The idea of final utility is to the expert the “open sesame” by which he unlocks the most complicated phenomena of economic life and solves the hardest problems of the science. FULL ARTICLE by Eugen von Böhm-Bawerk
Source link: http://archive.mises.org/13698/the-law-of-final-utility/
The Law of Final Utility
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“The value of goods is measured by the importance of the want whose satisfaction.”
In other words, the utility of commodities is taken as the point of departure for an analysis of the prices of commodities since any theory of value serves chiefly to explain prices, i.e., Böhm-Bawerk takes as his point of departure what Marx excludes from his analysis as an irrelevant quantity.
I can apply literally to Böhm-Bawerk the words Marx uttered on Condillac: “We see in this passage, how Condillac not only confuses use-value with exchange value, but in a really childish manner assumes that in a society, in which the production of commodities is well developed, each producer produces his own means of subsistence, and throws into circulation only the excess over his own requirements.”
“The historical school believes the ultimate source of the errors of classical economy to be the false method by which it was pursued. It was almost entirely abstract-deductive, and, in their opinion, political economy should be only, or at least chiefly, inductive. In order to accomplish the necessary reform of the science, we must change the method of investigation; we must abandon abstraction and set ourselves to collecting empirical material — devote ourselves to history and statistics.
In this passage Böhm-Bawerk is also describing economics as it is taught today especially econometrics “collecting emprical material” and devoting themselves “to history and statistics.” And that does not even mention aggregate analysis that totally strips out the utility theory of value.
Do we always exchange that which is least valuable to us? Are we not sometimes so willing to obtain a product that we exchange that which is not of least value to us?
The point is that, if we exchange something we value more highly than something we retain, we naturally attempt to move the resources providing the latter to allow us to get the former again. The net effect is that we trade the least valued possibility.
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