452 lotka: objective standard of value 



There are certain apparent objections which naturally present 

 themselves upon a first consideration of the measure of value here 

 proposed. The first of these relates to the question of currency. 

 The common standard of currency in most civilized countries is 

 gold. Now it may be urged that to measure the value of an ounce 



of gold by its ^— would be absurd. It is true that a certain 



limited quantity of gold is in use in the industries, where a definite 



^-- may properly be assigned to it. But the great bulk of gold 



circulates as currency, and such gold would be absolutely useless 

 to a person isolated from commerce. It will rightly be urged that 



here ^^ — is practically zero, yet the gold has a very definite and 



high value in exchange. 



The fact is that currency is a ''value" in a class by itself: it is 

 strictly speaking not a value at all, but merely a certificate of 

 ownership in values not specified in kind. The theory of currency 

 therefore must be developed along special lines. There is no need 

 to enter here into this aspect of our subject, as it is dealt with 

 satisfactorily in the standard works on economics and currency, 

 as for instance, in Irving Fisher's The Purchasing Power of Money. 



Another set of values to which it may appear at first sight as if 

 the standard of measurement here developed could not be applied 

 is that of certain luxuries, such as gold ornaments, diamonds, and 

 jewelry generally. The possession of these obviously can exert 

 little or no direct influence upon the owner in such a way as to 

 cause an increase (or decrease) in r. But it must be understood 



that in forming the differential coefficient ^r — not only the direct 



but also the indirect effects must be taken into account. And 

 the indirect effect of luxuries in economics may be of the highest 

 importance: The desire for their possession acts as an incentive 

 to further effort to those who have already attained the bare 

 necessities of life — often the very persons who by their superior 

 ability are particularly qualified to render valuable services to 

 the community by their activities. Such luxuries may be likened 



