Previously in this series: A Mengerian Solution to the Diamond-Water Paradox
In section C of the chapter on value in Principles, Menger shifts from questions of quantity to questions of quality. In the following explication, I will use examples that are similar, but not necessarily identical, to Menger's. Let us compare two pairs of goods: (A.) steak vs. stale bread and (B.) beech wood vs. fir. Let us say the two pairs are of identical weights. In such cases, the difference in quality can have two different kinds of effects on how the goods satisfy needs. The qualitative difference can have (1.) a qualitative effect on how the two goods satisfy needs. For example, although both steak and stale bread supply nourishment, only the steak provides enjoyment. Conversely the qualitative difference can have (2.) a quantitative effect on how the two goods satisfy needs. For example, beech wood is better firewood for providing human warmth than fir. However, fir still does provide human warmth, just not as much, per weight; so the difference is quantitative. If you provided enough additional fir, you could bring about just as much human warmth as with the lesser amount of beech wood. But all the stale bread in the world wouldn't provide a whit of enjoyment.
if coal of inferior carbon content, oak bark of inferior tannin content, and the ordinary labor services of tardy or less efficient day-laborers are only available to economizing men in sufficiently large quantities, they can generally replace the more highly qualified goods perfectly. But even if unpalatable foods or beverages, dark and wet rooms, the services of mediocre physicians, etc., are available in the largest quantities, they can never satisfy our needs as well, qualitatively, as the corresponding more highly qualified goods.
Since the value of a good is imputed by the importance of the satisfaction supplied by the good, any given amount of beech wood would be valued equally with the amount of fir that provides the same amount of human warmth. Any amount of fir less than that, even if it is still greater than the amount of beech wood, would still be less valuable than the given amount of beech wood.
Let's say a man has two kinds of goods at his disposal which can both be used for two different uses, and that one is superior to the other in a quantative way. The value scale rankings of the satisfactions provided by all four good-use pairs are as follows. (Remember, a higher number is of higher ranking.)
|... ||Use A||Use B |
|Superior Good ||5 ||2 |
|Inferior Good ||3 ||2 |
Now let us say the man loses one unit of the superior good. What could he do then?
He could allocate things so that Use A had one less superior good assigned to it than before. This would entail a loss of satisfaction he ranks as 5.
He could take a unit of his remaining supply of the superior good away from Use B and assign it to Use A. This would entail a loss of satisfaction he ranks as 2.
He could take a unit of the inferior good away from Use B and assign it to Use A. This would entail a loss in Use B satisfaction ranked as 2 and a loss in Use A satisfaction ranked as 2, because the inferior good would only supply a rank-3 satisfaction as opposed to the lost unit of the superior good, which supplied a rank-5 satisfaction (5-3=2). Menger contends that the Use B loss together with the Use A loss would mean a combined loss of satisfaction of rank-4 (2+2). The rank of the least important "Use A" satisfaction rendered by the superior good (5) minus the rank of the satisfaction ultimately lost if a unit of the superior good is lost (4, as calculated above) is called by Menger the "value quota", which in this case would be 1 (5 - 4 = 1). According to Menger the use value of the superior good is the rank of the least important satisfaction provided by the superior good (which would be the Use B satisfaction ranked as 2) minus the value quota calculated above (1). Thus in this case the use value of the superior good would be ranked at 1 (2 - 1 = 1).
All this adding and subtracting of ranks seems to be antithetical to Austrian economics as it is now conceived. Any help in resolving this seeming paradox would be much appreciated.