Finally, numerous goods which their owners have not the smallest intention of selling, are estimated by their exchange value. In frustration we may make use of the example which Bohm-Bawerk, who was the first to examine this particular instance, gives in his Werth (p. 37). A poor man values his overcoat on account of the use he expects from it as a defence against cold, knowing well that, should he lose the coat, he will be exposed to all the severity of the winter weather, as he does not possess sufficient means to purchase another. Even to a man in better circumstances the loss of his overcoat would be a loss;but in this case it could and would be replaced at the price of making another. The rich man, therefore, will not value his coat according to its utility, but according to the cost of procuring it; in his estimation this cost will stand lower than the utility, and to that cost he can always reduce the injury he suffers from its loss. Cases of this kind of valuation by exchange value are innumerable. All household goods which, when lost or stolen, can be replaced by purchase are thus valued. Here we see that the proximate basis for valuation is the market price at which the purchase can he made, while the ultimate basis is again a use value; that, namely, which is anticipated in the valuation of the purchase price.(5*) To sum up. The exchange value which we have here explained is that value which is ascribed to goods, either by reason of the owners' intention to sell them, or because of the possibility of replacing them by purchase. More briefly stated, it is that value which attaches to goods on account of an anticipated act of exchange. Exchange value in this sense and use value are of the same nature; the former is derived from the latter, and is one of its forms of development. Both forms of value follow the same general laws;both are subjective; and the amount of both varies according to personal circumstances. The price of an article never completely expresses the exchange value it has for its owner. This depends further upon the "personal equation" of money to him.
Subjective exchange value cannot be absent in any individual economy without causing the greatest confusion in all its exchange relations. The "personal equation" of money is indispensable in every economy, in order that we may weigh against each other goods estimated according to their use value, and goods estimated according to their exchange value. Without it no expenditure, no purchase, no sale could be logically made. The poor man could not enter the market as a poor man, nor the rich man as a rich. Every separate act of exchange depends upon it, and thus not only the regulation of individual economies, but the whole of exchange depends upon it.
It is most wonderful that a fact of such universal practice, and of so great importance, has, until quite lately, been almost entirely neglected by theory. Menger was the first to give it a clear theoretical explanation, and to adopt it in his system; and it is not the least of his many services to economics.
NOTES:
1. Or, as we say simply, in purchase of goods -- money and goods being generally thought of as in opposition to each other.
2. For instance, the value of a shilling to me depends (1) on the number of shillings I have to spend; (2) on what and how much Ican buy in the shops for a shilling; (3) on what use I can make of the shilling's worth of goods when I get them -- which, again, depends (a) on how much I have of similar goods already; and (b)on my natural or acquired capacity of consuming or employing such goods. -- W.S.
3. See Jevons, p. 152.
4. Of course the author does not mean that the consideration of possible personal use of his goods ever comes into the mind of the maker or merchant who supplies the market. Their "use" to him is their "exchange." Wieser is only making out the logical point that even goods made for sale would not be estimated at their exchange value if it were not that the personal use is less than the exchange use. -- W.S.
5. On the change of motive which results from this in the conflict of price, see Bohm-Bawerk's Werth (p. 515). I may perhaps be allowed to point out that in my Ursprung des Werthes (p. 185) I alluded briefly to the case described above.
