Before proceeding to other topics, it appears to me to be of preëminent importance to our science that we should become clear about the causal connections between goods. In our own, as in all other sciences, true and lasting progress will be made only when we no longer regard the objects of our scientific observations merely as unrelated occurrences, but attempt to discover their causal connections and the laws to which they are subject. The bread we eat, the flour from which we bake the bread, the grain that we mill into flour, and the field on which the grain is grown-all these things are goods. But knowledge of this fact is not sufficient for our purposes. On the contrary, it is necessary in the manner of all other empirical sciences, to attempt to classify the various goods according to their inherent characteristics, to learn the place that each good occupies in the causal nexus of goods, and finally, to discover the economic laws to which they are subject.
Our well-being at any given time, to the extent that it depends upon the satisfaction of our needs, is assured if we have at our disposal the goods required for their direct satisfaction. If, for example, we have the necessary amount of bread, we are in a position to satisfy our need for food directly. The causal connection between bread and the satisfaction of one of our needs is thus a direct one, and a testing of the goods-character of bread according to the principles laid down in the preceding section presents no difficulty. The same applies to all other goods that may be used directly for the satisfaction of our needs, such as beverages, clothes, jewelry, etc.
But we have not yet exhausted the list of things whose goodscharacter we recognize. For in addition to goods that serve our needs directly (and which will, for the sake of brevity, henceforth be called “goods of first order”) we find a large number of other things in our economy that cannot be put in any direct
causal connection with the satisfaction of our needs, but which possess goods-character no less certainly than goods of first order. In our markets, next to bread and other goods capable of satisfying human needs directly, we also see quantities of flour, fuel, and salt. We find that implements and tools for the production of bread, and the skilled labor services necessary for their use, are regularly traded. All these things, or at any rate by far the greater number of them, are incapable of satisfying human needs in any direct way-for what human need could be satisfied by a specific labor service of a journeyman baker, by a baking utensil, or even by a quantity of ordinary flour? That these things are nevertheless treated as goods in human economy, just like goods of first order, is due to the fact that they serve to produce bread and other goods of first order, and hence are indirectly, even if not directly, capable of satisfying human needs. The same is true of thousands of other things that do not have the capacity to satisfy human needs directly, but which are nevertheless used for the production of goods of first order, and can thus be put in an indirect causal connection with the satisfaction of human needs. These considerations prove that the relationship responsible for the goods-character of these things, which we will call goods of second order, is fundamentally the same as that of goods of first order. The fact that goods of first order have a direct and goods of second order an indirect causal relation with the satisfaction of our needs gives rise to no difference in the essence of that relationship, since the requirement for the acquisition of goods-character is the existence of some causal connection, but not necessarily one that is direct, between things and the satisfaction of human needs.
Taken From : PRINCIPLES OF ECONOMICS
