I see more clearly what I have by possessing a thing when Iimagine what would be the consequence if I ceased to have it. But this holds only under certain circumstances, namely, as regards a stock of goods of the same kind, where if, in imagination, I take away one good from the others, it is this one good alone and nothing else that is taken away. It does not hold in the case of a stock of heterogeneous and co-operating production goods, where if, in imagination, I remove one, I deprive the others also of a portion of their effect.
The full effect of all the elements in any productive combination can only be realised when these elements remain together undisturbed; it is therefore impossible to discover what value I receive and enjoy from this undisturbed possession, if Ibegin by assuming the dissolution of the combination, and then ask what still remains. The question must be put positively: What do I actually obtain from the goods as they stand at my disposal?
Those productive employments which stand first, -- the employments which are most desirable and would be first chosen --decide the value; not those which stand second, and would be taken up only in the exceptional case of some disturbance of the original combination. Two persons who are both in exactly the same circumstances, and whose judgment agrees as to the best arrangements for production, must obviously ascribe precisely the same value to their productive possessions, although one of them should have something better to fall back upon in case the first plan falls through. According to Menger, however, the values, in this latter case, would require to be assessed differently, and indeed the higher valuation would be that of the person who had the least to fall back upon, because to him it would be much more important that the first plan should not fall through.
The assumption of loss is sufficient if what is required is the dividing up of the return which the elements of one combination guarantee when put into other combinations; but it is of no use when what is wanted is to calculate as well the surplus by which the first-chosen combination excels all others. This surplus is left an undivided remainder of the return, and as regards it the problem of imputation is not solved, but comes up again for solution.(1*)It needs only a very slight turn to correct the error in Menger's theory. Every well-thought-out train of reasoning teaches by its very faults, as these faults also possess the first requisite of scientific insight, that is, clearness; and Menger's theory contains in itself the indication as to how the error may be corrected. The deciding element is not that portion of the return which is lost through the loss of a good, but that which is secured by its possession.(2*)NOTES:
1. Menger reckons this undivided residue to each separate factor instead of charging it to the entire amount, and thus the value comes out too high. In our example the surplus equals 1 (10-9).
Menger calculates it three times instead of only once; thus calculating two units too many, and showing a value of 12 where there is only a return of 10.
