The Value of MoneyAnderson, Benjamin M. (Benjamin McAlester)
General
The Value of Money
Anderson, Benjamin M. (Benjamin McAlester)
Money
(5) The theory has no bearing on the explanation of entrepreneur
cost--money-outlay, "opportunity cost," alternative positive values, or
what not. It finds no place for the modern cost doctrine. It does not in
any way open the path to the Austrian theory of costs. Costs, for
Austrian theory, as, in general, for modern theory, are reflections of
_demand_ for the employment of the agents of production in alternative
uses. Thus, it costs a great deal to raise wheat in Illinois, because of
the rival demand for the land to produce corn. Labor costs are high in
ordinary manufacturing, because of the rival demand for labor in the
munitions factories, etc. As Schumpeter's theory can give no account of
the _demand_ for labor in the munitions factories, it follows that it
can give no account of the _cost_ of labor in the other factories.
Instead, indeed, of giving us the modern cost doctrine, we see
Schumpeter's scheme reviving the old _real cost_ doctrine, running in
terms of sacrifices in production.[84]
(6) The foregoing paragraph gives emphasis to the point with which we
started, namely, that Schumpeter's theory is not a _causal_ theory, but
merely a theory which gives mathematical relations in a static picture.
For the general theory of the Austrians, this real cost doctrine is
anathema. Values are positive. The emphasis is put on positive wants, as
_causes_ which guide and motivate industry. The _clue_ to all values is
in the values of _consumption_ goods, which are in direct contact with
the utilities which are the source of value. From the values of
consumption goods, we _derive_ the values of production goods, labor,
etc., which are goods of "second, third and fourth _ranks_" and whose
values are merely reflected from the causal marginal utilities of the
consumption goods they are destined to create. None of this causation is
brought into Schumpeter's conspectus picture. On the contrary, with the
bringing in of disutility of production, we have the doctrine of the
earlier English School revived. The equilibrium picture is as good a
proof of the one theory as of the other. If we assume the utility-curves
constant, and allow the cost-curves to vary, then causation would be
initiated by the cost-curves.[85]
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