Chapter 1: Fundamentals of Human Action (Part 1/3)
1
F UNDAMENTALS
OF H UMAN A CTION 1
1
1. The Concept of Action
T HE DISTINCTIVE AND CRUCIAL FEATURE in the study of man
.
is the concept of action Human action is defined simply as pur-
poseful behavior. It is therefore sharply distinguishable from
those observed movements which, from the point of view of
man, are not purposeful. These include all the observed
movements of inorganic matter and those types of human
behavior that are purely reflex, that are simply involuntary
responses to certain stimuli. Human action, on the other
hand, can be meaningfully interpreted by other men, for it is
governed by a certain purpose that the actor has in view. The
2
purpose of a man's act is his end ; the desire to achieve this
end is the man's motive for instituting the action.
[P UBLISHER S OTE : Page numbers cited in parentheses within the
' N
text refer to the present edition.]
1 For further reading on this topic, the best source is the epochal work
of Ludwig von Mises, Human Action (New Haven, Conn.: Yale University
Press, 1949), pp. 1–143, and passim .
2 Cf. ibid ., p. 11; F.A. Hayek, "The Facts of the Social Sciences," in
Individualism and Economic Order (Chicago: University of Chicago Press,
1948), pp. 57–76; Hayek, The Counter-Revolution of Science (Glencoe, Ill.:
The Free Press, 1952), pp. 25–35; and Edith T. Penrose, "Biological
Analogies in the Theory of the Firm," American Economic Review, Decem-
ber, 1952, pp. 804–19, especially 818–19.
1
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2 Man, Economy, and State with Power and Market
All human beings act by virtue of their existence and their
3
nature as human beings. We could not conceive of human
beings who do not act purposefully, who have no ends in view
that they desire and attempt to attain. Things that did not act ,
that did not behave purposefully, would no longer be classified
as human.
It is this fundamental truth—this axiom of human action—
that forms the key to our study. The entire realm of praxeology
and its best developed subdivision, economics, is based on an
analysis of the necessary logical implications of this concept. 4
The fact that men act by virtue of their being human is indis-
putable and incontrovertible. To assume the contrary would be
an absurdity. The contrary—the absence of motivated behav-
ior—would apply only to plants and inorganic matter. 5
2. First Implications of the Concept
The first truth to be discovered about human action is that it
can be undertaken only by individual "actors." Only individuals have
ends and can act to attain them. There are no such things as ends
of or actions by "groups," "collectives," or "States," which do not
take place as actions by various specific individuals. "Societies" or
3 Cf. Aristotle, Ethica Nicomachea , Bk. I, especially ch. vii.
4 This chapter consists solely of a development of the logical implica-
tions of the existence of human action. Future chapters—the further parts
of the structure—are developed with the help of a very small number of
subsidiary assumptions. Cf. Appendix below and Murray N. Rothbard,
"Praxeology: Reply to Mr. Schuller," American Economic Review, December,
1951, pp. 943–46; and "In Defense of 'Extreme Apriorism,'" Southern Eco-
nomic Journal, January, 1957, pp. 314–20.
5 There is no need to enter here into the difficult problem of animal
behavior, from the lower organisms to the higher primates, which might be
considered as on a borderline between purely reflexive and motivated
behavior. At any rate, men can understand (as distinguished from merely
observe) such behavior only in so far as they can impute to the animals
motives that they can understand.
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Fundamentals of Human Action 3
"groups" have no independent existence aside from the actions
of their individual members. Thus, to say that "governments"
act is merely a metaphor; actually, certain individuals are in a
certain relationship with other individuals and act in a way that
they and the other individuals recognize as "governmental." 6
The metaphor must not be taken to mean that the collective
institution itself has any reality apart from the acts of various
individuals. Similarly, an individual may contract to act as an
agent in representing another individual or on behalf of his
family. Still, only individuals can desire and act. The existence
of an institution such as government becomes meaningful only
through influencing the actions of those individuals who are
and those who are not considered as members. 7
In order to institute action, it is not sufficient that the indi-
vidual man have unachieved ends that he would like to fulfill. He
must also expect that certain modes of behavior will enable him to attain
his ends. A man may have a desire for sunshine, but if he realizes
that he can do nothing to achieve it, he does not act on this desire.
He must have certain ideas about how to achieve his ends. Action
thus consists of the behavior of individuals directed towards ends
in ways that they believe will accomplish their purpose. Action
requires an image of a desired end and "technological ideas" or
plans on how to arrive at this end.
Men find themselves in a certain environment , or situation . It
is this situation that the individual decides to change in some
way in order to achieve his ends. But man can work only with
the numerous elements that he finds in his environment, by
rearranging them in order to bring about the satisfaction of his
6 To say that only individuals act is not to deny that they are influenced
in their desires and actions by the acts of other individuals, who might be
fellow members of various societies or groups. We do not at all assume, as
some critics of economics have charged, that individuals are "atoms" iso-
lated from one another.
7 Cf. Hayek, Counter-Revolution of Science , p. 34. Also cf. Mises, Human
Action , p. 42.
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4 Man, Economy, and State with Power and Market
ends. With reference to any given act, the environment external
to the individual may be divided into two parts: those elements
which he believes he cannot control and must leave unchanged,
and those which he can alter (or rather, thinks he can alter) to
arrive at his ends. The former may be termed the general condi-
tions of the action; the latter, the means used. Thus, the individ-
ual actor is faced with an environment that he would like to
change in order to attain his ends. To act, he must have techno-
logical ideas about how to use some of the elements of the envi-
ronment as means , as pathways, to arrive at his ends. Every act
must therefore involve the employment of means by individual
actors to attempt to arrive at certain desired ends. In the exter-
nal environment, the general conditions cannot be the objects
of any human action; only the means can be employed in
action. 8
All human life must take place in time . Human reason can-
not even conceive of an existence or of action that does not take
place through time. At a time when a human being decides to
act in order to attain an end, his goal, or end, can be finally and
completely attained only at some point in the future. If the
desired ends could all be attained instantaneously in the present,
then man's ends would all be attained and there would be no
reason for him to act; and we have seen that action is necessary
to the nature of man. Therefore, an actor chooses means from
his environment, in accordance with his ideas, to arrive at an
expected end, completely attainable only at some point in the
future. For any given action, we can distinguish among three
periods of time involved: the period before the action, the time
absorbed by the action, and the period after the action has been
completed. All action aims at rendering conditions at some time
in the future more satisfactory for the actor than they would
have been without the intervention of the action.
8 Cf. Talcott Parsons, The Structure of Social Action (Glencoe, Ill.: The
Free Press, 1949), pp. 44ff.
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Fundamentals of Human Action 5
A man's time is always scarce. He is not immortal; his time
on earth is limited. Each day of his life has only 24 hours in
which he can attain his ends. Furthermore, all actions must take
place through time. Therefore time is a means that man must
use to arrive at his ends. It is a means that is omnipresent in all
human action.
Action takes place by choosing which ends shall be satisfied
by the employment of means. Time is scarce for man only
because whichever ends he chooses to satisfy, there are others
that must remain unsatisfied. When we must use a means so
that some ends remain unsatisfied, the necessity for a choice
among ends arises. For example, Jones is engaged in watching a
baseball game on television. He is faced with the choice of
a
spending the next hour in: ( ) continuing to watch the baseball
game, ( )playing bridge, or ( ) going for a drive. He would like
c
b
to do all three of these things, but his means (time) is insuffi-
cient. As a result, he must choose ; one end can be satisfied, but
the others must go unfulfilled. Suppose that he decides on
course A. This is a clear indication that he has ranked the satis-
faction of end Ahigher than the satisfaction of endsB or C .
From this example of action, many implications can be
deduced. In the first place, all means are scarce, i.e., limited with
respect to the ends that they could possibly serve. If the means
are in unlimited abundance, then they need not serve as the
object of attention of any human action. For example, air in
most situations is in unlimited abundance. It is therefore not a
means and is not employed as a means to the fulfillment of ends.
It need not be allocated, as time is, to the satisfaction of the
more important ends, since it is sufficiently abundant for all
human requirements. Air, then, though indispensable, is not a
means, but a general condition of human action and human wel-
fare.
Secondly, these scarce means must be allocated by the actor
to serve certain ends and leave other ends unsatisfied. This act
of choice may be called economizing the means to serve the most
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6 Man, Economy, and State with Power and Market
desired ends. Time, for example, must be economized by the
actor to serve the most desired ends. The actor may be inter-
preted as ranking his alternative ends in accordance with their
value to him. This scaling of ends may be described as assigning
ranks of value to the ends by the actor, or as a process of valua-
tion . Thus, suppose that Jones ranked his alternative ends for
the use of an hour of time as follows:
(First) 1. Continuing to watch the baseball
game
(Second) 2. Going for a drive
(Third) 3. Playing bridge
This was his scale of values or scale of preferences . The supply of
means (time) available was sufficient for the attainment of only
one of these ends, and the fact that he chose the baseball game
shows that he ranked that highest (or first). Suppose now that
he is allocating two hours of his time and can spend an hour on
each pursuit. If he spends one hour on the game and then a sec-
ond hour on the drive, this indicates that his ranking of prefer-
ences is as above. The lowest-ranking end—playing bridge—
goes unfulfilled. Thus, the larger the supply of means available,
the more ends can be satisfied and the lower the rank of the
ends that must remain unsatisfied.
Another lesson to be derived is that action does not necessar-
ily mean that the individual is "active" as opposed to "passive,"
in the colloquial sense. Action does not necessarily mean that an
individual must stop doing what he has been doing and do
something else. He also acts, as in the above case, who chooses
to continue in his previous course, even though the opportunity
to change was open to him. Continuing to watch the game is
just as much action as going for a drive.
Furthermore, action does not at all mean that the individual
must take a great deal of time in deliberating on a decision to
act. The individual may make a decision to act hastily, or after
great deliberation, according to his desired choice. He may
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Fundamentals of Human Action 7
decide on an action coolly or heatedly; none of these courses
affects the fact that action is being taken. 9
Another fundamental implication derived from the exis-
tence of human action is the uncertainty of the future. This must
be true because the contrary would completely negate the pos-
sibility of action. If man knew future events completely, he
would never act, since no act of his could change the situation.
Thus, the fact of action signifies that the future is uncertain to
the actors. This uncertainty about future events stems from two
basic sources: the unpredictability of human acts of choice, and
insufficient knowledge about natural phenomena. Man does not
know enough about natural phenomena to predict all their
future developments, and he cannot know the content of future
human choices. All human choices are continually changing as
a result of changing valuations and changing ideas about the
most appropriate means of arriving at ends. This does not
mean, of course, that people do not try their best to estimate
future developments. Indeed, any actor, when employing
means, estimates that he will thus arrive at his desired goal. But
he never has certain knowledge of the future. All his actions are
of necessity speculations based on his judgment of the course of
future events. The omnipresence of uncertainty introduces the
ever-present possibility of error in human action. The actor may
find, after he has completed his action, that the means have
been inappropriate to the attainment of his end.
To sum up what we have learned thus far about human
action: The distinguishing characteristic of human beings is
that all humans act . Action is purposeful behavior directed
toward the attainment of ends in some future period which will
involve the fulfillment of wants otherwise remaining unsatis-
fied. Action involves the expectation of a less imperfectly satis-
fied state as a result of the action. The individual actor chooses
9 Some writers have unfoundedly believed that praxeology and econom-
ics assume that all action is cool, calculating, and deliberate.
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8 Man, Economy, and State with Power and Market
to employ elements in his environment as means to the
expected achievement of his ends, economizing them by direct-
ing them toward his most valued ends (leaving his least valued
ones unsatisfied), and in the ways that his reason tells him are
most appropriate to attain these ends. His method—his chosen
means—may or may not turn out to be inappropriate.
3. Further Implications: The Means
The means to satisfy man's wants are called goods . These
goods are all the objects of economizing action. 10 Such goods
a
may all be classified in either of two categories: ( ) they are
immediately and directly serviceable in the satisfaction of the
b
actor's wants, or ( ) they may be transformable into directly
serviceable goods only at some point in the future—i.e., are indi-
rectly serviceable means. The former are called consumption goods
or consumers' goods or goods of the first order. The latter are called
producers' goods or factors of production or goods of higher order.
Let us trace the relations among these goods by consider-
ing a typical human end: the eating of a ham sandwich. Having a
desire for a ham sandwich, a man decides that this is a want
that should be satisfied and proceeds to act upon his judgment
of the methods by which a ham sandwich can be assembled.
The consumers' good is the ham sandwich at the point of being
eaten. It is obvious that there is a scarcity of this consumers'
good as there is for all direct means; otherwise it would always
be available, like air, and would not be the object of action. But
if the consumers' good is scarce and not obviously available,
how can it be made available? The answer is that man must
rearrange various elements of his environment in order to pro-
duce the ham sandwich at the desired place—the consumers'
good. In other words, man must use various indirect means as
10 The common distinction between "economic goods" and "free
goods" (such as air) is erroneous. As explained above, air is not a means, but
a general condition of human welfare, and is not the object of action.
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Fundamentals of Human Action 9
co-operating factors of production to arrive at the direct means.
This necessary process involved in all action is called production ;
it is the use by man of available elements of his environment as
indirect means—as co-operating factors—to arrive eventually at
a consumers' good that he can use directly to arrive at his end.
Let us consider the pattern of some of the numerous co-
operating factors that are involved in a modern developed econ-
omy to produce one ham sandwich as a consumers' good for the
use of one consumer. Typically, in order to produce a ham sand-
wich for Jones in his armchair, it is necessary for his wife to
expend energy in unwrapping the bread, slicing the ham, plac-
ing the ham between bread slices, and carrying it to Jones. All
this work may be called the labor of the housewife. The co-oper-
ating factors that are directly necessary to arrive at the con-
sumers' good are, then: the housewife's labor, bread in the
kitchen, ham in the kitchen, and a knife to slice the ham. Also
needed is the land on which to have room to live and carry on
these activities. Furthermore, this process must, of course, take
time , which is another indispensable co-operating factor. The
above factors may be called first-order producers' goods , since, in
this case, these co-operate in the production of the consumers'
good. Many of the first-order producers' goods, however, are
also unavailable in nature and must be produced themselves, with
the help of other producers' goods. Thus, bread in the kitchen
must be produced with the co-operation of the following fac-
tors: bread-in-retail-shop and housewife's labor in carrying it (plus
the ever-present land-as-standing-room, and time). In this pro-
cedure, these factors are second-order producers' goods, since
they co-operate in producing first-order goods. Higher-order
factors are those co-operating in the production of factors of
lower order.
Thus, any process (or structure ) of production may be ana-
lyzed as occurring in different stages . In the earlier or "higher"
stages, producers' goods must be produced that will later co-
operate in producing other producers' goods that will finally
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10 Man, Economy, and State with Power and Market
co-operate in producing the desired consumers' good. Hence, in
a developed economy, the structure of production of a given
consumers' good might be a very complex one and involve
numerous stages.
Important general conclusions can, however, be drawn that
apply to all processes of production. In the first place, each stage
of production takes time . Secondly, the factors of production
may all be divided into two classes: those that are themselves pro-
duced, and those that are found already available in nature—inman's
environment . The latter may be used as indirect means without
having been previously produced; the former must first be pro-
duced with the aid of factors in order to aid in the later (or
"lower") stages of production. The former are the produced fac-
tors of production ; the latter are the original factors of production .
The original factors may, in turn, be divided into two classes: the
expenditure of human energy , and the use of nonhuman elements pro-
vided by nature . The first is called Labor ; the latter is Nature or
Land. 11 Thus, the classes of factors of production are Labor,
Land, and the produced factors, which are termed Capital Goods.
Labor and Land, in one form or another, enter into each
stage of production. Labor helps to transform seeds into wheat,
wheat into flour, pigs into ham, flour into bread, etc. Not only
is Labor present at every stage of production, but so also is
Nature. Land must be available to provide room at every stage
of the process, and time, as has been stated above, is required
for each stage. Furthermore, if we wish to trace each stage of
production far enough back to original sources, we must arrive
at a point where only labor and nature existed and there were
no capital goods. This must be true by logical implication, since
all capital goods must have been produced at earlier stages with
the aid of labor. If we could trace each production process far
11 The term "land" is likely to be misleading in this connection because
it is not used in the popular sense of the word. It includes such natural
resources as water, oil, and minerals.
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Fundamentals of Human Action 11
enough back in time, we must be able to arrive at the point—
the earliest stage—where man combined his forces with nature
unaided by produced factors of production. Fortunately, it is
not necessary for human actors to perform this task, since
action uses materials available in the present to arrive at desired
goals in the future , and there is no need to be concerned with
development in the past .
There is another unique type of factor of production that is
indispensable in every stage of every production process. This is
the "technological idea" of how to proceed from one stage to
another and finally to arrive at the desired consumers' good.
This is but an application of the analysis above, namely, that for
any action, there must be some plan or idea of the actor about
how to use things as means, as definite pathways, to desired
ends. Without such plans or ideas, there would be no action.
These plans may be called recipes ; they are ideas of recipes that
the actor uses to arrive at his goal. A recipe must be present at
each stage of each production process from which the actor pro-
ceeds to a later stage. The actor must have a recipe for trans-
forming iron into steel, wheat into flour, bread and ham into
sandwiches, etc.
The distinguishing feature of a recipe is that, once learned , it
generally does not have to be learned again. It can be noted and
remembered. Remembered, it no longer has to be produced; it
remains with the actor as an unlimited factor of production that
never wears out or needs to be economized by human action. It
becomes a general condition of human welfare in the same way
as air. 12
It should be clear that the end of the production process—
the consumers' good—is valued because it is a direct means of
satisfying man's ends. The consumers' good is consumed , and
this act of consumption constitutes the satisfying of human wants.
12 We shall not deal at this point with the complications involved in the
original learning of any recipe by the actor, which is the object of human
action.
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12 Man, Economy, and State with Power and Market
This consumers' good may be a material object like bread or an
immaterial one like friendship. Its important quality is not
whether it is material or not, but whether it is valued by man as
a means of satisfying his wants. This function of a consumers'
good is called its service in ministering to human wants. Thus,
the material bread is valued not for itself, but for its service in
satisfying wants; just as an immaterial thing, such as music or
medical care, is obviously valued for such service. All these serv-
ices are "consumed" to satisfy wants. "Economic" is by no
means equivalent to "material."
It is also clear that the factors of production—the various
higher-order producers' goods— are valued solely because of their
anticipated usefulness in helping to produce future consumers' goods or
to produce lower-order producers' goods that will help to bring about
consumers' goods. The valuation of factors of production is
derived from actors' evaluation of their products (lower stages),
all of which eventually derive their valuation from the end
result—the consumers' good. 13
Furthermore, the omnipresent fact of the scarcity of con-
sumers' goods must be reflected back in the sphere of the fac-
tors of production. The scarcity of consumers' goods must
imply a scarcity of their factors. If the factors were unlimited,
then the consumers' goods would also be unlimited, which can-
not be the case. This does not exclude the possibility that some
factors, such as recipes, may be unlimited and therefore general
conditions of welfare rather than scarce indirect means. But
other factors at each stage of production must be in scarce sup-
ply, and this must account for the scarcity of the end product.
Man's endless search for ways to satisfy his wants—i.e., to
increase his production of consumers' goods —takes two forms:
increasing his available supply of factors of production and
improving his recipes.
13 Cf. Carl Menger, Principles of Economics (Glencoe, Ill.: The Free Press,
1950), pp. 51–67.
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Fundamentals of Human Action 13
Although it has seemed evident that there are several co-
operating factors at each stage of production, it is important to
realize that for each consumers' good there must always be more
than one scarce factor of production. This is implied in the very exis-
tence of human action. It is impossible to conceive of a situation
where only one factor of production produces a consumers'
good or even advances a consumers' good from its previous stage
of production. Thus, if the sandwich in the armchair did not
require the co-operating factors at the previous stage (labor of
preparation, carrying, bread, ham, time, etc.), then it would
always be in the status of a consumers' good—sandwich-in-the-
armchair. To simplify the example, let us suppose the sandwich
already is prepared and in the kitchen. Then, to produce a con-
sumers' good from this stage forward requires the following fac-
tors: (1) the sandwich; (2) carrying it to the armchair; (3) time;
(4) the land available. If we assume that it required only one fac-
tor—the sandwich—then we would have to assume that the
sandwich was magically and instantaneously moved from kitchen
to armchair without effort. But in this case, the consumers' good
would not have to be produced at all, and we would be in the
impossible assumption of Paradise. Similarly, at each stage of the
productive process, the good must have been produced by at
least more than one (higher-order) scarce co-operating factor;
otherwise this stage of production could not exist at all.
4. Further Implications: Time
Time is omnipresent in human action as a means that must
be economized. Every action is related to time as follows:
. . . A is the period before the beginning of the action; is the
A
point in time at which the action begins; AB is the period during
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14 Man, Economy, and State with Power and Market
which the action occurs; is the point at which the action ends;
B
and B . . . is the period after the end of the action.
AB is defined as the period of production —the period from the
beginning of the action to the time when the consumers' good
is available. This period may be divided into various stages, each
itself taking a period of time. The time expended during the
period of production consists of the time during which labor
energy is expended ( or working time ) and maturing time , i.e., time
required without the necessity of concurrent expenditure of
labor. An obvious example is the case of agriculture. There
might be six months between the time the soil is tilled and the
time the harvest is reaped. The total time during which labor
must be expended may be three weeks, while the remaining
time of over five months consists of the time during which the
crop must mature and ripen by the processes of nature. Another
example of a lengthy maturing time is the aging of wine to
improve its quality.
Clearly, each consumers' good has its own period of pro-
duction. The differences between the time involved in the
periods of production of the various goods may be, and are,
innumerable.
One important point that must be emphasized when
considering action and the period of production is that acting
man does not trace back past production processes to their orig-
inal sources. In the previous section, we traced back consumers'
goods and producers' goods to their original sources, demon-
strating that all capital goods were originally produced solely by
labor and nature. Acting man, however, is not interested in past
processes, but only in using presently available means to achieve
anticipated future ends. At any point in time, when he begins
the action (say ), he has available to him: labor, nature-given
A
elements, and previously produced capital goods . He begins the
action at expecting to reach his end at B. For him , the period
A
of production is AB , since he is not concerned with the amount
of time spent in past production of his capital goods or in the
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Fundamentals of Human Action 15
methods by which they were produced. 14 Thus, the farmer
about to use his soil to grow crops for the coming season does
not worry about whether or to what extent his soil is an origi-
nal, nature-given factor or is the result of the improvements of
previous land-clearers and farmers. He is not concerned about
the previous time spent by these past improvers. He is con-
cerned only with the capital (and other) goods in the present
and the future. This is the necessary result of the fact that action
occurs in the present and is aimed at the future. Thus, acting
man considers and values the factors of production available in
the present in accordance with their anticipated services in the
future production of consumers' goods, and never in accor-
dance with what has happened to the factors in the past.
A fundamental and constant truth about human action is that
man prefers his end to be achieved in the shortest possible time. Given
the specific satisfaction, the sooner it arrives, the better. This
results from the fact that time is always scarce, and a means to
be economized. The sooner any end is attained, the better.
Thus, with any given end to be attained, the shorter the period
of action, i.e., production, the more preferable for the actor.
This is the universal fact of time preference. At any point of time,
and for any action, the actor most prefers to have his end
attained in the immediate present. Next best for him is the
immediate future, and the further in the future the attainment
of the end appears to be, the less preferable it is. The less waiting
time, the more preferable it is for him. 15
14 For each actor, then, the period of production is equivalent to his
waiting time —the time that he must expect to wait for his end after the
commencement of his action.
15 Time preference may be called the preference for present satisfaction
over future satisfaction or present good over future good , provided it is
remembered that it is the same satisfaction (or "good") that is being com-
pared over the periods of time. Thus, a common type of objection to the
assertion of universal time preference is that, in the wintertime, a man
will prefer the delivery of ice the next summer (future) to delivery of ice
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16 Man, Economy, and State with Power and Market
Time enters into human action not only in relation to the
waiting time in production, but also in thelength of time in which
the consumers' good will satisfy the wants of the consumer. Some con-
sumers' goods will satisfy his wants, i.e., attain his ends, for a
short period of time, others for a longer period. They can be
consumed for shorter or longer periods. This may be included
in the diagram of any action, as shown in Figure 2. This length
of time, BC , is the duration of serviceableness of the consumers'
good. It is the length of the time the end served by the con-
sumers' good continues to be attained. This duration of ser-
viceableness differs for each consumers' good. It may be four
hours for the ham sandwich, after which period of time the
actor desires other food or another sandwich. The builder of a
house may expect to use it to serve his wants for 10 years. Obvi-
ously, the expected durative power of the consumers' good to
serve his end will enter into the actor's plans. 16
Clearly, all other things being equal, the actor will prefer a
consumers' good of greater durability to one of lesser, since the
former will render more total service. On the other hand, if the
in the present. This, however, confuses the concept "good" with the
material properties of a thing, whereas it actually refers to subjective sat-
isfactions. Since ice-in-the-summer provides different (and greater) satis-
factions than ice-in-the-winter, they are not the same, but different goods.
In this case, it is different satisfactions that are being compared, despite
the fact that the physical property of the thing may be the same.
16 It has become the custom to designate consumer goods with a longer
duration of serviceableness as durable goods , and those of shorter duration as
nondurable goods . Obviously, however, there are innumerable degrees of
durability, and such a separation can only be unscientific and arbitrary.
= Page 81 =
Fundamentals of Human Action 17
actor values the total service rendered by two consumers' goods
equally, he will, because of time preference, choose the less
durable good since he will acquire its total services sooner than
the other. He will have to wait less for the total services of the
less durable good.
The concepts of period of production and duration of
serviceableness are present in all human action. There is also a
third time-period that enters into action. Each person has a
general time-horizon, stretching from the present into the
future, for which he plans various types of action. Whereas
period of production and duration of serviceableness refer to
specific consumers' goods and differ with each consumers'
good, the period of provision (the time-horizon) is the length of
future time for which each actor plans to satisfy his wants. The
period of provision, therefore, includes planned action for a
considerable variety of consumers' goods, each with its own
period of production and duration. This period of provision dif-
fers from actor to actor in accordance with his choice. Some
people live from day to day, taking no heed of later periods of
time; others plan not only for the duration of their own lives,
but for their children as well.
5. Further Implications
A.E NDS AND V ALUES
All action involves the employment of scarce means to attain
the most valued ends. Man has the choice of using the scarce
means for various alternative ends, and the ends that he chooses
are the ones he values most highly. The less urgent wants are
those that remain unsatisfied. Actors can be interpreted as rank-
ing their ends along a scale of values, or scale of preferences.
These scales differ for each person, both in their content and in
their orders of preference. Furthermore, they differ for the
same individual at different times. Thus, at some other point in
time, the actor mentioned in section 2 above might choose to
go for a drive, or to go for a drive and then to play bridge,
= Page 82 =
18 Man, Economy, and State with Power and Market
rather than to continue watching the game. In that case, the
ranking on his preference scale shifts to this order:
(First) 1. Going for a drive
(Second) 2. Playing bridge
(Third) 3. Continuing to watch baseball game
Moreover, a new end might have been introduced in the mean-
time, so that the actor might enjoy going to a concert, and this
may change his value scale to the following:
(First) 1. Going for a drive
(Second) 2. Going to a concert
(Third) 3. Playing bridge
(Fourth) 4. Continuing to watch baseball game
The choice of which ends to include in the actor's value scale
and the assignment of rank to the various ends constitute the
process of value judgment. Each time the actor ranks and
chooses between various ends, he is making a judgment of their
value to him.
It is highly useful to assign a name to this value scale held by
all human actors. We are not at all concerned with the specific
content of men's ends, but only with the fact that various ends are
ranked in the order of their importance. These scales of prefer-
ence may be called happiness or welfare or utility or satisfaction or
contentment. Which name we choose for value scales is not
important. At any rate, it permits us to say, whenever an actor
has attained a certain end, that he has increased his state of satis-
faction, or his contentment, happiness, etc. Conversely, when
someone considers himself worse off, and fewer of his ends are
being attained, his satisfaction, happiness, welfare, etc., have
decreased .
It is important to realize that there is never any possibility
of measuring increases or decreases in happiness or satisfaction.
Not only is it impossible to measure or compare changes in the
= Page 83 =
Fundamentals of Human Action 19
satisfaction of different people; it is not possible to measure
changes in the happiness of any given person. In order for any
measurement to be possible, there must be an eternally fixed
and objectively given unit with which other units may be com-
pared. There is no such objective unit in the field of human val-
uation. The individual must determine subjectively for himself
whether he is better or worse off as a result of any change. His
preference can only be expressed in terms of simple choice, or
rank . Thus, he can say, "I am better off" or "I am happier"
because he went to a concert instead of playing bridge (or "I will
be better off" for going to the concert), but it would be com-
pletely meaningless for him to try to assign units to his prefer-
ence and say, "I am two and a half times happier because of this
choice than I would have been playing bridge." Two and a half
times what ? There is no possible unit of happiness that can be
used for purposes of comparison and, hence, of addition or mul-
tiplication. Thus, values cannot be measured; values or utilities
cannot be added, subtracted, or multiplied. They can only be
ranked as better or worse. A man may know that he is or will be
happier or less happy, but not by "how much," not by a meas-
urable quantity. 17
All action is an attempt to exchange a less satisfactory state of
affairs for a more satisfactory one. The actor finds himself (or ex-
pects to find himself) in a nonperfect state, and, by attempting
to attain his most urgently desired ends, expects to be in a bet-
ter state. He cannot measure the gain in satisfaction, but he
does know which of his wants are more urgent than others, and
17 Accordingly, the numbers by which ends are ranked on value scales
are ordinal , not cardinal , numbers. Ordinal numbers are only ranked; they
cannot be subject to the processes of measurement. Thus, in the above
example, all we can say is that going to a concert is valued more than play-
ing bridge, and either of these is valued more than watching the game.
We cannot say that going to a concert is valued "twice as much" as watch-
ing the game; the numbers two and four cannot be subject to processes of
addition, multiplication, etc.
= Page 84 =
20 Man, Economy, and State with Power and Market
he does know when his condition has improved. Therefore, all
X
action involves exchange —an exchange of one state of affairs, ,
for , which the actor anticipates will be a more satisfactory one
Y
(and therefore higher on his value scale). If his expectation turns
out to be correct, the value of on his preference scale will be
Y
higher than the value of , and he has made a net gain in his
X
state of satisfaction or utility. If he has been in error, and the
value of the state that he has given up— —is higher than the
X
Y
value of , he has suffered a net loss . This psychic gain (or profit )
and loss cannot be measured in terms of units, but the actor
always knows whether he has experienced psychic profit or psy-
chic loss as a result of an action-exchange. 18
Human actors value means strictly in accordance with their
valuation of the ends that they believe the means can serve. Obvi-
ously, consumers' goods are graded in value in accordance with
the ends that men expect them to satisfy. Thus, the value placed
on the enjoyment contributed by a ham sandwich or a house will
determine the value a man will place on the ham sandwich or the
house themselves. Similarly, producers' goods are valued in
accordance with their expected contribution in producing con-
sumers' goods. Higher-order producers' goods are valued in
accordance with their anticipated service in forming lower-order
producers' goods. Hence, those consumers' goods serving to
attain more highly valued ends will be valued more highly than
those serving less highly valued ends, and those producers' goods
serving to produce more highly valued consumers' goods will
themselves be valued more highly than other producers' goods.
Thus, the process of imputing values to goods takes place in the
opposite direction to that of the process of production. Value
proceeds from the ends to the consumers' good to the various
18 An example of suffering a loss as a result of an erroneous action
would be going to the concert and finding that it was not at all enjoyable.
The actor then realizes that he would have been much happier continu-
ing to watch the game or playing bridge.
= Page 85 =
Fundamentals of Human Action 21
first-order producers' goods, to the second-order producers'
19
goods, etc. The original source of value is the ranking of ends
by human actors, who then impute value to consumers' goods,
and so on to the orders of producers' goods, in accordance with
their expected ability to contribute toward serving the various
ends. 20
B. T HE L AW OF M ARGINAL U TILITY
It is evident that things are valued as means in accordance
with their ability to attain ends valued as more or less urgent.
Each physical unit of a means (direct or indirect) that enters into
human action is valued separately. Thus, the actor is interested
in evaluating only those units of means that enter, or that he
considers will enter, into his concrete action. Actors choose
between, and evaluate, not "coal" or "butter" in general, but
specific units of coal or butter. In choosing between acquiring
cows or horses, the actor does not choose between the class of
cows and the class of horses, but between specific units of
them—e.g., two cows versus three horses. Each unit that enters
into concrete action is graded and evaluated separately. Only
when several units together enter into human action are all of
them evaluated together.
The processes that enter into valuation of specific units of dif-
ferent goods may be illustrated in this example: 21 An individual
possessing two cows and three horses might have to choose
between giving up one cow or one horse. He may decide in this
case to keep the horse, indicating that in this state of his stock,
19 A large part of this book is occupied with the problem of how this
process of value imputation can be accomplished in a modern, complex
economy.
20 This is the solution of a problem that plagued writers in the economic
field for many years: the source of the value of goods.
21 Cf. Ludwig von Mises, The Theory of Money and Credit (New Haven:
Yale University Press, 1953), p. 46.
= Page 86 =
22 Man, Economy, and State with Power and Market
a horse is more valuable to him than a cow. On the other hand,
he might be presented with the choice of keeping either his
entire stock of cows or his stock of horses. Thus, his stable and
cowshed might catch fire, and he is presented with the choice of
saving the inhabitants of one or of the other building. In this
case, two cows might be more valuable to him than three
horses, so that he will prefer to save the cows. When deciding
between units of his stock, the actor may therefore prefer good
Y
Y
X to good , while he may choose good if he must act upon
his whole stock of each good .
This process of valuation according to the specific units
involved provides the solution for the famous "value paradox"
which puzzled writers for centuries. The question was: How
can men value bread less than platinum, when "bread" is obvi-
ously more useful than "platinum"? The answer is that acting
man does not evaluate the goods open to him by abstract
classes, but in terms of the specific units available. He does not
wonder whether "bread-in-general" is more or less valuable to
him than "platinum-in-general," but whether, given the present
available stock of bread and platinum, a "loaf of bread" is more
or less valuable to him than "an ounce of platinum." That, in
most cases, men prefer the latter is no longer surprising. 22
As has been explained above, value, or utility, cannot be
measured, and therefore cannot be added, subtracted, or mul-
tiplied. This holds for specific units of the same good in the
same way as it holds for all other comparisons of value. Thus,
if butter is an object serving human ends, we know that two
pounds of butter will be valued more highly than one pound.
This will be true until a point is reached when the butter is
available in unlimited quantities to satisfy human wants and
22 Also cf. T.N. Carver, The Distribution of Wealth (New York: Macmil-
lan & Co., 1904), pp. 4–12. See below for a further discussion of the influ-
ences on man's valuation of specific units resulting from the size of the
available stock.
= Page 87 =
Fundamentals of Human Action 23
will then be transferred from the status of a means to that of a
general condition of human welfare. However, we cannot say
that two pounds of butter are "twice as useful or valuable" as
one pound.
What has been involved in this key concept of "specific
units of a good"? In these examples, the units of the good have
been interchangeable from the point of view of the actor . Thus, any
concrete pound of butter was evaluated in this case perfectly
equally with any other pound of butter. Cow A and cow B were
valued equally by the individual, and it made no difference to
him which cow he was faced with the choice of saving. Similarly,
horse A was valued equally with horse B and with horse C, and
the actor was not concerned which particular horse he had to
choose. When a commodity is in such a way available in specific
homogeneous units equally capable of rendering the same service to the
actor , this available stock is called a supply . A supply of a good is
available in specific units each perfectly substitutable for every
other. The individual above had an available supply of two cows
and three horses, and a supply of pounds of butter.
What if one pound of butter was considered by the actor as
of better quality than another pound of butter? In that case, the
two "butters" are really different goods from the point of view of
the actor and will be evaluated differently. The two pounds of
butter are now two different goods and are no longer two units
of a supply of one good. Similarly, the actor must have valued
each horse or each cow identically. If he preferred one horse to
each of the others, or one cow to the other, then they are no
longer units of the supply of the same good. No longer are his
horses interchangeable for one another. If he grades horse A
above the others and regards horses B and C indifferently, then
he has supplies of two different goods (omitting the cows): say,
"Grade A horses—one unit"; and "Grade B horses—two units."
If a specific unit is differently evaluated from all other units,
then the supply of that good is only one unit.
= Page 88 =
24 Man, Economy, and State with Power and Market
Here again, it is very important to recognize that what is
significant for human action is not the physical property of a
good, but the evaluation of the good by the actor. Thus, physi-
cally there may be no discernible difference between one pound
of butter and another, or one cow and another. But if the actor
chooses to evaluate them differently, they are no longer part of
the supply of the same good.
The interchangeability of units in the supply of a good does
not mean that the concrete units are actually valued equally.
They may and will be valued differently whenever their position
in the supply is different. Thus, suppose that the isolated individ-
ual successively finds one horse, then a second, then a third.
Each horse may be identical and interchangeable with the oth-
ers. The first horse will fulfill the most urgent wants that a horse
can serve; this follows from the universal fact that action uses
scarce means to satisfy the most urgent of the not yet satisfied
wants. When the second horse is found, he will be put to work
satisfying the most urgent of the wants remaining. These wants,
however, must be ranked lower than the wants that the previous
horse has satisfied. Similarly, the third horse acquired might be
capable of performing the same service as the others, but he will
be put to work fulfilling the highest of the remaining wants—
which, however, will yet be lower in value than the others.
The important consideration is the relation between the unit
to be acquired or given up and the quantity of supply (stock) already
available to the actor. Thus, if no units of a good (whatever the
good may be) are available, the first unit will satisfy the most
urgent wants that such a good is capable of satisfying. If to this
supply of one unit is added a second unit, the latter will fulfill
the most urgent wants remaining, but these will be less urgent
than the ones the first fulfilled. Therefore, the value of the sec-
ond unit to the actor will be less than the value of the first unit.
Similarly, the value of the third unit of the supply (added to a
stock of two units) will be less than the value of the second unit.
It may not matter to the individual which horse is chosen first
and which second, or which pounds of butter he consumes, but
= Page 89 =
Fundamentals of Human Action 25
those units which he does use first will be the ones that he val-
ues more highly. Thus, for all human actions, as the quantity of the
supply (stock) of a good increases, the utility (value) of each additional
unit decreases.
Let us now consider a supply from the point of view of a
possible decrease , rather than an increase. Assume that a man has
a supply of six (interchangeable) horses. They are engaged in
fulfilling his wants. Suppose that he is now faced with the neces-
sity of giving up one horse. It now follows that this smaller stock
of means is not capable of rendering as much service to him as
the larger supply. This stems from the very existence of the
good as a means. 23 Therefore, the utility of X units of a good is
always greater than the utility of X – 1 units. Because of the
impossibility of measurement, it is impossible to determine by
how much greater one value is than the other. Now, the question
arises: Which utility, which end, does the actor give up because
he is deprived of one unit? Obviously, he gives up the least
urgent of the wants which the larger stock would have satisfied. Thus,
if the individual was using one horse for pleasure riding, and he
considers this the least important of his wants that were fulfilled
by the six horses, the loss of a horse will cause him to give up
pleasure riding.
The principles involved in the utility of a supply may be il-
lustrated in the following value-scale diagram (Figure 3). We
are considering any given means, which is divisible into homo-
geneous units of a supply, each interchangeable and capable of
giving service equal to that of the other units. The supply must
be scarce in relation to the ends that it is capable of fulfilling;
otherwise it would not be a good, but a condition of human
welfare. We assume for simplicity that there are 10 ends which
23 This would not be true only if the "good" were not a means, but a
general condition of human welfare, in which case one less unit of supply
would make no difference for human action. But in that case it would not
be a good , subject to the economizing of human action.
= Page 90 =
26 Man, Economy, and State with Power and Market
the means could fulfill, and that each unit of means is capable
of serving one of the ends. If the supply of the good is 6 units,
then the first six ends, ranked in order of importance by the
valuing individual, are the ones that are being satisfied. Ends
ranked 7–10 remain unsatisfied. If we assume that the stock
arrived in successive units, then the first unit went to satisfy end
1, the second unit was used to serve end 2, etc. The sixth unit
was used to serve end 6. The dots indicate how the units were
used for the different ends, and the arrow indicates the direc-
tion the process took, i.e., that the most important ends were
served first; the next, second, etc. The diagram illustrates the
aforementioned laws that the utility (value) of more units is
greater than the utility of fewer units and that the utility of each
successive unit is less as the quantity of the supply increases.
Now, suppose the actor is faced with the necessity of giving
up one unit of his stock. His total will be 5 instead of 6 units.
Obviously, he gives up satisfying the end ranked sixth, and con-
tinues to satisfy the more important ends 1–5. As a result of the
interchangeability of units, it does not matter to him which of
= Page 91 =
Fundamentals of Human Action 27
the six units he must lose; the point is that he will give up serv-
ing this sixth end. Since action considers only the present and
the future not the past, it does not matter to him which units he
acquired first in the past. He deals only with his presently avail-
able stock. In other words, suppose that the sixth horse that he
had previously acquired (named "Seabiscuit") he had placed in
the service of pleasure riding. Suppose that he now must lose
another horse ("Man o' War") which had arrived earlier, and
which was engaged in the more important duty (to him) of lead-
ing a wagon. He will still give up end 6 by simply transferring
Seabiscuit from this function to the wagon-leading end. This
consequence follows from the defined interchangeability of
units and from disregard of past events which are of no conse-
quence for the present and the future.
Thus, the actor gives up the lowest-ranking want that the
original stock (in this case, six units) was capable of satisfying.
This one unit that he must consider giving up is called the mar-
ginal unit . It is the unit "at the margin." This least important
end fulfilled by the stock is known as the satisfaction provided by
the marginal unit, or the utility of the marginal unit —in short: the
marginal satisfaction, or marginal utility . If the marginal unit is
one unit, then the marginal utility of the supply is the end that
must be given up as the result of a loss of the unit. In Figure 3,
the marginal utility is ranked sixth among the ends. If the sup-
ply consisted of four units, and the actor were faced with the
necessity of giving up one unit, then the value of the marginal
unit, or the marginal utility , would have a rank of four. If the
stock consisted of one unit, and this had to be given up, the
value of the marginal unit would be one—the value of the high-
est-ranked end.
We are now in a position to complete an important law in-
dicated above, but with different phraseology: The greater the
supply of a good, the lower the marginal utility; the smaller the sup-
ply, the higher the marginal utility. This fundamental law of eco-
nomics has been derived from the fundamental axiom of human
= Page 92 =
28 Man, Economy, and State with Power and Market
action; it is the law of marginal utility, sometimes known as the
law of diminishing marginal utility . Here again, it must be
emphasized that "utility" is not a cardinal quantity subject to the
processes of measurement, such as addition, multiplication, etc.
It is a ranked number expressible only in terms of higher or lower
order in the preferences of men.
This law of marginal utility holds for all goods, regardless of
the size of the unit considered. The size of the unit will be the
one that enters into concrete human action, but whatever it is,
the same principle applies. Thus, if in certain situations, the
actor must consider only pairs of horses as the units to add or sub-
tract from his stock, instead of the individual horses, he will
construct a new and shorter scale of ends with fewer units of
supply to consider. He will then go through a similar process of
assigning means to serve ends and will give up the least valued
end should he lose a unit of supply. The ends will simply be
ranked in terms of the alternative uses of pairs of horses, instead
of single horses.
What if a good cannot be divided into homogeneous units
for purposes of action? There are cases where the good must be
treated as a whole in human action. Does the law of marginal
utility apply in such a case? The law does apply, since we then
treat the supply as consisting of one unit . In this case, the mar-
ginal unit is equal in size to the total supply possessed or desired
by the actor. The value of the marginal unit is equal to the first
rank of the ends which the total good could serve. Thus, if an indi-
vidual must dispose of his whole stock of six horses, or acquire
a stock of six horses together, the six horses are treated as one
unit. The marginal utility of his supply would then be equal to
the first-ranking end that the unit of six horses could supply.
If, as above, we consider the case of additions instead of de-
creases to stock, we recall that the law derived for this situation
was that as the quantity of supply increases, the utility of each
additional unit decreases. Yet this additional unit is precisely the
marginal unit . Thus, if instead of decreasing the supply from six
= Page 93 =
Fundamentals of Human Action 29
to five horses, we increase it from five to six, the value of the ad-
ditional horse is equal to the value of the sixth-ranking end—
say, pleasure riding. This is the same marginal unit, with the
same utility, as in the case of decreasing the stock from six to
five. Thus, the law derived previously was simply another form
of the law of marginal utility. The greater the supply of a good,
the lower the marginal utility; the smaller the supply, the higher
the marginal utility. This is true whether or not the marginal
unit is the unit of decrease of stock or the unit of addition to
stock, when these are considered by the actor. If a man's supply
of a good equals X units, and he is considering the addition of
one unit, this is the marginal unit. If his supply is X + 1 units,
and he is considering the loss of one unit, this too is his mar-
ginal unit, and its value is identical with the former (provided
that his ends and their ranking are the same in both cases).
We have dealt with the laws of utility as they apply to each
good treated in human action. Now we must indicate the
relationship among various goods. It is obvious that more than
one good exists in human action. This has already been defi-
nitely proven, since it was demonstrated that more than one fac-
tor of production, hence more than one good, must exist. Fig-
ure 4 below demonstrates the relationship between the various
goods in human action. Here the value scales of two goods are
Y
X
considered— and . For each good, the law of marginal util-
ity holds, and the relation between supply and value is revealed
in the diagram for each good. For simplicity, let us assume that
Y
X is horses and cows, and that the value scales representing
those held by the individual are as follows (horizontal lines are
drawn through each end to demonstrate the relationship in the
Y
ranking of the ends of the two goods): End -1 is ranked high-
X
est (say, cow one); then ends -1, -2, and -3 (horses one,
X
X
two, and three); -2; -3; -4; -4; -5; -5; -6; -7; -6; -
Y
Y
Y
X
X
Y
Y
X
X
Y
7.
Now, the man's value scales will reveal his choices involv-
ing alternatives of action in regard to these two goods. Suppose
= Page 94 =
30 Man, Economy, and State with Power and Market
Y
X
that his stock is: 3 (cows) and 4 (horses). He is faced with the
alternative of giving up either one cow or one horse. He will
choose the alternative that will deprive him of the least valued
end possible. Since the marginal utility of each good is equal to
the value of the least important end of which he would be
deprived, he compares the marginal utility of X with the marginal
X
X
utility of Y . In this case, the marginal unit of has a rank of -
Y
4, and the marginal unit of has a rank of -3. But the end -
Y
Y
3 is ranked higher on his value scale than -4. Hence, the mar-
X
Y
ginal utility of is in this case higher than (or greater than) the
X
marginal utility of . Since he will give up the lowest possible
utility, he will give up one unit of X.Thus, presented with a choice
of units of goods to give up, he will give up the good with units of low-
est marginal utility on his value scale. Suppose another example:
that his stock is three horses and two cows. He has the alterna-
tive of giving up 1 or 1 . In this case, the marginal utility of Y
Y
X
is ranked at -2, and that of X is ranked at -3. But -3 occu-
X
X
Y
pies a higher position on his value scale than -2, and therefore
Y
= Page 95 =
Fundamentals of Human Action 31
the marginal utility of is at this point lower than the marginal
Y
X
Y
utility of . He gives up a unit of .
The converse occurs if the man must choose between the
alternative of increasing his stock by either one unit of or one
X
unit of . Thus, suppose that his stock is four units of X and
Y
Y
four units of . He must choose between adding one horse or
one cow. He then compares the marginal utility of increase, i.e.,
the value of the most important of the not yet satisfied wants.
Y
X
Y
The marginal utility of is then ranked at -5; of at -5. But
X
X -5 ranks higher than -5 on his value scale, and he will there-
Y
fore choose the former. Thus, faced with the choice of adding units
of goods, he will choose the unit of highest marginal utility on his value
scale.
Another example: Previously, we saw that the man in a posi-
Y
X
tion of (4 , 3 ) would, if faced with the choice of giving up one
unit of either X or , give up the unit of , with a lower mar-
Y
X
X
ginal utility. In other words, he would prefer a position of (3 ,
Y
X
X
Y
3 ) to (4 , 2 ). Now suppose he is in a position of (3 , 3 ) and
Y
faced with the choice of adding one unit of X or one unit of .
Y
Since the marginal utility of the increased is greater than that
X
of , he will choose to add the unit of and to arrive at a posi-
X
Y
X
tion of (4 , 3 ) rather than (3 , 4 ). The reader can work out
X
Y
Y
the hypothetical choices for all the possible combinations of the
actor's stock.
It is evident that in the act of choosing between giving up or
adding units of either X or , the actor must have, in effect,
Y
placed both goods on a single, unitary value scale. Unless he
could place and on one value scale for comparison, he could
X
Y
not have determined that the marginal utility of the fourth unit
of X was higher than that of the fourth unit of . The very fact
Y
of action in choosing between more than one good implies that
the units of these goods must have been ranked for comparison
on one value scale of the actor. The actor may not and cannot
measure differences in utility, but he must be engaged in rank-
ing all the goods considered on one value scale. Thus, we
= Page 96 =
32 Man, Economy, and State with Power and Market
should actually consider the ends served by the two means as
ranked on one value scale as follows:
Ends (Ranked)
1 — 1
Y-
2 — -1
X
X
3 — -2
4 — -3
X
5 — -2
Y
6 — -3
Y
7 — -4
X
Y
8 — -4
X
9 — -5
Y
10 — -5
11 — -6
X
12 — -7
X
13 — -6
Y
Y
14 — -7
These principles permit of being extended from two to any
number of goods. Regardless of the number of goods, any man
will always have a certain combination of units of them in his
stock. He may be faced with the choice of giving up one unit of
any good that he might choose. By ranking the various goods
and the ends served by the relevant units, the actor will give up
the unit of that good of which the marginal utility to him is the
lowest. Similarly, with any given combination of goods in his
stock, and faced with the choice of adding one unit of any of the
goods available, the actor will choose that good whose marginal
utility of increase will be highest. In other words, all the goods
are ranked on one value scale in accordance with the ends they
serve.
If the actor has no units of some goods in his possession, this
X
does not affect the principle. Thus, if he has no units of or Y
in his possession, and he must choose between adding a unit of
= Page 97 =
Fundamentals of Human Action 33
Y
X or one unit of , he will choose the marginal unit of greatest
utility, in this case, . The principle is easily extended to the
Y
case of goods.
n
It must be reiterated here that value scales do not exist in a
void apart from the concrete choices of action. Thus, if the
Z
Y
actor has a stock of (3 , 4 , 2 , etc.), his choices for adding and
X
subtracting from stock take place in this region, and there is no
need for him to formulate hypothetical value scales to deter-
X
mine what his choices would have been if his stock were (6 ,
Z
Y
8 , 5 , etc.). No one can predict with certainty the course of his
choices except that they will follow the law of marginal utility,
which was deduced from the axiom of action.
The solution of the value paradox mentioned above is now
fully clear. If a man prefers one ounce of platinum to five loaves
of bread, he is choosing between units of the two goods based
on the supply available. On the basis of the available supply of
platinum and of bread, the marginal utility of a unit of platinum
is greater than the marginal utility of a unit of bread. 24
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