Part I: The General Principles of Imputation, Chapter I: return value

Production goods, as well as consumption goods, afford utility. Land, capital, and labour afford utility inasmuch as they produce useful objects of consumption. As the latter serve directly, so do the former indirectly, toward the satisfaction of wants. The seed, the tree, the soil, the yarn, the coal, the machine:—these are not indeed ripe or finished goods, like the fruit and the garment, but they are just as really goods. They contain prospective or potential utility.

And the production goods, land, labour, and capital, must receive value on account of their utility, so far as they are not available in superfluity. The atom of air, which floats above the field in company with the countless others that throng space, is useful but valueless, because its place is at any time taken and filled by another. On the other hand, in the judgment of economic men, all those elements of production must receive value on account of their useful effect, which, however numerous they be, are yet not numerous enough to prevent even a small loss in them being perceptible and bringing harm in its train. Production does not despise free goods; it does not disdain the fruitful land although it should stretch away in excess of all requirements, or the wood in the primeval forest, or free water power: on the contrary, it seeks them out and prefers to use them wherever it can, because their services are the most perfect possible, and present no break in the rendering. None the less it must be said that production pays little attention to free goods,—indeed less than little. It does not consider them at all. It merely uses them; it ascribes to them no value. It does not even reckon to them the services they render. Utility alone gives no value; there must be limitation of supply as well, before value emerges from utility. Utility is and remains the source of value, but in order to set the source flowing there must be a peculiar motive power, which will direct the attention of man to the necessity of watching and attending to it.

It is, however, not usual to follow the value of production goods to its source in utility. To estimate the value of a field I do not consider what satisfactions of want can be had from its crop. I content myself with calculating what and how much crop it will probably yield; this crop then I estimate according to the value which attaches to it in virtue of its utility; and this value is to me the basis from which I ascertain the value of the field. The act of valuation of production goods, which ought to reach right back to wants, is, therefore, usually carried only to that point at which the relation of these goods to the value of their products is clearly established, for in the value of products the calculation of the wants is already represented. To this extent it is possible to say that the value of production goods is determined by the value of their products or by the value of the return. Productive value is return-value. The consideration that, from production goods, one can obtain a return in goods which possess not only utility but value, gives production goods their value.

According to the manner in which production is planned and carried out, it is possible to obtain from the same goods widely diverse kinds and amounts of return. Economic principles demand the obtaining of the greatest possible return; that is, the return possessing the greatest value which it is possible to obtain under the circumstances. It is this “greatest possible return” whose value should serve as basis for the valuation of production goods. Probably it never is possible to decide this beforehand with absolute accuracy, but some anticipatory estimate there must be. It is not therefore actually the value of the return which forms the ground of production value,—but the expectation which is formed of it. It is the anticipated value of the anticipated return.

The greater the return reckoned on, the greater will be the productive value. The greater the dividend expected from a stock, the higher will be the value put upon the stock. This illustration of stocks and dividends is, on the whole, the best that could be given to explain productive value. Every means of production, every tool, every piece of land or raw material, every service of labour, represents, if one may say so, a share in an undertaking. This share contributes to the result cf the undertaking, and consequently gets ascribed to it a quota of the result, and upon the amount of this result its value must depend.