FOOTNOTES:

The laws and conditions of the production of wealth, partake of the character of physical truths. There is nothing optional or arbitrary in them.... It is not so with the Distribution of Wealth. That is a matter of human institution solely. The things once there, mankind, individually or collectively, can do with them as they like. They can place them at the disposal of whomsoever they please, and on whatever terms. Further, in the social state, in every state except total solitude, any disposal whatever of them can only take place by the consent of society, or rather of those who dispose of its active force. Even what a person has produced by his individual toil, unaided by any one, he cannot keep, unless by the permission of society. Not only can society take it from him, but individuals could and would take it from him, if society only remained passive; if it did not either interfereen masse, or employ and pay people for the purpose of preventing him from being disturbed in the possession. The distribution of wealth, therefore, depends on the laws and customs of society. The rules by which it is determined, are what the opinions and feelings of the ruling portion of the community make them, and are very different in different ages and countries; and might be still more different, if mankind so chose.

The distribution of wealth, then, depends on social psychic forces. And among these are the social, ethical and legal values of men and of socialclasses. Economists of an earlier school took these factors for granted, when they thought of them at all, and assumed that they are constant, relatively unchangeable things, a sort of fixed framework within which the forces of a Malthusian biology, or the forces of "self-interest" might work. Commonly, indeed, they thought of them not at all, and wrote as if the factors which they allowed to vary told the whole story. Such is, indeed, still the procedure, in our present day "pure economic" theories of distribution, which either exclude the non-economic factors,[171]or else relegate them to the "poundof 'cæteris paribus.'"[172]If ours were a stagnant civilization, this procedure might be safe, but in a highly "dynamic" society, where laws, morals, class relations, the very fundamentals of organization, are being made the subjects of scrutiny, agitation, class struggle, etc., are being subjected to "transvaluations," and are continually changing them with the principles, machinery and results of distribution, and so one of the biggest factors lying back of economic values, no study of value can afford to ignore them.

It is of course recognized that a purely ethical and legal theory of distribution would be as much an abstraction as the "reinwirtschaftlich" theory of distribution—and probably a much less useful abstraction. Either abstraction is legitimate, if it do not seek to abolish the other factors. We may safely enough define a set of legal and moral values, concerned with the organization of society and industry, and, assuming them constant, a sort of frozen framework, let man's values with reference to the immediate consumption and production of economic goods ("utilities and costs" in current phrase) vary, and see what the consequences, both on the ranking of men, and the ranking of goods, will be. Or, assuming "utilities and costs" constant, we may let the legal and moral values vary, and see what consequences would follow. Or, assuming all other factors constant, we may vary the size of the population, or vary the proportions between labor and productive instruments, or between land and population, or pick out any other factor of the concrete situation we happen to be interested in, as the "standard of living,"and let it change, and see what consequences flow therefrom. But, in doing this, we must not forget that the other factors remain essential, equally potent in the general situation with the one on which we have centred our attention. And we must not forget that changes in one factor, while we may in thought allow it to occur alone, cannot occur without bringing in changes in the others as well. An increase in the number of laborers, e.g., may also mean an increase ofvotersof a given political tendency, and may mean a change in the political power of classes, and a change in the laws. And it may be tremendously significant whether the increased number of laborers consists of Irish Catholics, or of Russian Jews, or of native Americans, or of negroes,—significant from the standpoint of distribution, of the values of economic goods, and the direction of economic activity.[173]Reduce your labor force to "efficiency units," so that from the standpoint of productive power of the additions no difference is made whether they be of the one class or the other, and still it is a matter ofconsequence, from the standpoint of distribution, and ultimately of the values of goods, whether they belong to one class or the other. One sort of laborer may be capable of efficient labor-union organization, with the result that a large share of the product goes to labor. Another sort of laborer may be incapable of much organization, may work at cross-purposes with the rest of the labor force, and may be an easy victim of exploitation. "Other things equal," we may concede that productive efficiency, or "standard of living," or other abstract principle, determines the share that goes to labor—but many indeed are "the other things." The distribution of wealth is not an "arbitrary" matter—if by that it be meant that no scientific laws can be worked out to describe it. Mill himself would be first to protest against any metaphysical "freedom of the will" here. But it is a matter into which law and morals and personal friendship and monopoly privilege and charity and benevolence and statesmanlike purpose and selfish struggle—in a word, the whole intermental life of men in society—are involved. And any principle of distribution that we may select is only true, not only if other things are "equal," but also if other things are in a particular set of relations. We have seen the assumptions of a non-economic sort that are implicit in Wieser's conception of a "natural society." It may be interesting to note what is involved in the situation which Professor Clark treats in hisDistribution of Wealth. That his system should hold,we must have, of course, private property, and personal freedom. We must have perfectly free competition. We must have absolutely no monopoly privilege of any sort. We must have such rapid and free communication of ideas that no monopoly of knowledge should exist. But imagine the moral values that must rule in a society where such a situation holds! How are men to be prevented from getting monopolies? How prevent laws in the interests of the alert and influential? How prevent the monopoly of ideas? A very different moral situation must obtain in such a society from that we know. And a very different system of laws. In saying this, of course, I say nothing that was not obvious enough to Professor Clark when he constructed his system on the basis of "heroic abstraction," but still it cannot be neglected. Not every one who has undertaken to interpret Professor Clark, and to make practical application of his theories, has seen these limitations.

Or, again, what does the system of competition mean? Why do we have such varied estimates from different writers? Why do some see in it a benevolent influence, while for others it is a ghastly nightmare? The answer is, I think, that competition is an abstraction, which each makes in his own way. If we look on competition as a system where each is free to follow his "pure economic" tendencies in the shortest and simplest manner, I think there can be no question but that we must condemn it. The "pure economic impulse," namely, the impulseto get the maximum of wealth with the minimum of effort, left unchecked and unguided by any other social forces, would lead, by the shortest and simplest path, to theft, robbery, and murder. They are easier than work! And more sensible than work, if one be "reinwirtschaftlich," and live in a society where there is little chance that he who creates wealth will enjoy it. Or, partly checked by social constraints (thinking of these as "external" matters solely), the "economic tendency" may lead—as it has led—to the dynamiting of rival plants, to the securing of preferential rates from common carriers, to the corrupting of legislatures and judges, to the spreading of false rumors, etc. On the other hand, if the "rules of the game" are high, if competition be limited to doing things which result in a better commodity with a decreased outlay of human effort and physical resources, and with kindly feeling among competitors (or even without this last), we may see in it a great source of justice and progress. It all depends on what Professor Seligman calls the "level of competition."[174]That is to say, it depends on the extent to which the system includes factors of moral, legal and social nature, other than the "pure economic"—a thing "that never was on land or sea."

And what shall we say of "inevitable economic tendencies"? A good many of them—leading in diverse directions—have appeared in the literature of economics. On the one hand, inevitabletendencies towards a divine "economic harmony." On the other hand, inevitable tendencies toward monopoly; toward ever more numerous panics; toward greater concentration of wealth; toward proletarian misery of an ever more hopeless sort—all bringing us finally to a socialistic state. I see no inevitable economic tendencies anywhere. The "economic motive," as already indicated, if left free to work in vacuo, would lead us to anarchy. But it doesn't workin vacuo. And the question as to where the infinite complex of social forces may lead us is not one that can be settled "reinwirtschaftlich." We can only say that economic values, at a given moment, are the focal points at which the laws and moral values and loves and hates, and "utilities" and "costs" directly connected with economic goods, and the multitudinous other values of concrete social life exert their motivating influence on the economic activities of society. Then, given these economic values, and assuming that they alone are of significance for the activity of society, we may see where they would lead us. But we should still be in a world of abstractions if we did so. For the economic social values do not exhaust the social forces of motivation. Very much of social activity is non-economic in character. And the force of a given moral value—say that of elevating the condition of a degraded class—may be divided, tending indirectly by raising the value of a certain sort of economic good, to encourage its production, and tending directly to prevent its production.Let us assume, for example, that this moral value leads to an increase in the income of the degraded class, and so tends to increase the demand for liquor; but assume, further, that this same moral value is the force leading to a prohibition law, that forbids the production and sale of liquor. Ethical, religious, legal, esthetic, and other values may indirectly motivate the economic activity of men through entering into economic values, or they may directly, in their own form, antagonize these economic values, by constraining those who do not "participate" in them, and by impelling those who do feel them to activities in lines other than those where the greatest surplus of economic value is to be gained. Even, then, though we have a theory of economic value which includes these other social forces, we have no right to speak of "inevitable economic tendencies." Social life is one organic whole. There is no phase of social activity which is wholly directed by one set of values, and there is no one set of values that exclusively depends on one sort of motive. And when we give exclusive attention, in our study, to one set of values, as it is often necessary to do, we must recognize that we are handling an abstraction, that the other forces remain, and must be dealt with before our conclusions have any validity for practice.

FOOTNOTES:[163]See chaps.viandvii,supra.[164]Bk.ii, chap.vi.[165]Cf.Davenport,op. cit., p. 560. "For, in truth, not merely the distribution of the landed and other instrumental, income-commanding wealth in society, but also the distribution of general purchasing power ... are, at any moment in society, to be explained only by appeal to along and complex history[italics mine], a distribution resting, no doubt, in part upon technological value productivity, past or present, but in part also tracing back to bad institutions of property rights and inheritance, to bad taxation, to class privileges, to stock-exchange manipulation ... and, as well, to every sort of vested right in iniquity....But there being no apparent method of bringing this class of facts within the orderly sequences of economic law, we shall—perhaps—do well to dismiss them from our discussion...." [Italics are mine.] It may be questioned if the "orderly sequence" is worth very much if it ignore facts so decisive as these. It is precisely this sort of abstractionism which has vitiated so much of value theory. Most economists slur over the omissions; Professor Davenport, seeing clearly and speaking frankly, makes the extent of the abstraction clear. I venture to suggest that the reason he can find no place for facts like these within the orderly sequence of his economic theory is that he lacks an adequate sociological theory at the basis of his economic theory. A historicalregressuswill not, of course, fit in in any logical manner with a synthetic theory which tries to construct an existing situation out of existing elements. Our plan of alogicalanalysis of existing psychic forces makes it possible to treat these facts which have come to us from the past, not as facts of different nature from the "utilities" with which the value theorists have dealt, but rather as fluid psychic forces, of the same nature, and in the same system, as those "utilities."[166]I do not, of course, mean to question the immense light which history throws upon the nature of existing social forces.[167]Wieser,op. cit., pp. 79-80.[168]Ibid., p. 62.[169]Pol. Econ., 1888 edition, p. 5.[170]Principles, bk. II, chap. I.[171]Professor Clark seems to desire to exclude all phases of social life except the "pure economic," from his static conception, as indicated by the footnote which follows, taken from page 76 of hisDistribution of Wealth: "The statement made in the foregoing chapters that a static state excludes true entrepreneurs' profits does not deny that a legal monopoly might secure to an entrepreneur a profit that would be as permanent as the law that should create it—and that, too, in a social condition which, at first glance, might appear to be static. The agents, labor and capital, would be prevented from moving into the favored industry, though economic forces, if they had been left unhindered, would have caused them to move to it. This condition, however, is not a true static state, as it has here been defined. Such a genuine static state has been likened to that of a body of tranquil water, which is held motionless solely by an equilibrium of forces. It is not frozen into fixity; but as each particle is impelled in all directions by the same amounts of force, it retains a fixed position. There is aperfect fluidity, but no flow; and in like manner the industrial groups are in a truly static state when the industrial agents, labor and capital, showa perfect mobility, but no motion. A legal monopoly destroys at a certain point this mobility [so would a law forbidding the manufacture of, say, opium or liquor, or any law or moral force that prevents the individual's using his labor and capital in the manner most advantageous to himself regardless of public consequences], and is to be treated as an element of obstruction or of friction that is so powerful as not merely to retard a movement that an economic force, if unhindered, would cause, but to prevent the movement altogether." This would seem to leave economic forces workingin vacuoin Professor Clark's static state—if "unhindered" is to be taken literally. It is probably a juster interpretation, however, to hold that Professor Clark has in mind a constant legal situation, in which absolutely free competition is assured by law. But even in his scheme for an economic dynamics, there is no place for legal or ethical changes. There are five general sets of dynamic changes which Professor Clark mentions, whose operation is to constitute the subject matter of economic dynamics. They are (Essentials, p. 131, andDistribution, pp. 56et seq.): (1) population increases; (2) capital increases; (3) methods of production change; (4) new modes of organizing industry come into vogue; (5) the wants of men change and multiply. These five categories are all, primarily, at least, economic in character. While legal and ethical changes would doubtless influence them, they certainly cannot comprehend the full influence of these legal and ethical changes, especially those affecting the ranking of men, and the distribution of wealth. There seems to be a marked difference between Professor Clark's point of view in hisDistribution of Wealthand that of his earlierPhilosophy of Wealth, and I must confess my preference for the earlier point of view. In saying this, of course, I am far from impeaching the masterly economic analysis which the later book contains—rather, I join heartily in the general estimate which counts that book as of altogether epoch-marking significance. My point is, rather, as will be indicated more fully in the chapters on the relation between value-theory and price-theory, that the presuppositions and significance of such a study as Professor Clark's need clarification and interpretation in the light of a theory of value which takes account of the rich complexity of social life.Professor Joseph Schumpeter, of Vienna, carries out economic abstractionism to its logical limits, both in "statics" and in "dynamics." For an estimate of his statics,videProfessor Alvin S. Johnson's review of Schumpeter'sDas Wesen und der Hauptinhalt der theoretischen Nationalökonomie(Leipzig, 1908), in theJournal of Political Economy, 1909, pp. 363 et seq. His dynamics is also to be "reinwirtschaftlich." An essay in economic dynamics, the introduction to which sets forth his general point of view, appears in the AustrianZeitschrift für Volkswirtschaft, etc., 1910, under the title, "Das Wesen der Wirtschaftskrisen." In this Professor Schumpeter narrows, by a process of exclusion, the conception of what would constitute a "pure economic" explanation of crises virtually to a pinpoint—and then fails to carry out his program of giving us a "reinwirtschaftlich" theory. For, in order to get anyperiodicityinto his economic movement, he is obliged to bring in, from the field of sociological theory, the factor ofimitation—he does not use the term, imitation, though he does use the verb, "kopieren." (Videesp. pp. 298-99.) Professor Schumpeter very explicitly recognizes the existence of factors other than the "reinwirtschaftlich," but counts them as "external" factors.[172]Cf. Professor Marshall's discussions in his sections on economic law and method, and Professor Davenport's classification of the factors in the economic environment (Value and Distribution, pp. 514-15).[173]The danger of the abstract individualistic study, from the entrepreneur's viewpoint—a useful enough method within limits—is well illustrated by Professor Davenport's contention that "men as employees are passive facts, mere agents under the direction of managing producers, and are therefore only potentially directing forces. The problem of production and of marginalship is, accordingly, an entrepreneur problem." (Op. cit., p. 279, n.) This is set forth as a limitation on the doctrine, stated in the paragraph which precedes it, that "man is to be conceived as the subject and centre of economic science, etc." Surely Professor Davenport's contention is an impossible abstraction from the rich facts of social control. The managing entrepreneur knows better, when he deals with union rules and walking delegates. And the economist, tracing the subtler forces that underlie values, and so motivate the direction of industry, should know more, rather than less, than the entrepreneur.[174]Principles, 1905 ed., pp. 147et seq.

[163]See chaps.viandvii,supra.

[164]Bk.ii, chap.vi.

[165]Cf.Davenport,op. cit., p. 560. "For, in truth, not merely the distribution of the landed and other instrumental, income-commanding wealth in society, but also the distribution of general purchasing power ... are, at any moment in society, to be explained only by appeal to along and complex history[italics mine], a distribution resting, no doubt, in part upon technological value productivity, past or present, but in part also tracing back to bad institutions of property rights and inheritance, to bad taxation, to class privileges, to stock-exchange manipulation ... and, as well, to every sort of vested right in iniquity....But there being no apparent method of bringing this class of facts within the orderly sequences of economic law, we shall—perhaps—do well to dismiss them from our discussion...." [Italics are mine.] It may be questioned if the "orderly sequence" is worth very much if it ignore facts so decisive as these. It is precisely this sort of abstractionism which has vitiated so much of value theory. Most economists slur over the omissions; Professor Davenport, seeing clearly and speaking frankly, makes the extent of the abstraction clear. I venture to suggest that the reason he can find no place for facts like these within the orderly sequence of his economic theory is that he lacks an adequate sociological theory at the basis of his economic theory. A historicalregressuswill not, of course, fit in in any logical manner with a synthetic theory which tries to construct an existing situation out of existing elements. Our plan of alogicalanalysis of existing psychic forces makes it possible to treat these facts which have come to us from the past, not as facts of different nature from the "utilities" with which the value theorists have dealt, but rather as fluid psychic forces, of the same nature, and in the same system, as those "utilities."

[166]I do not, of course, mean to question the immense light which history throws upon the nature of existing social forces.

[167]Wieser,op. cit., pp. 79-80.

[168]Ibid., p. 62.

[169]Pol. Econ., 1888 edition, p. 5.

[170]Principles, bk. II, chap. I.

[171]Professor Clark seems to desire to exclude all phases of social life except the "pure economic," from his static conception, as indicated by the footnote which follows, taken from page 76 of hisDistribution of Wealth: "The statement made in the foregoing chapters that a static state excludes true entrepreneurs' profits does not deny that a legal monopoly might secure to an entrepreneur a profit that would be as permanent as the law that should create it—and that, too, in a social condition which, at first glance, might appear to be static. The agents, labor and capital, would be prevented from moving into the favored industry, though economic forces, if they had been left unhindered, would have caused them to move to it. This condition, however, is not a true static state, as it has here been defined. Such a genuine static state has been likened to that of a body of tranquil water, which is held motionless solely by an equilibrium of forces. It is not frozen into fixity; but as each particle is impelled in all directions by the same amounts of force, it retains a fixed position. There is aperfect fluidity, but no flow; and in like manner the industrial groups are in a truly static state when the industrial agents, labor and capital, showa perfect mobility, but no motion. A legal monopoly destroys at a certain point this mobility [so would a law forbidding the manufacture of, say, opium or liquor, or any law or moral force that prevents the individual's using his labor and capital in the manner most advantageous to himself regardless of public consequences], and is to be treated as an element of obstruction or of friction that is so powerful as not merely to retard a movement that an economic force, if unhindered, would cause, but to prevent the movement altogether." This would seem to leave economic forces workingin vacuoin Professor Clark's static state—if "unhindered" is to be taken literally. It is probably a juster interpretation, however, to hold that Professor Clark has in mind a constant legal situation, in which absolutely free competition is assured by law. But even in his scheme for an economic dynamics, there is no place for legal or ethical changes. There are five general sets of dynamic changes which Professor Clark mentions, whose operation is to constitute the subject matter of economic dynamics. They are (Essentials, p. 131, andDistribution, pp. 56et seq.): (1) population increases; (2) capital increases; (3) methods of production change; (4) new modes of organizing industry come into vogue; (5) the wants of men change and multiply. These five categories are all, primarily, at least, economic in character. While legal and ethical changes would doubtless influence them, they certainly cannot comprehend the full influence of these legal and ethical changes, especially those affecting the ranking of men, and the distribution of wealth. There seems to be a marked difference between Professor Clark's point of view in hisDistribution of Wealthand that of his earlierPhilosophy of Wealth, and I must confess my preference for the earlier point of view. In saying this, of course, I am far from impeaching the masterly economic analysis which the later book contains—rather, I join heartily in the general estimate which counts that book as of altogether epoch-marking significance. My point is, rather, as will be indicated more fully in the chapters on the relation between value-theory and price-theory, that the presuppositions and significance of such a study as Professor Clark's need clarification and interpretation in the light of a theory of value which takes account of the rich complexity of social life.Professor Joseph Schumpeter, of Vienna, carries out economic abstractionism to its logical limits, both in "statics" and in "dynamics." For an estimate of his statics,videProfessor Alvin S. Johnson's review of Schumpeter'sDas Wesen und der Hauptinhalt der theoretischen Nationalökonomie(Leipzig, 1908), in theJournal of Political Economy, 1909, pp. 363 et seq. His dynamics is also to be "reinwirtschaftlich." An essay in economic dynamics, the introduction to which sets forth his general point of view, appears in the AustrianZeitschrift für Volkswirtschaft, etc., 1910, under the title, "Das Wesen der Wirtschaftskrisen." In this Professor Schumpeter narrows, by a process of exclusion, the conception of what would constitute a "pure economic" explanation of crises virtually to a pinpoint—and then fails to carry out his program of giving us a "reinwirtschaftlich" theory. For, in order to get anyperiodicityinto his economic movement, he is obliged to bring in, from the field of sociological theory, the factor ofimitation—he does not use the term, imitation, though he does use the verb, "kopieren." (Videesp. pp. 298-99.) Professor Schumpeter very explicitly recognizes the existence of factors other than the "reinwirtschaftlich," but counts them as "external" factors.

Professor Joseph Schumpeter, of Vienna, carries out economic abstractionism to its logical limits, both in "statics" and in "dynamics." For an estimate of his statics,videProfessor Alvin S. Johnson's review of Schumpeter'sDas Wesen und der Hauptinhalt der theoretischen Nationalökonomie(Leipzig, 1908), in theJournal of Political Economy, 1909, pp. 363 et seq. His dynamics is also to be "reinwirtschaftlich." An essay in economic dynamics, the introduction to which sets forth his general point of view, appears in the AustrianZeitschrift für Volkswirtschaft, etc., 1910, under the title, "Das Wesen der Wirtschaftskrisen." In this Professor Schumpeter narrows, by a process of exclusion, the conception of what would constitute a "pure economic" explanation of crises virtually to a pinpoint—and then fails to carry out his program of giving us a "reinwirtschaftlich" theory. For, in order to get anyperiodicityinto his economic movement, he is obliged to bring in, from the field of sociological theory, the factor ofimitation—he does not use the term, imitation, though he does use the verb, "kopieren." (Videesp. pp. 298-99.) Professor Schumpeter very explicitly recognizes the existence of factors other than the "reinwirtschaftlich," but counts them as "external" factors.

[172]Cf. Professor Marshall's discussions in his sections on economic law and method, and Professor Davenport's classification of the factors in the economic environment (Value and Distribution, pp. 514-15).

[173]The danger of the abstract individualistic study, from the entrepreneur's viewpoint—a useful enough method within limits—is well illustrated by Professor Davenport's contention that "men as employees are passive facts, mere agents under the direction of managing producers, and are therefore only potentially directing forces. The problem of production and of marginalship is, accordingly, an entrepreneur problem." (Op. cit., p. 279, n.) This is set forth as a limitation on the doctrine, stated in the paragraph which precedes it, that "man is to be conceived as the subject and centre of economic science, etc." Surely Professor Davenport's contention is an impossible abstraction from the rich facts of social control. The managing entrepreneur knows better, when he deals with union rules and walking delegates. And the economist, tracing the subtler forces that underlie values, and so motivate the direction of industry, should know more, rather than less, than the entrepreneur.

[174]Principles, 1905 ed., pp. 147et seq.

Back to the concrete whole, then, of social-mental life. The abstract elements with which the Austrians and the pain-abstinence cost school undertook to solve the value problem, have their place in this whole. The "utility" of goods to individuals, growing out of the nature of their wants, depends very largely on social causes. Mode,[175]fashion, custom—how powerfully they mould our wants. And individual "cost," likewise: a university athlete could dig a ditch far more easily, so far as bodily pain is concerned, than could an aged negro, and yet would suffer much more in doing it than would the negro. A social standard would bring a feeling of shame to him which the negro would not share. If we abstract from the concrete forms which individual wants and "costs" take, and define them in their lowest physical terms, we might leave out a social reference. But men do not desire raw meat, and the skins of beasts, and caves in which to live. Their food they wish to eat in accordance with the conventions of their class, and of a sort that their fellows eat, their water, of late, they wish free from germs, their housesand clothing must be "in style,"—facts well enough recognized, though not in themselves enough for a theory of "social value." These individual "utilities" and "costs" have little meaning till we know the social ranking of the men who feel them, till we know how much the men who have them count for in the scale of fundamentalhumanvalues. And their effect on "supply price" and "demand price"—the money measures of infinitely complex social forces, to which the entrepreneur immediately looks for his "cue"—has absolutely no constant relation to their intensity. The wants of slaves may count for little. The utterly unattractive and inefficient man may starve. The gilded parasite of a prerevolutionary French monarch may command untold resources, while the useful and productive millions may barely exist. On the other hand, with a changed set of legal and moral values, we may have men of social influence and power striving constantly to increase the incomes and relieve the sufferings of the poor and helpless. Our legislatures may be busy with laws shortening the hours of all labor, laws prohibiting child labor, laws restricting the labor of women, laws for the protection of miners, laws relating to the conditions of pay for labor and to compensation for accidents—which promptly reflect themselves in the values of the goods produced in the industries affected, and in the increased values—through increased "demand"—of the goods consumed by these classes.

The ideal of "no pay without function" mayattain—as I think it is to-day attaining—a value of increasing power. And it may lead men to strive for the abolition of monopoly incomes, and the correction of the gross inequalities in the distribution of wealth. If it do not succeed—and it does not by any means succeed—it is because opposing values check it. At any given moment, there is an equilibrium, usually unstable, between the forces tending to correct, and to perpetuate, these inequalities. And it need not be an evil force that is the real obstacle to the realization of greater justice in distribution. The legal value of private property—one of those social "absolute values" which do not readily lend themselves to the "marginal process"—checks at an early stage many of our well-meant, but badly planned, efforts at justice. Glad as most of us would be to deprive plutocratic pirates of what they have not earned, we still do not care to upset the fundamentals of our social system in the process. But the conflict between these values brings them both into clearer light. We see, and feel, the significance, the "presuppositions," the "funded meanings," of each. And while, for the present, there is a "mechanical haul and strain" between them, which, if no more light comes, may ultimately lead to the triumph of one and the complete defeat of the other, still, we may hope to get a result like that which often comes in the case of conflicts between values in the individual psychology—a fuller appreciation of the significance of both values, which will get us away from the"absoluteness" of each, and effect a marginal equilibrium between them, or, perhaps, get a new value which will comprehend them both. Of course, the thing is not so simple as this. It is not a conflict simply between two values, both of which the same man may "participate" in. Our plutocrats are also parts of the social will. They count! The economic value they control may bribe lawmakers, may corrupt judges, may seduce writers and preachers and teachers and others who have to do with the making of public sentiment and the shaping of social values. And, in subtler ways, through the social prestige which their mere wealth too often gives, through the ideals which they themselves honestly feel, and communicate to those about them, do they create values opposing the values making for a juster distribution of wealth. Infinitely complex is the situation, many and varied are the values, which reinforce each other, oppose each other, and come into equilibrium with each other, in a given moment in the social will.

Older egoistic theories of political economy, which assumed perfect freedom of competition, and gloried in the "harmonies" which result therefrom, whereby the interests of the individuals and of society converge, and the maximum of social welfare is attained by the individual's attaining his own interests—these theories have been much attacked of late by those who accept the premise of egoism, but reject the premise of freedom. To them economic "friction" means simply an opportunity for the strong to prey uponthe weak, and the social outlook is gloomy indeed. The harmonies are shattered and gone. If we reject the other premise also, however, as necessarily a dominant principle, the outlook is changed or may be changed. It is true that there are ignorance, helplessness, and passions among men, and that wolves prey. But it is also true that there are forces of righteousness alert and militant in the world, not merely in the pulpit and cloister and missionary field. And the struggle between these contending forces is pregnant with implications for value theory. An astute corporation lawyer argues before a court; an honest attorney-general defends the rights of the people; and the ticker on 'Change records whether right or wrong has prevailed. Prices are big with the moral tidings they would speak—shall we read in them only mathematical ratios between quantities of physical objects?

It is by turning, then, to the concrete whole of social-mental life, and especially to the moral and legal values of distribution, that we break the circle[176]of our economic values. Economicshas failed to profit by the example of the other social sciences here. Ethics has frankly recognized the tremendous import of economic values for ethical values. Jurisprudence has frankly accepted the fact that law grows, in large part, out of economic needs—even though it remains behind the needs of the present economic situation. But economic theory has sought to make itself too much a thing apart, to isolate its phenomena from other phases of social life, and has busied itself exclusively with "utility" and "cost" and "prices," and the like. And where the economist has consented to consider the relations between his own field and adjacent fields, he has done so with a preconception of the priority of his own phenomena, and his results have been an "economic" interpretation of history, ethics, jurisprudence, etc. That the economic interpretation of the other fields has much to commend it is certain, but it is equally certain that law and morality react on economic values, especially in the higher stages of civilization. This has been so fully and convincingly stated by Professor Seligman, in hisEconomic Interpretation of History, that I forego further elaboration here. One comment is necessary however: even though we might grant Marx and Buckle that the physical environment and the progress ofeconomic technique are of ultimate ruling significance for the direction of social progress, it is still a far cry from that doctrine to the doctrine that the "utilities" and "costs" directly connected with the production and consumption of economic goods, in the minds of individual men, are an adequate explanation of anything.

Were we interested in ethical and political values for their own sake, it would be easy to show that our conception of the nature of society and of social values has a similar significance for politics and ethics. There is no one distinctive emotion, as fear, or the love of domination, that lies at the basis of the state; there is no one emotion, as sympathy, or the love of pleasure, which constitutes the essence of the moral values, nor is there any single type of mental activity, as imitation, or consciousness of kind, which furnishes the peculiar theme of sociology. Social life is not in water-tight compartments. It is one whole, of which the different sciences study different aspects. And the principle of division of labor among the social sciences is not that one science shall offer one theory of society and another science another theory, but rather, that each science shall take as its problem a phase of society, and explain it by reference to a general set of facts which all have in common. The differentiation comes not in theexplanationphenomena[177]—no science hasany monopoly on any set of forces which may be used for the purpose of explanation—but in the phenomena to be explained, in theproblemphenomena.[178]

FOOTNOTES:[175]VideRoss,Foundations of Sociology, chapter on the "Sociological Frontier of Economics," and Tarde,Psychologie Économique,passim.[176]It may be objected that instead of "breaking the circle," we have simply widened it—that economic values, working through other forms of value, affect other economic values still. In a sense, of course, this is true. In any trulyorganicsituation, we have the phenomenon ofreciprocal causation. An organic situationmustbe circular in this sense. The parts areinterdependent. And our objection to the theories criticized is based on the fact that they are essentially efforts to describe a process inrectilinear causation—in the case of the Austrians,e.g., the process isfromsubjective utility,toobjective value of consumption goods, thentothe values of the production goods of the nearest rank, and then on and on to goods of remoter ranks, etc. Böhm-Bawerk recognizes very well that the charge of circular reasoning, if it could be brought home to the Austrians, would vitiate their system.Vide"Grundzüge," Conrad'sJahrbücher, 1886, p. 516. And Professor Clark likewise recognizes that value theory of the sort he is treating is spoiled by circular reasoning, as indicated by his criticism of a certain form of the labor theory in hisDistribution of Wealth, p. 397. Whenever a small set of abstractions is picked out, asthe sourceandcauseof the rest of a movement, such a process of rectilinear causation is implied. And a rectilinear process has no right to get into a circle![177]Pareto, in the introductory chapter of hisCours d'Économie Politique, defines economics in terms of the narrow abstraction which he has chosen for the explanation phenomenon, as the "science of ophelimity" (p. 6), and ophelimity is "an entirely subjective quality" (p. 4). There are two objections to this procedure: you neither completely explain your problem phenomena, nor do you exhaust the possibilities of your explanation phenomena—for the same sort of mental facts have bearing on ethical and other social problems as well as on economic problems.[178]I am indebted to Professor E. C. Hayes, of the Department of Sociology of the University of Illinois, for this distinction.

[175]VideRoss,Foundations of Sociology, chapter on the "Sociological Frontier of Economics," and Tarde,Psychologie Économique,passim.

[176]It may be objected that instead of "breaking the circle," we have simply widened it—that economic values, working through other forms of value, affect other economic values still. In a sense, of course, this is true. In any trulyorganicsituation, we have the phenomenon ofreciprocal causation. An organic situationmustbe circular in this sense. The parts areinterdependent. And our objection to the theories criticized is based on the fact that they are essentially efforts to describe a process inrectilinear causation—in the case of the Austrians,e.g., the process isfromsubjective utility,toobjective value of consumption goods, thentothe values of the production goods of the nearest rank, and then on and on to goods of remoter ranks, etc. Böhm-Bawerk recognizes very well that the charge of circular reasoning, if it could be brought home to the Austrians, would vitiate their system.Vide"Grundzüge," Conrad'sJahrbücher, 1886, p. 516. And Professor Clark likewise recognizes that value theory of the sort he is treating is spoiled by circular reasoning, as indicated by his criticism of a certain form of the labor theory in hisDistribution of Wealth, p. 397. Whenever a small set of abstractions is picked out, asthe sourceandcauseof the rest of a movement, such a process of rectilinear causation is implied. And a rectilinear process has no right to get into a circle!

[177]Pareto, in the introductory chapter of hisCours d'Économie Politique, defines economics in terms of the narrow abstraction which he has chosen for the explanation phenomenon, as the "science of ophelimity" (p. 6), and ophelimity is "an entirely subjective quality" (p. 4). There are two objections to this procedure: you neither completely explain your problem phenomena, nor do you exhaust the possibilities of your explanation phenomena—for the same sort of mental facts have bearing on ethical and other social problems as well as on economic problems.

[178]I am indebted to Professor E. C. Hayes, of the Department of Sociology of the University of Illinois, for this distinction.

It may help the exposition if we throw the argument, briefly, into terms of the more familiar mechanical analogies, and speak of the equilibria and transformations of social forces. Of course, mechanical analogies have been used from time to time already in our discussion—psychologists themselves often find it useful to conceive of their phenomena in mechanical terms. And while, in the exposition, we shall find frequent reason to prefer our plan of conceiving society as a psychical organism, and the social forces as phases in an organic process, still certain relations may be clearer for being put into the other form.

Social values may be transformed into other forms of social value—as heat may be transformed into electricity, or into motion, or motion into heat, etc. Professor Clark, with his distinction between "capital" and "capital goods," has shown how economic value may undergo constant transformation, as to its physical embodiment, and yet remain generically the same. But the possibilities of transformation are not confined to the economic sphere. We may generalize the notion. A man may use economic value to attain political power; having the political power, he may use it to get economic valueback again, by direct barter and sale, if he wishes to take bribes, or by subtler, but still all too familiar means. Or, the political power may be transformed into personal prestige, if used in ways that please those whose good will means prestige. And personal influence—"live human power" (in Professor Cooley's phrase),[179]may be transformed into values of numerous sorts, into political power, into moral values—if he who has it wishes to make a propaganda—into prestige for other men, into economic value—for cannot an inspiring man command the purses of others in behalf of his plans and purposes? And may not popular confidence in a great statesman or financier in times of panic cause fears to be allayed, and values to return to goods that had lost their value? A man who has goods for which no demand exists, and which have, hence, little value, may, employing those who possess the art of creating demand to make public opinion for him by advertising, find his investment, transformed into public belief and interest, return to him a golden harvest. A religious value may flow into the economic value of religious books. A moral or religious value may be transformed into a law. A legal value—as a franchise right[180]—has often a definitely recognized economic value as well. Economic value, spent in an educational campaign, mayresult in the establishment of a new moral or legal value. And so on indefinitely. Enough has been said to show that there is some sort of analogy between social and physical forces, in that both can be transformed into other forms of force. The analogy might be pushed further. It is often difficult to make the transformation in both cases—there's lots of "friction" if a man starts out publicly and brazenly to buy a political office, and a great deal of waste in the process. But enough has also been said to show the weakness of such an analogy: in creating personal prestige through the wise use of his political power, an officer may actually increase, instead of exhausting, his political power. Or, in the moment of attempting certain transformations, the original power may be suddenly wiped out—as if a great political leader should undertake to popularize some form of immorality. There is no law of equivalence, of conservation of energy, in social forces. Their nature and their relations are organic, and not mechanical.

Or, we may speak of equilibria among social forces. Economists have for a long time been used to this, speaking of equilibria between supply and demand, between labor and capital, between enterprise and the other factors of production, between intensive and extensive margins, etc. But we may also have equilibria between, say, demand and moral values, as when moral forces oppose the consumption of liquor, or between supply and law, as in the case where regulation, rather than total suppression, ofcertain vicious businesses is the practice, or where the effort at total suppression falls short. And equilibria between enterprise and law and morals are being constantly worked out—entrepreneurs seeking to produce at the minimum expense, even at the cost of the lives and health of their employees, and law and morals[181]drawing limits beyond which they must not go, with a struggle between them at the margin—and the money prices of the products reflect the marginal equilibrium attained. Supply may be in equilibrium with a protective tariff, or an internal revenue excise—legal values which the economists have long been accustomed to treat quantitatively by the laws of incidence, and whose strength they measure in terms of money prices.[182]Not "utility and cost," but an infinite complex of social forces are in equilibrium in the economic situation.

And the social forces in equilibrium at focal points are themselves composites of many forces, coöperating and reinforcing each other, each ofthese forces having its own equilibria with other minor forces—a net resultant sending the unneutralized energy of both in a common direction, to form part of a bigger stream of energy. "Demand" is a stream of energy fed by many springs, among which, no doubt, individual wants for the good in question are to be found, but which include the legal and moral values ofmen, also, and an infinite host of other forces.

And, just as one form of physical energy may be substituted for another, under different systems of technique, electricity taking the place of steam power, steam doing the work formerly done by horse or human power, so, in particular forms of social organization, one form of social force may do the work that is better done by some other form of social force under a different form of social organization. Thus the regulation of the details of conduct, a matter of iron law (or of custom with the force of law) in certain stages, we now leave to the control of subtler social forces. At one stage we depend on religious values, the curse and the benediction of the church, as a tremendously vital power in social control; now we find other modes of social energy frequently more efficacious. Now we depend primarily on economic social values, under a competitive system, to motivate the economic activities of society, to determine whether this piece of land shall be planted in wheat, or in some other crop, or fertilized in this or that manner; in the mediæval English manor, many questions like these were settled by vote of the manor court.

But whatever the form in which the social energy of control and motivation manifests itself, its functional character is the same. It has its origin in, and receives its vitality from, the social will—or better is a phase of the social will—as steam power, electric power, and the energy in human muscles, are species of the same generic force.

The effort has not been made to put the whole of our argument into these obviously uncongenial terms. The mechanical analogies, often useful for particular purposes, fail to bring out the rich complexity, the organic nature, of the social processes, and, by their very simplicity, often lead to the ignoring of essential factors. For the purposes of the practical economist, however, concerned with price analysis in a situation which is so complex that he can give attention to only one set of forces, or tendencies, at a time, and where quantitative measurement is essential, it is often highly necessary to abstract from the organic complexity, to assume that other forces than those he is measuring are constant, and to put his argument into mechanical terms. My conception involves no radical revision of economic methodology in this matter. It is primarily concerned with the interpretation and validation of this methodology. To this topic I shall return in the chapters on the relation between the theory of value and the theory of prices.

FOOTNOTES:[179]Social Organization, p. 264.[180]Professor J. R. Commons has made some interesting comments in a note ("Political Economy and Business Economy,"Quar. Jour. Econ., Nov., 1907), as to the extent to which intangible objects have come to have economic value. The legal and psychical nature of such values is, of course, very manifest.[181]Moral values, like economic values, in the sense in which I use the term here, are actual facts, and not mere ideals. A moral valueisa value, to the extent that it is an effectivepower in motivation, to the extent that the social will backs it up, and punishes with its disapproval and with the subtle penalties which social disapproval involves, infractions of the moral standard in question. I am not here passing judgment on moral values themselves in the light of any ideal standard, but simply describing the manner in which moral values function.[182]Intrinsically, there is no more reason why the economist should concern himself with measuring quantitatively the effect of tariff laws than with a similar treatment of other legal values. Tariffs do not affect industry any more intimately than hosts of other laws. The obvious reason why the economic laws of taxation have been worked out and the others ignored, in our economic analyses, is that the tax laws, being themselves expressed in money terms, are more easily handled by the economist.

[179]Social Organization, p. 264.

[180]Professor J. R. Commons has made some interesting comments in a note ("Political Economy and Business Economy,"Quar. Jour. Econ., Nov., 1907), as to the extent to which intangible objects have come to have economic value. The legal and psychical nature of such values is, of course, very manifest.

[181]Moral values, like economic values, in the sense in which I use the term here, are actual facts, and not mere ideals. A moral valueisa value, to the extent that it is an effectivepower in motivation, to the extent that the social will backs it up, and punishes with its disapproval and with the subtle penalties which social disapproval involves, infractions of the moral standard in question. I am not here passing judgment on moral values themselves in the light of any ideal standard, but simply describing the manner in which moral values function.

[182]Intrinsically, there is no more reason why the economist should concern himself with measuring quantitatively the effect of tariff laws than with a similar treatment of other legal values. Tariffs do not affect industry any more intimately than hosts of other laws. The obvious reason why the economic laws of taxation have been worked out and the others ignored, in our economic analyses, is that the tax laws, being themselves expressed in money terms, are more easily handled by the economist.

Professor Seligman's discussion of value theory has been extremely fertile in suggestions for me, and I find the spirit of the positive theory outlined in this book much closer to the general point of view of his doctrines than to those of any other economic writer. His recognition of the generic character of value, of the fact that economic value is but a species within a genus,[183]his contention that, while ethical principles depend on economic considerations in primitive life, they still, in later and higher stages, attain a relative independence, and react on economic life,[184]his recognition of the essentially social nature of even the individual's wants,[185]his discussion of the legal and moral "level of competition,"[186]and, in general, his insistence upon a sociological point of view, especially in the treatment of all practical problems, have been of marked assistance to me in freeing my mind from the individualistic bias of the narrow price analyses, and in making clear the gap between existing theories of value and the function of the value concept in economic science. At certainstages, as already indicated in part, his theories differ pretty radically from that set forth in the preceding pages. For one thing, I find no place in my scheme for the notions of social utility and social cost[187]which are prominent in his discussions, as, indeed, in the discussion of most of the adherents of the social value school. There is one further point of difference, however, to which I wish especially to call attention, as criticism of Professor Seligman's view brings to light certain significant points in the theory I am defending. The following quotation is from his article, "Social Elements in the Theory of Value," from theQuarterly Journalof May, 1901:[188]—

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