Davenport, who recognizes clearly "the rich-man-poor-man complication,"[54] and avoids, for the most part, the confusion into which others have fallen, of mixing a demand-price curve and a utility curve (a confusion dealt with in detail in the next chapter), and who accepts the psychological assumption of subjective isolation unreservedly,[55] reaches, as already indicated, the same conclusion regarding the nature of value. For him there is no social validity in value except as a ratio of exchange.[56]
The same may be said for Böhm-Bawerk, so far as his formal analysis goes. It is true that he recognizes the existence of an "objective value in exchange"[57] in addition to "subjective value" and "subjective value in exchange," and in addition to price,[58] but he makes no effort to exhibit its nature, or to show its origin. His study has to do with individual subjective ratios, between the marginal utilities of two goods, and the market ratio, or price, that results from the meeting of these individual ratios—not utilities—in the market. The nature of his objective exchange value is expected to become clear, somehow, from this surface determination of price:—
Exchange Value is the capacity of a good to obtain in exchange a quantity of other goods. Price is that other quantity of goods. But the laws of these two coincide. So far as the law of price explains that a good actually obtains such and such a price, and why it obtains it, it affords at the same time the explanation that the good is capable, and why it is capable, of obtaining a definite price. The law of Price, in fact, contains the law of Exchange Value.[59]
But (as will be elaborated more fully in chapter vi), Böhm-Bawerk's law of price does not explain the why any more than do those of Jevons and Pareto, and the assumption that an "objective value in exchange" exists, in addition to the ratio of exchange and the subjective values, might just as logically be added to their systems as to his, with the assumption that the problem of its nature and causes had been cleared up. The Austrian analysis, even with Professor Clark's correction, is simply an explanation of the modus operandi of the determination of particular ratios in the market. It tells us nothing of quantitative values, and, in fact, assumes a whole system of values already predetermined, before the question of any particular price can be approached.[60]
FOOTNOTES:
[49] Theory of Political Economy, 3d edition, p. 14.
[50] Op. cit., pp. 76-84.
[51] Ibid., p. 83.
[52] Op. cit., p. 81.