A Reconsideration of the Theory of Value. Part I

TLDR

The pure theory of exchange value, studied by Jevons and Marshall, has received little attention since 1900, with Pareto’s work being the most comprehensive static theory and demonstrating the immeasurability of utility. Pareto replaced the measurable utility concept with a scale of preferences, showing that observable conduct permits constructing such a scale but does not allow deriving a specific utility function.

Abstract

THE pure theory of exchange value, after a period of intensive study by economists of the generation of Jevons and Marshall, has received comparatively little attention from their successors in the twentieth century. Apart from some very interesting inquiries into what may be called the dynamics of the subject, due to contemporary writers of the school of Vienna,1 there has been only one major achievement in this field since I 900. That achievement was the work of Pareto, whose Manuel (and particularly its mathematical appendix) contains the most complete static theory of value which economic science has hitherto been able to produce. Of all Pareto's contributions there is probably none that exceeds in importance his demonstration of the immeasurability of utility. To most earlier writers, to Marshall, to Walras, to Edgeworth, utility had been a quantity theoretically measurable; that is to say, a quantity which would be measurable if we had enough facts. Pareto definitely abandoned this, and replaced the concept of utility by the concept of a scale of preferences. It is not always observed that this change in concepts was not merely a change of view, a pure matter of methodology; it rested on a positive demonstration that the facts of observable conduct make a scale of preferences capable of theoretical construction (in the same sense as above) but they do not enable us to proceed from the scale of preference to a particular utility function. The first signs of a break-dowrn of the old conception of