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There are two kinds of knowledge that men must possess as a prerequisite for any successful attempt to provide in advance for the satisfaction of their needs. They must become clear: (a) about their requirements—that is, about the quantities of goods they will need to satisfy their needs during the time period over which their plans extend, and (b) about the quantities of goods at their disposal for the purpose of meeting these requirements.

All provident activity directed to the satisfaction of human needs is based on knowledge of these two classes of quantities. Lacking knowledge of the first, the activity of men would be conducted blindly, for they would be ignorant of their objective. Lacking knowledge of the second, their activity would be planless, for they would have no conception of the available means.

In what follows, it will first be shown how men arrive at a knowledge of their requirements for future time periods; it will then be shown how they estimate the quantities of goods that will be at their disposal during these time periods; and finally a description will be given of the activity by which men endeavor to direct the quantities of goods (consumption goods and means of production) at their disposal to the most effective satisfaction of their needs.

1.

Human Requirements

A. Requirements for goods of first order (consumption goods).

Human beings experience directly and immediately only needs for goods of first order—that is, for goods that can be used directly for the satisfaction of their needs (p. 56). If no requirements for these goods existed, none for goods of higher order could arise. Requirements for goods of higher order are thus dependent upon requirements for goods of first order, and an investigation of the latter constitutes the necessary foundation

ments equal to the quantities of goods that would be necessary to satisfy his needs. Merchants and industrialists generally employ the term “requirements” in the narrower sense of the word, and often mean by it the “expected demand” for a good. In this sense also, one says that there are requirements for a commodity “at a given price” but not at another price, etc.

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for the investigation of human requirements in general. We shall first, accordingly, be occupied with human requirements for goods of first order, and then with an exposition of the principles according to which human requirements for goods of higher order are regulated.

The quantity of a good of first order necessary to satisfy a concrete human need4 (and hence also the quantity necessary to satisfy all the needs for a good of first order arising in a certain period of time) is determined directly by the need itself (by the needs themselves) and bears a direct quantitative relationship to it (them). If, therefore, men were always correctly and completely informed, as a result of previous experience, about the concrete needs they will have, and about the intensity with which these needs will be experienced during the time period for which they plan, they could never be in doubt about the quantities of goods necessary for the satisfaction of their needs—that is, about the magnitude of their requirements for goods of first order.

But experience tells us that we are often more or less in doubt whether certain needs will be felt in the future at all. We are aware, of course, that we will need food, drink, clothing, shelter, etc., during a given time period. But the same certainty does not exist with respect to many other goods, such as medical services, medicines, etc., since whether we shall experience a need for these goods or not often depends upon influences that we cannot foresee with certainty.

Even with needs that we know in advance will be experienced in the time period for which we plan, we may be uncertain about the quantities involved. We are well aware that these needs will make themselves felt, but we do not know before-

4The term “concrete human need” recurs from time to time in the text. Menger uses the term to refer to a need (or rather a portion of a need) that is satisfied by consumption of a single unit of a good. When an individual consumes successive units of a good, Menger pictures him as satisfying successive “concrete needs” of diminishing psychological importance. At some points he adopts a different terminology, and speaks of the consumption of successive units of a commodity as successive “acts of satisfaction.” See also note 3 of Chapter III and Appendix D for some suggestions regarding the meaning of “concrete.”—TR.

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hand in exactly what degree—that is, we do not know the exact quantities of goods that will be necessary for their satisfaction. But these are the very quantities here in question.

In the case of needs about which there is uncertainty as to whether they will arise at all in the time periods for which men make their plans, experience teaches us that, in spite of their deficient foresight, men by no means fail to provide for their eventual satisfaction. Even healthy persons living in the country are, to the extent permitted by their means, in possession of a medicine chest, or at least of a few drugs for unforeseen emergencies. Careful householders have fire extinguishers to preserve their property in case of fire, weapons to protect it if necessary, probably also fireand burglar-proof safes, and many similar goods. Indeed, even among the goods of the poorest people I believe that some goods will be found that are expected to be utilized only in unforeseen contingencies.

The circumstance that it is uncertain whether a need for a good will be felt during the period of our plans does not, therefore, exclude the possibility that we will provide for its eventual satisfaction, and hence does not cause the reality of our requirements for goods necessary to satisfy such needs to be in question. On the contrary, men provide in advance, and as far as their means permit, for the eventual satisfaction of these needs also, and include the goods necessary for their satisfaction in their calculations whenever they determine their requirements as a whole.5

But what has been said here of needs whose appearance is altogether uncertain is fully as true where there is no doubt that a need for a good will arise but only uncertainty as to the intensity with which it will be felt, since in this case also men correctly consider their requirements to be fully met when they are able to have at their disposal quantities of goods sufficient for all anticipated eventualities.

A further point that must be taken into consideration here is the capacity of human needs to grow. If human needs are capable of growth and, as is sometimes maintained, capable of infinite growth, it could appear as if this growth would extend

5See E.B. de Condillac, Le commerce et le gouvernement, in E. Daire (ed.),

Mélanges d’economie politique, Paris, 1847, p. 248.

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the limits of the quantities of goods necessary for the satisfaction of human needs continually, indeed even to complete infinitely, and that therefore any advance provision by men with respect to their requirements would be made utterly impossible.

On this subject of the capacity of human needs for infinite growth, it appears to me, first of all, that the concept of infinity is applicable only to unlimited progress in the development of human needs, but not to the quantities of goods necessary for the satisfaction of these needs during a given period of time. Although it is granted that the series is infinite, each individual element of the series is neverthe1ess finite. Even if human needs can be considered unlimited in their development into the most distant periods of the future, they are nevertheless capable of quantitative determination for all given, and especially for all economically significant, time periods. Thus, even under the assumption of uninterrupted progress in the development of human needs, we have to deal with finite and never with infinite, and thus completely indeterminate, magnitudes if we concern ourselves only with definite time periods.

If we observe people in provident activity directed to the satisfaction of their future needs, we can easily see that they are far from letting the capacity of their needs to grow escape their attention. On the contrary, they are most diligently concerned to take account of it. A person expecting an increase in his family or a higher social position will pay due attention to his increased future needs in the construction and furnishing of dwellings and in the purchase of carriages and similar durable goods. As a rule, and as far as his means will permit, he will attempt to take account of the higher claims of the future, not in a single connection only, but with respect to his holdings of goods as a whole. We can observe an analogous phenomenon in the activities of municipal governments. We see municipalities constructing waterworks, public buildings (schools, hospitals, etc.), parks, streets, and so on, with attention not only to the needs of the present, but with due consideration to the increased needs of the future. Naturally this tendency to give attention to future needs is even more distinctly evident in the activities of national governments.

To summarize what has been said, it appears that human re-

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quirements for consumption goods are magnitudes whose quantitative determination with respect to future time periods poses no fundamental difficulties. They are magnitudes about which, in activities directed to the satisfaction of their needs, men actually endeavor to attain clarity within feasible limits and insofar as a practical necessity compels them—that is, their attempts to determine these magnitudes are limited, on the one hand, to those time periods for which, at any time, they plan to make provision and, on the other hand, to a degree of exactness that is sufficient for the practical success of their activity.

B. Requirements for goods of higher order (means of production).

If our requirements for goods of first order for a coming time period are already directly met by existing quantities of these goods, there can be no question of a further provision for these same requirements by means of goods of higher order. But if these requirements are not met, or are not completely met, by existing goods of first order (that is, if they are not met directly), requirements for goods of higher order for the time period in question do arise. These requirements are the quantities of goods of higher order that are necessary, in the existing state of technology of the relevant branches of production, for supplying our full requirements for goods of first order.

The simple relationship just presented with respect to our requirements for the means of production is to be observed, however, as we shall see in what follows, only in rare cases. An important modification of this principle arises from the causal interrelationships between goods.

It was demonstrated earlier (pp. 58 ff.) that it is impossible for men to employ any one good of higher order for the production of corresponding goods of lower order unless they are able, at the same time, to have the complementary goods at their disposal. Now what was said earlier of goods in general becomes more sharply precise here when we take into account the available quantities of goods. It was shown earlier that we can change goods of higher order into goods of lower order, and thus use them for the satisfaction of human needs, only if we

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have the complementary goods simultaneously at our disposal. This principle can now be restated in the following terms: We can bring quantities of goods of higher order to the production of given quantities of goods of lower order, and thus finally to the meeting of our requirements, only if we are in the position of having the complementary quantities of the other goods of higher order simultaneously at our disposal. Thus, for instance, even the largest quantity of land cannot be employed for the production of a quantity of grain, however small, unless we have at our disposal the (complementary) quantities of seed, labor services, etc., that are necessary for the production of this small quantity of grain.

Hence requirements for a single good of higher order are never encountered. On the contrary, we often observe that, whenever the requirements for a good of lower order are not at all or are only incompletely met, requirements for each of the corresponding goods of higher order are experienced only jointly with quantitatively corresponding requirements for the other complementary goods of higher order.

Suppose, for example, that with still unfilled requirements for 10,000 pairs of shoes for a given time period, we can command the quantities of tools, labor services, etc., necessary for the production of this quantity of shoes but only enough leather for the production of 5,000 pairs. Or else suppose that we are in a position to command all the other goods of higher order necessary for the production of 10,000 pairs of shoes but only enough labor services for the production of 5,000 pairs. In both instances, there can be no doubt that our full requirements, with respect to the given time period, would extend to such quantities of the various goods of higher order necessary for the production of shoes as would suffice for the production of 10,000 pairs. Our effective requirements, however, with respect to the other complementary goods, would, in each case, extend to such quantities only as are needed for the production of 5,000 pairs. The remaining requirements would be latent, and would only become effective if the other, lacking, complementary quantities should also become available.

From what has been said, we derive the principle that, with respect to given future time periods, our effective requirements

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for particular goods of higher order are dependent upon the availability of complementary quantities of the corresponding goods of higher order.

When cotton imports to Europe declined considerably because of the American Civil War, requirements for cotton piece goods remained evidently quite unaffected since that war could not change the needs for these goods significantly. To the extent to which there were future requirements for cotton piece goods that were not already met by finished manufactured products, there were also, as a result, requirements for the corresponding quantities of goods of higher order necessary for the production of cotton cloth. Hence these requirements also could not, on the whole, be altered significantly in any way by the civil war. But since the available quantity of one of the necessary goods of higher order, namely raw cotton, declined considerably, the natural consequence was that a part of the previous requirements for goods complementary to raw cotton with respect to the production of cotton cloth (labor services, machines, etc.) became latent, and the effective requirements for them diminished to such quantities as were necessary for processing the available quantities of raw cotton. As soon, however, as imports of raw cotton revived again, the effective requirements for these goods also experienced an increase—to the exact extent, of course, that the latent requirements diminished.

Immigrants, bringing with them viewpoints acquired in highly developed mother countries, often fall into the error of striving from the outset for an extended landed property to the neglect of more important considerations, and even without regard to whether the corresponding quantities of the other goods, complementary to the land, are available in their settlements. Yet nothing is more certain than that they can progress in using the land for the satisfaction of their needs only to the extent that they are able to acquire the corresponding complementary quantities of seed grain, cattle, agricultural instruments, etc. Their course of action betrays an ignorance of the above principle, which makes itself so inexorably felt that men must either submit to its validity or bear the injurious consequences of its neglect.

The further civilization progresses with a highly developed

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division of labor, the more accustomed do people in various lines become to producing quantities of goods of higher order under the implicit and as a rule correct assumption that other persons will produce the corresponding quantities of the complementary goods. Manufacturers of opera glasses very seldom produce the glass lenses, the ivory or tortoise-shell cases, and the bronze parts, used in assembling the opera glasses. On the contrary, it is known that the producers of these glasses generally obtain the separate parts from specialized manufacturers or artisans and only assemble these parts, adding perhaps a few finishing touches. The glass-cutter who makes the lenses, the fancy-goods worker who makes the ivory or tortoise-shell cases, and the bronze-worker who makes the bronze castings, all operate under the implicit assumption that requirements for their products do exist. And yet nothing is more certain than that the effective requirements for the products of each one of them are dependent upon the production of the complementary quantities in such a fashion that, if the production of glass lenses were to suffer an interruption, the effective requirements for the other goods of higher order necessary for the production of telescopes, operaglasses, and similar goods, would become latent. At this point, economic disturbances would appear that laymen usually consider completely abnormal, but which are, in reality, entirely in accordance with economic laws.

C. The time limits within which human needs are felt.

In our present investigation, the only topic still remaining to be taken into consideration is the problem of time, and we must demonstrate for what time periods men actually plan their requirements.

On this question, it is clear, in the first place, that our requirements for goods of first order appear to be met, with reference to a given future time period, if, within this time period, we will be in the position of having directly at our disposal the quantities of goods of first order that we require. It is different if we must meet our requirements for goods of first or, in general, of lower order indirectly (that is, by means of quantities of the corresponding goods of higher order), because of the lapse

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of time that is inevitable in any production process. Let us designate as Period I the time period that begins now and extends to the point in time when a good of first order can be produced from the corresponding goods of second order now at our disposal. Let us call Period II the time period following Period I and extending to the point in time when a good of first order can be produced from the goods of third order now available to us. And similarly, let us designate the following time periods III, IV, and so on. A sequence of time periods is thus defined for each particular kind of good. For each of these time periods we have immediate and direct requirements for the good of first order, and these requirements are actually met since, during these time periods, we come to have direct command of the necessary quantities of the good of first order.

Suppose, however, that we should try to meet our requirements for a good of first order during Period II by means of goods of fourth order. It is clear that this would be physically impossible, and that an actual provision of our requirements for the good of first order within the posited time period could result only from the use of goods of first or second order.

The same observation can be made not only with respect to our requirements for goods of first order, but with respect to our requirements for all goods of lower order in relation to the available goods of higher order. We cannot, for example, provide our requirements for goods of third order during Period V by obtaining command, during that time period, of the corresponding quantities of goods of sixth order. On the contrary, it is clear that for this purpose we would already have had to obtain command of the latter goods during Period II.6

If the requirements of a people for grain for the current year were not directly covered in late autumn by the then existing stocks of grain, it would be much too late to attempt to employ the available land, agricultural implements, labor services, etc., for that purpose. But autumn would be the proper time to provide for the grain requirements of the following year by utilizing the above-mentioned goods of higher order. Similarly, to

6In this paragraph Menger implicitly assumes his time periods to be of equal duration. Reference to the definitions of the second paragraph preceding will confirm that this need not be the case.—TR.