FOOTNOTES:

FOOTNOTES:[45]This statement must be qualified, as subsequently appears. Even in Wieser's "natural" community, there are psychic factors in value other than mere utility. See chap.xiii,infra.[46]For further discussion of this doctrine, see chaptersivandviiiof this book. Böhm-Bawerk,Positive Theory, p. 149, n., says: "One gives donations, charities, and the like, when the importance of such, measured by their marginal utility, is very much higher as regards the well-being Footnote: of the receiver than as regards that of the giver, and almost never when the converse is the case." The assumption that emotional states in different minds can be compared is very clear in this passage.Cf.Veblen, Thorstein, "Professor Clark's Economics,"Q. J. E., Feb., 1908, p. 170, n.: "Among modern economic hedonists, including Mr. Clark, there stands over from the better days of the order of nature a presumption, disavowed, but often decisive, that the sensational response to the like mechanical impact of the stimulating body is the same in different individuals. But, while this presumption stands ever in the background, and helps to many important conclusions,... few modern hedonists would question the statement in the text" [i.e., that comparison of emotional intensity in one man's mind with emotional intensity in another man's mind is impossible]. In the light of the psychological doctrine which I shall maintain in the chapter on the psychology of value, this whole question will seem beside the point, considered as a psychological question. But my interest here is in making clear the psychological implications of the Austrian theory, as I wish for the present to consider their theory on their own ground.[47]Böhm-Bawerk and Wieser are certainly seeking an objective value, but Jevons and Pareto are concerned simply with the ratio. See Wieser,Natural Val., p. 53, n. Jevons, Pareto, and Böhm-Bawerk are discussed, with reference to this point, in chap.iv.[48]This law is first set forth by Professor Clark in an article in theQ. J. E., vol.viii, "A Universal Law of Economic Variation." See also,The Distribution of Wealth, pp. 210-45. A brief exposition of the doctrine is found in Seligman,Principles, 1905, pp. 185-88.

[45]This statement must be qualified, as subsequently appears. Even in Wieser's "natural" community, there are psychic factors in value other than mere utility. See chap.xiii,infra.

[46]For further discussion of this doctrine, see chaptersivandviiiof this book. Böhm-Bawerk,Positive Theory, p. 149, n., says: "One gives donations, charities, and the like, when the importance of such, measured by their marginal utility, is very much higher as regards the well-being Footnote: of the receiver than as regards that of the giver, and almost never when the converse is the case." The assumption that emotional states in different minds can be compared is very clear in this passage.Cf.Veblen, Thorstein, "Professor Clark's Economics,"Q. J. E., Feb., 1908, p. 170, n.: "Among modern economic hedonists, including Mr. Clark, there stands over from the better days of the order of nature a presumption, disavowed, but often decisive, that the sensational response to the like mechanical impact of the stimulating body is the same in different individuals. But, while this presumption stands ever in the background, and helps to many important conclusions,... few modern hedonists would question the statement in the text" [i.e., that comparison of emotional intensity in one man's mind with emotional intensity in another man's mind is impossible]. In the light of the psychological doctrine which I shall maintain in the chapter on the psychology of value, this whole question will seem beside the point, considered as a psychological question. But my interest here is in making clear the psychological implications of the Austrian theory, as I wish for the present to consider their theory on their own ground.

[47]Böhm-Bawerk and Wieser are certainly seeking an objective value, but Jevons and Pareto are concerned simply with the ratio. See Wieser,Natural Val., p. 53, n. Jevons, Pareto, and Böhm-Bawerk are discussed, with reference to this point, in chap.iv.

[48]This law is first set forth by Professor Clark in an article in theQ. J. E., vol.viii, "A Universal Law of Economic Variation." See also,The Distribution of Wealth, pp. 210-45. A brief exposition of the doctrine is found in Seligman,Principles, 1905, pp. 185-88.

In the foregoing analysis, the assumption of the homogeneity and communicability of human wants was made. Only on this assumption could value as a quantity of utility appear even in Wieser's "natural" community. How hopeless the case becomes when individualistic methods and assumptions are pushed to the extreme, will appear from a consideration of Jevons and Pareto, both of whom insist on the entirely subjective and incommunicable nature of human wants. Thus, Jevons:[49]—

I see no means by which such a comparison [between the motives of one man and those of another] can be accomplished. The susceptibility of one mind may, for what we know, be a thousand times greater than that of another. But, provided that the susceptibility was different in a like ratio in all directions, we should never be able to discover the difference. Every mind is thus inscrutable to every other mind, and no common denominator of feelings seems to be possible.... But the motive in one mind is weighed only against other motives in the same mind, never against the motives in other minds. Each person is to other persons a portion of the outside world—thenon-egoas the metaphysicians call it. Thus the motives in the mind of A may give rise to phenomena which may be represented by motives in the mind of B; but between A and B there is a gulf. Hence the weighing of motives must always be confined to the bosom of the individual.

This question as to the homogeneity and communicability of emotional states in different men is one fundamental to any value theory which starts with individual feelings or desires as elements—and, indeed, from a somewhat different viewpoint, is fundamental to all value theory. Value, as a concrete quantity of desire or feeling, embodied in a given good at a given time, regardless of who is purchaser and who is seller, can exist only if feelings and desires are homogeneous and can interact—even in Wieser's ideal society, where the complication of differences in wealth does not obtain. And value must have some very different meaning unless this assumption be held. In illustration of this, I wish to quote further from Jevons. Jevons finds for value[50]three distinct meanings, for each of which he employs both a "popular" and a "scientific" name: (1) value in use ("popular" name) = total utility ("scientific" name); (2) esteem, or urgency of desire ("popular" name) = final degree of utility ("scientific" name); (3) purchasing power ("popular" name) = ratio of exchange ("scientific" name). Now the first two of these are purely subjective, individual facts, varying as to their quantities for each individual. The only one that can have social meaning is the third, and that, as Jevons explicitly states, is a numerical ratio, an abstract number.[51]This is brought out very clearly when he discusses the question of the concrete dimensions of these three quantities. Total utility has dimensions,and so has final utility, but ratio of exchange, which he considers the precise scientific equivalent for the popular term, purchasing power, has no dimension at all. Its dimension is zero. Finding these ambiguities in the word value, Jevons proposes to abandon it altogether, and to use instead either of the three expressions discussed, depending on which sense of the word value is intended.[52]He can find no definite meaning for value as an unqualified term. Now in this I believe he is correct. Economic value is not total utility to an individual, nor marginal utility to an individual, nor is it a mere ratio of exchange. If no other meaning of the term can be found—and no other meaningcanbe found on Jevons's psychological assumptions—then the term should be abandoned altogether.

Pareto's position[53]is essentially similar. "Ophelimity" (which he uses in place of the more ambiguous "utility" to mean what Jevons means by the latter term) "is an entirely subjective quality." (4.) "On ne doit pas oublier que le vigneron établit l'égalité des deux ophélimités pour lui, et que le laboureur fait de même, mais qu'il n'y a aucun rapport entre l'ophélimité du vin pour le vigneron et pour le laboureur, ni entre l'ophélimité du blé pour le vigneron et pour le laboureur. Il faut toujours se rapeller ce caractère subjectif de l'ophélimité." (21.) Now no quantity of value, irrespective of the particularholder of the good, emerges for Pareto. Value is either a "rapport de convenance" between a man and a good, i.e., ophelimity, or is a "taux d'échange," a ratio between two goods. (30.) The older term, "puissance d'achat," power in exchange, which John Stuart Mill makes synonymous with value in exchange, is, at bottom, nothing but a vague conception of ophelimity. (30.) The two conceptions, ratio of exchange and ophelimity, are to be sharply distinguished, power in exchange is ruled out as a vague and confused conception, and value as an objective quantity does not appear at all.

Davenport, who recognizes clearly "the rich-man-poor-man complication,"[54]and avoids, for the most part, the confusion into which others have fallen, of mixing a demand-price curve and a utility curve (a confusion dealt with in detail in the next chapter), and who accepts the psychological assumption of subjective isolation unreservedly,[55]reaches, as already indicated, the same conclusion regarding the nature of value. For him there is no social validity in value except as a ratio of exchange.[56]

The same may be said for Böhm-Bawerk, so far as his formal analysis goes. It is true that he recognizes the existence of an "objective value in exchange"[57]in addition to "subjective value"and "subjective value in exchange," and in addition to price,[58]but he makes no effort to exhibit its nature, or to show its origin. His study has to do with individual subjective ratios, between the marginal utilities of two goods, and the market ratio, or price, that results from the meeting of these individual ratios—not utilities—in the market. The nature of his objective exchange value is expected to become clear, somehow, from this surface determination of price:—

Exchange Value is the capacity of a good to obtain in exchange a quantity of other goods. Price is that other quantity of goods. But the laws of these two coincide. So far as the law of price explains that a good actually obtains such and such a price, and why it obtains it, it affords at the same time the explanation that the good iscapable, and why it is capable, of obtaining a definite price. The law of Price, in fact, contains the law of Exchange Value.[59]

But (as will be elaborated more fully in chaptervi), Böhm-Bawerk's law of price does not explain thewhyany more than do those of Jevons and Pareto, and the assumption that an "objective value in exchange" exists, in addition to the ratio of exchange and the subjective values, might just as logically be added to their systems as to his, with the assumption that the problem of its nature and causes had been cleared up. The Austrian analysis, even with Professor Clark's correction, is simply an explanation of themodus operandiof the determination ofparticularratios in the market. It tells us nothing of quantitative values, and, in fact, assumes a whole system of values already predetermined, before the question of any particular price can be approached.[60]

FOOTNOTES:[49]Theory of Political Economy, 3d edition, p. 14.[50]Op. cit., pp. 76-84.[51]Ibid., p. 83.[52]Op. cit., p. 81.[53]Cours d'Économie Politique, vol.i, pp. 1-40. The numerals in the text refer to pages in this volume.[54]Value and Distribution, p. 444.[55]Professor Davenport's attitude on this point we shall discuss more fully in chapterviii.[56]Ibid., pp. 184, n., and 330-31.[57]It is not wholly clear whether or not Böhm-Bawerk means his "objective value in exchange" to be considered as an absolute or as a relative concept. His formal definition ("Grundzüge der Theorie des wirtschaft lichen Güterwerts," Conrad'sJahrbücher, N. F.,xiii, 1886, p. 5) is as follows: "Hierunter ist zu verstehen die objective Geltung der Güter im Tausch, oder mit anderen Worten, die Möglichkeit für sie im Austausch eine Quantität anderer wirtschaftlicher Güter zu erlangen, diese Möglichkeit als eine Kraft oder Eigenschaft der ersteren Güter gedacht." The concluding phrase would seem to point to an absolute conception, as would also his criticism of the expressions, "ratio of exchange," "Austauschverhältnis," and "Tauschfuss" (Ibid., p. 478, n.): "Diese Ausdrücke haben nämlich eine Nüance an sich, die es unmöglich macht, sie sprachlich den Gütern als Eigenschaft beizulegen, oder von einer grösseren oder geringeren Höhe derselben zu sprechen." But, on the other hand, his identification of the concept, "objective value in exchange," with the term "power in exchange" of the English economists (in both the passages referred to) would seem to make the relative implication in the concept unavoidable, and perhaps there is no point to raising the question. His criticism of Hermann in theCapital and Interest(p. 203) is based on the relative conception of value.Cf.our discussion of the practical usage of the Austrians in chaptersxiandxviii.[58]Whether price be defined as a quantity of goods given for a good, or as the ratio between the two quantities of goods exchanged, is for present purposes immaterial.[59]Positive Theory, p. 132.[60]See chaptervi,infra.

[49]Theory of Political Economy, 3d edition, p. 14.

[50]Op. cit., pp. 76-84.

[51]Ibid., p. 83.

[52]Op. cit., p. 81.

[53]Cours d'Économie Politique, vol.i, pp. 1-40. The numerals in the text refer to pages in this volume.

[54]Value and Distribution, p. 444.

[55]Professor Davenport's attitude on this point we shall discuss more fully in chapterviii.

[56]Ibid., pp. 184, n., and 330-31.

[57]It is not wholly clear whether or not Böhm-Bawerk means his "objective value in exchange" to be considered as an absolute or as a relative concept. His formal definition ("Grundzüge der Theorie des wirtschaft lichen Güterwerts," Conrad'sJahrbücher, N. F.,xiii, 1886, p. 5) is as follows: "Hierunter ist zu verstehen die objective Geltung der Güter im Tausch, oder mit anderen Worten, die Möglichkeit für sie im Austausch eine Quantität anderer wirtschaftlicher Güter zu erlangen, diese Möglichkeit als eine Kraft oder Eigenschaft der ersteren Güter gedacht." The concluding phrase would seem to point to an absolute conception, as would also his criticism of the expressions, "ratio of exchange," "Austauschverhältnis," and "Tauschfuss" (Ibid., p. 478, n.): "Diese Ausdrücke haben nämlich eine Nüance an sich, die es unmöglich macht, sie sprachlich den Gütern als Eigenschaft beizulegen, oder von einer grösseren oder geringeren Höhe derselben zu sprechen." But, on the other hand, his identification of the concept, "objective value in exchange," with the term "power in exchange" of the English economists (in both the passages referred to) would seem to make the relative implication in the concept unavoidable, and perhaps there is no point to raising the question. His criticism of Hermann in theCapital and Interest(p. 203) is based on the relative conception of value.Cf.our discussion of the practical usage of the Austrians in chaptersxiandxviii.

[58]Whether price be defined as a quantity of goods given for a good, or as the ratio between the two quantities of goods exchanged, is for present purposes immaterial.

[59]Positive Theory, p. 132.

[60]See chaptervi,infra.

Much of the foregoing would be needless were it not for the fact that there has been, and is, in the writings of the Austrians and those who have followed them, a confusion of two very different things: on the one hand, the curve of utility for a single individual of a given good, measured in terms of money, on the assumption that the marginal utility of money remains constant to him; and, on the other hand, the demand-price curve of that commodity for a whole community or a "trading body,"[61]made up of many individuals, differing in wealth and in tastes.[62]The former curve does express a diminishing scale of absolute feeling-magnitudes,[63]concerned with the consumption of the good. The latter does not. The latter is not necessarily a diminishing utility curve at all, for the poor man whose price offer is lowest may easily desire the good more intensely than does the rich man whose demand price is highest. These confusions, in the writings of Böhm-Bawerk and Wieser, especially, have been adequately commented on by ProfessorDavenport,[64]who adheres pretty carefully throughout to the distinction drawn above, and to the strictly individualistic, subjectivistic conception of price determination, with its correlate of relativity. Jevons's confusion on this point has been noted by Marshall.[65]It is amazing, really, when one sets about to find them, how numerous are the occasions on which leading economists have been guilty of this confusion—a confusion that utterly vitiates very many of the conclusions based upon it. In truth, Professor Davenport is not far wrong when he asserts that "the general understanding of Austrian theory has come to be that it explains market value by marginal utility, and resolves market value into marginal utility."[66]

To go through the roll of the economists in pointing out this confusion is a needless task here, but a few representative names must be called, in addition to those mentioned above. Thus, Pierson:[67]—

There is nothing to prevent our treating a group of persons as a unit, and examining the position which commodities occupy in relation to that unit. If we do this, we shall see that the above diagram [the regular diminishing utility diagram of Jevons], depicting the position which they occupy in many cases in relation to the individual, must depict the position which they occupy in a still larger number of cases in relation to the group. And the truth of this statement is greater in proportion to the size of the group.

Similar confusions appear in Professor Patten'sTheory of Prosperity, in a number of places.[68]President Hadley's discussion of "Speculation" falls into this confusion, also.[69]Professor Ely's confusion on this point is instanced in hisOutlines of Economics, 1908 edition, pp. 358-59.[70]Schaeffle, in hisQuintessence of Socialism,[71]treats utility as if it were demand. With Professor Flux it seems more a deliberate identification than an unconscious confusion, as he recognizes very clearly the complication which differences in wealth bring in, and yet none the less declares, "The measure of the exchange value is, then, the utility which is on the margin of not being realized, or the marginal utility," and "The series of marginal-demand-prices, corresponding to all the varied possible scales of supply, register, in fact, the utility of the marginal supply for each such scale."[72]It is somewhat disheartening, however, to find Professor Marshall, who has pointed out the confusion on the part of Jevons, allowing his marginal notes to speak of "utility and cost" when the body of the text, to which they refer, is discussing demand and supply.[73]And still more disheartening to find Professor Davenport, at theend of his cautiously written volume, marked throughout by the greatest clearness of thought, and by especially painstaking care in the criticism of this confusion in the writings of others, saying:—

Limitation upon the supply of goods relatively to the need gives value. Thus value in producible goods is ultimately explained by human desires over against a limitation of supply due either to the shortage of instrumental goods or to the irksomeness of effort, or to both.With great esteem for good singing, and with the rarity of good singers, the high gains of prima donnas find sufficient explanation.

With great esteem for good singing, and with the rarity of good singers, the high gains of prima donnas find sufficient explanation.

This, as a separate, unqualified proposition in the "Summary of Doctrine,"[74]is hardly to be counted anything but alapsus, even though recognition is later accorded to the necessity of backing up "utility" with "purchasing power."

But it cannot be too strongly insisted, in the first place, that only particular ratios, market relations, can come out of the individualistic analysis of satisfactions of consumption and dissatisfactions of production, and that, in the second place, these ratios, and this relativity, are but surface explanations, that point to, and are based upon, something underlying and definite—without which they would be hanging in the air.[75]

FOOTNOTES:[61]See Jevons,Theory of Pol. Econ., 3d ed., pp. 88-90; 95-96.[62]See, especially, Pareto,op. cit., vol.i, pp. 36-37.[63]Our question here is primarily alogical, and not apsychological, one, else I should choose a different term from "feeling-magnitude." For the present, I am accepting the Austrian psychology, and attacking the Austrian logic.Cf.the chapter in this work on the psychology of value.[64]Op. cit., pp. 300, 312, 313et seq., 320, 325, n., 327, 328 n., 329, and chap.xvii.[65]Principles, 1898 ed., p. 176.[66]Op. cit., p. 300.[67]Principles of Economics, London, 1902, p. 57.[68]Page 18, "The consumption of all the individuals in a community or nation can also be represented by this diagram if their feelings, sentiments, and habits are nearly enough alike to create a normal type."—A statement which is defensible only if "habits" be stretched to include incomes! See, also, pp. 28 (diagram) and 82.[69]Economics, 1904 ed., pp. 101-104.[70]Seesupra, p. 17, n.[71]English edition, London, 1889, pp. 90-91[72]Flux, A. W.,Economic Principles, London, 1904. Compare pp. 4, 29, and 27.[73]Principles, 1907 ed., pp. 348-50.[74]Op. cit., p. 569.[75]As shown in chapterii. An interesting illustration of this general conclusion as to the significance of the results based on the individualistic analysis is found in the reformulation of the law of marginal utility by Professor Irving Fisher in his "Mathematical Investigations in the Theory of Value and Prices,"Trans. of the Connecticut Academy of Arts and Sciences, vol.ix, p. 37. The theory of marginal utility in relation to prices "is not, as sometimes stated: 'the marginal utilities to the same individual of all articles are equal,' much less is it: 'the marginal utilities of the same article to all consumers are equal;' butthe marginal utilities of all articlesCONSUMED [capitals mine]by a given individual are proportional to the marginal utilities of the same series of articles for each other consumer, and this uniform continuous ratio is the scale of prices for those articles." This conception of Professor Fisher's is clear as far as it goes, but it by no means explains the action of individual desires upon prices. It rather explains how an already established set of prices controls individualexpenditureandconsumption. Compare, however, Böhm-Bawerk's view, "Grundzüge," Conrad'sJahrbücher, N. F.,xiii, 1886, pp. 516et seq.

[61]See Jevons,Theory of Pol. Econ., 3d ed., pp. 88-90; 95-96.

[62]See, especially, Pareto,op. cit., vol.i, pp. 36-37.

[63]Our question here is primarily alogical, and not apsychological, one, else I should choose a different term from "feeling-magnitude." For the present, I am accepting the Austrian psychology, and attacking the Austrian logic.Cf.the chapter in this work on the psychology of value.

[64]Op. cit., pp. 300, 312, 313et seq., 320, 325, n., 327, 328 n., 329, and chap.xvii.

[65]Principles, 1898 ed., p. 176.

[66]Op. cit., p. 300.

[67]Principles of Economics, London, 1902, p. 57.

[68]Page 18, "The consumption of all the individuals in a community or nation can also be represented by this diagram if their feelings, sentiments, and habits are nearly enough alike to create a normal type."—A statement which is defensible only if "habits" be stretched to include incomes! See, also, pp. 28 (diagram) and 82.

[69]Economics, 1904 ed., pp. 101-104.

[70]Seesupra, p. 17, n.

[71]English edition, London, 1889, pp. 90-91

[72]Flux, A. W.,Economic Principles, London, 1904. Compare pp. 4, 29, and 27.

[73]Principles, 1907 ed., pp. 348-50.

[74]Op. cit., p. 569.

[75]As shown in chapterii. An interesting illustration of this general conclusion as to the significance of the results based on the individualistic analysis is found in the reformulation of the law of marginal utility by Professor Irving Fisher in his "Mathematical Investigations in the Theory of Value and Prices,"Trans. of the Connecticut Academy of Arts and Sciences, vol.ix, p. 37. The theory of marginal utility in relation to prices "is not, as sometimes stated: 'the marginal utilities to the same individual of all articles are equal,' much less is it: 'the marginal utilities of the same article to all consumers are equal;' butthe marginal utilities of all articlesCONSUMED [capitals mine]by a given individual are proportional to the marginal utilities of the same series of articles for each other consumer, and this uniform continuous ratio is the scale of prices for those articles." This conception of Professor Fisher's is clear as far as it goes, but it by no means explains the action of individual desires upon prices. It rather explains how an already established set of prices controls individualexpenditureandconsumption. Compare, however, Böhm-Bawerk's view, "Grundzüge," Conrad'sJahrbücher, N. F.,xiii, 1886, pp. 516et seq.

The great and permanent service of the Austrian analysis is in the fact that it looks for the explanation of value—a psychical fact—in human minds. Its essential defect is that it takes only a small part of the human mind for that explanation. It makes two abstractions, neither of which is allowable: first, it abstracts the "individual mind" from its vital and organic union with the socialmilieu; and second, it abstracts from the "individual mind" thus abstracted, only those desires and thoughts which are immediately concerned with the consumption and production of economic goods—really, in the narrower analysis of "market price," only those concerned with the consumption of economic goods. Now it is at once conceded that a science, in explaining its phenomena, must ignore some of the relations which those phenomena bear to other phenomena. No science is called upon to link its facts with all the other facts in the universe. Some abstraction,[76]much abstraction, is legitimate and necessary. Where to draw the line is often a perplexing question,and I do not intend to lay down a general rule here. But there is one familiar canon which the Austrians have violated in drawing the line so narrowly as they have done: we must include enough in ourexplanationphenomena to enable us to explain ourproblemphenomenon in terms other than itself. Concretely, in explaining value, we have not solved the problem if the explanation assumes value. Rather, we are reasoning in a circle. Now have the Austrians done this? Wieser explicitly rejects the older circle in thedefinitionof value,[77]which made the value of A equal to what it would exchange for, B, the value of B being in turn equal to what it would exchange for, namely, A, and does point out that the value of a good must be treated as an absolute thing, independent of the particular exchange that happens to be made. He even works out an explanation of value in purely psychical terms,[78]as it would exist in a hypothetical individual economy, or in a hypothetical "natural" communistic society, where all men's wants are equally regarded. But when the Austrians come to the explanation of value as it exists in society as actually organized, the attempt to explain value in terms of individual desires for economic goods (or individual aversions in connection with their production) fails, and a circle again emerges: Why has the good, A, value? Because men desire it? No, that is not enough: the men whodesire it must have other economic goods, i.e., wealth, with which to buy it. And why will these other goods buy it? Because they havevalue! For the power is proportioned, not to the quantity of their wealth in pounds or yards or other physical units, but simply to its amount invalue.—The explanation of the value of these goods then becomes another problem, for which the Austrian analysis can offer only the same solution, with the same circle in reasoning, and the same problem of value at the end. This circle is made explicit in Wieser's treatment:—

The relation of natural value to exchange value is clear. Natural value is one element in the formation of exchange value. It does not, however, enter simply and thoroughly into exchange value. On the one side, it is disturbed by human imperfection, by error, fraud, force, chance; and on the other, by the present order of society, by the existence of private property, and by the differences between rich and poor,—as a consequence of which latter a second element mingles itself in the formation of exchange value, namely,purchasing power.[79][Italics mine.]

Thispurchasing powercan only be either the inaccurate name of the English School for value itself, or else a consequence of the possession of goods which have value in the sense in which Wieser uses the term value, in the note on page 53 of hisNatural Valuealready quoted.[80]The circle becomes still more explicit in Hobson.[81]Hobson attempts to coördinate the Austrian theory with the older cost theory, and in this connection gives a table analyzing the forces that lieback of value, or "importance," from the supply side, and from the demand side. And there, apparently oblivious of the obvious circle, he places "purchasing power" as one of the ultimate factors on the demand side! If the Austrian analysis attempt nothing more than the determination of particular prices, one at a time, on the assumption that the transactions are, in each particular case, so small as not to disturb the marginal utility of money for each buyer and seller, and on the assumption that the values and prices of all the goods owned by buyers and sellers are already determined and known, except that of the good immediately in question, it is clear that it but plays over the surface of things. If it attempt more it is involved in a circle.

FOOTNOTES:[76]The extreme abstraction of the utility school is made very clear by Pareto,op. cit., introductory chapter. He is concerned only with "the science of ophelimity" (p. 6), and ophelimity is a "wholly subjective quality" (p. 4).[77]Seesupra, chap.ii.[78]But as later indicated (infra, chap.xiii), the apparent simplicity of his analysis simply covers up, and does not eliminate, the complexity of the situation.[79]Op. cit., pp. 61-62.[80]Seesupra, chap.ii.[81]Economics of Distribution, p. 81.

[76]The extreme abstraction of the utility school is made very clear by Pareto,op. cit., introductory chapter. He is concerned only with "the science of ophelimity" (p. 6), and ophelimity is a "wholly subjective quality" (p. 4).

[77]Seesupra, chap.ii.

[78]But as later indicated (infra, chap.xiii), the apparent simplicity of his analysis simply covers up, and does not eliminate, the complexity of the situation.

[79]Op. cit., pp. 61-62.

[80]Seesupra, chap.ii.

[81]Economics of Distribution, p. 81.

And all attempts to explain value in terms of these abstract factors must become similarly entangled. The Austrians themselves have pointed out that the explanation of value from the standpoint of individual costs involves a circle, that costs resolve themselves into value-complexes, and that the cost theorists are really explaining value by value.[82]I have shown that the same is true of the Austrian attempt to reduce values to terms of individual utilities. It is also true of Hobson's attempt to combine the two explanations, as shown, and the same could be shown of at least the earlier writings of Professor Marshall.[83]There is another attempt to work out the explanation of value, still in terms of sacrifices in production and satisfactions in consumption, but no longer from the same standpoint, which deserves special attention here. Professor Clark, in theYale Reviewfor 1892, in the article above referred to, "The Ultimate Standard of Value" (since reproduced as chapterxxivof theDistribution of Wealth), has attempted so to add up individual units of cost and individual units ofutility, as to get absolute social units of utility and cost either of which might serve as the ultimate standard of value. It will be remembered that I have already quoted from this article with reference to the quantitative nature of value, and that Professor Clark stands as the leading exponent of the conception that value is a social fact, "is social and subjective," the value put on goods by the social organism. In this article, he is seeking the unit of social value, the measure of the importance of a good to society. Either the unit of social utility or the unit of social detriment would serve, but it happens, he holds, that the unit of detriment is the more available for purposes of measurement, and so the final unit[84]of value is the sacrifice entailed by a quantity of distinctively social labor (p. 261). Professor Clark avoids the complication that labor and capital work together, by isolating labor at the margin, in the manner made familiar in hisDistribution of Wealth. Assume capital constant, introduce or subtract a small quantity of labor, and whatever of product is added or subtracted is due to that labor only (p. 263).

This virtually unaided labor is the only kind that can measure values. Attempts to use the labor standard have come short of success, because of their failure to isolate from capital the labor to which products are due.

Work, however, is miscellaneous and heterogeneous. There is needed "a pervasive elementin the actions, and one that can be measured." This is "personal sacrifice," which is "common to all varieties of labor." An isolated worker, making and using his own products, readily finds an equilibrium point, where utility and sacrifice are equal, and where he stops his day's work (pp. 364-65). If the product of any hour's labor be destroyed (p. 366) he will not suffer the loss of anything more important than the product of the last hour's labor, for he will forego that, and re-create the good with the higher utility. The utility of the last hour's product and the pain of the last hour's labor are equal. Either is hisunit of value.

Of society regarded as a unit the same is true.

Take away the articles that the society gains by the labor of a morning hour,—the necessary food, clothing and shelter that it absolutely must have,—and it will divert to making good the loss the work performed at the approach of evening, which would otherwise have produced the final luxuries on its list of goods.

(It might be questioned parenthetically here whetherallare fed beforeanybegin to enjoy luxuries, or, if not, just what is considered the "socially necessary" amount of food, and whom does social necessity require that we feed before we devote an hour to making luxuries?) Professor Clark finds the final hour of social labor-pain to be a compound, the sum of the final hour's dissatisfactions of all the laborers. This sum is theultimate standard of value. It is in equilibrium with the sum of the utilities of the final hour's products to all the laborers considered as consumers. Thisis illustrated by a diagram on page 271. But the problem still remains as to the value of particular goods. Granted that the sum of the satisfactions got from the total amount—a vast amount—of the final hour's product is equal to the sum of the pains incurred in producing this giant composite, and granted that the pain incurred by each man in making his part of the composite is equal to the satisfaction gained by him in consuming his part of the composite—not the same part!—the problem still remains as to the connection of the marginal utility and the value of theparticulargoods that make up the composite, with social labor. Professor Clark concedes at once that there is no necessary connection between the utility of the good to him who enjoys it, and the pain of making it to him who makes it. What connection is there than, between the value of the good and social labour? It is at this point, I venture to suggest, that Professor Clark's argument fails. I shall not follow his argument in detail, but shall quote a couple of paragraphs which seem to exhibit the failure (pp. 272-73):—

The burden of labor entailed on the man who makes an article stands in no relation to its market value. The product of one hour's labor of an eminent lawyer, an artist, a business manager, etc., may sell for as much as that of a month's work of an engine stoker, a seamstress or a stonebreaker. Here and there are "prisoners of poverty," putting life itself into products of which a wagon load can literally be bought for a prima donna's song. Wherever there is varying personal power, or different position, giving to some the advantage of a monopoly, there is a divergence of cost and value, if by these terms we mean the cost to theproducer, and the value in the market. Compare the labor involved in maintaining telephones with the rates demanded for the use of them. Yet of monopolized products as of others our rule holds good; they sell according to the disutility of the terminal social labor expended in order to acquire them.

But suppose they areboughtwith monopolized products, and suppose that a monopoly element enters, at some stage or other, intoeveryproduct of the market, and in varying degrees in each, either in the form of control of raw material, or special native mental or physical aptitude, or patent right, or any other of the innumerable forms that monopoly takes? Can these monopoly products then call forth a definite amount of social labor? Or can they merely call out a definite amount of value?[85]"Differences in wealth between different producers cause the cost of products to vary from their value." (Italics mine.) But surely this is our old circle again. If differences in wealth, which is the embodiment of value, are to modify the working of the "pervasive element" of "personal sacrifice" (p. 263), it is difficult to seehow that pervasive element can in any way be an ultimate explanation or measure of value.

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