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.(1*) 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 frustration 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 of the undertaking, and consequently gets ascribed to it a quota of the result, and upon the amount of this result its value must depend.(2*)NOTES:
1. The value of the productive unit again is decided according to the marginal law -- i.e. by the least among these returns. See below, Book III. chap. viii.
2. The classical political economy really examines only the value of products, or, more exactly, of produced consumption goods. So far as the factors of production are concerned, it looks upon them, on the one side, as sources of income (rent, interest, wage, and, perhaps, also undertaker's income); on the other side, as the elements which go to form the costs of production, and are considered to decide, principally, the value of the products.
But when one compares with this the endeavours which, explicitly or implicitly, guide the new writers on the theory of value, we find the circle of the phenomena to which the idea of value is applied extraordinarily widened. Factors of production -- better expressed by the later writers as "production goods" --are conceived of all through as objects of value; costs are directly phenomena of value; and even income must be so conceived. Further than this, the relations between the value of utilities and the value of production goods is turned just the other way about -- the former being considered as determining, the latter as determined. On the present occasion we have first to do with the proposition which may serve as starting-point for the whole theory, -- that production goods receive their value from the value of the products which they serve to create.
Gossen, Jevons, Menger, and Walras are all agreed on this point In my opinion it is again Menger who gives the most clear and comprehensive statement of the matter. He divides (as does also Gossen, though much less perfectly) the entire goods which stand in the productive nexus into Ranks, and value is conducted from rank to rank. The first and lowest rank is formed by those utilities which receive their value direct from wants. The value thus received passes over first to goods of the second rank, those, namely, which serve directly towards the producing of goods of the first rank; as e.g. the meal and the labour of the baker in the preparation of bread. From these value passes on to goods of the third rank (e.g. wheat and the labour of the miller); and so on, step by step, till it reaches the highest, or, as Bohm-Bawerk calls them, the most remote ranks.
