Hayek on Value

books quotes economics value hayek

28 Jan 2014

On the meaning of value, Hayek writes:

Value indicates the potential capacities of an object or action to satisfy human needs, and can be ascertained only by the mutual adjustment through exchange of the respective (marginal) rates of substitution (or equivalence) which different goods or services have for various individuals.

Value is not an attribute or physical property possessed by things themselves , irrespective of their relations to men, but solely an aspect of these relations that enables men to take account, in their decisions about the use of such things, of the better opportunities others might have for their use. Increase in value appears only with, and is relevant only with regard to, human purposes.

As Carl Menger made clear ( 1871/ 1981: 121), value ‘is a judgement economising men make about the importance of goods at their disposal for the maintenance of their lives and well-being’. Economic value expresses changing degrees of the capacity of things to satisfy some of the multiplicity of separate, individual scales of ends.

That the utility of an object or action, usually defined as its capacity to satisfy human wants, is not of the same magnitude to different individuals, now seems so obvious that it is difficult to understand how serious scientists should ever have treated utility as an objective, general and even measurable attribute of physical objects.

Economic values are interpretations of physical facts in the light of the degrees of suitability of kinds of physical objects in particular situations for the satisfaction of needs.

The Fatal Conceit: The Errors of Socialism F.A. Hayek 125-127 Taylor and Francis. Kindle Edition.