5 When we describe value as the measure of effective we reach a far more significant explanation of its real character. The utility of any commodity is its power to satisfy desire. Its effective utility is the extent to which the satisfaction of the desire is dependent upon the particular commodity. A glass of water has great utility if it quenches intense thirst ; but if, on the loss of a glass of water, another could be substituted without the slightest labor or in convenience, its effective utility is zero, because the satisfaction of the want is not in the least dependent upon the possession of the particular glass of water which is actually used. If a favorite volume of poems yields to the reader a delight which he ranks high above ordinary pleasures, its utility is correspondingly great ; but its effective utility is measured by the im portance which he attaches to the volume in view of all the circumstances which have a bear ing upon it, — the possibility of securing another copy, the possibility of substituting other poetry, or the possibility of turning his attention to other enjoyments of equal or nearly equal inten sity. Effective utility is the term which de ' Clark, Philosophy of Wealth, Chapter V.
scribes the entire effect of any good upon the consumer's welfare. It includes its positive utility, with any necessary deduction for second ary negative utility.' Value is the measure of this effective utility. It is well to fix clearly in mind this conception of value, in order that its essential relation to utility may not be lost sight of in future discussions of the laws by which value is determined and distributed.
The final phrase suggested at the outset as an equivalent for the value of a com modity is its full importance to society. The standpoint is here changed from that of the individual to that of the total body of per sons who might conceivably attach any im portance to the commodity. It is yet too early to inquire by what method the estimate of society is ascertained ; but to guard against misapprehension we may say that the method is precise and invariable, and that it is not by taking an average of the various individual estimates, that the importance to society is determined. This shifting from the individual to the social standpoint is necessary thus I See Chapter V.
early in the explanation of value. All the various substitutes for the term "value" must frequently be understood in the social sense. Consumer's cost means the general cost to consumers, not that which an individual con sumer may happen to incur ; power in ex change throughout an entire market, not in an exceptional bargain which may fall to an individual producer ; measure of effective utility, not to an individual, but to society.
Value would remain even if the possessor of goods were in complete isolation, and its laws would correspond to those which pre vail in society. But unless by some fying expression the sense is limited to an isolated individual, it is the value to society that is the object of investigation.
Value can best be explained by reference to the law of diminishing utilities. It will be simpler to consider first the case of an isolated consumer in possession of a stock of commodities which for a definite period can not be increased. To adopt an illustration already familiar in the discussions of value, suppose an isolated settler on a Western prairie to be in possession of three cribs of corn, one to furnish food for his family until the next crop is gathered, a second to feed his team of horses, and a third for chickens and pigs, that he may have meat for the winter. The corn is of uniform quality. He has no other kinds of grain or other substitute for the corn. The three wants that are to be supplied by the corn are of very different de grees of importance, but each is satisfied by one-third of the total supply. Since the utility of a good corresponds to the want which it satisfies, the utility of the first crib is almost beyond measure. The deprivation that would be experienced by an entire lack of grain for his own table would be intolera ble. The utility of the second crib is some what less immediate, but is still very great, since the team is indispensable in cultivating the crop of the following season. That of the third crib is much less, but considerably above zero. Regarding the crib as the unit, for convenience, we may represent the utility of the three cribs by the numbers to, 5, and 3, respectively. The initial utility of corn to the isolated settler under the circumstances de scribed is io. The final or marginal utility is 3. The total utility is to plus 5 plus 3, or 18. What now is the value or the effec tive utility of any one crib ? and what is the effective utility or the value of the entire supply ? It is obvious that the effective utility or value of each crib is 3. No crib can be valued at more than 3 so long as there is a supply of three cribs. If the crib which has a utility of to is destroyed or sold, it is re placed by one of the others, and the initial utility is not sacrificed. Notwithstanding the differences in the wants which they satisfy, the value of each is the same as that of the others so long as all are present, and the value of each is equal to the utility of the final unit. The value of the entire stock is easily ascertained by multiplying the value of each unit by the number of units. In the case under consideration the value of the stock is 3 X 3, or 9.