Critics of Classical Views on Value

The Critics of Classical Views on Value: Lauderdale

Let us review the theories of some of those who guided these critical currents of economic thought. One of the earliest writers to explain the relation of utility to value was that Scottish critic of Adam Smith, Lord Lauderdale. He pointed out that it was the persistence of men's desires in relation to the quantity of a good available which actually created value. In this regard, however, he noted that the demand for necessities persisted as supply decreased; but the demand for luxuries was more likely to rise and fall. Lauderdale made a very clear statement of what we now call elasticity of demand.

The first use of the concepts of diminishing and marginal utility, and their first formulation were in the work of W. F. Lloyd (1794-1853). First he pointed out that specific wants were satiable, and that value disappeared at the moment of satisfaction. His use of the example of the hungry man getting successive ounces of food, showing that the desire for food diminishes with each additional ounce, has become commonplace in economic text-books dealing with utility and value. Value, said Lloyd, really meant a state of mind which showed itself at the point of separation between satisfied and unsatisfied wants.