4.8 A utility theorist in Kentucky

If the Trinity College contributions to subjective utility theory remained unknown outside Ireland, still more obscure was an isolated and amazing contribution in the course of several articles in a Kentucky newspaper. Written by the youngish but influential editor of the Frankfort (Ky) Argus, Amos Kendall (1789–1869), later to become a leading brain-truster of Andrew Jackson in his battle against fractional-reserve banking and particularly against the Bank of the United States, the articles remained unread and unknown even in the United States until exhumed by historians in the twentieth century.²² And yet especially considering that they were written in 1820, antedating Bailey and even Craig, they were phenomenal. Not only did they champion subjective value; they were the first expression of the law of diminishing marginal utility.

Kendall was moved to explore the question of economic value by a fierce dispute in Kentucky during the catastrophic Panic of 1819 on whether or not debtors should receive relief at the hands of the state government. While Kendall was not opposed to all relief measures, he was disturbed by proposals that would have repudiated all existing debt. To explore the subject in depth, Kendall published three articles in the Argus, beginning on 27 April, examining the problems of money and more fundamentally, the nature of value. Unfortunately, in his autobiography, arranged and edited posthumously by his son-in-law, Kendall gives no hint on which economists might have inspired his advanced views.

In his first article, Kendall went straight to the basics and examined the question of value per se. He begins by saying that there have been many erroneous explanations of value: labour expended, price, even demand. But, he points out,

All these notions are erroneous. Things have value, not because they are produced by labor, nor because they are in general demand, nor because they will sell or exchange for a certain number of dollars, but simply because men desire to possess them. Desirableness is value. In exact proportion that a thing is desirable it is valuable. (Italics in original.)

Kendall went on, in dismissing the ‘value paradox’, to say that water and air have little or no value because of their abundance: ‘Were meat and bread as common as air and light they would possess no more value; they would not create desire.’ In the Garden of Eden, land, being superabundant, possessed no value. Labour, Kendall went on, conferred no value, for:

With regard to the produce of labor, value is generally antecedent to the labor of production. It springs from our desire to possess that which labor may produce. Were labor to fix value upon its products, everything on which much has been spent would be very valuable. This notoriously is not the fact... But labor could not make a thing valuable which was not desirable. Labor may be wasted. It may be applied to the production of that which nobody desires, which has no value.

And Kendall sparkingly concludes: ‘Things do not become valuable because men spend labor upon them, but men spend their labor upon them because they are valuable.’

The demand for a product, furthermore, stems from men's desire to obtain it. The desire is primary: ‘Demand is not, therefore, the cause of value... A thing becomes desirable or valuable before there is a demand for it. The demand follows... But when the desire to possess it cease, it has value no longer, and is no longer in demand.’

The next step, for Kendall, is that desires, being subjective and evanescent, cannot be measured, and that therefore neither can value:

What standard can be invented for the desires of men? Can the necessities, the comforts, the pleasures, the fashions, the opinions, and the caprices of man be reduced to any standard? Are they not ever changing like the winds of heaven? Measure never varies. A yard is always equal to the length with which it is compared... These lengths, surfaces, and quantities never vary or change. Therefore they may be reduced to a standard which shall be uniform and last forever. But does value never vary? Will that which is now worth a dollar always be worth just the same sum?

Tastes and desires are ever-changing, and so therefore is value; hence it can have no measure or standard. Kendall then concludes his devastating critique – one that we might wish Ricardo and his epigones had read and understood:

To make a standard of value you must first make every acre of ground, every bushel of wheat, and any given quantity of any other article, at all times, in all situations and under all circumstances, sell for precisely the same amount. There must be no such thing as profit or loss, or buying or selling.

We have said enough to show the utter impossibility of a standard of value, and that to talk seriously of any such thing is simply ridiculous. We may as well talk of a standard of hunger, thirst, opinion, fashion, caprice, and all those wants... which make things desirable.