FUNDAMENTAL CONCEPTS 1. Utility.In economics the words utility and value are given an exact definite meaning which must be clearly understood, since in everyday speech they are used in different senses.
Briefly, utility is want-satisfying._ power.. Any . , thing which men want is said to possess utility-. If only one man desires it, then it possesses utility to him, but not to others. If a thing is intensely desired it is said to possess great utility ; the less intense the desire, the less the utility. Potatoes, for example, are g,reatly desired for food and thus possess great utility. Diamonds are greatly desired because of their beauty and on that account possess utility.
Utility and usefulness are not synonyms. Ameri can Beauty roses can scarcely be said to be useful, yet they are greatly desired and therefore possess great utility. No one doubts that the potato is a useful vegetable.' Yet a peck of comparatively use less diainonds could possess greater utility than sev eral million bushels of potatoes, since men are willing to give much more for a single diamond than they are for many bushels of potatoes. The word usefulness implies the attainment of some practical and desired end. A crutch under the arm of a lame man is prop erly called useful; to him also it possesses utility. The slender canes which young men sometimes carry nobody would call useful, yet to the young man they may possess perhaps as much utility as the crutch does to the lame man.
Sometimes econornists use the word utility in a substantive sense. For example, if a thing possesses utility they sometimes speak of it as being a utility, by which they merely mean that it is something desired by man, something capable of gratifying a human want. It is well to note at the outset that the econ omist sometimes thinks of commodities as being a mass of utilities.
2. Kinds of ntility.—For convenience economists classify utilities in relation to time, form and place. Ice, for example, possesses greater value in summer than in winter. Hence we may say that an ice house serves to increase the time utility of ice. Cold storage
houses preserve utilities from decay, besides keeping them until they possess greater time utility. Manu facturers in general increase the value of raw mate rials by increasing their form utility, wood being more valuable in the form of a chair than in the form of a board. Merchants of all classes increase the place utilities of the goods they handle, and hence are the joint producers of their value along with the farmers and manufacturers.
3. Value.—Some objects possessing utility are sup plied by nature so generously that man has to make no effort ordinarily to get all he wants. Air and water, except in cities, are utilities of this sort. So often in many country districts are apples and berries. Econ omists are not concerned about things of this kind. They are interested only in those articles which are not freely available for those who want them and for the proddetion of which a certain amount of labor is necessary. Articles of this kind are said to possess value or exchange power because they combine utility and scarcity. Of course, utility is the first pre requisite of value, for nobody will give anything in exchange for what nobody wants. An article can possess value only on condition that it possesses utility and exists in a quantity insufficient to satisfy the de sires of those who want it.
Value and income are probably the two most im portant words in political economy. Men toil in order that they may get things possessing value, for from the possession of such things they derive the psychic income or mental satisfaction which each re gards as most desirable.
Popularly the word value is used in many different senses. Men speak of the value of a good name, for example. A business concern values its reputation and good will. A fine singer will think of his voice as having great value. If Paderewski thru the negli gence of a corporation should lose one of his fingers a court would be called on to pass on its value, yet he could not sell one of his fingers. Most economists use the word in the sense of purchasing power, ex change power.