THE THEORY OF VALUE - Carl Menger

Utility is the capacity of a thing to serve for the satisfaction of human needs, and hence (provided the utility is recognized) it is a general prerequisite of goods-character. Non-economic goods have utility as well as economic goods, since they are just as capable of satisfying our needs. With these goods also, their capacity to satisfy needs must be recognized by men, since they could not otherwise acquire goods-character. But what distinguishes a non-economic good from a good subject to the quantitative relationship responsible for economic character is the circumstance that the satisfaction of human needs does not depend upon the availability of concrete quantities of the former but does depend upon the availability of concrete quantities of the latter. For this reason the former possesses utility, but only the latter, in addition to utility, possesses also that significance for us that we call value.
     Of course the error underlying the confusion of utility and use value has had no influence on the practical activity of men. At no time has an economizing individual attributed value under ordinary circumstances to a cubic foot of air or, in regions abounding in springs, to a pint of water. The practical man distinguishes very well the capacity of an object to satisfy one of his needs from its value. But this confusion has become an enormous obstacle to the development of the more general theories of our science.