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NOTE Appendix B: On Value

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Appendix B, On Value

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Economics has made such extensive use of the term value that it would be inexpedient to abandon it now.

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However, there is undoubtedly confusion because the term is used in a variety of different ways.

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It is more important to keep distinct the subjective use of the term in the sense of valuation and preference

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Preference, as against the objective use in the sense of purchasing power or price on

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the market.

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Up to this chapter, value in this book has meant the subjective individual valuing process

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of ranking goods on individual value scales.

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In this chapter, the term value of capital signifies the purchasing power of a durable

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Capital Good in terms of money on the market. If a house can be sold on the market for 250

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ounces of gold, then its capital value is 250 ounces. The difference between this and

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the subjective type of value is apparent. When a good is being subjectively valued,

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it is ranked by someone in relation to other goods on his value scale. When a good is being

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The Evaluator estimates how much the good could be sold for in terms of money.

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This sort of activity is known as appraisement and is to be distinguished from subjective

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evaluation.

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If Jones says, I shall be able to sell this house next week for 250 ounces, he is appraising

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It's Purchasing Power or Objective Exchange Value at 250 ounces of gold.

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He is not, thereby, ranking the house and gold on his own value scale, but is estimating

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the money price of the house at some point in the future.

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We shall see that appraisement is fundamental to the entire economic system in an economy

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of indirect exchange.

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Not only do the renting and selling of consumers goods rest on appraisement and on hope of

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monetary profits, but so does the activity of all the investing producers, the keystone

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of the entire productive system.

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We shall see that the term capital value applies not only to durable consumers goods, but to

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all non-human factors of production as well.

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That is, land and capital goods, singly and in various aggregates.

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The use and purchase of these factors rest on appraisement by entrepreneurs of their

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eventual yield in terms of monetary income on the market, and it will be seen that their

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capital value on the market will also tend to be equal to the discounted sum of their

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and their future yields of money income.