46 VALUE more words than are necessary that it is useful : that is to say, value in use is an awkward phrase for utility. The conception of utility (see WEALTH) is the most fundamental in economics. It is held by Mill to mean the capacity to satisfy a desire or serve a purpose, and thus " useful," the corresponding adjective, is as fitly applied to ices as to steam-engines. But utility is obviously much wider than value, and Mill proceeds to say that by value in political economy we should always understand exchange value. This language seems familiar and definite, but on analysis it is clear that exchange implies two terms at least. If we say that a thing can be exchanged, we imply that it can be exchanged for something else, and when we speak of the exchange value of a thing we must directly or indirectly refer to the value of some other thing or things. In practice in modern societies this other thing is standard money : an Englishman who talks of the exchange value of anything means the number of pounds sterling (or parts thereof) which it will fetch in the market or be appraised Price. at by a fair arbitrator. On this view then the value of a thing is its price ; but a very little experience in the theory or history of economics will show that it is often desirable, and sometimes necessary, to contrast value with price. "At the same time and place," says Adam Smith, "money is the exact measure of the real exchangeable value of all commodities. It is so, however, at the same time and place only." If, however, the exchange value of a thing is not its price, what is it 1 According to Mill, "The value of a thing is its general power of purchasing, the command which its possession gives over purchasable commodities in general." But what, we may well ask with Mill, is meant by command over commodities in general 1 Are we to understand the complete national inventory of wealth, or the total of things consumed in a given time by a nation 1 Obviously such conceptions are extremely vague and possibly unworkable. If, however, we make a selection on any representative principle, this selection will be more or less arbitrary. Mill is to some extent aware of these difficulties, although he never sub jected them to a rigorous analysis ; and he points to the obvious fact that a coat, for example, may exchange for less bread this year than last, but for more glass or iron, and so on through the whole range of commodities it may obtain more of some and less of others. But in this case are we to say that the value of the coat has risen or fallen 1 On what principles are we to strike an average? The attempt to answer these questions in a satisfactory manner is at present engaging the attention of economists more than any other problem in the pure theory. Mill, how ever, instead of attempting to solve the problem, frankly assumed that it is impossible to say except in one simple case. If, owing to some improvement in manufacture, the coat exchanges for less of all other things, we should certainly say that its value had fallen. This line of argu ment leads to the position : " The idea of general exchange value originates in the fact that there really are causes which tend to alter the value of a thing in exchange for things generally, that is, for all things that are not them selves acted upon by causes of similar tendency." There can be no doubt as to the truth of the latter part of this statement, especially if we substitute for one commodity groups of commodities. But it is doubtful if the idea of general exchange value arises from a consideration of the causes of value ; and recent writers have constantly emphas ized the distinction between any change and the causes of the change. Following out the idea in the last sentence quoted, Mill goes on to say that any change in the value of one thing compared with things in general may be due cither to causes affecting the one thing or the large group of all other things, and that in order to investigate the former it is convenient to assume that all commodities but the one in question remain invariable in their relative values. On this assumption any one of them may be taken as representing all the rest, and thus the money value of the thing will represent its general purchasing power. That is to say, if for the sake of simplicity we assume that the prices of all other things remain constant, but that one thing falls or rises in price, the fall or rise in price in this thing will indicate the extent of the change in its value compared with things in general. There can be no doubt that, in discussing any practical problem as to the changes in the relative value of any particular thing, it is desirable to take the changes in price as the basis, and much confusion and cumbrousness of expression would have been avoided in the theory of the subject if, to adapt a phrase of Cournot s, money had by Mill and others been used to oil the wheels of thought, just as in practice it is used to oil the wheels of trade. By this method of abstraction the treatment of the Requi- theory of value becomes essentially an examination of the - sites for causes which determine the values of particular commodi- value - ties relatively to a standard which is assumed to be fixed. Now in order that anything may possess value in this sense, that it may exchange for any portion of standard money or its representatives, it is evident on the first analysis that two conditions must be satisfied. First, the thing must have some utility ; and secondly, there must be some difficulty in its attainment. As regards utility, Mill apparently regards it simply as a kind of entrance examination which every commodity must pass to enter the list of valuables, whilst the place in the list is deter mined by variations in the degree of the difficulty of attainment. Later writers, however (more particularly Final and Jevons), have given much more prominence to utility, total and have drawn a careful distinction between final and utilit y- total utility. This distinction is useful in throwing light on the advantages of, and motives for, exchanging com modities. Suppose that on a desert island A possesses all the food, so many measures (say) pecks of corn, and B all the drinking water, so many measures (say) pints. Then A, taking into account present and future needs, might ascribe to the possession of each portion of his stock so much utility. The utility of the first few pecks of corn might be regarded as practically infinite; but, if his stock were abundant, and a speedy rescue probable, the utility ascribed to successive portions would be less and less. In the same way B might make an estimate of the utility of successive measures of the drinking water. N"ow, if we regard only total utilities from the point of view of each, both are infinite. If an exchange were made of the total stocks of both men, the position of neither would be improved. But, if A sets aside (say) half his stock, then it may well happen that he could advantageously exchange the rest against part of B s drinking water. In precisely the same way B might set aside so much of his stock for his own consumption, and then the utility of the remain ing portion would be much less than the utility he would gain if he obtained in exchange A s surplus. Thus, if the two men exchange their remainders, both will gain in utility ; in the case supposed they will make an enormous gain. For simplicity we have supposed each stock to be divided into two portions, but nothing has been said of the principles of the division. It is, however, clear that A can advantageously go on exchanging a measure of corn for a measure of water so long as by doing so he makes a gain of utility. Conversely B can advantageously offer water so long as he gains greater utility from the corn received in exchange. The utility of the last portion of corn retained by A (or of water by B) is the final utility
of the stock retained, and similarly the utility of the last