The Concept of Value in Ethics and Economics; R. Foley, Jr.

ory of value might serve merely to edify the writer, not the read ers who have heard or read it all before from more ardent and con vincing sources. Yet the mere fact that modern value theory recog nizes the subjective nature of value fails to mean that a lesson once uttered is forever learned. Indeed, human experience and be havior -demonstrate that thiscen tral concept represents one of the most fugitive of ideas, difficult to grasp and even more taxing to apply. Thus, penetration to the core of the concept seems warranted for two reasons: (1) to restate and communicate a basic truth and (2) to define and analyze the idea in a manner which will illuminate the thought against the backdrop of vexing and perplexing problems. An analyst can gain insight 115 116 THE FREEMAN February into the meaning of concepts by recourse to a trusted friend: the dictionary. Like other trusted friends, this one may be wrong on occasion but by and large it will offer sound advice or at least point the direction. Yet one must constantly recall that words con stitute poor vehicles for the con veyance of concepts, and the im precision of language may ob scure the nature and essence of truth.

After some false starts, my dic tionary defines value as "relative worth, utility or importance" on a scale of preference. 1 The lexicog rapher offers some important in sights derived from the bare gen esis. (A) The Individual and Value. First and foremost, value means nothing unless it relates in some manner to an individual, an act ing human being. 2 One cannot meaningfully discourse upon worth or value unless he relates the worth of some tangible or intan gible good or idea to some par ticular individual actor. Any crea ture lacking the capacity to choose between alternative courses of action cannot assess or recognize value. (B) Value and Objects. One writer has correctly asserted that discussion of value must include consideration of the questions "value to whom" and "value for what purpose."3 An object evi dences no value unless it can be utilized by some person to achieve a certain goa1.4 Correct, as far as it goes: value does mean worth to an individual in relation to a goal, end or desire.

However, the view of objects as the sole entity or repository of value adumbrates reality. Values include intangibles. As discussed later, the concept (and impor tance) of the subjective value theory extends beyond the con fines of mere economic theory or dealings with material things. It plays a· seminal role in the dismal science, to be sure, but one must not discount the fact that human values reach farther fences. A simple explanation accounts for the emphasis upon value in relation to material goods: the concept of subjective value devel oped almost simultaneously by three economists working sep ara tely ...;.. Messrs. Carl Menger, W. S. Jevons, and Professor Wal ras 5 - men whose minds were con cerned with the problems accom panying the exchange of goods and services. It is not that these men and their followers restricted the application of this novel the ory to material matters but rather that they used it as a tool to ex plain economic phenomena and, 1975 VALUE IN ETHICS AND ECONOMICS 117 particularly, to refute the labor theory of value which arose in the classical period and reached its deadly apogee in Das Kapital of Karl Marx. 6 The objective value theory be comes manifest in the labor the ory of value in the field of econom ics, the theory that the value of a good or service is determined by the cost of production or the amount of energy expended. 7 The brilliant Austrian economist and student of Professor Carl Men ger, Eugen Bohm-Bawerk, inci sively exposed the fallacies of the labor theory of value in the late nineteenth century.8 Contrary to the tenets of the labor theory of value, value is determined by in dividual evaluations of personal utilitY,9 or, as Dr. North reminds us, the value of labor derives from the value of labor's product. 1O CC) Value and Ends. The view that value represents that which possesses utility clouds the ex pansive nature of value in the same manner as the strict rela tion of value to tangible objects.

One may value laughter or a sun rise - ephemeral but real delights - over butter, bread or bricks. One may value God, or love, or commitment to a philosophy over his own life. Concentration on the very real role that value plays in market exchanges ought not mask the equal truth that values equate with both tangible and intangible goals as well as the means of satis fying those go'als. The value of friendship cannot be stated in mar ket terms like the measure of a pound of coffee. Thus, value refers to worth as a means to an end as well as to the end itself. Perhaps the im precision of language betrays and muddies this important distinc tion in common speech. CD) Value on a Scale of Pref erences. Leonard Read remarks that possessions reflect a man's values and we are, in a very real sense, that which we own.ll True, to the extent that possessions ac curately reflect goals. Values of each man refer to the goals of each acting individual as viewed by that person in the hierarchy of his purposes and measured by him as relevant to those pur poses. 12 Each actor commands a scale of preferences in his life; only he can rate a particular goal, end, object or thing on that scale.

The Theory of Subjective Value The objective theory of value holds that absolute, intrinsic val ues exist and can be discovered by man. Certain matters are in herently good or desirable and rank as absolutes on the scale of preference for every human being.

118 THE FREEMAN February The subjective theory of value, to the contrary, recognizes the nonexistence of any means to identify or define in absolute or universal terms the essential char acteristics of an ultimate good. Dr. Rogge succinctly summarizes this position: The first of the propositions on which I wish to base my argument is the fundamental proposition of all mod ern value theory: Value does not con sist of objectively definable charac teristics of a good or service; value exists only as subjective judgment in the mind of each beholder. It cannot be measured directly but only indi rectly by the behavior it elicits. There is no way that the subjective valua tions of two people can be summed or even directly compared. 13 Consider the application of this concept in the economic milieu. The exchange value of any item, good, or service is what another person will offer for it in volun tary exchange. 14 No individual can determine value for another; no one can comprehend the in tricate hierarchy of preferences residing within another person.

The practice of subjective eval uation represents the embodiment of freedom of personal choice or liberty.15 If nothing entails value unless it bears a relevance to a desired end, no individual other than the actor can (1) recognize the end sought and (2) measure the relevance of the tangible or intangible value in -achieving that end. Achievement of any end re quires payment of a cost. In the economic realm, we term that cost the "price," the amount of exchange goods satisfactory to a willing buyer and a· willing seller in a free and· uncoerced exchange. Price acts as the indicator or ob jective expression of value; it measures value but does not con stitute value. 16 The common concept of cost dis guises the fact that cost may be measured in nonmonetary or, in deed, nonmarket terms. What it costs one to choose a course of action may not be measurable in dollars and cents but in loss of opportunities for happiness, safe ty, self-respect, love or some other real but intangible item of im portance. Consider government nationalization of an industry or application of the doctrine of emi nent domain for "social" purposes, current euphemism'S for outright theft. Under civilized standards, the state takes over the electric power industry or the coal mines but salves its collective conscience by paying full (objective) value to the owner. Objective value con sists .of the amount of money which expert appraisers tell the parties that some mythical buyer would pay for the properties and 1975 VALUE IN ETHICS AND ECONOMICS 119 which some mythical seller would accept. Yet payment of such an objective cost cannot disguise rob bery of the subjective worth of the enterprise, the right and op portuni ty to peacefully engage in that endeavor. Subjective value achieves free rein only in willing exchange; by definition, eminent domain and nationalization pro ceedings involve coerced exchange wherein one individual's subjec tive scale of values indicates a preference to retain property rather than exchange it.

The Myth of An Absolute Objective Value Adherents of the basic freedom philosophy often encounter severe difficulties in understanding and applying the theory of subjective value. One primary reason con cerns the apparent clash between the idea of subjective value and the belief in absolute principles governing man, life and the uni verse. Many libertarians believe, rationally or intuitively, that life contains absolute tenets; for this reason, these thinkers decry the postulates of relativism, be it eco nomic or moral. For example, Lord Keynes, challenged by con temporaries concerning the ex tended effects of his irrational monetary and employment poli cies, supposedly uttered the dic tum, "In the long run, we are all dead," a clear expression of the relativistic neomercantile ap proach to solution of economic problems. Free marketeers disdain such an overture, cognizant that man must pay a cost for every purchase, that every cause pro duces effects. Again, in the field of axiology, libertarians often decry the concept of situational ethics, a trend which may justify "immorality" on a relativistic basis.

Reflection reveals no conflict between the concept of subjective value and the existence of funda mental absolute principles in the universe. The key lies in the na ture of man: man is a finite, fall ible, limited creature; he can glimpse truth through St..Augus tine's dark glass. No man possesses unchallengable, immutable ability to know truth; each of us main tains a world view frayed and scarred by his own ineptitude, flawing his perceptiol1 and caus ing his knowledge to deviate from reality. Truth or reality is absolute; it cannot vary; one cannot challenge fact. Absolute principles derive from truth and exist untrammeled in the universe. These absolutes exist wholly apart from our per ception. Man can contest truth or reality, but he must pay the price of error. The validity of the fact of· ab120 THE FREEMAN February solute existence does not in any way counteract the theory of sub jective value. An actor places val ues on a range of choice related to his real or imagined goals.

Truth may not rank high in his perspective. Or, he may perceive a different truth from his neighbor. Or, he may value other truths on a higher plane than his traducer. Or, he may fall into error. The points remain: (1) absolutes ex ist; (2) man may not recognize absolutes; (3) different men may become cognizant of different views of reality; (4) only each man, acting individually, can rate values in his order of preference. These four propositions do not wage internecine war; they coex ist. Thus, the concept of subjec tive value and the existence of absolute truth occupy mutually in dependent spheres. Truth never varies, never becomes relative; man's ranking of important things does vary, from person to person and from time· to time. Dr. Gary North defrocked the error in confusion of the two con cepts a few years ago when he pointed out the fallacious reason ing of conservatives who believe that gold possesses intrinsic (ob jective or inherent) value. 17 Many freedom philosophers prefer to convert their assets to gold or sil ver rather than trust in fiat paper.

Gold and silver contain intrinsic properties which account for their historic value, yet neither gold nor silver nor anything else man ifests intrinsic worth. Whether or not these metals are valuable depends upon the individual sub jective choices of the owner and the one with whom he may wish to trade. One may rank gold as less valuable than food, clothing or shelter, depending upon his circumstances. And, one may rate food or water or life itself less valuable than a cause or the life of another person. Literature and history abound with examples of those who have valued the lives of friends or family more in tensely than their own continued existence and so chose to sacrifice their very being. Ethics and Economics Comprehension of subjective value may increase when exam ples portray its application to sev eral fields of choice. In so doing, what appears apostasy may be come doctrine.

As noted earlier, the initial ap plication of the doctrine of sub jective value appeared "in the field of economics. Easy examples ap pertain here. Only the buyer knows whether he values soap more than matchbooks, water cress more than acorn squash, or pet food more than quilts. Will ing exchange commands that each 1975 VALUE IN ETHICS AND ECONOMICS 121 participant to a trade subjectively believes that he gains from the transaction. IS If the swap only occurs by virtue of coercion, no willing exchange would have taken place and the trade does not cor respond with the subjective value of at least one actor. 19 One "pro fits at another's expense" only if he employs force or fraud in the transaction ;20 by definition, each actor benefits from a free trans fer. Normally, the simple model be comes more complex in modern society, but the basic principles remain. One employs his creative talents in an endeavor which pro duces an abundance beyond his own needs; he then barters those extra goods to others in exchange for different items which he sub jectively values beyond his extra creations. As time passes and spe cialization and division of labor grow, society uses trade goods as a medium of exchange: goods we call "money." The more compli cated model does not alter the fundamental fact that a producer will choose to produce and to trade in accordance with his subjective values, and a purchaser will choose to consume on the identical basis.

Each individual portrays the roles of producer and consumer and only the individual can determine (in accordance with his personal scale of preferences) what an'd how much to consume. At some point in time, the actor will de cide it accords with his prefer ences to withhold production or consumption of a given good when the value given in return appears too insignificant or too costly ac cording to his choice. Ethics in Human Relationships Like rules govern the ethical judgments made by man. Only the actor can determine whether or not he should destroy the life of another human being,· either dur ing warfare sanctioned by a group (the state) or during a fit of per sonal pique. Other human beings may wreak consequences upon the actor as a result of his chosen course of conduct, the threat of which may have a direct bearing upon his initial choice. Similarly, only the actor can decide whether to lie or deceive even if no legal consequences attend his conduct, whether extrinsic circumstances such as ill health of another j usti fy an untruth, whether one ought to marry a specific person, whether fairness and mercy obligate the donor to transfer $100 to poor relief, whether to honor one's parents, or whether to worship God or to maintain quiet on the Sabbath.

Moreover, the concept applies to personal relationships between hu man beings. Friendships develop 122 THE FREEMAN February out of a concatenation of values. Like goals attract; unlike values repel.' No state can effectively leg islate friendship oi camaraderie, but at best an uneasy truce. No one can force you to love your neighbor; you will do so only if that relationship fits your world view and· your scheme of values. Again, the doctrine applies easily to choices· in aesthetics and art. Preferences among persons surface abruptly in the fields of art, architecture, sculpture, music, photography, literature, and enter tainment. That which the public (individual patrons collected) subjectively values produces rewards (exchanged goods, plaudits, fame) for the artist or entertainer; that which no one subjectively values rots in the producer's garret or resides, unnoticed and und usted, on a purveyor's shelf. The artist may continue to produce despite rejection because he receives val ue from the creation of his art; that value may far outstrip the value chosen by others in the mar ket place.

Those who ignore the concept of subjective value lead the pa rade to subsidize "cultural" activ ities as "intrinsically" good: wit ness organizations to collect tax funds for support of symphonies, art galleries and civic theatres. Yet these activities contain no more intrinsic value than an ounce of gold. If a sufficient number of persons in the community subjec tively value the symphony or the theatre, these endeavors will en dure; if not, their continued ex istence depends solely on force. Subjective Value and an Ordered Liberty A number of persons who be lieve themselves to be tradition alist-conservative if not libertar ian in outlook opt for a concept of "ordered liberty." They value eternal things, necessary to order and the good life in their subjec tive view. Unfortunately, this ap proach lends itself to the applica tion of an objective value concept. Order becomes the touchstone; deviates receive punishment; men become fit to a Procrustean bed measured by those in political power.

All too often, the· "ordered lib erty" proponents penalize "devi,;, ant" personal conduct which fits the subjective value of the actor and harms no other person. Sun-; day Blue Laws, compulsory chapel, conscription, law proscribing sex ual activities between consenting adults all partake of this attitude. Public display of nudity may not be in the best of taste, but man should be concerned with living his own life, not limiting the equal, reciprocal right of others in this regard. The judicial sys1975 VALUE IN ETHICS AND ECONOMICS 123 tem tends to impose values upon disputants in this kind of society rather than performing the lim ited function of deciding concrete cases. The law becomes a censor of personal conduct and a prescriber of the objective values to be maintained. Let me commit what may seem an unpardonable heresy: neither freedom nor mankind itself rep resents an objective value. To me, as a believer in the freedom phi losophy and the dignity of man, individual liberty and my right to live my own life as I see fit rank high on my personal scale of val ues. I fervently hope that others think likewise - but. I recognize that all too many persons do. not hold these beliefs or, if they pay lip service to such values, they manifest a remarkable inability to equate their means and· ends. Per sonal freedom and the fundamen tal rights of man accord with ab solute verity but one cannot con sistently claim intrinsic value for such rights.

Those who seek an ordered lib erty may be on the trail of very real values. Many of us favor the serenity of the quiet life where no neighbors intrude in our sylvan glade. Yet, as long as man shares this globe with other men, con flicts will arise. These conflicts can be resolved in two ways : by force or by mutual uncoercive interchange and negotiation. I pre fer my order to develop out of the market, be it a market for goods or a bazaar of ideas. A respect for the subjective values of others bodes well for the survival of man as a choosing, free creature; em phasis upon objective value theory delivers a dulling blow to the cre ative spirit. ~ - FOOTNOTES 1 Webster's Third New International Dictionary (G. & C. Meriam Co., Spring field, Massachusetts 1966) 2530-253l. 2 See, e.g., Jennings, Frederic Beach, Jr., "Value, Exchange & Profits: The Bedrock of Economic Science," 16 Free man (No.9) 52 (September 1966); Read, Leonard E., "Freedom's Theory of Value," 17 Freeman (No. 10) 594, 596 (October 1967).

3 Jennings, op. cit., Note 2. 4 Ibid. 5 Read, op. cit., Note 2. 6 See, North, Gary, "The Fallacy of 'Intrinsic Value'" 19 Freeman (No.6) 370, 371 (June 1969). 7 See, Read, op. cit., Note 2, p. 595; Lipton, Dean, "The Man Who Answered Marx," 17 Freeman (No. 10), 597, 600 (October 1967). 8 Lipton, ibid. 9 Read,· op cit., Note 2, p. 596. 10 North, op. cit.,N ote 0, p. 372. 11 Read, op. cit., N ote2, p. 594. 12 Jennings, op. cit., Note 2. 13 Rogge, Benjamin A., "NoN ew Urban Jerusalem," 3 Imprimis (No. 9) 1 (September 1974). 14 Read, op. cit., Note 2, p. 594. 15 Ibid. 16 Pitt, W. H., "Value: The Soul of Economics," 19 Freeman (No.9) 515, 517 (September 1969). 17 North, O,p. cit., Note· 6. 18 Read, op. cit., Note 2, p. 594; J en nings, op. cit., Note 2. 19 Jennings, ibid. 20 Ibid.