order in which other commodities have been consumed previously. Thus, for instance, the gratification a loaf of bread may afford depends not only on its size and on the appetite of the eater, but also on the other viands, if any, he partakes of with it, on the fact of his having quenched his thirst or possessing the means of doing so, of his feeling cold or warm, tired or fresh, sad or gay. The order in which dishes are served heightens, or detracts from, the hedonic effect of a dinner. Each of these conditions then may be regarded as a factor of production, and all of them together as forming a combination of factors of production, or of complementary elements. Con- sidered from this point of view, the theory of complementary commodities assumes a very general aspect. Every problem of production or consumption will be transformed into a problem of complementary commodities or factors of production, and the most general theorem concerning complementary com- modities will be the most general theorem concerning production and consump- tion.
CHAP, iv THE CLASSIFICATION OF COMMODITIES 83
is lacking, may attain to the limit of the total utility of the direct commodity that ivoidd satisfy the want to which the complex of complementary commodities in question relates.1
The law of definite proportions is one of the most generally applicable of natural laws, and economic science only recognises a particular aspect of it. It is well known that bodies combine chemically only in definite proportions, and that any quantity of an element, in excess of that required for combination with other elements present in definite quantities, remains free. If the quantity of one element is deficient with respect to that of other elements present, the combination only takes place to the extent the former element admits of. Just in the same way, any quantity of a commodity, in excess of the proportion in which nature, or any technical art, can combine it with a determinate quantity of other complementary commodities present, is useless or noxious as regards the economic result ; and if all the complementary commodities requisite for the pro- duction of a direct commodity are present in various quantities, then the quantity of the complementary commodity that is present in a lesser quantity than any other, is that which determines the quantity that can be produced of the direct commodity in question ; the superfluous quantities of the other complementary commodities being, for this purpose, destitute of utility. This law of definite proportions is of capital import- ance in explaining a very frequent form of economic crisis, consisting in the disproportionate production of complementary commodities. It must, however, not be understood as if there were only one definite proportion in which complementary commodities can be combined. There are generally a great many, but only one gives a maximum hedonic result. This maximum combination is the one towards which every economic effort tends.
1 The problem of the distribution of the utility produced by a combination of complementary commodities among the latter as the causes of such utility, or in other words, the problem of the distribution of the utility produced by the concurrence of complementary commodities among the possessors (supposed to be distinct) of each such commodity, will be discussed in detail in chap. i. of part iii. instead of here, where it might be appropriately considered. This is owing to purely didactic reasons, so that any one already proficient in economic questions may complete this theme now, by passing on to part iii. chap. i.
The nature of the problem has been referred to in part i. chap. iv. § 2, note, and will be touched on again in part ii. chap. iii. § 3.
84 THE THEORY OF UTILITY PART i
Finally, there is a third class of things and utilities, which in so far as they pertain to this class, never afford any direct satisfaction, whether considered singly or in conjunction with others, but which serve as instruments for the obtainment of immediate and of. complementary commodities. Thus e.g. whilst bread is an immediate commodity, the flour, the wheat, the soil, are instrumental commodities, each more remote in degree with respect to the bread. To this category belong all raw materials which must undergo some transforming process in order to become consumable commodities, all machines or instruments required for the production of immediate commodities, and hence also most services, and especially the workman's labour. These instrumental com- modities rank in degree according to their remoteness from the immediate commodities to whose production they are sub- servient, i.e. according as they are instruments for the pro- duction of an immediate commodity, or instruments for the production of an instrument required for the production of an immediate commodity, and so on. Instrumental commodities are also known by various names ; sometimes they are called commodities of a superior degree, sometimes capital, sometimes productive commodities, or producers wealth. It must above all be observed, that every direct commodity may become an instrumental commodity , from the mere fact that its possessor decides to use it as an article of exchange. In that case, its utility is measured by the utility of the thing procured through its instrumentality, by way of exchange.
It is clear that a commodity may be simultaneously, lut with respect to diverse wants or uses, an immediate, a com- plementary, and an instrumental commodity. A piece of land, e.g., may be an immediate commodity if suitable as a place of recreation, an instrumental commodity, if cultivated, and a complementary commodity for a tenant possessed of farming stock, live stock, and every other complementary com- modity necessary to the carrying on of agriculture. Nearly all instrumental commodities are at the same time supplementary to other instrumental commodities.1
The total utility of instrumental commodities is determined,
1 A special way in which instrumental commodities may become direct com- modities is noticed by Mr. H. Spencer, Data of Ethics, p. 158.
CHAP, iv THE CLASSIFICATION OF COMMODITIES 85
like that of complementary commodities, by the satisfaction afforded by the extinction of the want to which they corre- spond, i.e. its maximum limit is the total utility of the direct commodity to the production of which they contribute. If an instrumental commodity cannot be transformed forthwith into a direct commodity, but requires the concurrence of other instrumental commodities, as is generally the case, we cannot discuss its utility, as such, singly, because it is subject to the law of complementary commodities. Here, too, recurs the phenomenon, that the single element that is lacking may come to possess the total utility due to the complex of instrumental commodities required for the production of a direct commodity. Instrumental commodities are also subject to the law of definite proportions}
1 The distinction between immediate or direct, and instrumental commodities, and the theorem derived from it concerning the total utility of the latter, owe their origin to Giammaria Ortes, in whose system they constitute a cardinal point. It has thus taken this theory nearly a hundred years to commend itself to the general acceptance of economists, viz. from 1774, the date of publication of the Economia nazionale, until 1871, when Menger rendered it current. Ortes explains : ' ' that though lands are the groundwork of commodities, they cannot for that reason themselves rank as commodities ; so that whatever extent of land be given, the sustenance accruing therefrom to the nation is attributable, not to the land, but to the commodities derived therefrom, unless we were to live on mud like the frogs, or underground like the moles." Nor can land be considered as equivalent to commodities : "so that again whatever extent of land be given, and whatever amount of produce be derived from it, a nation does not on this account find itself provided with any commodities for its sustenance, unless it be immaterial whether we eat chestnuts or acorns, cabbage or chicory, or whether we clothe ourselves with vine leaves or briers." And hence "the whole relation of land to commodities, and the necessity of the former with respect to the latter, is limited to the possibility of deriving certain commodities from the former ex- clusively." See Ortes, Dell' economia nazionale, book iv. c. 2, pp. 13-16 : c. 3, pp. 18-20 ; c. 18, pp. 103 et seq. vol. xxii. Collezione Custodi. The theory of immediate, complementary, and instrumental commodities was explained in the most masterly fashion by Gossen, op. cit. pp. 24-27 ; and Menger, to whom the theory is often attributed, added nothing to it.
The law of definite proportions is much more general than Gossen suspected ; but Menger also failed to perceive the fact. In the most general form it signifies that every quality of things exists only in a given measure, either known or un- known, and that consequently every relation among things, of whatever kind, being a relation of quality, may be expressed mathematically. The theory of utility and of instrumental commodities has on the other hand made a notable advance — notable not in respect of its magnitude, but in respect of the difficulty of making it, — through v. Wieser. See ante, chap. iv. § 2, note ; part ii. chap, iii. § 4 ; and part iii. chap. i.
THE THEORY OF UTILITY PART i
§ 6. Of Actual and Prospective Utility, and of an Analogous Classification of Things as Actual and Prospective Com- modities.
Our wants are partly actual and partly prospective, i.e. we experience at the same moment a twofold series of wants, some due to the presence of a real cause of pain, and others due to the apprehension of pains which we consider as probable or certain in the future. In the same way, we are presently gratified as we become possessed of commodities, and we are also gratified by the anticipation that certain commodities will, at a deter- minate point of time, become ours. The conception of a future commodity supposes that we anticipate, not only the future availability of a thing, but also the existence, at that point of time, of the corresponding want. Now, there are many wants of which we can foresee the continued duration, or the constantly renewed recurrence, at all periods of our life, — notwithstanding the law of the variableness of our wants (chap. ii. § 2 and chap, iii. 8 4, ante), — and there are also many wants of which we can foresee the future existence, in consequence of the law of the variableness of our wants. The tribal egoist moreover foresees the wants of others, i.e. of those to whom his egoistic cares extend.
Calculations as to prospective wants and commodities are always surrounded with great difficulties ; it is necessary to fore- see when the prospective wants will come into being, lest the provision made for their satisfaction should be premature or tardy ; and we must also foresee their magnitude, lest such provision should be excessive or deficient. Evidently the hedonist, i.e. the homo ceconomicus, must tend to maximise his enjoyments for the entire probable duration of his life, and not merely for the present instant, or for that immediately subsequent to it. The calculation is therefore further compli- cated by the estimate he has to form of his own probable sensibility to pleasure and pain, from time to time, during the probable course of his life ; and he must distribute the painful efforts requisite to the production of commodities, and the enjoyment he can derive from the latter, in such a way as to achieve, on the whole, the maximum of pleasures and the
CHAP, iv THE CLASSIFICATION OF COMMODITIES 87
minimum of pains. Every one must see how many errors of hedonimetric calculation must be made, even by the acutest minds, and how different accordingly the theoretic action of the homo ceconomicus must prove to be from the real course of human conduct. But nature treats men just as if they were omniscient and perfect hedonists, eliminating in the struggle for existence those who blunder, or debilitating them, if they do not succumb at the first stroke, so that they remain more liable to be eliminated by the second or third blow entailed by subsequent mistakes.
The present valuation of prospective commodities calls for some explanation. Prospective commodities are of two kinds, and it will be advisable in the first instance to consider the simpler kind, viz. those which can only once be productive of a service, or in other words, that only once are useful, and satisfy a want.
Now, supposing two commodities of simple productiveness, the one actual, the other prospective, but equal in every other respect, the question arises whether their total present utility will be esteemed as equal or unequal. A glass of water, e.g., is an actual commodity of simple productiveness for any one who is thirsty, a loaf of bread for any one who is hungry, a sum of money for any one who requires to spend it ; whilst instances of a prospective commodity of simple productiveness are a growing crop, or a credit maturing at a certain date, such as a bill of exchange. The hypothesis of two commodities pertaining, the one to the category of actual, the other to the category of prospective commodities, and being equal in every respect, except as regards the time at which they are available, implies the concurrence of numerous and complex conditions, and more especially : that their utility should be equal in duration and intensity, i.e. that their metrical quantity should be the same ; that they should correspond to the same kind of wants ; that these wants should be of even degree in the scale of wants, and equally intense at the two different times when the com- modities in question reach maturity, and that they should be equally certain; and the question whether the total utility of the two commodities, at the present moment, is the same or different, is equivalent to the question whether they correspond, at present, to equally intense wants, and occupy the same rank in the scale of wants.
88 THE THEORY OF UTILITY PART i
Now, we have already remarked above (chap. ii. § 4), that if a hedonist were quite certain that he would still be alive when the prospective commodity (or discommodity) matured ; if he con- sidered the prospective event as undoubted ; and if he were further convinced that he would then possess the same sensibility to pleasures and pains in all respects as he is now endowed with, then he must estimate such prospective commodity (or discom- modity) precisely in the same manner, attributing to it exactly the same quantity of utility (or disutility) as if it were present. There is only one case in which his estimate may possibly differ from the above, consistently with the hedonic postulate, namely, if it be a condition precedent of enjoying the prospective commodity at all, or of enjoying it with the same intensity, that the present commodity should have been enjoyed first. Thus, for instance, it is a necessary condition of our enjoying food at a future time, that we should continue alive until then, and consequently that we should partake of food in the mean- time ; and many present acts of consumption may be at the same time an indispensable condition of our enjoying prospec- tive pleasures with the same degree of sensibility as we at present possess. In this special case of the correlation of present and prospective enjoyments, whose respective total utilities are compared, the latter will not be estimated as equal ; but this very correlation constitutes a contradiction of the terms in which