This section is from the "Economics In Two Volumes: Volume I. Economic Principles" book, by Frank A. Fetter. Also available from Amazon: Economic
§1. Choice; its origin. §2. Development of conscious choice. §3. The idea of scarcity. § 4. Valuation. § 5. One's own labor as a valuation unit. § 6. Crusoe's scale of valuations. § 7. Choice before and after valuation. § 8. Value. Notes on Aspects of things chosen, Various meanings of scarcity, Value and valuations.
§ 1. Choice; its origin. The world of industry, as we look out upon it, appears to be alive with motion, like a beehive. In the crowded harbor, the busy railroad yard, the noisy steel mill, the bustling department store, we see a ceaseless and bewildering activity. In all this movement and apparent confusion, there is, however, a large degree of order and a pretty regular succession of events which reflects a succession of choices that men are making.
These choices are not always and entirely the result of deliberate and conscious calculation. They are determined in a very great degree by habit or by instinct. Every living creature has a nervous organization of some sort - plants as well as the lowest forms of animals. This nervous organization has a pretty definite "set" or habit of response toward its environment; that is, the nerves react in certain ways to external stimuli. The seed in moist soil germinates; it sends rootlets into the earth in search of water and of the particular soil-elements which it by nature "chooses"; it sends stock and leaf upward into the light and air, it spreads or climbs or twines according to its nature. The chick picks its way out of the shell, and then instinctively (by its inborn nature) picks at any particle it sees. It finds some objects "good" and it eats them; it finds others "bad" and it rejects them. It thus adds to its instinctive choice the choice resulting from experience.
§ 2. Development of conscious choice. Every human being starts on his life of choice in just this way, with a fund of natural impulses, a capacity for certain instinctive reactions. The new-born child cries when hungry or uncomfortable, and it does not know in advance (the first time) what it is crying for. It is moved by mere impulse, tho we say loosely that it "knows" well enough when it gets the right thing. Some food it rejects, other food it takes; and its mere impulse has now become a vague aversion or a vague desire. Very quickly it learns to associate the presence of some object with this or with that choice, and reaches for it, cries for it, giving now a very definite direction to the impulse which it feels. Feeling directed in this way upon some particular object or action is called desire. If we speak of this as a "conscious desire," we mean not that the person is reflecting on the nature of the desire, but simply that he is conscious of the presence of the thing, and that he desires it. As the child grows older, choice becomes vastly more complex, but all human choice is the development of the first simple impulsive acts. The difference in this matter between man and the animals lies in the degree to which the original fund of impulses is strengthened or weakened by experience and training, and is modified by the greater growth of forethought, imagination, and reason. As the man attains his maturity, deliberate calculation enters more and more into the making of choice. Yet the instinctive and habitual elements of choice continue to be very potent.
Tastes change with age, are trained, are influenced by custom, by example, and by suggestions of many kinds, and are given a wider range by wealth, travel, and opportunity. But choice is ruled fundamentally by impulse and by instinct; one likes what he likes; de gustibus non disputandum est.
Choice develops in this way as it is directed upon each of the great classes of things with which man is surrounded; clothing, houses, furniture, horses, automobiles, books, etc. It operates also upon the actions of the man himself. He reaches out or withdraws his hand; he seeks or he shuns; he labors to make or to destroy, to possess or to get rid of. Thus the choice among one's own acts is intertwined with one's choice of things.1
§ 3. The idea of scarcity. Now we are not likely to feel a very keen desire for a particular thing unless the supply of it at our disposal is relatively limited. The air which we breathe is essential to life. But the air is all around us, and ordinarily in boundless abundance. Moreover, we breathe by reflex or automatic action of the muscles without conscious attention. The result is that we do not ordinarily feel a desire for air. But in a crowded room where there is a real scarcity of fresh air relative to our need for it, our desire for a breath of fresh air may become very keen indeed. Under such circumstances the air takes on a very different importance as an object of choice. Our impulsive actions and our thought are directed toward getting it. The diver in his diving suit must make this his first and most constant interest; the drowning man tragically feels this need.
The scarcity which we are now discussing is such a limitation in the number or quantity of objects that not all desires can be met then and there by the amount of goods available. In the numberless cases where some desires are not met or are only partially met, we are under the necessity of making a choice as to which desires shall be met. This involves a choice - and therefore a comparison - among things.2
§ 4. Valuation. If we choose one thing rather than another it is plain that for us the first thing has the greater importance. For one cause or another (instinct, training, experience, imagination, judgment) it weighs more in the scale of our choice than the thing which is rejected. Now in our daily life we are constantly making comparisons of this sort
1 See note on Aspects of things chosen, at end of chapter.
2 See note at end of chapter on Various meanings of scarcity. between things. Few of us - if any - are able to secure all the things which we desire. We are under the necessity of choosing among the various possibilities. We are, therefore, under the recurring necessity of comparing one thing with another, and in so doing, we assess or estimate one thing in terms of the quantity of the other thing. Such an expression of the importance of one object of choice in terms of another we may call a valuation.
A comparison of this sort between things may take the form of a mere vague preference without any exact quantitative expression of the degree to which the one thing is more important to us than the other. (Fig. 1.) We prefer one object, X, to another object, Y, without attempting to express even to ourselves the exact strength of the preference. On the other hand, our valuations may and usually do take the form of definite mathematical ratios. In the early American fur trade, for example, a beaver skin came by convention to be used as a unit in terms of which the relative importance of other things (e.g., other furs, food supplies, etc.) was expressed. The other things were measured as multiples (or fractions) of the unit.