The obvious answer to the question posed at the end of the post devoted to the role of employees in the company is that NO ONE is richer. Each of them PREVIOUSLY – in addition to other assets – had a certain amount of money, and NOW they have what they bought with that money (this is due to the equivalence of exchange principle already mentioned). The only difference between the two is that the first of these people in a moment, when they have used up their food and fuel, will have paid for the right to an apartment for the next month and a new pair of shoes, while the other two have a CHANCE to earn an income from the sale of what they currently have.
And this is where the thing worth highlighting comes in. Each of the people in this example used the money they POSSESSED to buy something that they NEEDED, although each of those needs was different. Each of them, therefore, had to MAKE that money somehow in order to satisfy THOSE NEEDS. Now, however – assuming they don’t have savings or don’t want to violate them – each of these people must do something that will enable them to meet FUTURE NEEDS. The consumer in the example must WORK FURTHER at his job to get his next paycheck. Otherwise, he will have no income and will not be able to cover his next expenses. The merchant in the second example MUST WORK AS A SELLER in his stall in order to sell the vegetables he previously bought at a profit. If he fails to do so, he won’t have enough money to buy errands for home or the next batch of goods to trade the next day. Similarly, the lawnmower manufacturer must work, trying to SELL at a profit the ones that have already been produced. Only when the efforts of each of the people in the example are EFFECTIVE will they earn the income necessary to meet their NEXT NEEDS, both personal and business needs.
What all three cases have in common is the fact that both the next PAYMENT of the wage earner, and the eventual PROFITS, of the merchant and the manufacturer, IF ANY, will have the SAME SOURCE. Namely, they will be the monetary effect of the subsequent EFFECTIVE EFFORTS of these individuals in the field in which each of them operates. The salaried worker will get the EQUIVALENT for his SERVICES rendered to his employer. On the other hand, the eventual PROFITS of the merchant and the lawnmower manufacturer will be payment for the fact that they provided their customers with the GOODS they NEEDED at the time and place they wanted to buy them FOR THE PRICE INCLUDING THAT PROFIT, i.e., for their SERVICE OF ENTERPRISE. This service consists of all the entrepreneur’s activities that lead to sales; both those that are personal in nature, i.e. simply his work, and those that require additional costs. The latter, of course, do not enter into the concept of profit, but are a component of the so-called trade margin. However, if these goods were not sold, there would obviously be no profit.
How does this relate to the value of goods? Well, the answer is that whether a good or service offered for sale on the market will have VALUE TO THEIR PURCHASERS, and if so, whether that value will be greater than the bidder’s costs by an AMOUNT OF PROFIT, will be decided by those who buy them. Should they run out, the unsold goods will remain as a tangible EFFECT of the ENTREPRENEUR’S ACTION, only that they are unnecessary to those for whom they were intended.
Do such goods have any value? Both yes and no! They have value to the ENTREPRENEUR, and have NO value to the rest of us, at least for now. The proof that they have value is the fact that the entrepreneur has incurred the specific total cost of producing them, measured in money. The proof that they have NO VALUE is the fact that no one wanted to buy them.
This is where the SUBJECTIVE CHARACTER OF VALUE AS AN ECONOMIC CATEGORY becomes apparent. It manifests itself in the fact that what for some IS WORTH incurring certain efforts, and in particular – paying a certain price to get a certain good or service, for others IS NOT WORTH IT, with the reasons for such an attitude being irrelevant. It is worth emphasizing, however, that the subjective evaluation of WORTH or NOT WORTH has nothing to do with the measurability or immeasurability of the outlay. For from the fact that someone paid a specific price for a given good, thus recognizing that it was WORTH paying it, it does not at all follow that this price becomes objective, i.e. that the one for whom this price is NOT worth paying to possess the good is wrong.
On the other hand, the OBJECTIVE nature of value is revealed in the fact that those who SUBJECTIVELY find it worthwhile to take action to achieve a given goal do so. In such a case, the MEASUREMENT of this OBJECTIVE VALUE becomes all the MATERIAL AND IMMATERIAL expenses incurred, ultimately finding expression in the PRICE PAID.
Applying these considerations of value to the lawnmower manufacturer from the example given in the previous post, it is indisputable that since the owner of the business incurred specific and quantifiable expenses for everything needed to produce the lawnmowers, it means that he SUBJECTIVELY felt that it was worth it to incur such expenses in order to produce those 50 lawnmowers. It is also indisputable that his goal was not to POSSESS the mowers, but to SELL them at a PROFIT. In order to achieve this, this manufacturer still has to add additional expenses and its own efforts to these costs, which it values in the form of a profit margin added to these costs. Ultimately, however, it will be SUBJECTIVELY the eventual buyers who will decide whether this price will be considered worth paying, that is, whether it will become the MARKET VALUE of these mowers. When they are gone, it will prove that they have NO VALUE to buyers. In that case, of course, they will remain as a MATERIAL EFFECT of the work and efforts of their manufacturer, only that they are unnecessary to anyone else. The same is also true, of course, in the case of the marketplace merchant.
It is worth emphasizing; a person’s WORK ALWAYS brings him ANY EFFECTS, including material ones, but these effects are not always needed by someone else enough for him to want to give something of his own for them. In that case, these effects have NO VALUE to anyone else.
What follows from this will be devoted to the next entries.