By devitalizing the marginal utility theory, by stating it in such a way that it makes no causal assertions, and in such a way that it leaves the real value problem untouched, it is possible to free it from the circle just pointed out. Schumpeter does so state it.
Schumpeter's theory of value,[75] though he attributes it to Böhm-Bawerk, seems to the present writer to be essentially different. Böhm-Bawerk undertakes to explain the value (objective value in exchange) of each good by its _own_ marginal utility to different individuals, buyers and sellers of the good--indeed, by its marginal utility to _four_ individuals, the two "marginal pairs."[76] He sees at points that the prices of other goods are sometimes factors, making marginal utility give way to "subjective value in exchange," as the determinant of an individual's behavior toward a given good in the market--as in his much discussed overcoat illustration.[77] But Böhm-Bawerk never gets out of the circle which this reaction of the market-prices on the individual subjective values involves. Schumpeter seems to rise to a higher conspectus picture, which, in form, avoids the circle. His picture is that of a vast equilibrium, in which, instead of attributing the market value of each good to its own marginal utility, you explain the exchange ratios[78] of every good to every other good, all at once, by reference to a total situation: _given_ the number of goods of each class, given the number of individuals in the market, given the _distribution_ of each class of goods among the individuals, given the utility-_curves_ (not marginal utilities) of each good to each individual, an equilibrium will be reached, through trading, in which ratios between marginal utilities of each kind of good to each individual are inversely proportional to the abstract ratios (ratios of exchange) between the same goods, each measured in its own unit. The ratios are abstract ratios, between pure numbers, so far as the market ratios are concerned; the ratios in the mind of each individual are concrete ratios, between marginal utilities. The scheme, thus stated, says nothing as to the _causal_ relation between marginal utility and market ratios; it merely states certain _mathematical_ relations between each individual system of marginal utilities on the one hand, and the abstract market ratios on the other. By avoiding _assertions_ as to causation, it avoids a causal circle. In such a situation, marginal utilities and market ratios are, in reality, alike resultants, _effects_, of the given quantities of goods, distribution of goods, numbers of buyers and sellers, and individual utility-_curves_--not _marginal_ utilities. To this picture, one may add--what Schumpeter does not add--the curves showing time-preferences of each individual for each sort of good, and (an element which Schumpeter does include) the curves of _dis_-utility for the individuals who produce each kind of good. The system, it may be noted, is as good a proof of _real cost_ doctrine as it is of utility doctrine.