This section is from the "Economics In Two Volumes: Volume I. Economic Principles" book, by Frank A. Fetter. Also available from Amazon: Economic
In a multitude of cases the concrete, direct good and the thing valued simply as an agent to get it, are only a single step removed from each other. The land and the trees in the orchard are agents to get the fruit of the harvest; the spinning machine and the loom are agents to make cloth. Again, the good may be removed by many steps or processes from psychic income, much as in the story of the house that Jack built: the charcoal heats the fire, the fire melts the iron, the iron forms the hatchet, the hatchet cuts the tree, the tree forms the boat, the boat is used for catching fish, the fish is used for food, and that is the cause of man's desire for everything that went before - charcoal, fire, iron, hatchet, tree, and boat. Again, several objects may be complementary agents, that is, may be needed together to obtain one direct use, as the charcoal and iron and some other tools must be brought together to make the hatchet; the boat, a pole, a hook, and bait must all be used together to catch the fish.
•Psychic income may be represented as a narrow band at the base. Borne direct uses are constantly being transmuted into psychic income. In turn many of these direct uses result from somewhat indirect uses, these in turn from more indirect uses, and the value of each and all of the whole series of uses rests ultimately on this basis of psychic income.
§ 5. Direct and indirect uses of the same good. Many goods yield at the same time direct and indirect uses for the same or for different persons. The pitcher on the table as an ornament pleasing to the eye is of direct use, while in holding the water to quench our thirst it is of indirect use. In many other cases the one thing has two or more kinds of uses at once, and the proper distinction is that between direct and indirect uses of a good, rather than between direct and indirect goods. The wagon carries a load of produce to market and a happy family to the circus at the same time; a train may carry both passengers and freight; a stove may warm the room and at the same time cook the dinner, etc. Again, the good may be used indirectly at one time and directly at another; the horse which plows the field to-day may to-morrow draw the owner's carriage. In still other cases two or more uses, either direct or indirect, are possible, but are mutually exclusive: the tree may be kept to bear fruit, may be burned as fuel, turned into lumber for furniture, or used to make a workbench to be used, to make still other goods.
Directness, like valuation, has relation to some one person in each case. There are many things, commodities of trade, which in their physical substance and form are ready to be used directly, yet which in the course of trade are still indirect goods to their possessors. As yet they are merely the means of earning a business profit (have an indirect use), but they will later render direct uses to the final consumer.1 Retail and wholesale stores, cold storage and other warehouses, are filled with goods of this kind.
1This peculiar case is personal, "contractual" indirectness, resulting from a legal contract between men.
Such facts as these make it clear that concrete goods can not be rigorously classified as either direct or indirect. Any-particular good may under different circumstances be used either directly or indirectly. Therefore, the classification of directness and indirectness applies properly to uses rather than to goods, and it is a matter of much importance in our study of economics to keep this thought clearly in mind.
§ 6. Various changes affecting value. Desire is directed upon concrete goods, but in the logical view it is all the uses together which, as experience corrects false impulses and hopes, constitute the cause of all the desires men have for the objects and forces of the outer world. Nothing which is not in some causal relation, near or remote, to desire, has value. The vine which Tantalus is unable to reach magnifies his misery. A captive, chained to a rock, gets uses only from the things within his reach. Men living in savagery and ignorance starve amid the possibilities of plenty. Chained by their incapacity and by their improvidence to a little spot of earth, they do not see clearly, either in time or in space, the economic relations about them. Men begin by valuing goods for their direct uses, but the valuation comes to be extended over all the goods having indirect uses, which by instinct, experience, habit, association of ideas, etc., have come to have a connection with desire.
The nature of the uses rendered by goods may be considered here in connection with the thought of the four aspects of choice as already suggested.2 It was seen there that choice presents itself in one of four aspects, a preference for a kind of goods (stuff), for goods of a particular form, or at a certain place, or at a certain time.
Now the various uses which are accomplished through the indirect instrumentality of goods may be divided into four general classes: (1) stuff changes, (2) form changes, (3) place changes, and (4) time changes. The blast furnace helps to convert the ore into pig iron. The sawmill cuts the log into boards. The steamship carries grain across the ocean. The greenhouse hastens the growth of flowers and vegetables so that they may be brought earlier to market.
2 See note on Aspects of things chosen, at end of ch. 2.
It is almost needless to say that such changes have results in the realm of value. For the increase in value which is expected to result from these changes, of course, gives the motive for bringing the changes about. If grain were not, to some one, more valuable in Liverpool than in New York there would be nothing to gain in shipping it three thousand miles across the ocean. If the log were as useful as the boards, the labor and materials put into the sawmill could be turned in other directions.
It must be observed, however, that all four considerations -stuff, form, place, and time - are factors that enter into value whenever value exists. If a particular thing has value, that value is due partly to its composition, partly to its form, partly to its being where it is, and partly to its being available at the particular time. A change in any one of these factors might bring about a change in the value.