§ 9. The economic test of technical improvements. It is a notorious fact, however, that not every improvement of technical method is advantageous from the economic point of view. The Patent Office at Washington is a veritable grave yard of ingenious inventions that are not commercially profit able. The inventor, in order to gain material rewards and at the same time to benefit mankind, must study not only the technical side of his problem, but the question of value as well. Many technical improvements of method cost more than they are worth. The market may be too small to warrant the increased investment, or many other difficulties may stand in the The ultimate test determining whether a new proc ess or a new device is better to use than the old one is not technical, but economic. It must effect a net increase in value. If it occasions extra costs, the additional advantages must more than offset them.
§ 10. The psychology of indirect valuation. We have now pointed out the logical relationship between the desires of man and the valuations which he puts upon indirect agents. Noth ing seems more simple or obvious than that the agent is valued as an agent—as an instrumentality in the gratification of de sire. However, it is well to recall that the process of valua tion is not always as logical and as consciously calculated as it would seem. The reactions of men are in large part im pulsive, instinctive, imitative, and habitual, rather than rig orously logical. But experience and reflection alter the choices and extend their range. The desire which at one time was aroused only by the direct good, becomes more or less spread over all the indirect goods connected with it. Thus men, without deliberately and consciously reasoning on the matter, desire directly many of the things which technically I see, for example, ch. 38, on Abstinence and production.
are of only indirect use. In many cases instincts have prob ably evolved to affect desire for indirect goods whose real rela tion to desires is never fully perceived or understood by the person choosing. The desires of civilized men have become
diffused over, and now pervade, the immense complex equip ment of the economic world, and both the direct and the re motely indirect goods color the feelings and influence the con duct of men. They are alike the objects of desire. Hesitation and conscious calculation do, however, occur in some choices, and have occurred in many other choices which have now be come habitual. And in all highly organized business, where production is for the market, the business man calculates not only consciously, but laboriously and with great care, both the desires of consumers and the relation of indirect agents to those desires.
§ 11. The element of time in the valuation of indirect agents. There is one more important aspect to the problem of the valuation of indirect goods. If the value of the indirect use is but the reflection of the direct use, it might, on first thought, seem that it should always be of the same magnitude. If an agent, A, used indirectly, produces a limited number of direct uses, x, y, z, it would seem that the sum of their values should be the same as the value of the agent, A, itself. If the indirectness of the process were the only factor in the case this would be true. As a matter of fact it normally re quires a certain period of time for the direct use to be ob tained. The uses of an agent are frequently spread over many years. Because of this lapse of time the value of the agent A at the present moment is not by any means the same as the ag gregate value of its uses in the future when they will occur. The element of time introduces a different problem which will call for consideration at a later point in our study of the prob lem of I Particularly in Part IV on Time-value and interest.