Value
Say and Destutt de Tracy developed their value theories in the context of a long tradition of French economists - starting from Turgot - who put emphasis on the role of utility in the formation of prices.
Their reasoning was different, however. Like Turgot in Valeur et Monnaie, Destutt de Tracy started from the analysis of bilateral exchange: it allowed each individual to acquire a good whose utility was greater than that of the good that was traded. Turgot (1769, III, 91) observed that “trade between two men increases their respective wealth, in that they can receive a greater quantity of pleasure with the same faculties”. For him, this benefit came from the division of labour which allowed output to grow for both goods.[17] For Destutt de Tracy, the improvement could be explained by the fact that the satisfaction of both individuals - the total utility - increased. Essentially, like Condillac, Destutt de Tracy argued that trade was a productive activity. Say (1828-29, 312) rejected such a conclusion, contending that “the value that constitutes wealth... is not an arbitrary value that any individual retrieves from a good that he owns”.Turgot distinguished between two types of exchange rates: the fundamental price (“prix fondamental”) and the “current price” (“prix courant”). “The fundamental price is what the good costs to that who sells it, that is, the costs of raw materials, interest on advances, wages and operating costs” (Turgot 1767, 655 n). The current price is determined by supply and demand and tends to be equal to the fundamental price. In the first edition of Traite, Say made a similar distinction, namely natural value and exchange value. The distinction between the two types of value gradually became secondary, leading Say to simply maintain that the price of a good was determined by supply and demand. Destutt de Tracy opposed necessary value (“valeur naturelle et necessaire”) and market value (“valeur conventionnelle et venale”); however, his necessary value was different from Turgot’s fundamental price.
In Destutt de Tracy’s mind, the necessary value is only determined by the costs of the goods required to maintain the existence of the workers. The necessary value is therefore a minimum, unlike the fundamental price, which is the cost of production, including interest, around which the market value gravitates.What is the source of value?
In the first edition of the Traite, Say mainly developed his view of value from the Wealth of Nations: his development relies on the gravitation of the market price around the natural price. In the second edition, his analysis changed. Utility was now “the first base of the value of things” (Say 1814, 592), and the cost of production was the second. The link between the two is supply and demand. Say first studied the role of individual choices and the distribution of income in the relation between the price of a good and the demand for it. Individuals have different needs they rank according to their degree of importance for them; they satisfy first the most urgent ones, then those that are less so, and so on. However, to derive the total demand from individuals, the distribution of income must be taken into account. Say described it as a pyramid: only a few consumers are rich, many are poor. When the price is high, only a few persons can afford the good; when it was low, almost all are able to. On the other hand, Say (1826, 619) stressed that, when the demand for a good increases, the demand for productive services which are necessary to produce it and their prices increase as well. He concluded that, while some economists like Ricardo wrote that
the cost of production regulates the price of products, they were right in this sense that products are never sold for a long time at a price lower than their cost of production; but when they said that demand does not influence their value, they were wrong... demand influences the value of the productive services, increases the cost of production and rises the value of products without exceeding product costs.
(1826, 619)
The exchange process involves a vast circulation of values, but exchange does not form the source of value:
A mutual exchange indicates the value that men attach to what they own, in the time, in the place, in the type of society in which they live................................................................... This is
the reason why many people regarded exchange as the source of value and wealth, which it is not. It only allows you to determine value and wealth, by comparing it to other values, and particularly by reducing the various types of wealth to a common expression, to a certain quantity of a given product, just like any quantity of [money].
(Say 1819, 1107)
Say conceded that there could be a difference in the perception of value between traders. However, “the personal opinion of the sellers and the buyers, each taken separately, makes no more changes to the value of goods than it changes their weight or size” (Say 1828-29, 312). Therefore, the only objective measure of value is the market price that Say called current price (“prix courant”).
Smith (1776, 12) viewed the products of land and labour as real wealth. His approach rested on the idea that wealth consisted of physical goods. Relying on Say’s analysis, Destutt de Tracy contended that production - in the economic sense of the term - is a production of utility and that only human labour creates wealth. Goods used by individuals do not come from the means used to create them, but they were the result of the uses of human faculties:
We own a good field or a good tool only because we recognise the properties of the raw material and made it easy to make it useful.... It is always from the use of our faculties that these goods are created.
(Destutt de Tracy 1815, 98)
This idea caused some controversies and led some commentators such as Say (1825, 713) and Head (1985, 130; 1987) to consider Destutt de Tracy a proto-Ricardian author who proposed a labour theory of value - passages in this sense can be found in Ricardo himself.
Several developments in the Commentaires and in the Elements d’ideologie can also support this view:Because it is certain that our physical and moral faculties constitute our only true wealth, that using these faculties, that is any labour, is our only primitive treasure, and that it is always from this use that all the things we call goods originate... it is equally certain that all these goods only represent the labour that allowed them to be created, and that... they can only retrieve their values from the labour used to create them.
(Destutt de Tracy 1815, 99-100)
But should one conclude that Destutt de Tracy predated Ricardo in thinking that “the value of a commodity, or the quantity of any other commodity for which it will exchange, depends on the relative quantity of labour which is necessary for its production” (Ricardo 1817-21, 11)? Ricardo himself seemed somewhat hesitant:
M. de Tracy has given a useful and an able treatise on the general principles of Political Economy, and I am sorry to be obliged to add, that he supports, by his authority, the definitions which M. Say has given of the words “value,” “riches,” and “utility”.
(Ricardo 1817-21, 284-5 n)
Therefore, the question of whether Destutt de Tracy defended a labour theory of value calls for a cautious answer, as Magnan de Bornier (2013, 212) rightly suggested (see also Beraud and Faccarello 2014, 26, 69). Destutt de Tracy did not claim that the quantity of necessary labour required for producing a good determines its value: he maintained that labour is the source of the utility of goods, considering that only our faculties enable us to use the means at our disposal to satisfy our needs.
The measure of value
One should distinguish two separate questions, albeit related: the measure of value on the one hand, and the determination of value on the other. In chapter XX of the Principles, Ricardo criticised Say when he explained that the exchangeable value of a commodity “is the quantity of any other product that one can receive in exchange” (Say 1803-41, 596).
To make his point, Ricardo used the following example: suppose someone intended to measure the value of cloth based on the quantity of another commodity received in exchange. Suppose the production of the commodity became easier; Say believed the value of that commodity would increase, while Ricardo (1817-21, 281) contended that it would remain unchanged, because the commodity must be produced with the same quantity of labour. In his Logique, Destutt de Tracy (1801, 150 and 336) explained that “To measure any thing is to compare it to a given quantity of the same thing, which we take as the term of comparison, as a unit”. This statement does not allow to solve the disagreement between Say and Ricardo, since they both seem to agree with Destutt de Tracy. In fact, they held two different conceptions of value theory. For Say, value was relative, while Ricardo regarded value as an absolute concept. However, when Say (1814, 1162) argued that the market price is a measure of utility, he seemed to violate Tracy’s principle: Only the utility of one good can measure the utility of another good. Destutt de Tracy suggests that to measure a thing’s utility to us, we must look at the sacrifices we are willing to make to acquire it (Destutt de Tracy 1815, 172).The differences between Say and Destutt de Tracy are clearer on trade and prices. Condillac (1776, 53), after Turgot, had indicated that “it is wrong to believe that in trade, equal value for equal value is given. On the contrary, each trader always gives up a lower value in exchange for a greater one”. Say (1828-29, 312) replied that, in terms of production and trade, value was not something that individuals assigned to goods they owned; value was a magnitude determined on the market. In other words, value was equivalent to the current price. Say’s comment leaves the problem unresolved because, obviously, Condillac understands value to mean the utility of the thing and not its price. Destutt de Tracy (1815, 144) adopted Condillac’s stance without making any explicit reference, however: “Trade is an admirable transaction in which the two parties are always better off”.
He concluded that society, “which essentially... consists of a continuous series of trades”, is “an uninterrupted sequence of re-emerging advantages for all its members”. Trade enabled to improve the well-being of the members of the community.In the first edition of Traite - the only one that Destutt de Tracy had read when he wrote his Traite de la volonte - Say distinguished between natural value and exchangeable value in the same way Smith differentiated between natural price and market price. For him, the natural value of wheat comprises the profit from the land where wheat is cultivated (rent), the interest of capital of the landowner or of the farmer who uses the land, and the wage of all the individuals who contribute to the production process. Destutt de Tracy saw things differently. For him, land rent was not a specific income: “a field is a tool like any other and land rent is exactly the same thing as the cost of renting a machine or the interest on a loan” (Destutt de Tracy 1819, 285). Rather than distinguishing between natural value and exchangeable value, he opted for the opposition between necessary value (“valeur necessaire”) and market value (“valeur venale”): “[The] necessary value is the sum of essential needs whose satisfaction is necessary for the existence of that who performs [a] task during a specific time frame” (Destutt de Tracy 1815, 175). Put differently, the price of a good must be high enough to cover the subsistence wage of the workers who directly and indirectly participated in the production process. Thus, a good can never be produced in a durable fashion if the market value is less than the necessary value; but Tracy’s market value differs from Smith’s in that the market value does not gravitate around the necessary value. The market value is simply “the real measure of utility of production because it determines its price” (1815, 176). This could create some difficulties, Destutt de Tracy admitted. Suppose an improvement of production techniques allows workers to double output in the same time period. Initially, the market value might remain unchanged. In the long run, however, the market value would decline to a point where the value of the total product would reach its initial level, while the quantity produced doubled. Wages would not be higher, despite the fact that workers performed twice as many tasks: “Therefore, their labour would not be more profitable for them, but it would be more profitable for society as a whole” (1815, 178). Destutt de Tracy thus highlighted problems that can arise when one intends to use the market value as a measure of utility.
The measurement of the utility of public works can be used as an illustration. Claude Navier, a polytechnician and engineer from Ecole Nationale des Ponts et Chaussees, called for the construction of new canals with free access in order to maximise the benefit for the public. To determine whether a canal should be built, Navier explained that its utility should be estimated. According to Navier, the utility is equal to the product of the total quantity of goods transported multiplied by the difference between the transportation costs on the road (old traffic) and the transportation costs on the canal (new traffic). Although Navier (1830) did not mention Say, Dupuit (1844, 347) believed that in fact Navier’s formula was inspired from Say. Dupuit showed that the formula overestimates the utility of public works, given that the new traffic of goods on the canal does not travel by road before the construction of the canal. Measuring utility remained unsolved until the publication of Jules Dupuit’s essays in 1844 and 1849: “To measure the utility of an object, political economy must use each consumer’s maximum willingness to pay” (Dupuit 1844, 343).
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