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+The Project Gutenberg EBook of Social Value, by B. M. Anderson
+
+This eBook is for the use of anyone anywhere at no cost and with
+almost no restrictions whatsoever.  You may copy it, give it away or
+re-use it under the terms of the Project Gutenberg License included
+with this eBook or online at www.gutenberg.org
+
+
+Title: Social Value
+       A Study in Economic Theory Critical and Constructive
+
+Author: B. M. Anderson
+
+Release Date: November 18, 2011 [EBook #38047]
+
+Language: English
+
+Character set encoding: ASCII
+
+*** START OF THIS PROJECT GUTENBERG EBOOK SOCIAL VALUE ***
+
+
+
+
+Produced by Curtis Weyant, Josephine Paolucci and the
+Online Distributed Proofreading Team at https://www.pgdp.net.
+(This book was produced from scanned images of public
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+
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+
+
+
+
+SOCIAL VALUE
+
+A STUDY IN ECONOMIC THEORY CRITICAL AND CONSTRUCTIVE
+
+BY
+
+B. M. ANDERSON, JR., PH.D.
+
+_Instructor in Political Economy Columbia University_
+
+BOSTON AND NEW YORK
+HOUGHTON MIFFLIN COMPANY
+The Riverside Press Cambridge
+1911
+
+
+COPYRIGHT, 1911, BY HART, SCHAFFNER & MARX
+
+ALL RIGHTS RESERVED
+
+_Published November 1911_
+
+
+TO MY FATHER
+
+BENJAMIN M. ANDERSON
+
+OF COLUMBIA, MISSOURI
+
+MY FIRST TEACHER OF
+
+POLITICAL ECONOMY
+
+
+
+
+PREFACE
+
+
+This series of books owes its existence to the generosity of Messrs. Hart,
+Schaffner, and Marx of Chicago, who have shown a special interest in
+directing the attention of American youth to the study of economic and
+commercial subjects, and in encouraging the systematic investigation of the
+problems which vitally affect the business world of to-day. For this
+purpose they have delegated to the undersigned Committee the task of
+selecting topics, making all announcements, and awarding prizes annually
+for those who wish to compete.
+
+In the year ending June 1, 1910, the following topics were assigned:--
+
+     1. The effect of labor unions on international trade.
+
+     2. The best means of raising the wages of the
+     unskilled.
+
+     3. A comparison between the theory and the actual
+     practice of protectionism in the United States.
+
+     4. A scheme for an ideal monetary system for the United
+     States.
+
+     5. The true relation of the central government to
+     trusts.
+
+     6. How much of J. S. Mill's economic system survives?
+
+     7. A central bank as a factor in a financial crisis.
+
+     8. Any other topic which has received the approval of
+     the Committee.
+
+A first prize of six hundred dollars, and a second prize of four hundred
+dollars, were offered for the best studies presented by class A, composed
+chiefly of graduates of American colleges.
+
+The present volume was awarded the second prize.
+
+PROFESSOR J. LAURENCE LAUGHLIN,
+_University of Chicago, Chairman_.
+
+PROFESSOR J. B. CLARK,
+_Columbia University_.
+
+PROFESSOR HENRY C. ADAMS,
+_University of Michigan_.
+
+HORACE WHITE, ESQ.,
+New York City.
+
+PROFESSOR EDWIN F. GAY,
+_Harvard University_.
+
+
+
+
+A NOTE
+
+
+The following study is the outgrowth of investigations in the "Quantity
+Theory" of money, carried on in the seminar of Professor Jesse E. Pope, at
+the University of Missouri, during the term 1904-5. That a satisfactory
+general theory of value must underlie any adequate treatment of the problem
+of the value of money, and that there is little agreement among monetary
+theorists concerning the general theory of value, became very evident in
+the course of this investigation; and that the present writer's conception
+of value, as expressed in a paper written at that time on the "Quantity
+Theory," was not satisfactory, became painfully clear after Professor
+Pope's kindly but fundamental criticisms. The problem of value, laid aside
+for a time, forced itself upon me in the course of my teaching: my students
+seemed to understand the treatment of value in the text-books used quite
+clearly, but I could never convince myself that I understood it, and the
+conviction grew upon me that the value problem really remained unsolved.
+Hence the present book. It was begun in Dean Kinley's seminar, at the
+University of Illinois, in the term 1909-10. The first three parts, in
+substantially their present form, and an outline sketch of the germ idea of
+the fourth part, were submitted, in May of 1910, in the Hart, Schaffner &
+Marx Economic Prize Contest of that year. Part IV was elaborated in
+detail, and minor changes made in the first three parts, during the year
+1910-11, at Columbia University. The book is submitted as a doctor's
+dissertation to the Faculty of Political Science of that institution.
+
+My obligations to others in connection with this book are numerous. I
+cannot refrain from thanking my old teacher Professor Pope, in this
+connection. I owe my interest in economic theory, and the greater part of
+my training in economic method, to the three years I spent in his seminar
+at Missouri. I am also indebted to him for substantial aid in the critical
+revision of the proofsheets. At the University of Illinois, Dean Kinley and
+Professors E. L. Bogart and E. C. Hayes were of special service to me, as
+was also Mr. F. C. Becker, now of the department of philosophy at the
+University of California. Dean Kinley, in particular, criticized several
+successive drafts, and made numerous valuable suggestions. My chief
+obligations at Columbia University are to Professors Seligman, Seager, John
+Dewey, and Giddings. My debt to Professors Seligman and Dewey is, in part,
+indicated in the course of the book, so far as points of doctrine are
+concerned. Both have been kind enough to read and criticize the provisional
+draft, and Professor Seligman has supervised the revision at every stage.
+My wife's services, in criticism, in bibliographical work, and in the
+mechanical labors which writing a book involves, have been indispensable.
+
+It is due Professor J. B. Clark, since I discuss his theories here at
+length, to mention the fact that, owing to his absence from Columbia
+University during the year 1910-11, I have been unable to talk over my
+criticisms with him, and so may have misinterpreted him at points. Of
+course, there is a similar danger with reference to every other writer
+mentioned in the book, but the reader will not be likely to think, in the
+case of others, that the interpretations have been passed on by the writers
+discussed, in advance of publication. I must also mention here Professor H.
+J. Davenport, whose name occurs frequently in the following pages. Chiefly
+he has evoked criticism in this discussion, but it goes without saying that
+his _Value and Distribution_ is a most significant work in the history of
+economic theory, and my indebtedness to it will be manifest.
+
+THE AUTHOR.
+
+COLUMBIA UNIVERSITY,
+May, 1911.
+
+
+
+
+ANALYTICAL TABLE OF CONTENTS
+
+
+PART I. INTRODUCTION
+
+CHAPTER I
+
+PROBLEM AND PLAN OF PROCEDURE
+
+    Social Value concept recently become important, chiefly
+    in America, and primarily through the influence of
+    Professor J. B. Clark--Value and "social marginal
+    utility"--Relation of social-value theory to Austrian
+    theory: Professor Clark's view; views of Boehm-Bawerk,
+    Wieser, and Sax--Statement of the author's position:
+    conceptions of social utility and social cost
+    unsatisfactory, but social value concept a necessity for
+    the validation of economic theory--Plan of procedure:
+    study of logical requirements of valid value concept;
+    failure of current theory to justify such a concept;
+    cause of this failure in faulty psychology,
+    epistemology, and sociology presupposed by current
+    economic theory; reconstruction of these
+    presuppositions; on the basis of the reconstruction, a
+    positive theory of social value                             3
+
+
+PART II. CRITIQUE OF CURRENT VALUE THEORY
+
+CHAPTER II
+
+FORMAL AND LOGICAL ASPECTS OF THE VALUE CONCEPT
+
+    Value as ideal, and value as market fact--Value as
+    absolute, and value as relative--Value as
+    quantity--Relation between quantity and
+    quality--Relative conception of value involves a vicious
+    circle, if treated as ultimate--Every "relative value"
+    implies two absolute values--Ratios must have
+    quantitative terms--But physical quantities cannot serve
+    as these terms--Value and evaluation: confusion of the
+    two responsible, in part, for doctrine of
+    relativity--Value in current economic usage: value and
+    wealth; money as a "measure of values"                     13
+
+CHAPTER III
+
+VALUE AND MARGINAL UTILITY
+
+    Individualistic method of Jevons and the Austrians--Such
+    a method, applied to value problem in concrete social
+    life, yields, not quantities of value, but rather,
+    particular ratios between such quantities--Value cannot
+    be identified with marginal utility of a good to a
+    marginal individual, even though we assume the
+    commensurability and homogeneity of human
+    emotions--Clark's Law                                      28
+
+CHAPTER IV
+
+JEVONS, PARETO AND BOeHM-BAWERK
+
+    When individualistic methods and assumptions are pushed
+    to the extreme, the problem of a quantitative value
+    becomes still more hopeless--Jevons' psychological and
+    epistemological assumptions--No objective value quantity
+    for Jevons--The same true of Pareto--Boehm-Bawerk, trying
+    to find law of value in law of price, reaches results no
+    more satisfactory--Austrian analysis, even with
+    Professor Clark's correction, is simply an explanation
+    of the modus operandi of determining particular ratios
+    between values in the market--It tells us nothing of
+    value itself, and assumes a whole system of values
+    predetermined                                              34
+
+CHAPTER V
+
+DEMAND CURVES AND UTILITY CURVES
+
+    Constant confusion of demand curves and utility curves
+    in current economic literature has made necessary much
+    of the foregoing criticism--Confusions in the writings
+    of Jevons, Boehm-Bawerk, Wieser, Pierson, Patten, Hadley,
+    Ely, Schaeffle, Flux, Marshall, and Davenport              40
+
+CHAPTER VI
+
+THE VICIOUS CIRCLE OF THE AUSTRIANS
+
+    Extreme abstractness of the Austrian theory--Abstraction
+    legitimate and necessary, but must not be carried so far
+    that the explanation phenomena are obliged to include
+    the problem phenomenon--Austrians explain value in terms
+    of value,--a vicious circle--Circle explicit in
+    Wieser--Also explicit in Hobson's attempt to combine
+    Austrian theory with cost theory of English School         45
+
+CHAPTER VII
+
+PROFESSOR CLARK'S THEORY OF SOCIAL VALUE
+
+    All attempts to explain value in terms of the highly
+    abstract factors of individual utility and individual
+    cost, or any combination of them, must become similarly
+    entangled--Austrians have shown this of English
+    theory--Professor Clark's value theory, set forth in the
+    Distribution of Wealth, intended to justify social value
+    concept, really uses only these abstract individual
+    factors, combined in arithmetical sums, and similarly
+    falls into a circle--Differences between Professor
+    Clark's point of view in his _Philosophy of Wealth_ and
+    that of his later writings--The point of view of the
+    earlier book, supplemented by later studies in social
+    psychology, will afford the basis for an organic
+    conception of society, and a valid doctrine of social
+    value                                                      49
+
+
+PART III. THE PRESUPPOSITIONS OF ECONOMIC
+THEORY
+
+CHAPTER VIII
+
+THE PHILOSOPHICAL AND PSYCHOLOGICAL PRESUPPOSITIONS
+
+    Connection between social philosophy and metaphysics and
+    epistemology always close--Three stages in history of
+    philosophy: dogmatic, skeptical, critical--Ancient and
+    modern philosophy have each gone through these three
+    stages--Each philosophic stage characterized by
+    distinctive social philosophy: individualism and
+    sociological monadism go with skeptical philosophy,
+    while organic conception of society goes with critical
+    stage--Economics to-day based on skeptical philosophy of
+    Hume--Doctrine of sociological monadism: Marshall,
+    Pareto, Jevons, Veblen, Davenport--Critique of
+    sociological monadism, from standpoint of epistemology
+    and psychology                                             59
+
+CHAPTER IX
+
+THE SOCIOLOGICAL PRESUPPOSITIONS
+
+    Conceptions of the social unity: mechanical, biological,
+    psychological--DeGreef's criticism of mechanical and
+    biological analogies--Hierarchy of sciences: Comte and
+    Baldwin--Baldwin's psychical abstractionism--Cooley's
+    psychological conception of the nature of society seems
+    most useful for purposes of this study--Cooley's
+    view--Relation between Cooley and Giddings: the Social
+    Mind--Summary of sociological doctrine--Critique of
+    Davenport                                                  72
+
+
+PART IV. A POSITIVE THEORY OF SOCIAL VALUE
+
+CHAPTER X
+
+VALUE AS GENERIC--THE PSYCHOLOGY OF VALUE
+
+    Economic value a species, coordinate with ethical,
+    legal, aesthetic, and other values--Psychology of value,
+    as manifested in individual experience--Values as
+    "tertiary qualities"--When we reflectively break up the
+    experience, values thrown from object to subject's
+    emotional life, but this an abstraction from concrete
+    experience--Feeling and desire in relation to value:
+    hedonism; Ehrenfels and Davenport; Urban and
+    Meinong--"Presuppositions" of value--Feeling and desire
+    both _phases_ in value, but neither is _the_
+    worth-fundamental, and each may vary in intensity
+    without affecting amount of value--Value and reality
+    judgment: Meinong and Tarde; Urban--On _structural_
+    side, feeling, desire, and "reality feeling" are all
+    significant phases in value--But real significance of
+    value lies in its _functional_ aspect: the function of
+    value is the function of _motivation_--Essence of value
+    is _power_ in motivation--For concrete experience, this
+    power a quality of the object--Positive and negative
+    values--Complementary values--Rival values: two cases:
+    qualitatively compatible, and qualitatively incompatible
+    values--In first case, quantitative marginal compromise
+    often possible: generalization of Austrian
+    analysis--So-called "absolute values" ("absolute" here
+    used as in history of ethics)--No sharp lines between
+    different sorts of values, as ethical, economic,
+    aesthetic--Different sorts of values do not constitute
+    self-complete, separate systems--Generalization of
+    notion of price--Suggestions as to analogues in the
+    field of the social values                                 93
+
+CHAPTER XI
+
+RECAPITULATION--THE SOCIAL VALUES--FUNCTIONS OF
+THE VALUE CONCEPT IN ECONOMICS
+
+    Conclusions reached both in economic analysis and in
+    sociological analysis point to values which correspond
+    to no individual values, great social forces of
+    motivation--To individual, economic, legal, and moral
+    values appear as external forces, over which his control
+    is limited, and to which he must adapt his individual
+    behavior--Economic theory, often unconsciously, has
+    assumed objectively valid, quantitative value, and
+    economic theory valid only on the basis of such a
+    concept: value the homogeneous element among the
+    diversities of physical forms of goods, by virtue of
+    which ratios, sums, and percentages may be obtained
+    among them, and comparisons made--Process of
+    "imputation" assumes such a value concept--Value used by
+    economists to explain motivation of economic
+    activity--Such a value concept essential for the theory
+    of money--Implied in the term, "purchasing power"--Such
+    a concept has never been justified, but economists, more
+    concerned about practical results than logical
+    consistency, have found it essential, and used
+    it--Impossible to develop a social quantity by synthesis
+    of abstract individual elements--Correct procedure the
+    reverse of this                                           115
+
+CHAPTER XII
+
+SOCIAL VALUE: THE THEORIES OF URBAN AND TARDE
+
+    Neither Urban nor Tarde primarily concerned with
+    economic value--Urban's important contributions--Insists
+    on conscious feeling as essential for social value--But
+    feeling may vary in intensity without affecting the
+    power in motivation of the value--Feeling significant
+    when values are to be compared--Social weight of those
+    who feel a value a highly significant phase which Urban
+    ignores--Tarde recognizes this phase, but errs in
+    treating it as an abstract element, which obeys the laws
+    of simple arithmetic                                      124
+
+CHAPTER XIII
+
+ECONOMIC SOCIAL VALUE
+
+    How get out of Austrian circle?--Temporal _regressus_
+    _vs._ logical analysis of the concrete whole of the
+    Social Mind--Even in Wieser's "natural" community,
+    psychic elements other than "marginal utility"
+    significant for the determination of economic values,
+    especially legal and moral values concerned with
+    distribution--Quotation from Mill--Critique of "pure
+    economic" theories of distribution--They presuppose as a
+    "framework" a set of legal and moral values which, in
+    modern times, especially, are little more stable than
+    "pure economic" forces, and which, in any case, are of
+    same nature as economic forces,--fluid, psychic
+    forces--"Pure economic" forces, working in _vacuo_,
+    would lead to anarchy; any concrete economic tendency
+    depends on legal and moral forces quite as much as on
+    "pure economic" forces--Illustrations                     132
+
+CHAPTER XIV
+
+ECONOMIC SOCIAL VALUE (_continued_)
+
+    Abstract elements of the Austrian and English schools,
+    individual "utilities" and "costs," have their place in
+    the concrete whole of social intermental life--Social
+    causes largely determine them--But this not enough for a
+    theory of social value--Intensity of a man's feelings or
+    desires has no relation whatever to value in market till
+    we know social rankings of _men_--Conflicts of values
+    concerned with these social rankings--Prices express
+    results of court decisions as well as results of
+    changing individual desires for economic goods--We break
+    the circle by turning to the concrete whole of
+    social-mental life--Economics has failed to profit by
+    example of other social sciences here--No social science
+    can explain its phenomena by reference to one or two
+    abstract factors                                          148
+
+CHAPTER XV
+
+SOME MECHANICAL ANALOGIES
+
+    Mechanical analogies of limited use in revealing full
+    complexity of social control, but of use for certain
+    purposes--Our argument can be put, in part, in terms of
+    mechanical analogies--Transformations of social
+    forces--Illustrations--Marginal equilibria among social
+    forces--Illustrations--Social forces of control take
+    different forms under different conditions--Mechanical
+    analogies useful enough for economic price-analysis--Our
+    thesis involves no radical revision of economic
+    methodology--It is rather concerned with interpretation
+    and validation of economic methodology                    156
+
+CHAPTER XVI
+
+PROFESSOR SELIGMAN'S PSYCHOLOGICAL DOCTRINE OF THE
+RELATIVITY OF VALUES
+
+    Professor Seligman's contributions to value
+    theory--Points of difference between his views and those
+    here maintained--His psychological doctrine of
+    relativity--Different from doctrine of English School,
+    which is a matter of logical definition--Values relative
+    because there is fixed sum of values, and increase in
+    one value can come only through decrease in other
+    values--Criticism: psychological difficulties;
+    diminution of all values in times of panics and
+    epidemics; decrease of economic values through increase
+    of religious and other values--Element of truth in
+    Professor Seligman's doctrine--Relation between
+    Professor Seligman's view and that of Professor Clark     162
+
+CHAPTER XVII
+
+THE THEORY OF VALUE AND THE THEORY OF PRICES
+
+    Price and _Preis_--Price broadened to include all
+    relations between values, whether money be involved or
+    not--History of price-concept in English
+    economics--Distinction between prices and
+    values--Generalization of notion of price--Measurement
+    of beliefs, etc., in terms of money--"Qualitative
+    analysis" and "quantitative analysis"--Great bulk of
+    economic theory, and virtually all that is valid and
+    valuable in economic theory, has so far been in theory
+    of prices, and not in theory of value--Methods of price
+    analysis--Abstract units of value--Price theory and
+    practical problems                                        175
+
+CHAPTER XVIII
+
+THE THEORY OF VALUE AND THE THEORY OF PRICES (_concluded_)
+
+    Great work of Austrians really done in field of price
+    theory--They have, without logical right, but with
+    excellent results, assumed and used a quantitative,
+    objective value concept--Distribution in relation to
+    theory of value and theory of prices--Mill's treatment
+    primarily from standpoint of fundamental value theory;
+    later theories, as a rule, chiefly concerned with more
+    superficial, but also more exact, price analysis of
+    distributive problems--Theory of value not a substitute
+    for detailed price analysis, but, rather, a
+    presupposition of it--Prices have _meanings_, which only
+    theory of value can explain                               188
+
+CHAPTER XIX
+
+THE THEORY OF VALUE AND THE SOCIAL OUTLOOK--SUMMARY
+
+    Belief that social optimism and social pessimism are
+    connected with theory of value--Views of Fetter,
+    Schumpeter, Wieser, and Davenport--No such implications,
+    either optimistic or pessimistic, in theory here
+    maintained--Theory of value does not contain
+    justification of existing social order--Summary of main
+    argument of book 194
+
+INDEX OF NAMES                                                201
+
+
+
+
+PART I
+
+INTRODUCTION
+
+
+
+
+SOCIAL VALUE
+
+
+
+
+CHAPTER I
+
+PROBLEM AND PLAN OF PROCEDURE
+
+
+Recent economic literature has had much to say about "social value." The
+conception, while not entirely new,[1] has become important only of late
+years, chiefly through the influence of Professor J. B. Clark, who first
+set it forth in his article in _The New Englander_ in 1881 (since
+reproduced as the chapter on the theory of value in his _Philosophy of
+Wealth_). The conception has been found attractive by many other American
+writers, however, and has become familiar in many text-books, and in
+periodical literature. Among those who have used the conception may be
+named: Professors Seligman, Bullock, Kinley, Merriam, Ross, and C. A.
+Tuttle.[2] Gabriel Tarde, the brilliant French sociologist, has
+independently developed a social value doctrine, different in many respects
+from that of the Americans named, which we shall later have occasion to
+consider.[3]
+
+In its most definite form, the theory asserts that the value of an economic
+good is determined by, and precisely accords with, the marginal utility of
+the good to society, considered as a unitary organism. Professor Clark, as
+is well known, makes use of the analysis of diminishing utility in an
+individual's consumption of goods in much the same fashion that Jevons
+does, but while Jevons makes this simply a step in the analysis of market
+ratios of exchanges, Professor Clark treats it as analogical, representing
+_in parvo_ what society does, as an organic whole, on a bigger scale.[4]
+
+The precise relation of social value to social marginal utility is
+variously stated by the writers named: for Professor Clark, value is the
+_measure_ of effective, or marginal, utility;[5] for Professor Seligman,
+social value is the _expression_ of social marginal utility;[6] for
+Professors Ross, Merriam, and Kinley, value _is_ that social marginal
+utility itself.[7] These statements are more different in words than in
+ideas, though some significance is to be attached to Professor Seligman's
+formulation, as will later appear.
+
+This conception is a bold one. It has, moreover, never been adequately
+developed or criticized. Its friends have found it a convenient and useful
+working hypothesis, and Professor Clark, especially, has built a great
+system upon it, but, with the exception of an article in the _Yale Review_
+of 1892,[8] has made no serious efforts, either to make clear its full
+meaning, or to vindicate it--except that, of course, his whole system may
+be considered such a vindication. Professor Seligman, in an article in the
+_Quarterly Journal of Economics_, vol. XV, and also in his _Principles of
+Economics_, has espoused the conception, and has shown how, assuming its
+truth, a great many antagonistic theories may be harmonized; but he, also,
+has failed to treat it with that detail which full demonstration requires.
+In particular, he has omitted a treatment of the problem of the relation
+between the value of a good for the individual and for society, and the
+relation between individual and social marginal utility.[9] The most
+searching investigation of the theory has come from unfriendly critics,
+among whom may be especially named Professor H. J. Davenport, and Professor
+J. Schumpeter of Vienna.[10]
+
+For the purposes of this discussion, Professor Clark will be considered as
+the representative of the Social Value School, for the most part, though
+attention will be given to some of the other writers named as well. It is
+worth while, consequently, to make clear at this point the relation between
+Professor Clark and the Austrian School, with which he is sometimes
+associated by economic writers. His extensive use of the marginal
+principle, his use of the term, "utility," and his deduction of value from
+utility, seem to place him at one with them. Professor Clark has pointed
+out, however, in the preface to the second edition of his _Philosophy of
+Wealth_, that his theory is to be distinguished from that of Jevons by "the
+analysis of the part played by society as an organic whole in the valuing
+processes of the market." And the Austrians, for their part, have rejected
+the conception that value and social marginal utility coincide, or that
+society, as an organic whole, puts a value on goods. Thus, Boehm-Bawerk:--
+
+     Man pflegt den objektiven Tauschwert im Gegensatz zu
+     dem auf individuellen Schaetzungen beruhenden
+     subjektiven Wert haeufig auch als den
+     _volkswirtschaftlichen Wert_ der Gueter zu bezeichnen.
+     Ich halte diesen Gebrauch fuer nicht empfehlenswert.
+     Zwar wenn man durch ihn nichts anders hervorheben
+     wollte, als dass diese Gestalt des Wertes nur in der
+     Gesellschaft und durch die Gesellschaft hervortreten
+     koenne, dass er also das volks- und
+     sozialwirtschaftliche Wertphaenomen _per eminentiam_
+     sei, so waere dagegen nichts zu erinnern. Gewoehnlich
+     mischt sich aber mit jener Benennung auch die
+     Vorstellung, dass der Tauschwert der Wert sei, den ein
+     Gut _fuer_ die Volkswirtschaft habe. Man deutet ihn als
+     ein ueber den subjektiven Urteilen der einzelnen
+     stehendes Urteil der Gesellschaft, welche Bedeutung ein
+     Gut fuer sie im ganzen habe; gewissermassen als
+     Werturteil einer objektiven hoeheren Instanz. Dies ist
+     irrefuehrend.[11]
+
+Equally emphatic is Wieser:--
+
+     The ordinary conception, which makes price the social
+     estimate put upon goods, has to the superficial
+     judgment the attraction of simplicity. A good A whose
+     market price is L100 is not only ten times as dear as B
+     whose market price is L10, but it is also absolutely
+     and for every one ten times as valuable. In our
+     conception the matter is much more complicated....
+     Price alone forms no basis whatever for an estimate of
+     the economic importance of the goods. We must go
+     further and find out their relation to wants. But this
+     relation to wants can only be realised and measured
+     individually.... And the question how it is possible to
+     unite those divergent individual valuations into one
+     social valuation, is one that cannot be answered quite
+     so easily as those imagine who are rash enough to
+     conclude that price represents the social estimate of
+     value.[12]
+
+Sax, likewise, expresses his dissent:--
+
+     Da fuer die exacte Forschung die Psyche einer
+     fabelhaften Collectiv-Personlichkeit nicht existirt, so
+     kann der Ausgangspunkt unserer Untersuchung auch wieder
+     nur der Individualwerth sein.[13]
+
+Whatever the worth of the conception of social value, it is not the same as
+the Austrian theory. It is proper to remark here that these strictures of
+the Austrian writers are probably directed, not against Professor Clark,
+but rather against the social use-value concept as it had appeared in
+Germany, in the writings, say, of Rodbertus, and of Adolph Wagner, who
+accepts Rodbertus' notion.[14]
+
+It may be well, at the outset, for the writer to define his own position
+briefly. We shall find the notion of social marginal utility, and the
+companion notion of social marginal cost (considering the latter as a "real
+cost," or pain-abstinence cost, concept), unsatisfactory and
+unilluminating. Social marginal utility, as a determinant of value, cannot
+be the marginal utility of a good to some particular individual who stands
+out as _the_ marginal individual in society, nor can it be an average of
+individual marginal utilities, nor a sum of individual marginal utilities,
+nor any other possible arithmetical combination of individual marginal
+utilities, if our conclusions are true. For the term, social marginal
+utility, we can find only a vague, analogical meaning, if any at all,
+unless we identify it outright with social value, in which case it is a
+superfluous term, which itself not only explains nothing, but rather
+presents complications which call for explanation. We shall find no use for
+the social utility concept in our analysis. On the other hand, we shall
+find the conception of social value a necessity for the validation of
+economic analysis, and a conception which present-day psychological and
+sociological theory abundantly warrant us in accepting.
+
+I do not desire, at the outset of a comparatively short book, to anticipate
+my arguments in detail, but a statement of the plan of procedure may aid
+the exposition somewhat. I shall first, through an examination of the
+logical necessities of economic theory, and of the function of the value
+concept in economics, set up certain logical and formal qualifications for
+an adequate value concept. Then I shall examine the efforts made by current
+theories of value to attain such a value concept, by means of the elements
+of individual utilities, individual costs, or combinations of the two, and
+show that such procedure gets into invincible logical difficulties. We
+shall find the source of these difficulties in the faulty epistemology,
+psychology, and sociology which constitute the avowed or implicit
+presuppositions of the economic theory of to-day. Criticizing these faulty
+presuppositions, we shall endeavor to reconstruct them in the light of
+later epistemological, psychological, and sociological doctrine, and then,
+on the basis of the new presuppositions, we shall endeavor to develop a
+truly organic doctrine of social value, and to link it with what seems
+valuable--that is to say, the greater part--in the economic theory of
+to-day.
+
+FOOTNOTES:
+
+[1] The value concept of Marx is not, strictly speaking, a social value
+concept. _Cf._ Pareto, V., _Cours d'Economie Politique_, vol. I, p. 32.
+Rodbertus, however, has a doctrine of social use value, based on the
+organic conception of society. "Nemlich so: es gibt nur Eine Art Werth und
+das ist der Gebrauchswerth.... Aber dieser Eine Gebrauchswerth ist entweder
+individueller Gebrauchswerth oder _socialer_ Gebrauchswerth.... Der zweite
+ist der Gebrauchswerth, den ein aus vielen individuellen Organismen
+bestehender _socialer Organismus_ hat.... Damit glaube ich also bewiesen zu
+haben, dass der Tauschwerth nur der historische Um- und Anhang des socialen
+Gebrauchswerths aus einer bestimmten Geschichtsperiode ist. Indem man also
+dem Gebrauchswerth einen Tauschwerth als logischen Gegensatz gegenueber
+stellt, stellt man zu einem logischen Begriff einen historischen Begriff in
+logischem Gegensatz, was logisch nicht angeht." From a letter to Adolph
+Wagner, published by Wagner in the _Zeitschrift fuer die Gesammte
+Staatswissenschaft_, 1878, pp. 223-24. Wagner indicates his approval of
+this concept, though he makes little use of it, in his _Grundlegung der
+politischen Oekonomie_, Leipzig, 1892, pp. 329-30. Ingram, in his _History
+of Political Economy_ (New York, 1888), although he takes no account of
+social value theories of other writers, suggests one of his own--which is,
+however, a vague one, mixing technological, ethical, and economic
+categories. See p. 241.
+
+[2] Seligman, E. R. A., _Principles of Economics_, New York, 1905,
+especially pp. 179-82 and 192-93. Bullock, C. J., _Introduction to the
+Study of Economics_, especially pp. 162-64. There is no attempt at a
+psychological treatment in this work, and no clear statement of the meaning
+of the concept, social. Kinley, David, _Money_, New York, 1904, pp. 125-26.
+The social value conception runs through the book. Merriam, L. S., "The
+Theory of Final Utility in its Relation to Money and the Standard of
+Deferred Payments," _Annals of the American Academy_, vol. III; "Money as a
+Measure of Value," _ibid._, vol. IV; an unfinished study in the same
+volume, pp. 969-72, described by Professor J. B. Clark. Ross, E. A., "The
+Standard of Deferred Payments," _ibid._, vol. III; "The Total Utility
+Standard of Deferred Payments," _ibid._, vol. IV. These articles by
+Professors Ross and Merriam were written in the course of an interesting
+controversy between the gentlemen named, Tuttle, C. A., "The Wealth
+Concept," ibid., vol. I; "The Fundamental Economic Principle," _Quarterly
+Journal of Economics_, 1901.
+
+[3] See chapter XII.
+
+[4] See especially Professor Clark's _Essentials of Economic Theory_, New
+York, 1907, pp. 41-42.
+
+[5] See especially _The Philosophy of Wealth_, 1892 ed., pp. 73-74.
+
+[6] _Principles_, pp. 179-82.
+
+[7] The general references for Ross and Merriam have been given _supra._
+_Cf._ p. 62 of Dean Kinley's _Money_.
+
+[8] "Ultimate Standard of Value." This article is substantially the same as
+chap, XXIV of _The Distribution of Wealth_, New York, 1899.
+
+[9] In his discussion of social value in the _Principles_, Professor
+Seligman modifies a statement made in his article, "Social Elements in the
+Theory of Value" (_Quarterly Journal of Economics_, vol. XV). The two
+discussions are parallel in part, the former being based upon the latter.
+The passage quoted is from the _Q. J. E._ article, pp. 323-24. The same
+passage is essentially reproduced in the _Principles_ (first edition, p.
+180), with the exception of the passages in italics: "I not only measure
+the relative satisfaction that I can get from apples or nuts, but the
+quantity of apples I can get for the nuts depends upon the relative
+estimate put upon them by the rest of society. _Some individuals may prize
+a commodity a little more, some a little less; but its real value is the
+average estimate, the estimate of what society thinks it is worth._ If an
+apple is worth twice as much as a nut, it is only because the community,
+after comparing _and averaging_ individual preferences," etc. The
+conception of social value as an _average_ of individual values is
+withdrawn in the second treatment, and no substitute is offered for it.
+
+[10] Davenport, "Seligman, 'Social Value,'" _Journal of Pol. Econ._, 1906;
+_Value and Distribution_, Chicago, 1908. This last work reproduces, in
+abridged form, the article on Professor Seligman, in a footnote, pp. 444
+_et seq._ Schumpeter, "On the Concept of Social Value," _Q. J. E._, Feb.,
+1909; "Die neuere Wirtschaftslehre in den Vereinigten Staaten," _Jahrbuch
+fuer Gesetzgebung, Verwaltung und Volkswirtechaft im Deutschen Reich_, 1910,
+pp. 913 _et seq._ In the last-named article (p. 925, n.) Professor
+Schumpeter indicates that his objection to the social value concept relates
+not so much to the question of fact as to the question of method. The
+English article in the _Quarterly Journal_ contains Schumpeter's fullest
+treatment of the topic.
+
+[11] Boehm-Bawerk, "Grundzuege der Theorie des wirtschaftlichen Gueterwerts,"
+Conrad's _Jahrbuecher_, N. F., Bd. XIII, 1886, p. 478.
+
+[12] _Natural Value_, p. 52, n.
+
+[13] Sax, Emil, _Grundlegung Der Theoretischen Staatswirtschaft_, Vienna,
+1887, p. 249.
+
+[14] See _supra_, p. 3, note 1.
+
+
+
+
+PART II
+
+CRITIQUE OF CURRENT VALUE THEORY
+
+
+
+
+CHAPTER II
+
+FORMAL AND LOGICAL ASPECTS OF THE VALUE CONCEPT
+
+
+     The study of wealth is meaningless, unless there be a
+     unit for measuring it. The questions to be answered are
+     quantitative.... Reciprocal comparisons give no
+     sums.... Ratios of exchange alone afford us no answer
+     to the economist's chief inquiries.[15]
+
+This quotation from Professor Clark raises an issue which we must examine
+in detail. Professor Clark proceeds, pointing out the need for a
+homogeneous element, among the diversities of the physical forms of goods,
+capable of absolute measurement, if goods are ever to be added together, or
+a sum of wealth obtained. Money, on the surface of things, affords this
+common standard, but "the thought of men runs forward to the power that
+resides in the coins." This power is effective social utility, the
+quantitative measure of which is value. Elsewhere in his writings,[16]
+Professor Clark insists on the conception of value as a quantity, an
+absolute magnitude, and he consistently makes use of this conception. All
+of the exponents of the social value concept named, except Professor
+Seligman, follow him in this, and it may be considered an essential feature
+of the theory. Marginal utility is a definite quantity, social marginal
+utility is a definite quantity, and value, if conceived as identical with
+social marginal utility, or as the quantitative measure of it (the
+difference is verbal, for present purposes, at least), must be so
+considered. A _ratio of exchange_, then, is a ratio between two quantities
+of social marginal utility, or social value, rather than between two
+physical objects, and _price_, in this view, is a particular sort of ratio
+of exchange, namely, one where one of the terms of the ratio is the social
+marginal utility, or the social value, of the money unit.
+
+It is important to contrast value as thus conceived, in its formal and
+logical aspects, with other historical conceptions of value. In the
+classification which follows, the writer has by no means attempted an
+exhaustive list. Definitions of value are very numerous, but it is not
+necessary to list them all, since many differ, not so much in their logical
+or formal aspects, as in the theory of the origin of value which the
+definition is made to include. There are two principles of classification
+which will be used, however, which, used in a cross-classification, will
+enable us to exhibit the contrasts of most importance for present purposes.
+
+The first line of cleavage is between the conceptions which treat value as
+an ethical ideal, often different from the market fact, and those which
+accept the value which is expressed in prices in the market as the "real or
+true" value for economic science. The medieval conception of the _justum
+pretium_ belongs to the first class, as does also the conception of
+President Hadley: "The price of an article or service, in the ordinary
+commercial sense, is the amount of money which is paid, asked, or offered
+for it. The value of an article or service, is the amount of money which
+may properly be paid, asked, or offered for it."[17] And the value theory
+of Karl Marx, though differing from either of these in points, is yet like
+them in this one respect: value and price do not necessarily agree for
+Marx. The value of a thing for him depends on the "socially necessary"
+labor embodied in it, while some things, as land, command a price in the
+market, even though embodying no labor.[18] Opposed to this group of
+theories are, doubtless, the greater part of present-day writers, who,
+while differing among themselves at many points, would insist that value is
+a fact, and not an ideal.
+
+The second line of division is between the conceptions of value as a
+quantity and value as a ratio, or, to put the thing more generally and more
+accurately, between the value of a thing as a definite magnitude,
+independent of exchange relations, and that value as a relative thing, not
+only _measured_ by the process of exchanging, but also caused by it, and
+varying with the value of the things with which the article is compared.
+Professor Clark and his followers belong in the second group of the first
+classification, and in the first group of the second classification. The
+social value of which they speak is a fact, and not an ideal (though
+Professor Clark has often been interpreted as teaching that the fact
+corresponds closely with an ideal), and social value as treated by them
+(noting the exception of Professor Seligman, who does not follow Professor
+Clark closely), is an absolute magnitude.[19] Karl Marx and Henry George
+agree with them upon this latter point. Value is a quantity, and not a mere
+relation, for both.[20] Wieser would concur here.[21]
+
+Professor Carver, in a recent article in the _Quarterly Journal of
+Economics_,[22] insists on the conception of value as a quantity. Gabriel
+Tarde states the matter illuminatingly in a passage in his _Psychologie
+Economique_:[23]--
+
+     Value is a quality which we attribute to things, like
+     color, but which, like color, exists only in
+     ourselves.... This quality is of that peculiar species
+     of qualities which present numerical degrees, and mount
+     or descend a scale without essentially changing their
+     nature, and hence merit the name of quantities.
+
+On the other hand, the doctrine of relativity has characterized the
+teachings of the English School, of the Austrians (except Wieser), and of
+many of the more eclectic followers of each in this country. It will appear
+later that this relative conception follows naturally from their
+individualistic method of approaching the subject. The essence of the
+relative conception of value, whether defined as "power in exchange," or
+"ratio of exchange," or, with Professor Fisher,[24] and others, as a
+quantity of goods to be got in exchange, comes out in the statement, so
+common in the text-books, that, while there can be a general rise or fall
+of _prices_, there cannot be a general rise or fall of _values_, since a
+rise in the value of one good implies a corresponding fall in the value of
+all other goods. The incompatibility of the two opposing conceptions comes
+out strikingly here: if value be an absolute magnitude, then there _can_ be
+a general rise or fall of values without disturbing exchange ratios at
+all--12:6::6:3. All values might be cut in half, or multiplied by any
+factor, and, provided all decreased or increased in the same degree,
+exchange relations would not change.
+
+Now this difference is fundamental. Vastly more than terminology and
+definition is involved. Is value a quantity or a relation? Is value a thing
+which determines causally exchange relations, or is value determined
+causally by them? To the writer, the former conception seems a logical
+necessity. Value as merely relative is a thing hanging in the air. There is
+a vicious circle in reasoning if, when I ask you what the value of wheat
+is, you refer me to corn, and then when I ask you the value of corn, you
+refer me again to wheat. And if you put in intermediate links, even as many
+links as there are different commodities in the market, the circle still
+remains: the value of A is its power over, or its ratio with, B; the value
+of B its relation to C; the value of C ... its relation to Z; and the value
+of Z, the last in the series, must come back to its relation to one of
+those named before. This circle is noted and sharply criticized by
+Wieser:[25]--
+
+     Theorists who have confined themselves to the
+     examination of exchange value, or, what comes to the
+     same thing, of price, may have succeeded in discovering
+     certain empirical laws of changes in amounts of value,
+     but they could never unfold the real nature of value,
+     and discover its true measure. As regards these
+     questions, so long as examination was confined to
+     exchange value, it was impossible to get beyond the
+     formula that value lies in the relation of
+     exchange;--that everything is so much more valuable the
+     more of other things it can be exchanged for....
+     Absolutely and by itself, value was not to be
+     understood. It is significant of this conception to
+     state that one thing cannot be an object of value in
+     itself; that a second must be present before the first
+     can be valued.
+
+     Theory has only very gradually shaken itself free from
+     this misconception, this circle. Where an absolute
+     theory was attempted--such as the labour theory, or
+     that which explained value as usefulness--some logical
+     leap generally reconnected it with the relative
+     conception.
+
+Now the validity of this reasoning might be admitted, in so far as it
+applies to "Crusoe economics"--though Professor Seligman, with strict
+consistency, insists that even there value arises from a comparison in
+Crusoe's mind of apples with nuts[26]--by those who would object to its
+application to value in society. Value there, it would be insisted, is
+determined through exchange, and does not have any meaning except as a
+ratio between physical commodities.[27] But even here, it seems to me, the
+same reasoning must hold. We really do not find a ratio between physical
+commodities at all. Four gallons of milk exchange for one dollar, or 23.22
+grains of gold. The exchange ratio is four to one. But milk is in units of
+liquid measure; gold in incommensurable units of Troy weight. The ratio,
+4:1, is not on the basis of any physical commensurability. If any physical
+basis of comparison be taken, whether weight, or bulk, or length, or more
+subtle and less easily measurable physical qualities, the ratio would be
+found very different. But 4:1 _is_ the market ratio. Now a quantitative
+ratio is between commensurable quantities. Gold and milk must be, then,
+commensurable quantities, _i.e._ must have a common _quality_, present in
+each in definite quantitative degree, before comparison is possible, or a
+ratio can emerge. This quality is _value_. The difficulty, from the
+standpoint of logic, is only covered up, and not avoided, if we say with
+Professor Davenport,[28] "Value is a ratio of exchange between two goods,
+_quantitatively specified_." [Italics mine.] For the quantitative
+specification depends on the extent to which the homogeneous quality is
+present in each of the goods, or, if we assume that the quantitative
+specification is made before the question of exchange ratio is raised, then
+the exchange ratio will vary with the extent to which the common quality is
+present in each of the goods. We can have no quantitative ratios between
+unlike things. And yet, we must have terms for our ratios. The situation
+here is not unlike the situation that arises when we compare two weights.
+We have no unit of weight in the abstract. Weight never appears as an
+isolated quality, but always along with other qualities, as extension,
+color, and the like. And when we compare weights, we really compare two
+heavy objects, and make our weight ratio between the object to be weighed
+and the physical standard of weight. Nor does value ever appear as an
+isolated quality. And we have no unit of abstract value which we can apply
+abstractly in a measurement. Instead, we choose some valuable object, as
+23.22 grains of gold, and make our ratio between the given quantity of gold
+and the object whose value we wish to measure. But we must not forget that
+this is merely a symbol, a convenient mode of expression, and that the fact
+expressed is something different--that the real terms of our ratios are so
+many units of abstract weight, or of abstract value, as the case may be.
+Otherwise conceived, the ratio itself is meaningless: it has no terms. We
+have four to one up in the air, not four units of something to one unit of
+something. The abstract ratio is a thing for pure mathematics, and not a
+thing for economics. An economic ratio must have "economic quantities" as
+terms.[29]
+
+The difficulty with the doctrine we are maintaining arises from the
+difficulty of isolating and defining this quality of value. It is not a
+quality "inherent" in the good (whatever "inherent" may mean). It does not
+arise from the simple relation between our senses and the object, or even
+from an intellectual elaboration thereof. It rather grows out of the
+relation between our emotional-volitional life and the object, and the
+definition of this relation, and the determination of the quality, have
+been so difficult, that some writers, as Professor Davenport,[30] have
+explicitly given it up as a hopeless task, and have determined to content
+themselves with the surface facts of relativity. But there is no logical
+resting place in those surface facts. Relativity implies _things_ related,
+ratios must have quantitative _terms_, additions require _homogeneous_
+quantities to make up a sum.
+
+Some further distinctions are necessary. When we say "absolute magnitude,"
+we do not mean a magnitude which stands out of all relations to other facts
+in the universe. There is no intention of setting up a metaphysical
+absolute here. The terms "positive" and "relative" (suggested by Professor
+Taylor)[31] might serve our purpose better, except for the fact that we
+wish to reserve the term "positive value" to contrast with "negative value"
+at a later stage of our discussion. Our objection to the relative
+conception of value really gives our value more, rather than less
+relations. Instead of allowing its relation to one particular thing,
+namely, some other good with which it happens to be compared, to determine
+its amount, we insist that that relation is so much a minor matter that it
+can generally be ignored, and that the significant relations--a very
+numerous set of relations indeed, as we shall later see!--are of another
+sort. The contention is that value is absolute only in this sense: its
+amount is not determined by the particular exchange ratio in which it
+happens to be put, and is not changed _eo ipso_ every time a new comparison
+is made.
+
+Further, it is in the process of exchange, and by the method of comparison,
+that the value of goods becomes quantitatively _known_, as a rule. That is
+to say, we find out precisely _how much_ value a good has by comparing it
+in exchange with some other good. In this respect, value is again like
+other qualities. We measure lengths, weights, cubic contents of objects,
+all by comparison, direct or indirect, with other objects. But the amount
+of water in a vessel is not changed when we put it into a measure, and
+determine how many gallons of it there are. Nor is the amount of value in a
+good _causally_ determined by the process of exchange.[32] We must
+distinguish between two confused meanings of the word "determine." It may
+mean "to cause," and it may mean "to find out" or "to measure." We must
+distinguish, in Kantian phrase, between the "_ratio essendi_" and the
+"_ratio cognoscendi_." _Value_ and _evaluation_ are two distinct things.
+Value, to anticipate a later part of the study, is primary, and grows out
+of the action of the volitional-emotional side of human-social life;
+evaluation is secondary, and is the intellectual process devoted, not to
+_giving_ value, but to _finding out_ how much value there is in a good.
+This distinction between the existence of a quantity, and our precise
+knowledge of its amount, is brought out by several writers, among them,
+General F. A. Walker,[33] and the keen mathematical economists, Pareto[34]
+and Edgeworth.[35]
+
+There are two further arguments for the propriety of this conception,
+considered primarily as a question of terminology, to be drawn from usage
+in the treatment of other terms. The first is drawn from a consideration of
+the function of the value concept in economic science,[36] and of its
+relation to the concept of wealth. "The notion of value is to our science
+what that of energy is to mechanics," says Jevons.[37] It is clear that a
+mere abstract ratio, which Jevons two pages later declares value to be,
+cannot serve such a purpose. Abstract ratios are subject-matter for
+mathematics, not for economics. "Wealth and value differ as substance and
+attribute," (Senior, quoted with approval by F. A. Walker.[38]) With this
+view, Marx[39] would concur. "Wealth is that which has value," Professor
+Laughlin states.[40] Clearly a qualitative attribute, and not a ratio, must
+be indicated here, even though Professor Laughlin elsewhere in the book
+defines value as a "ratio between two objective articles."[41] And if we
+take a definition like that of Professor Seligman, who defines wealth in
+terms which entirely ignore the ideas of comparison and exchange as
+consisting of those things which are (1) capable of satisfying desire, (2)
+external to man, and (3) limited in supply,[42] we find no basis for
+insisting on relativity, exchange and comparison, as essential to the idea
+of value, which is the essential and distinguishing characteristic of
+wealth. The science loses in coherency from this diversity of definition.
+The second argument is similar. Current economic usage speaks of money as a
+"measure" of values. Professor Seligman uses the expression in the chapter
+on money in the book referred to. But the point made by General Walker
+against this expression, when value is defined as a ratio, is absolutely
+valid. He says:--
+
+     I apprehend that this notion of money serving as a
+     common measure of value is wholly fanciful; indeed, the
+     very phrase seems to represent a misconception. Value
+     is a relation. Relations may be expressed, but not
+     measured. You cannot measure the relation of a mile to
+     a furlong; you express it as 8:1.[43]
+
+Only on the basis of a definition of value as a quantity is it proper to
+speak of a "measure of values."[44]
+
+I conclude that the value of a thing is a quantity, and not a ratio. It is
+a definite magnitude, and not a mere relation. What sort of a quantity
+remains to be seen.
+
+FOOTNOTES:
+
+[15] Clark, J. B., "Ultimate Standard of Value," _Yale Review_, 1892. p.
+258.
+
+[16] _E.g._, _The Philosophy of Wealth_, chap. v.
+
+[17] _Economics_, p. 92. See also the article by President Hadley on
+"Value" in Baldwin's _Dictionary of Philosophy_, etc., and
+"Misunderstandings about Economic Terms," _Yale Review_, vol. IV, pp.
+156-70. The same ideas are expressed in all.
+
+[18] Some of my socialist friends object to the interpretation of Marx
+given above. I feel strengthened in my position here by finding the same
+view expressed by Conrad in his _Grundriss_, etc., 4te Aufl, Bd. I, pp.
+17-18. Professor O. D. Skelton's admirable _Socialism_ (Hart, Schaffner &
+Marx Series, 1911) comes to hand while the proof sheets of the present
+volume are being revised. _Cf._ his interesting chapter on the Marxian
+theory of value.
+
+[19] Seligman, _Principles_, pp. 184-85. See also Taylor, W. G. L.,
+"Values, Positive and Relative," _Annals A. A._, vol. IX, pp. 70-106.
+Taylor, who follows Professor Clark largely, accepts the conception of
+social value as a quantity.
+
+[20] Marx, _Capital and Capitalistic Production_, London, 1896, pp. 2-4.
+George, _Science of Political Economy_, New York, 1898, chap. XI.
+
+[21] _Natural Value_, p. 53, n.
+
+[22] "The Concept of an Economic Quantity," _Q. J. E._, May, 1907.
+Professor Carver insists on the quantitative nature of value, taking as his
+point of departure the point made _infra_, p. 27, with reference to money
+as a measure of values. But it is not clear that he has entirely freed
+himself from the conception of relativity, for he continues to speak of
+value as "purchasing power" (pp. 438-39), and this term has usually the
+relative, rather than the absolute, significance. _Cf._ his use of the term
+"purchasing power" in his _Distribution of Wealth_, 1904, pp. 51-52, where
+the _relativity_ of value is insisted on as a basis for a criticism of
+Professor Clark's amendment of the Austrian theory.
+
+[23] Paris, 1902, vol. I, p. 63.
+
+[24] Fisher, Irving, _The Nature of Capital and Income_, New York, 1906,
+pp. 13 _et seq._ Ely, R. T. (and others). _Outlines of Economics_, New
+York, 1908, pp. 156-57. Professor Ely uses the term in a different sense on
+pp. 99-100; and on the pages first cited indicates that value, defined as a
+quantity of other goods, is to be distinguished from subjective value. But
+"subjective" (individual) value would hardly serve as an equivalent for the
+value described on pp. 99-100. There are, in fact, four pretty distinct
+uses of the term value to be found in Professor Ely's discussion,
+inadequately distinguished, and often confused in the treatment: (1)
+homogeneous quality among the diversities of the physical forms of wealth,
+by virtue of which a sum of wealth may be obtained (99-100); (2) ratio of
+exchange (156); (3) quantity of goods obtained in exchange (157); (4)
+subjective utility (157 and _ante_); and a fifth meaning is indicated for
+market value on pp. 358-59, where, in explaining the law of rent for
+pleasure grounds and residence sites, the "general law of value" is
+declared to be that value measures _marginal utility_. _Cf._ the confusions
+of utility and demand pointed out _infra_, chapter v. This loose treatment
+of the value concept, while doubtless accentuated by the fact that four men
+have cooperated in the production of the book, is too much characteristic
+of most of the text-books. There is even to-day little uniformity or
+agreement as to what value means.
+
+[25] _Natural Value_, p. 53, n.
+
+[26] _Principles of Economics_, p. 183. Professor Seligman in the _Q. J.
+E._ article (_supra_, p. 6, note I) indicates that Pantaleoni expresses a
+similar thought (_Pure Economics_, London, 1898, p. 127). This idea is
+elaborated by Professor Georg Simmel, _Philosophie des Geldes, Erster Teil,
+Kap. 2_. (A translation of this chapter, under the title, "A Chapter in the
+Philosophy of Value," appears in the _American Journal of Sociology_, vol.
+v, pp. 577-603. The translation was made from the author's manuscript,
+before the publication of the book, and does not exactly correspond with
+the chapter as published by Simmel.) Simmel's contention is that, even for
+an isolated economy, value arises from exchange, and that exchange is
+essential to it. Every value is relative to some other value. But to
+develop this conception, "exchange" is distorted into a variety of
+meanings. In one place, exchange takes place between an isolated man and
+his environment. It makes no difference to him whether he is exchanging
+with other men or with the order of nature (_Phil. des Geldes_, p. 34). But
+later, exchange is declared to be "a sociological structure _sui generis_"
+(_ibid._, p. 56). Again, only in the vaguest sort of sense is exchange used
+in this expression, "_wo wir Liebe um Liebe tauschen_" (_ibid._, p. 33).
+Yet all these meanings are forced in to fit the exigencies of the argument.
+The doctrine of cost is brought in, and the exchange is between individual
+cost and individual utility, and an equality between them is insisted upon,
+despite the well-known phenomenon of "consumer's surplus." This emphasis on
+_equality_ in exchanges is stressed especially on p. 31, and economic
+activity is said to derive its peculiar character from a consideration of
+these equalities in abstraction.
+
+The gist of Simmel's argument comes out in the following: "The object is
+not for us a thing of value so long as it is dissolved in the subjective
+process as an immediate stimulator of feelings." Desire must encounter
+obstacles before a value can appear. "It is only the postponement of an
+object through obstacles, _the anxiety lest the object escape_ [italics
+mine], the tension of struggle for it, which brings into existence that
+aggregate of desire elements which may be designated as intensity or
+passion of volition." Value is conditioned upon a "distance between subject
+and object" (_A. J. S._, 589-90).--I waive for the moment Simmel's apparent
+insistence upon the element of conscious desire as essential to value,
+though I shall attack that doctrine in a later chapter on the psychology of
+value. It is enough to point out here that this "distance between subject
+and object" is adequately present, that there is surely "anxiety lest the
+object escape," if only the object be sufficiently limited in supply,
+independently of the existence of other objects so limited.--Simmel
+undertakes to meet this objection by holding that "scarcity, purely as
+such, is only a negative quantity, an existence characterized by a
+non-existence. The non-existent, however, cannot be operative" (_Phil. des
+G._, p. 57).--But the scarcity, I would reply, is not, as he holds, "the
+quantitative relation in which the object stands to the aggregate of its
+kind" (_A. J. S._, p. 592), but is rather a relation between the object and
+our wants. A bushel of wheat would be a scarcity, a bushel of diamonds a
+superabundance, for a man. There is a positive thing here, not a mere
+"non-existence," and that positive thing is the _unsatisfied want_. _Cf._
+Pareto, _Cours d'Economie Politique_, vol. I, p. 34.
+
+See further, on the psychology of value, chapter X, and on Professor
+Seligman's theory of the relativity of value, chapter XVI, of the present
+volume.
+
+[27] Laughlin, J. L., _Elements of Political Economy_, rev. ed., copyright
+1902, p. 18: "Value ... is a ratio between two objective articles." See
+also Professor Laughlin's rejoinder to Clow's "The Quantity Theory and its
+Critics," _Journal of P. E._, 1902, where Professor Laughlin insists that
+exchange value is "something physical." Professor Davenport, _Value and
+Distribution_, Chicago, 1908, p. 569, defines value similarly.
+
+[28] _Value and Distribution_, p. 569.
+
+[29] Professor Davenport, caught between two apparently invincible logical
+difficulties, accepts this situation frankly, as, seemingly, the only thing
+possible. See _Value and Distribution_, p. 184, n. The ratio has no terms
+for him.
+
+[30] _Value and Distribution_, pp. 330-31.
+
+[31] "Values, Positive and Relative." _Annals_, vol. IX.
+
+[32] It is, of course, recognized that exchange modifies value in so far as
+exchange is a _productive_ process. But the essential thing here is the
+_transfer_ aspect of exchange, which would hold even in a communistic
+society where value relations might be found out by some process other than
+exchange.
+
+[33] _Political Economy_, New York, 1888, p. 84.
+
+[34] _Cours d'Economie Politique_, vol. I, pp. 8-9.
+
+[35] Edgeworth, F. Y., _Mathematical Psychics_, London, 1881, chapter on
+"Unnumerical Mathematics," pp. 83 _et seq._
+
+[36] A fuller discussion of the functions of the value concept is given in
+chapter XI where this argument is materially strengthened. The points here
+made, however, seem adequate.
+
+[37] Jevons, _Principles of Economics_, 1905 (posthumous), p. 50.
+
+[38] Walker, _op. cit._, p. 5.
+
+[39] Marx, _op. cit._, vol. I, chap. I.
+
+[40] Laughlin, _Elements_, p. 77. _Cf._ also, Ely, _op. cit._, 99-100.
+
+[41] _Ibid._, p. 18. It is interesting to note that Professor Irving Fisher
+so defines wealth and value as to divorce the two concepts. Wealth includes
+free human beings, who cannot be exchanged, while the idea of value is
+derived from that of price, which, in turn, comes from the ideas of
+exchange and transfer. (_Nature of Capital and Income_, chap. I.)
+
+[42] _Principles_, pp. 8-11.
+
+[43] _Money_, p. 288.
+
+[44] _Cf._ Kinley, _op. cit._, Merriam, _loc. cit._, and Carver, "The
+Concept of an Economic Quantity," _loc. cit._ _Cf._ also, Laughlin,
+_Money_, 1903, pp. 14-16; and Davenport, _Value and Distribution_, p. 181,
+n.
+
+
+
+
+CHAPTER III
+
+VALUE AND MARGINAL UTILITY
+
+
+The method of Jevons and the Austrians, and, for that matter, of the great
+majority of value theorists, including even the social value school, in
+seeking the determinants of value, is to start with individual "utilities"
+or psychic "costs" directly connected with the consumption or production of
+goods. Such a study, if confined to an isolated individual economy, or if
+confined to an ideal communistic economy, like that for which Wieser works
+out his laws of "natural value," seems to yield us quantities of "utility,"
+which may properly be called values, or quantities of sacrifice which may
+be properly treated as exactly measuring values.[45] But when applied to a
+competitive society, or to any society where there are inequalities among
+men in their power to attain the gratification of their wants, it yields
+us, not quantities of value, but only particular ratios between such
+quantities, or prices. An examination of the Austrian procedure will make
+this clear.
+
+If the Austrian analysis be taken as meaning anything more than a method of
+determining surface ratios of exchange, difficulties at once arise. What
+quantitative relation is there between the satisfaction which an individual
+man gets from a good and the value of that good? What quantitative relation
+does the sacrifice, in terms of dissatisfactions endured and satisfactions
+foregone, of the individual producer bear to the value of his product? Now
+in thus positing the problem, I wish to distinguish it clearly from another
+problem, namely: what is the quantitative relation between psychic
+satisfaction, subjective individual value, and psychic cost, connected with
+the commodity, in the mind of some hypothetical "normal" man, and market
+value in a hypothetical market, where only "normal" men are found, and
+where there is an equality of wealth among these men? The problem is a
+concrete one: how are the actual desires and aversions of living men and
+women, no one of them "normal" perhaps, living in a world where
+inequalities of wealth are everywhere manifest, _quantitatively_ related to
+value in the market?
+
+Let us consider the inadequacy of the old Austrian analysis for this
+quantitative determination. I assume, without trying to prove here, the
+homogeneity and commensurability of human desires and aversions. (The
+Austrians, be it noted, do not explicitly postulate this, and Jevons, as
+will later be noted, rejects it, but it is necessary for Wieser's argument,
+and Boehm-Bawerk implies it clearly enough in places.[46]) This does not
+mean that any two men have, necessarily, the same desire for any particular
+good, or the same aversion from any particular piece of work, but simply
+that the desires and aversions of one man are comparable with those of
+another, and may be fractions or multiples of them, even though not exactly
+equal. My object in this assumption is to justify the use of the concept of
+_units_ of desires and aversions, which are not the desires and aversions
+of a hypothetical "normal" man, but are some particular concrete desire and
+some particular concrete aversion of any man you choose to take. Now let us
+assume the market as treated in the usual Austrian analysis (somewhat
+simplified): five men have horses to sell, and five buyers appear in the
+market also.
+
+                           A    B    C    D    E
+     Sellers will take:   $20  $30  $40  $50  $60
+     Buyers will give:    $60  $50  $40  $30  $20
+
+_Price_ is then fixed at forty dollars. Now if all these men were "normal"
+men, and if all had equal wealth, we could say here, _marginal utility_ =
+_value_. But such is not the case in real life. Our marginal buyer and
+marginal seller may be as different as you please. Let us assume that the
+marginal buyer is a very rich man: forty dollars is to him a bagatelle:
+surrendering it means one unit of cost to him: he has, further, many
+horses: he has no special use in mind for the horse he is on the margin of
+buying: it has one unit of utility to him. The marginal seller, we will
+assume, is a poor country boy: the horse is one he has raised himself: he
+has a personal affection for it, and it is immensely useful to him: it has
+two hundred units of utility to him, and to give it up means two hundred
+units of sacrifice: but he needs the forty dollars pressingly: it has two
+hundred units of utility to him. Is marginal utility equal to value here?
+If so, marginal utility to whom? But this does not exhaust the difficulties
+of the analysis--if the analysis be designed to show anything except what a
+particular _price_ is, and the utility theorists, when very careful, do not
+always claim to do more than that.[47] But _price_ is not _value_.
+
+We take up now, as an additional point designed to show that marginal
+utility to an individual is not the same as value, Professor Clark's
+clean-cut analysis amending the Austrian theory which we shall call
+"Clark's Law."[48] A detailed statement of this law is not necessary here,
+but its main meaning may be outlined, and its demonstration left to
+Professor Clark himself. Any good, except the poorest and simplest, is a
+complex, giving several distinct services. Thus, an automobile gives the
+service of transportation (a cart would do that); of comfort (a
+spring-buggy, with top, would do that); of elegance and social distinction
+(a carriage would do that); of speed and exhilaration (only an automobile
+can do this last, and the others as well). Now each of these services
+Professor Clark considers as a distinct economic good, and he constructs a
+demand curve for each of them. The service of transportation would be worth
+$5000 to the marginal buyer of automobiles, if he could not get it for
+less, but then, he is not the marginal user of carts, and he gets the cart
+service for what the marginal buyer of it pays, say $10. The comfort
+element would be worth $3000 to him, but he is not the marginal buyer
+there, and he gets it for what the marginal buyer of buggies pays for a
+buggy, less the $10 for the mere transportation-service of the buggy, say
+$100 less $10, or $90. For the service of elegance and social distinction,
+he would pay $4000, but then he does not have to do so, for he is not the
+marginal buyer of carriages, and he gets this additional service for $800,
+less the price of the preceding two services, or less $100. For the
+additional service of speed and exhilaration he _is_ the marginal demander,
+and his margin fixes the price, say $2000, for that service. Now his
+automobile--and he is the marginal buyer, and he buys only one--gives him
+satisfaction far in excess of that measured by the price he pays for it.
+The automobile, economically considered, is several distinct services
+bundled together, worth to him $5000 plus $3000 plus $4000 plus $2000. But
+he pays for the automobile only $2800, or less than he would have paid even
+for the first service. Now by the Austrian definition the price of anything
+is determined by its utility to the marginal user. And marginal utility is
+the _total_ utility of the marginal unit consumed. The total utility of
+this marginal automobile, to this marginal user, would balance $14,000 in
+his mind, and this, by the Austrian analysis, ought to be the price. But
+the price is $2800. Marginal utility determines price? Marginal utility to
+whom? Not to the marginal buyer! To whom, then? Professor Clark says, to
+_society_, without further defining what he means by that, except in
+general terms of social organism, etc. But it seems to me clear that,
+except on the basis of some such conception, we shall have to give up the
+idea that marginal utility determines price, and say rather that price is
+something with which marginal utility has something to do! And the
+quantitative relation between the feeling of any individual and _value_ has
+become very uncertain indeed.
+
+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 chapters IV and VIII of
+this book. Boehm-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] Boehm-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 Boehm-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 the
+_Q. 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.
+
+
+
+
+CHAPTER IV
+
+JEVONS, PARETO AND BOeHM-BAWERK
+
+
+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--the _non-ego_ as 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 meaning _can_ be 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 etablit l'egalite des deux ophelimites pour lui, et
+que le laboureur fait de meme, mais qu'il n'y a aucun rapport entre
+l'ophelimite du vin pour le vigneron et pour le laboureur, ni entre
+l'ophelimite du ble pour le vigneron et pour le laboureur. Il faut toujours
+se rapeller ce caractere subjectif de l'ophelimite." (21.) Now no quantity
+of value, irrespective of the particular holder 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'echange_," 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 Boehm-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 is _capable_, 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 chapter VI), Boehm-Bawerk's law of
+price does not explain the _why_ any 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 the _modus operandi_ of the determination of _particular_ ratios 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'Economie 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 chapter VIII.
+
+[56] _Ibid._, pp. 184, n., and 330-31.
+
+[57] It is not wholly clear whether or not Boehm-Bawerk means his "objective
+value in exchange" to be considered as an absolute or as a relative
+concept. His formal definition ("Grundzuege der Theorie des wirtschaft
+lichen Gueterwerts," Conrad's _Jahrbuecher, N. F._, XIII, 1886, p. 5) is as
+follows: "Hierunter ist zu verstehen die objective Geltung der Gueter im
+Tausch, oder mit anderen Worten, die Moeglichkeit fuer sie im Austausch eine
+Quantitaet anderer wirtschaftlicher Gueter zu erlangen, diese Moeglichkeit als
+eine Kraft oder Eigenschaft der ersteren Gueter gedacht." The concluding
+phrase would seem to point to an absolute conception, as would also his
+criticism of the expressions, "ratio of exchange," "_Austauschverhaeltnis_,"
+and "_Tauschfuss_" (_Ibid._, p. 478, n.): "Diese Ausdruecke haben naemlich
+eine Nueance an sich, die es unmoeglich macht, sie sprachlich den Guetern als
+Eigenschaft beizulegen, oder von einer groesseren oder geringeren Hoehe
+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 the
+_Capital and Interest_ (p. 203) is based on the relative conception of
+value. _Cf._ our discussion of the practical usage of the Austrians in
+chapters XI and XVIII.
+
+[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 chapter VI, _infra_.
+
+
+
+
+CHAPTER V
+
+DEMAND CURVES AND UTILITY CURVES
+
+
+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 Boehm-Bawerk and Wieser, especially, have been adequately
+commented on by Professor Davenport,[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's _Theory 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 his _Outlines of Economics_, 1908 edition, pp.
+358-59.[70] Schaeffle, in his _Quintessence 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 the end 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.
+
+This, as a separate, unqualified proposition in the "Summary of
+Doctrine,"[74] is hardly to be counted anything but a _lapsus_, 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 a _logical_, and not a _psychological_,
+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, 313 _et 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] See _supra_, 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 chapter II. 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;' but _the marginal utilities of all articles_ CONSUMED [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 individual
+_expenditure_ and _consumption_. Compare, however, Boehm-Bawerk's view,
+"Grundzuege," Conrad's _Jahrbuecher, N. F._, XIII, 1886, pp. 516 _et seq._
+
+
+
+
+CHAPTER VI
+
+THE VICIOUS CIRCLE OF THE AUSTRIANS
+
+
+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 social _milieu_; 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 our _explanation_ phenomena to enable us to
+explain our _problem_ phenomenon 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 the _definition_ of
+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 who desire it must have other economic goods, i.e., wealth, with which
+to buy it. And why will these other goods buy it? Because they have
+_value_! 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 in
+_value_.--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.]
+
+This _purchasing power_ can 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 his _Natural Value_ already quoted.[80] The circle
+becomes still more explicit in Hobson.[81] Hobson attempts to coordinate
+the Austrian theory with the older cost theory, and in this connection
+gives a table analyzing the forces that lie back 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] See _supra_, 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] See _supra_, chap. II.
+
+[81] _Economics of Distribution_, p. 81.
+
+
+
+
+CHAPTER VII
+
+PROFESSOR CLARK'S THEORY OF SOCIAL VALUE
+
+
+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 the
+_Yale Review_ for 1892, in the article above referred to, "The Ultimate
+Standard of Value" (since reproduced as chapter XXIV of the _Distribution
+of Wealth_), has attempted so to add up individual units of cost and
+individual units of utility, 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 his _Distribution 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 element in 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 his
+_unit 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 whether _all_ are fed before
+_any_ begin 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 the
+_ultimate 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. This is 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
+the _particular_ goods 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
+     the producer, 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 are _bought_ with monopolized products, and suppose that a
+monopoly element enters, at some stage or other, into _every_ product 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 see how that pervasive element can in any way be an ultimate
+explanation or measure of value.
+
+     The rich worker stops producing early, while the
+     sacrifice entailed is still small; but his product
+     sells as well as if it were costly.
+
+     If we say that the prices of things correspond with the
+     amount and _efficiency_ of the labor that creates them,
+     we say what is equivalent to the above proposition. The
+     efficiency that figures in the case is power and
+     willingness to produce a certain effect. The
+     willingness is as essential as the power.... Moreover,
+     the effect that gauges the efficiency of a worker is
+     the value of what he creates; and this value is
+     measured by the formula that we have attained.
+
+But surely the circle is very clear here: the price (the expression of the
+value) of the good depends on the efficiency of the labor that produces it;
+and the efficiency of the labor depends on the value (of which price is the
+expression) of the good produced. Our "pervasive element" is complicated,
+as a determinant of social value, with several factors, among them _the
+value of the wealth of the different producers_, and the efficiency, which
+can be defined only in terms of _value product_, of the workers. Value is
+an ultimate in the explanation of value, and the effort to make individual
+costs and utilities an ultimate explanation of value has failed--as it must
+needs fail--even in the hands of Professor Clark.
+
+The validity of this criticism, assuming it valid, in no way invalidates
+Professor Clark's contention that value is, after all, the work of the
+social organism, and that the value of a good, at a given time, measures
+its importance to the social organism at that time. The difficulty with
+the analysis just criticized is that it has not been an analysis of an
+organic process, but rather, a mathematical study of sums. The individuals
+have been treated, not as interacting in their mental processes, but as
+isolated atoms, each of whom has a definite individual _quantum_ of pain or
+pleasure, and the social unit of pain or pleasure has been treated as
+simply a sum of these. But it is characteristic of an organism that the
+simple rules of arithmetic do not hold precisely in its activity. The whole
+is more than the sum of its parts, and something different from that sum.
+Professor Clark elsewhere says:--
+
+     But the owner is a part of the social body, and is the
+     organic whole indifferent to his suffering? If so,
+     society is an imperfect and nerveless organism. It
+     ought to feel, as a whole, the sufferings of every
+     member, and what makes or mars the happiness of every
+     slightest molecule, should make or mar the happiness of
+     all.
+
+     A sympathetic connection between members of society
+     exists, etc.[86]
+
+True: and indicative of the true line of study for the conception of value
+as a product of an organic society. But in the foregoing analysis we have
+no hint of "nerves" or social sympathy or other manifestation of a
+collective mental activity. The "social psychology" promised on page 261 of
+the article just reviewed, turns out not a social psychology at all, but
+simply a summation of the results of many individual psychologies. But the
+line along which the true nature of value is to be found is clearly
+indicated in the general conception of the psychical organic unity of
+society, and it remains for the present writer to make use of the studies
+in social psychology of Tarde, Cooley, Baldwin, and others,[87] not
+available, for the most part, when Professor Clark's article was written,
+in an effort to get nearer the heart of the problem.
+
+The doubly abstract conceptions of individual costs and individual
+satisfactions, connected with economic goods,--abstracted first from the
+social _milieu_, and second, from the rest of the individual's interests
+and desires,--lead us around in a circle, from value to value, but never to
+anything else. It is the belief of the writer that we get out of the circle
+only by broadening our explanation phenomena, by giving up these
+abstractions, and getting back to the concrete reality of the total
+intermental life of men in society.
+
+FOOTNOTES:
+
+[82] See _inter alia_ Boehm-Bawerk, "Ultimate Standard of Value," _Annals of
+the American Academy_, vol. V; also his "Grundzuege," p. 516, n.; Wieser,
+_op. cit._, bk. V.
+
+[83] See Laughlin, J. L., "Marshall's Theory of Value and Distribution,"
+_Q. J. E._ vol. I, pp. 227-32. See also Marshall's reply in the same
+volume.
+
+[84] There is a needless complication here. For Professor Clark's purposes
+it is not necessary to seek a _unit_ of value; what is needed is simply a
+vindication of the quantitative social value concept. The unit may then be
+arbitrarily chosen--_e.g._, the amount of value in 23.22 grains of gold.
+_Cf._ the discussion of abstract units of value, _infra_, chap. XVII, pp.
+183-84.
+
+[85] The issue appears to be shifted here. If an ultimate _cause_ of value
+is being sought, it is certain that labor does not supply it for the
+monopolized goods; and if it be simply a _measure_ of the amount of value
+embodied in the monopolized goods that is looked for, then it is clear that
+goods produced entirely by competitive labor (assuming that such goods
+exist, which I deny) can fulfill this function only by virtue of being
+themselves _valuable_--and that they serve this purpose no better than
+other goods into which a monopoly element enters. The doctrine here
+criticized goes back to Ricardo: "If the state charges a seignorage for
+coinage, the coined piece of money will generally exceed the value of the
+uncoined piece of metal by the whole seignorage charged, _because it will
+require a greater quantity of labour, or, which is the same thing, the
+value of the produce of a greater quantity of labour, to procure it_."
+(Italics mine.) Ricardo, _Works_, McCulloch edition, 1852, p. 213.
+
+[86] _Philosophy of Wealth_, 1892 ed., p. 83.
+
+[87] Tarde, _The Laws of Imitation_, _Psychologie Economique_, 2 vols.,
+Paris, 1902. Cooley, C. H., _Human Nature and the Social Order_, _Social
+Organisation_. Baldwin, Mark, _Social and Ethical Interpretations_. Elwood,
+C. A., _Some Prolegomena to Social Psychology_, Chicago, 1901; "The
+Psychological View of Society," _American Journal of Sociology_, March,
+1910. Hayden, Edwin Andrew, _The Social Will_, 1909. No attempt is made at
+an exhaustive list here, nor are the writers mentioned to be held
+accountable for the views maintained in the text, though their point of
+view is in general that which I shall maintain.
+
+
+
+
+PART III
+
+THE PRESUPPOSITIONS OF ECONOMIC THEORY
+
+
+
+
+CHAPTER VIII
+
+THE PHILOSOPHICAL AND PSYCHOLOGICAL PRESUPPOSITIONS
+
+
+The connection between social philosophy, on the one hand, and metaphysics
+and epistemology on the other hand, has always been a close one,--a fact
+not always adequately recognized by writers in the field of social science,
+in economics, especially. Scientists often "ignore" philosophy, holding
+that their concern is simply with the world of phenomenal "facts," and that
+the injection of philosophic considerations is illicit and unscientific.
+And this is often well enough in the field of the physical, chemical, and
+biological sciences, where the procedure is primarily inductive, and the
+data are got from sense observation. But in the social sciences, where the
+procedure is so largely deductive, and where the data are often principles
+of mind, whose truth is assumed as a starting point for investigation, and
+especially in economic theory, such an attitude cannot be justified. For
+philosophical assumptions _will_ creep in, and the scientist has no option
+about it. The only thing he can do is to be critical, and know definitely
+_what_ philosophical assumptions he is making,--and most of our treatises
+on economic theory do not bear evidence that this critical work has been
+done.
+
+There may be traced in the history of philosophy, in the ancient world, and
+also in the modern era, three main stages in philosophic thought, each
+accompanied by a distinctive set of ideas concerning the nature of society.
+In distinguishing these three stages, in showing the relation of each to
+social philosophy, and especially in tracing a parallel between the
+philosophy of the ancients and that of modern times, I recognize the grave
+dangers of giving a superficial treatment, and of distorting facts to make
+them fit a schematism. I recognize, further, that a host of details and a
+multitude of differences must be ignored in tracing the parallel I propose.
+Considerations of space, moreover, prevent such a detailed justification of
+the views here presented as would be required were this more than a minor
+phase of my subject. The need for this is lessened, however, by the fact
+that much of what follows is part of the commonplaces of the history of
+philosophy,--albeit a repetition of it seems needed in a criticism of
+economic theory. The three stages are: the dogmatic stage; the skeptical
+stage; and the critical stage. In Greek philosophy, the first stage is
+represented by the cosmological philosophers, as Thales, Anaximenes, and
+Anaximander, who, with perfect confidence in the power of their minds to
+solve the riddles of the universe, or rather, without questioning that
+point at all, proceeded to spin out poetical accounts of the origin and
+nature of things. The second stage is represented by the Sophists, who,
+struck by the manifold divergences in the philosophies of the earlier
+schools, and by the lack of harmony between the god-given laws and rules of
+morality which earlier tradition had handed down, and the needs of the
+social conditions among which they lived, found themselves unable to find
+truth readily, and reached the conclusion that each man is the measure of
+truth, that there are no universal criteria, or valid standards. The third
+stage begins with Socrates, who sought for a common principle of truth and
+justice in the midst of divergences, and this critical movement, continued
+by Plato and Aristotle, led to conceptions of unity once more.
+
+Now the social philosophy which goes with the first stage is relatively
+undefined. It is for the most part content with the existing order,
+recognizes a supernatural basis for it, and raises few questions. The
+social philosophy of the second period is intensely individualistic. In the
+third stage, the emphasis upon social solidarity and upon a unified,
+organic conception of society, a society which is paramount to individual
+interests and rights, comes to the fore again. The extreme poles of thought
+are, on the one hand, an individualism which leaves scant room for any very
+significant social relations whatsoever, and, on the other hand, a
+socialism--like that of the _Republic_--which swallows up the individual.
+The compromise view, expressed in the Aristotelian doctrine of the relation
+between "form" and "matter," applied to the social problem, finds the
+individual very real, to be sure, but still real only in his social
+relationships. Individual activities are facts, but social activity is more
+than a mere sum of individual activities. Society and the individual are
+alike abstractions, if viewed separately.
+
+The mediaeval conflict over realism and nominalism really derives its
+interest from the practical social issues involved, for the reality of the
+Church, as more than a mere aggregate of its members, and the validity of
+Christian doctrine, as more than the sum of individual beliefs, are at
+stake.
+
+The cycle began again in modern times. As representatives of the dogmatic
+period in modern philosophy, DesCartes and Spinoza may be chosen. They were
+not, of course, naively dogmatic, for philosophy had learned much from its
+many disappointments, and DesCartes, especially, starts out with
+reflections which would seem to make him very much a skeptic. And yet each
+believed in the power of the mind to draw absolute truth from itself, and
+each proceeded in a highly rationalistic way to build up his system. The
+very title of Spinoza's great work indicates this attitude of mind:
+"_Ethica more geometrico demonstrata_." The conception of society which
+characterizes this period is, again, not naive, but still has a
+supernatural, or at least a superhuman, basis, for it is in a Law of Nature
+(capitalized and personified) that social institutions find their origin
+and justification. Critical reflections, starting with Locke, and passing
+through Berkeley to the absolute skepticism of Hume, bring in the second,
+or skeptical, period, in which the rationalistic-dogmatic certitude of
+Spinoza and DesCartes is banished. And going with this movement in
+philosophic thought comes the extreme individualism of Rousseau in
+politics, and Adam Smith in economics. The movement away from skepticism,
+beginning with Kant, puts the world, and especially society, back into
+organic connections again, and we have, in Hegel, especially, society to
+the fore, and the individual real only as a part of society. The organic
+conception, revived by Hegel, and vitalized by the positivistic studies
+which applied the Darwinian doctrine to social phenomena, has characterized
+the greater part of the social philosophy of the last half hundred
+years--of course, not without protest and highly necessary criticism.
+
+Now all of this is, of course, commonplace. And yet a failure to recognize
+it has vitiated very much thinking in the field of economic theory.
+Economic thought is to-day very largely based on the philosophic
+conceptions which characterize the period in which economics began to be a
+differentiated science,--the skeptical doctrines of David Hume, the close
+friend of Adam Smith.[88] The individual is all-important; his world of
+thought and feeling is shut off from that of every other man; social
+relationships are largely mechanical, and grow out of calculating
+self-interest on the part of the individual; social laws are conceived
+after the analogy of physical laws. Ethics and politics, however, have been
+far more influenced by later thinking, and the organic conception of
+society has largely dominated these sciences of late, while the new
+science, sociology, free to base itself more largely upon present-day
+epistemological, philosophical, and psychological notions, has gone further
+than any other in accepting the doctrine of the unity and pervasiveness of
+social relations, organically conceived. I think there are few things more
+strikingly in contrast than the conception of society which the student
+meets in most works on economic theory, and that which he meets in studying
+the other social sciences. That this is so is due precisely to the fact
+that the economists have too largely neglected philosophy and psychology,
+and have accepted uncritically the assumptions of the founders of the
+science. Doctrines accepted then have become _crystallized_, and still form
+part of the current stock in trade of economic science, even though
+rejected by philosophy itself.
+
+To one of these faulty doctrines from the earlier time, attention has
+already been called. It is that the intensities of wants and aversions in
+the mind of one man stand in no relation to the same phenomena in the mind
+of another man, and that there can be no comparison instituted between
+them. The individual is an isolated monad,[89] mechanically connected with
+his fellows, who are to him "a part of the _non-ego_,"[90] but spiritually
+self-sufficient and inaccessible. The doctrine appears in Marshall's
+statement:[91] "No one can compare and measure accurately against one
+another even his own mental states at different times, and no one can
+measure the mental states of another at all, except indirectly and
+conjecturally, by their effects." Pareto I have quoted, as also Jevons, in
+chapter IV. The doctrine appears in Professor Veblen's recent article in
+criticism of Professor Clark:[92]--
+
+     It is evident, and admitted, that there can be no
+     balance, and no commensurability, between the laborer's
+     disutility (pain) in producing the goods and the
+     consumer's utility (pleasure) in consuming them,
+     inasmuch as these two hedonistic phenomena lie each
+     within the consciousness of a distinct person. There
+     is, in fact, _no continuity of nervous tissue_
+     [italics mine] over the interval between consumer and
+     producer, and a direct comparison, equilibrium,
+     equality, or discrepancy in respect of pleasure and
+     pain can, of course, not be sought except within each
+     self-balanced individual complex of nervous tissue.
+
+In the recent elaborate study, _Value and Distribution_, by Professor H. J.
+Davenport, the theories based on the conception of the individual as an
+isolated monad, a self-complete whole, with purely mechanical relationships
+with other men, find their fullest and most self-conscious expression, and
+the philosophical presuppositions are explicitly premised. The following
+quotation from Thackeray's _Pendennis_ is given as a footnote,[93] in which
+Professor Davenport's own conception is expressed:--
+
+     Ah, sir, a distinct universe walks about under your hat
+     and under mine--all things in nature are different to
+     each--the woman we look at has not the same features,
+     the dish we eat has not the same taste, to the one and
+     to the other; you and I are but a pair of infinite
+     isolations, with some fellow islands a little more or
+     less near us.
+
+This is, of course, manifestly the theme of the old subjectivistic
+analysis, by which all things are reduced to thoughts, sensations, and
+desires within the individual soul, and in accordance with which we have
+none save conjectural knowledge of anything outside of our own souls. Now
+a general answer might be given that this is an epistemological principle
+which holds true only for what Kant calls the "_Ding an sich_,"--if such a
+thing there be--and that there is no more reason why it should apply to
+human emotions, considered purely as phenomena, than to any other of the
+phenomena with which science busies itself. If this principle be adhered
+to, its effect will be simply to cast doubt on the conclusions of all
+sciences, physical as well as psychical. Certainly psychology would be
+impossible on this assumption, except in so far as the psychologist claims
+only to be working out a science of his individual soul, which, so far as
+he knows, is not true of any other individual. But it is precisely _not_
+this that psychology attempts. It is concerned with the laws and behavior
+of minds in general, with the "_typisch und allgemeingueltig_" and not with
+the mental idiosyncrasies of the particular individual.
+
+But the doctrine can be met from the standpoint of epistemology itself. The
+writers who are responsible for this subjective analysis, have held that
+_mind_ is more nearly capable of being known by mind than is anything else,
+since we can interpret things only in terms of our own experiences. The
+real nature of a purely physical thing is far more deeply hidden from our
+view than is the real nature of a mental fact, even though it be in the
+mind of another. And especially would they grant a degree, at least, of
+objective currency to clearly phrased conceptual thought. Now I base
+myself upon the present day pragmatic philosophy,[94] which is,
+essentially, concerned with the problem of knowledge. Its principle is that
+we believe things to be true, not because of any knowledge we have of some
+mystical, absolute truth, but because of our experiences of utilitarian
+sort. That is true which works. That is true which we find will satisfy our
+desires and needs. In a word, desire, volition, _values_, lie at the basis
+of intellect.[95] Whence it follows, that if our minds are so constituted
+that we understand each other on the intellectual side, then there must be
+a still deeper and more underlying similarity on the desire, feeling,
+volitional side.[96] Consequently, if there be anything at all, outside of
+our own mind, which we _can_ understand, it must be the feelings and
+emotions of other men.
+
+Considerations of a practical nature give us the strongest possible grounds
+for a belief that human desires, feelings, etc., are homogeneous and
+communicable. The fact is that we all have back of us many millions of
+years of evolutionary history in the same general environment. In the past,
+with relatively minor variations, the same influences have played upon our
+ancestors from the beginnings of life on our planet. And then, we are born
+into the same society, and it has given us, not, to be sure, the power of
+reaction, but certainly all of our most important stimuli.[97] Further, we
+do get along in society. We laugh together, we play together, we share each
+other's sorrows, we love and hate each other, in a way that would be wholly
+impossible if we did not in practice assume the correctness of our
+"inferences" about one another's motives and desires. And the fact that
+these "inferences" are in the main correct is the one thing that makes
+social life possible. We can, and do, understand one another's motives,
+desires, wants, emotions. We can, and do, constantly communicate our
+feelings to one another.
+
+It is only on the basis, further, of an intellectualistic psychology that
+such a subjectivistic conception is possible. If the voluntaristic
+psychology and the doctrine of "the unconscious" be accepted--and certainly
+the psychological facts on which the latter is based must be accepted,
+whether the metaphysical conclusions are or not[98]--we have no basis
+whatever for this doctrine that clearness holds within the mind, but that
+without all is uncertain. Really, only a little part of our mental life is
+in consciousness at any given moment. The "stream of consciousness" is but
+a narrow thing, and the unity of the individual mind is a unity, not of
+consciousness, but of _function_. As Goethe somewhere says, we know
+ourselves never by reflection, but by action. And often does it happen that
+a sympathetic friend, or even an observant enemy, may interpret more
+accurately our actions than we ourselves can do, and may measure more
+accurately the strength of a given motive for us than we can ourselves. In
+a certain sense, our knowledge of other minds is inference. We see other
+men's actions, or hear their voices, or watch the muscles of their faces,
+and so, indirectly, get at their thoughts and feelings. But, in much the
+same sense, our knowledge of their actions, or of their voices, is
+inference too. For we must interpret the image on the retina, or the sense
+excitation in the ear. But practically, neither is inference, if by
+inference be meant a consciously made judgment from premises of which we
+are conscious. In a casual walk with a friend, where conversation flows
+smoothly on easy topics, one is as _immediately_ conscious of his friend's
+thoughts and feelings, expressed in the conversation, as he is of the
+scenes that present themselves by the way, or even of the thoughts that
+arise within himself.[99]
+
+The significance of this conclusion is not quite the same as that which
+might be expected from the context from which I have taken the doctrine
+under criticism. The feelings of men with reference to economic goods are
+facts of definite, tangible nature, and subject-matter of social
+knowledge. But we have not yet reached a standard or source of social
+value. No homogeneous "labor jelly," or "pain jelly," or "utility
+jelly,"[100] made up by averaging arithmetically, or adding arithmetically,
+individual efforts or pains or pleasures, will solve our problem for us--as
+indeed I have been at pains to show in what has gone before. The purpose of
+the foregoing criticism is primarily to clear the ground for a conception
+of social organization which is more than mechanical, and in which the
+individual is both less and more than a self-sufficient monad.
+
+FOOTNOTES:
+
+[88] This criticism applies to the teachings of James Mill, J. S. Mill, and
+other sensationalist followers of Hume, even more than to Adam Smith. But
+see Professor Albion W. Small's _Adam Smith and Modern Sociology_, Chicago,
+1907, esp. p. 51.
+
+[89] It is easy for "analysis" to separate society into "individual"
+monads, and impossible for "synthesis"--once the validity of the analytic
+process is accepted--to put society together again. In fact, once the
+analytic process is begun, and once its results are accepted as anything
+more than matters of logical convenience, all unity and all organic
+connections, whether in the social or in other fields, seem to vanish like
+a dissolving show. There is a psychological doctrine of monadism, quite as
+logical as the sociological monadology here criticized, which finds it
+impossible to link together even the elements in a single individual's
+mind. (See William James, _Principles of Psychology_, 1905 ed., vol. I, pp.
+179-80.) Into what inextricable difficulties one falls, in pursuing the
+monadistic logic, is more dramatically illustrated than by anything else I
+know by Bradley's _Appearance and Reality_, esp. chaps. II and III. The
+most useful viewpoint seems to be as follows: unity is as much an object of
+immediate knowledge as is plurality,--both being, in fact, the products of
+reflective thought. And unity is no more called upon to justify itself,
+before we recognize its existence, than is plurality. _Cf._ William James,
+_The Meaning of Truth_, New York, 1909, p. xiii; and also his _Psychology_,
+vol. I, pp. 224-25. _Cf._ also the writings of Professor John Dewey.
+
+[90] Jevons, _Theory of Pol. Econ._, 3d ed., p. 14.
+
+[91] _Principles_, 1907, p. 15 (1898 ed., p. 76). See also Marshall's
+criticism of Cairnes' conception of supply and demand, in the 1898 edition
+of the _Principles_, p. 172.
+
+[92] "Professor Clark's Economics," _Q. J. E._, 1908, p. 170.
+
+[93] Davenport, _op. cit._, p. 300, n. It may seem somewhat unfair to hold
+a man responsible for the view of another writer which he throws into a
+footnote of his own book. One who has read Professor Davenport's book,
+however, will recognize, I think, that this quotation does express
+Professor Davenport's view. His discussion in the text on pages 300-301
+affirms virtually this same doctrine, as a proposition of psychology. See
+also his discussions in small type on pages 336-37. His whole system is
+based upon this doctrine.
+
+[94] See, especially, William James, _Pragmatism_, and _The Meaning of
+Truth_; John Dewey, _Essays in Logical Theory_; and F. C. S. Schiller,
+_Humanism_.
+
+[95] The utter impossibility of adequately summing up a philosophic
+doctrine in two or three sentences will excuse this statement to those
+pragmatists who would prefer a somewhat different formulation.
+
+[96] I am indebted for suggestions here to Professor H. W. Stuart's article
+on "Valuation as a Logical Process," in Dewey's _Studies in Logical
+Theory_, pp. 322-23.
+
+[97] _Cf._ Baldwin, _Social and Ethical Interpretations_, _passim_, and
+Cooley, _Human Nature and the Social Order_, _passim_.
+
+[98] The most interesting discussion of these topics I know is that of
+Friedrich Paulsen, in his _Introduction to Philosophy_ (translated by
+Professor Frank Thilly).
+
+[99] _Cf._ Perry, R. B., "The Hiddenness of the Mind," _Jour. of Phil.,
+Psy., and Sci. Meth._, Jan. 21, 1909; "The Mind Within and the Mind
+Without," _Ibid._, April 1, 1909; "The Mind's Familiarity with Itself,"
+_Ibid._, March 4, 1909. Urban, W. M., _Valuation_, p. 243.
+
+[100] Davenport, _op. cit._, p. 331.
+
+
+
+
+CHAPTER IX
+
+THE SOCIOLOGICAL PRESUPPOSITIONS
+
+
+Conceptions of the social unity fall, in the main, into three classes: the
+mechanical, the biological, and the psychological. Each of these
+conceptions recognizes, of course, that the individual has a mind, but the
+first thinks of that mind as so shut in that the only connections between
+men must be of an external sort; the second sees modes of collective action
+_analogous_ to the modes of individual action, and reaches the conception
+of a social mind by analogy; while the third treats the social mind as an
+empirical fact, the phenomena of which can be studied as concrete things in
+detail. And there are gradations here, and combinations.
+
+The following extract, freely translated and substantially abridged, is
+taken from chapter I of DeGreef's _Introduction a la Sociologie_:--
+
+     It is in vain that Spencer protests against the
+     accusation that he has assimilated the laws of biology
+     with those of sociology. The confusion is everywhere
+     complete. He has not indicated a single law, nor a
+     single phenomenon, which has not its correspondent, if
+     not its equivalent, in the antecedent sciences. Draper,
+     in his _History of the Intellectual Development of
+     Europe_, adopts precisely the doctrine that the laws of
+     biology apply equally to sociology. Man is the
+     archetype of society. Nations pass through their
+     periods of infancy, adolescence, maturity, age, death.
+     This sort of thing makes sociology wholly unnecessary.
+     The attempt of Stanley Jevons to explain economic
+     crises by sun-spots, so far from being an effort of
+     genius, is simply a _jeu d'esprit_. It is simply a
+     recognition of the common fact that climate is one of
+     the factors that influence man in society. According to
+     Hesiod, physical forces first engender each other, then
+     in turn the gods and man. Since then, social science
+     has in turn been founded on the laws of astronomy,
+     chemistry and biology. To-day it is the last, vitiated,
+     further, by false psychological notions about the power
+     and unlimited liberty of the reason, and the
+     consciousness of human individuals, and applied by
+     analogy to the collective reason.
+
+     The error consists in looking for the explanation of
+     social phenomena in the most general laws. This is
+     natural within certain limits, but has been pushed to
+     extreme, but logical consequences, by the American,
+     Carey (_Social Science_). He looks, in effect, to one
+     of the oldest sciences, and one, consequently, relating
+     to the most highly general phenomena, those of
+     astronomy, for the universal laws of society. Geometry,
+     he holds, gives us principles equally valid for the
+     chemist, the sociologist, and for him who measures the
+     earth. A system assuming to explain complex phenomena
+     solely by the laws of phenomena more simple, may be
+     compared to the effort to give an account of a book,
+     not by reading it line by line, but by examining the
+     cover and the title-page.
+
+As DeGreef elsewhere puts it, there is a hierarchy in science, proceeding
+from the more general to the less general, depending on the nature of the
+phenomena studied. This hierarchy has been variously stated. Comte puts it
+thus: mathematics, astronomy, physics, chemistry, physiology, social
+physics (sociology). Baldwin,[101] writing much later, of course, puts it
+thus:--
+
+     So here, as elsewhere, there is a gradation, a
+     hierarchy, in science: chemistry necessary to life, but
+     not itself of life; forces in the environment necessary
+     to evolution, but not themselves vital; life-processes
+     necessary to consciousness, but not themselves mental;
+     consciousness necessary to society, but not all
+     consciousness social; social consciousness necessary to
+     social organization, but not all social consciousness
+     actually in a social organization.
+
+Now the point with DeGreef is that the special laws of each successively
+narrower group of phenomena are to be explained only by concrete study, and
+that it is wholly vain to think that the application of principles drawn
+from other, more general groups of phenomena give us these laws. Thus the
+economists talk of "equilibria" between various economic forces, just as if
+they were physical forces;[102] and a whole school of mathematical
+economists has arisen, who find economic life a thing that will fit into
+equations. This work is valuable, but it is not final. Analogies are
+helpful, but are not ultimate. Similarly, the biological conception, which
+likens society to a man, has its contributions. The biological analogy has
+been pushed very far: thus Novikow calls the social intellectual _elite_
+the social _sensorium_; Lilienfeld likens the action of a mob to female
+hysterics; Simiand calls the idle rich the adipose tissue of society, the
+priests also represent fat, while the police are the social phagocytes
+which eat up wandering criminal cells.[103] But this, though suggestive, is
+not an ultimate social philosophy or even an approach to it. Even DeGreef,
+as I shall indicate a little later, errs by trying to trace a too rigid
+parallel between individual structure and social structure. We must
+introduce a careful study of the peculiarly social phenomena, those
+phenomena which are to be found only in society, before we are privileged
+to talk of a social organism or a social mind.[104]
+
+On the other hand, it seems to me that Baldwin has erred in the opposite
+direction. The laws of chemistry do not cease to be operative in the human
+body, even though more complex biological laws operate there. And the laws
+of biology are not suspended just because an animal organism develops a
+mind. The greatest defect of the older psychology, against which the
+experimental psychology is a reaction, was its failure to take proper
+account of physical processes connected with consciousness. Now society,
+according to Baldwin, is best described as analogous to a psychological
+organization, and such an organization as is found in the individual in
+_ideal thinking_.[105] But surely this is an abstraction, and not a fact.
+Society does not cease to be physical, chemical, biological, subconscious,
+merely because it has also attained in part a higher form of psychical
+activity (to which Professor Baldwin would object on the basis of his
+distinction between the "social" and the "socionomic").
+
+DeGreef's conception seems to me better, on this logical point,--though of
+course Baldwin's analysis of facts represents a great advance--but it is
+not satisfactory:[106]--
+
+     Since unconsciousness, instinct, and reflex action
+     characterize the psychic life of inferior beings, and
+     even the greater part of the intellectual activity of
+     those most highly developed, man included, we ought not
+     to be astonished, _a priori_, that the collective force
+     which constitutes the social superorganism presents the
+     same characteristics.
+
+     Consciousness is aroused in the individual, and new
+     activities result, which soon, however, lose their
+     conscious character, and become reflex and automatic.
+     So with society.
+
+Then follows an elaborate analogy between the individual brain and nervous
+system and their functions, and the social structure and its functions,
+which we need not reproduce here. This analogy seems forced to me. There is
+little point to trying to find such exact correspondences. It is enough if
+we have our general organic principle as a method of study, and then
+proceed to the study of social facts. I shall myself, however, make use of
+some analogies in what follows, but shall not insist too strongly upon
+them. I may here express the opinion that society is an organism less
+highly developed than a man's body or a man's mind, and that its unity is
+primarily a unity of _function_ rather than of _structure_,[107] though
+there is some structural unity.
+
+The conception of the social unity which seems most useful for the purpose
+of our study--and the writer would insist that no social theory is valid
+for all purposes, and that many social theories have value for some
+particular purposes--is that of Professor C. H. Cooley, as set forth,
+particularly, in the opening chapters of his _Social Organization_. As this
+book, however, presupposes certain doctrines set forth in Professor
+Cooley's earlier book, _Human Nature and the Social Order_, a brief account
+of certain points in that study must also be given. It may be noted, at the
+outset, that Professor Cooley neglects the study of the material aspects of
+society, and centres his attention upon the mental side. His purpose in
+this is not to deny the significance of the material factors, as he
+explains in the preface to _Social Organization_, but simply to narrow the
+scope of his labors. The writer wishes here to make a similar statement
+regarding his own viewpoint. In the following pages, attention will be
+centred almost exclusively upon the psychical forces involved, upon what we
+shall call the "social mind." In this, however, it is explicitly recognized
+that the physical environment and the biological individuals are essential
+factors, and that the forces which are manifested in them must be
+recognized as coefficients with the psychical forces which we shall study,
+in the determination of any concrete social situation. I have no intention
+whatever of giving an independent, ontological character to this psychical
+abstraction. For the purposes of this study we shall regard the physical
+factors as constant,--an assumption justified for purposes of study,
+provided we subsequently, in handling concrete problems, make allowance
+for the extent to which it is untrue.
+
+In his earlier book,[108] Professor Cooley objects to the customary
+antithesis between "individual" and "social." They are simply two aspects
+of the same thing. He discriminates three meanings of the word, social,
+none of which, he says, is properly to be contrasted with "individual": (1)
+that pertaining to the collective aspect of humanity, in its widest and
+vaguest meaning; (2) that pertaining to immediate intercourse; (3)
+conducive to collective welfare, and so nearly equivalent to moral. But
+none of these meanings has "individual" as its natural or logical
+antithesis.
+
+There are several forms of individualistic views: (1) _Mere_ Individualism.
+The distributive phase of human life is almost exclusively regarded. Each
+person is thought of as a separate agent; all social phenomena originate in
+the action of such agents. This view is much discredited by evolutionary
+science and philosophy, but is by no means abandoned even in theory, and
+practically it enters as a premise into most common thought of the day. (2)
+Double Causation,--a partition of power between society and the individual,
+both thought of as separate causes. This is ordinarily the view met with in
+social and ethical discussions. There is here the same premise of the
+individual as a separate, unrelated agent; but over against him is set a
+vaguely conceived collective interest or force. People are so accustomed to
+think of themselves as uncaused causes, special creators on a small scale,
+that when general phenomena are forced on their notice, they think of them
+as something additional, and more or less antithetical. The correction of
+this error will leave the contest between individualism and socialism,
+considered as philosophical notions, rather than as names for social
+programs, among the forgotten _debris_ of speculation. (3) The third view
+he calls Primitive Individualism. The individual is prior in time to
+society. This view is a variety of the preceding, perhaps formed by
+mingling individualistic preconceptions with a rather crude evolutionary
+philosophy. Individuality is lower in rank as well as prior in time. The
+social is the good, moral, and the individual is the anti-social and bad.
+Professor Cooley's view is that individuality is neither prior in time, nor
+inferior in rank, to sociality. If social be applied only to the higher
+forms of mental life, it should be opposed, not to individual, but to
+animal or sensual, or the like. Our remote ancestors were just as inferior
+when viewed separately as when viewed collectively. (4) The fourth form of
+individualism he calls the Social Faculty view. The social includes only a
+part, and often a rather definite part, of the individual. Individual and
+social are two different parts of human nature. Love is social; fear and
+anger are unsocial and individualistic. Some writers have treated
+intelligence as an individualistic faculty, and have founded sociality on
+some form of sentiment. This is well enough if we use social in the second
+sense of pertaining to immediate conversation, or fellow feeling. But that
+these sociable emotions are essentially higher, or pertain peculiarly to
+collective life, is very doubtful. Cooley holds that no such division of
+human nature is possible. Social or moral progress consists less in the
+aggrandizement of certain faculties and suppression of others, than in the
+discipline of all with reference to a progressive organization of life.
+
+The rest of the book is devoted to a study of society in its distributive
+aspect, or as we should say ordinarily, using the terms which Professor
+Cooley objects to, the study of the social nature of individuals. It is
+based in large measure upon a study of the development of children.
+Personality is an essentially social thing. The "I" feeling is a thing
+which only social influences can develop.[109] The thought process within
+the "individual mind" is a social process,--we think in words, and, indeed,
+in conversations.[110] I shall not develop these notions at length. They
+are of similar nature to those in Professor Baldwin's _Social and Ethical
+Interpretations_, when he discusses the "dialectic of personal growth."
+They are interesting and pertinent as showing in a concrete way the
+tremendous and comprehensive sweep of social factors in the creation of the
+individual mind.
+
+_Social Organization_, which appeared in 1909, takes up the collective
+aspect of human-mental life.
+
+     Mind is an organic whole, made up of cooperating
+     individualities, in somewhat the same way that the
+     music of an orchestra is made up of divergent but
+     related sounds.[111] No one would think it necessary or
+     reasonable to divide the music into two kinds, that
+     made by the whole, and that of the particular
+     instruments, and no more are there two kinds of mind,
+     the social mind and the individual mind. The view that
+     all mind acts together in a vital whole from which that
+     of the individual is never really separate, flows
+     naturally from our growing knowledge of heredity and
+     suggestion, which makes it increasingly clear that
+     every thought we have is linked with the thought of our
+     ancestors and associates, and through them with that of
+     society at large. It is also the only view consistent
+     with the general standpoint of modern science, which
+     admits nothing isolate in nature.
+
+     The unity of the social mind consists not in agreement
+     but in organization, in the fact of reciprocal
+     influence or causation among its parts, by virtue of
+     which everything that takes place in it is connected
+     with everything else, and so is an outcome of the
+     whole. Whether, like the orchestra, it gives forth
+     harmony may be a matter of dispute, but that its sound,
+     pleasing or otherwise, is the expression of a vital
+     cooperation, cannot well be denied.[112]
+
+Professor Cooley stresses the unconscious character of many of these social
+relations. "Although the growth of social consciousness is perhaps the
+greatest fact of history, it has still but a narrow and fallible grasp of
+human life." Cooley objects to the Cartesian postulate, which makes
+"_cogito_," "I think," the fundamental and most absolutely certain fact in
+the world. He holds that it grows out of the idiosyncrasy of a highly
+specialized, introspective philosopher's mind, and that, for the normal
+mind, "_cogitamus_," "we think," is just as obvious.[113] The "I" feeling,
+and the "we" feeling are differentiated together out of the inchoate
+experience of the child. And "I" and "we" are alike social in their nature.
+The self, for Professor Cooley, is not a scholastic "soul-substance" or
+transcendental ego, but simply a relatively differentiated portion of the
+social mind. "'Social organism' using the term in no abstruse sense, but
+merely to mean a vital unity in human life, is a fact as obvious to
+enlightened common sense as individuality."[114]
+
+I pause here to contrast this view of the "social mind" with that of some
+other writers, of whom I may take Professor Giddings as representative. I
+quote from page 134 of the 1905 edition of Professor Giddings' _Principles
+of Sociology_:--
+
+     The social mind is the phenomenon of many individual
+     minds in interaction, so playing upon one another that
+     they simultaneously feel the same sensation or emotion,
+     arrive at one judgment and perhaps act in concert. It
+     is, in short, the mental unity of many individuals, or
+     of a crowd.
+
+The social mind for Professor Giddings is thus made to depend upon an
+_identity of content_ in many individual minds. For Professor Cooley, it is
+an organization and integration of many differentiated and divergent minds,
+in a complementary activity. Professor Cooley's conception, thus, takes in
+all minds, while that of Professor Giddings would exclude the dissenters.
+Further, Professor Giddings emphasizes the element of consciousness;
+unconscious processes are included by Professor Cooley, whose conception
+really finds a place for the total psychosis of every individual in
+society. It may be noted, however, that Professor Giddings, in the more
+detailed exposition of the classroom, does not stress either the agreement
+or the consciousness in the absolute fashion that the brief passage quoted
+would indicate, and readily concedes that for theoretical purposes the more
+inclusive conception of Professor Cooley's is a very useful one. The
+difference between his viewpoint, as set forth in the classroom, and that
+of Professor Cooley, is primarily a matter of emphasis.[115]
+
+       *       *       *       *       *
+
+The following propositions are submitted, partly by way of summary, and
+partly by way of addition, as embodying the points essential for present
+purposes as to the nature of society:--
+
+(1) Society is an organism. Organism as here used is a generic term, with
+the following connotation: (_a_) an organism has different parts, with
+different functions; (_b_) these parts are interdependent; (_c_) an
+organism is alive, in the sense in which Spencer defined life, that is, an
+organism has the power of making appropriate inner adjustments to the
+external environment; (_d_) an organism has a central theme, not externally
+imposed, to the working-out of which the different parts contribute; but
+the organism--or the parts--is not necessarily conscious of this central
+theme; (_e_) an organism is constantly changing its "matter" without
+essential change in "form." (In a biological organism the process of
+metabolism goes on constantly. In a society, men are constantly passing out
+of society through death, or through lapsing into idiocy, etc., and new
+elements are constantly entering, not through the biological process of
+birth, but through the process of becoming "socialized," in the manner
+described by Baldwin as the "dialectic of personal growth," or by Cooley,
+in his _Human Nature and the Social Order_.) (_f_) An organism grows, by
+progressive differentiations and integrations.
+
+(2) There is a mind of society, a psychical organism. The minds of
+different individuals--themselves differentiated into systems of thoughts
+and feelings that are often lacking in harmonious adjustment to each
+other--are in such intimate interrelation that they may be said to
+constitute one greater mind. The physiological basis of this greater
+mind--if it be thought necessary to locate it--is the brains and nervous
+systems of individual men, _plus_ that set of physical symbols (e.g.,
+language, literature, gestures, art, music, etc.) which are set in motion
+by the nerve activity of one man, and then stimulate nerve activity on the
+part of another. This unity is primarily a unity of _function_,
+however.[116]
+
+(3) The fact of individual differences among the minds of men, does not
+vitiate the conception of a mind of society. It rather proves the _organic_
+character of the social mind, by introducing the fact of _differentiation_.
+The integrating element is found in the points which individual minds have
+in common.
+
+(4) The mind of society, like the mind of a man, is primarily volitional,
+and not intellectual. (Volition is here used in the wider sense, as
+including all motor and affective activities in mind.) Like the individual
+mind, the greater part of it is vaguely conscious or subconscious.
+
+(5) Less highly organized than the individual mind, the mind of society is
+less rational, and less highly conscious, than most, if not all,
+individual minds. "Social self-consciousness" is a rare, if not
+non-existent phenomenon.
+
+(6) The mind of society, in its entirety, is of necessity not a matter of
+perception for any individual. Each individual sees only that part which is
+in his own mind--not all of that!--and in the minds of other individuals
+with whom he is in communication.
+
+(7) But the minds of other men may be, and normally are, in part objects of
+perception for any social individual. There may be an "inferential" element
+in our perception of mental processes in the minds of other men, but it is
+not inference.
+
+(8) The individual monad is a myth. His machinery of thought--language and
+logic--is socially given him, his ideals and interests, his tastes even in
+matters of food and drink, are socially given,--apart from social
+intercourse his human-mental life would be mere potentiality.
+
+(9) The worth of this conception of social reality, like the worth of other
+scientific hypotheses, is to be determined by a pragmatic test: does it
+relate phenomena the connection between which was previously obscure,
+without introducing greater difficulties of its own? I believe that, for
+the problem of value theory at least, it will find such a pragmatic
+justification.
+
+       *       *       *       *       *
+
+This lengthy excursion into a field not commonly counted as part of the
+economist's territory is to be justified on the ground that the economist
+has not only failed to take account of the conclusions reached there, but
+has also, too often, been making and using assumptions which contradict
+them. It is further necessary, because the conception of "social value,"
+which forms the subject of this book, assumes a "social organism" which can
+give value to goods, without making it clear what sort of an organism
+society is conceived to be. The excursion has at least revealed some of the
+many meanings that lie behind that term. And it is especially necessary in
+view of the fact that the conception of "social value" has been attacked on
+the ground that the organic conception has been abandoned by the
+sociologists themselves.[117] That this is true of the biological analogy,
+which made society an animal, and drew social laws from biological laws,
+rather than from the study of social phenomena, is readily granted. But
+that sociologists have abandoned the generalized conception which gives us
+primarily a highly convenient schematism on which to group the social facts
+that we actually find, is by no means conceded. And the question is really
+one as to those facts themselves rather than as to the mode of grouping and
+conceiving them. If social activity be nothing more than a _sum_ of
+_similar_ individual activities, as Professor Davenport seems to think in
+the article criticizing Professor Seligman,[118] and if the individual be
+an isolated monad, then Professor Davenport's criticisms will hold. But if
+the individual is in vital psychic relation with other individuals, so
+much so that he is impossible apart from those relations, and if social
+activity is, not a _sum_ of _similar_ individual activities, but an
+_integration_ and _organization_ of _differentiated_ and _complementary_
+individual activities, spiritual as well as physical, then Professor
+Davenport's criticisms are not valid. And it is on this point that I would
+strongly insist. The argument of the following chapters may be put--though
+not so conveniently--in terms of the mechanical analogy, and the psychical
+processes treated, not as the action of a unitary, though differentiated,
+mind, but as a balancing and transformation of forces, and practically the
+same results for value theory will follow.
+
+FOOTNOTES:
+
+[101] Baldwin, Mark, _Social and Ethical Interpretations_, 1906 ed., pp.
+8-9.
+
+[102] _Cf._ John Stuart Mill's _Logic_, book VI, on the nature of social
+laws.
+
+[103] Cited by Baldwin, _op. cit._, p. 495, n.
+
+[104] See Giddings, _Principles of Sociology_, 1905 ed., p. 194.
+
+[105] _Op. cit._, p. 571.
+
+[106] _Op. cit._, chap. XIII.
+
+[107] _Cf._ Elwood, C. A., _Some Prolegomena to Social Psychology_,
+Chicago, 1901. _Cf. infra_ in this chapter the note on Professor Elwood's
+view.
+
+[108] _Human Nature, etc._, chap. I.
+
+[109] _Op. cit._, chaps. V and VI.
+
+[110] _Ibid._, pp. 52 _et seq._
+
+[111] This analogy is unhappy, if pushed very far--like most analogies
+between physics and psychics. It serves as a useful figure of speech,
+however,--which is all Professor Cooley designs it for.
+
+[112] _Social Organization_, pp. 3-4.
+
+[113] _Social Organization_, pp. 6-9.
+
+[114] _Ibid._, p. 9.
+
+[115] Compare Professor Giddings' more detailed and concrete treatment of
+the subject in his _Readings in Descriptive and Historical Sociology_, New
+York, 1906, pp. 124-428.
+
+[116] Professor C. A. Elwood, in the essay mentioned _supra_, _Some
+Prolegomena to Social Psychology_, is the first, so far as I know, to apply
+Professor Dewey's psychological viewpoint to the study of the social mind.
+Chap. II of his book contains a very excellent brief discussion of this
+point. Without going into the matter at length, it must suffice to say here
+that the new viewpoint stresses the significance of mental processes for
+_activity_, for the adjustment of the organism to its environment, rather
+than the _structure_ or _content_ of the mental process. It stresses
+impulse, instinct, habit, etc., and refuses to undertake a synthetic
+process, which strives to get some sort of mechanical unity by combining
+abstract, structural elements. The unifying principle in mind is
+_activity_, _function_. Professor Elwood holds that, while the individual
+mind has unity both of structure and of function, the social mind has a
+unity of function only. I think the contrast is not so sharp as that. There
+is _some_ structural unity in the social mind, there are points of identity
+among individual minds, common ideals, and a common--even though
+small--body of knowledge, especially in very elementary matters. And the
+unity of the individual mind is primarily a unity of _function_.
+Certainly--and there is no issue with Professor Elwood here!--there is no
+unifying "soul-substance" lying back of the psychic activities organized in
+the single individual mind. And the analogy between the mind of an
+individual and the mind of society is not intended to read into the social
+mind any of the hypothetical character which an absolutistic,
+preevolutionary metaphysics ascribed to the individual mind, but rather--in
+so far as the issue is raised at all--to divest the individual mind of just
+that hypothetical character. _Cf._ Friedrich Paulsen's _Introduction to
+Philosophy_, on "soul-substance," and Wundt's _Voelker-Psychologie_, vol. I,
+chap. I.
+
+[117] Davenport, _op. cit._, pp. 467-68.
+
+[118] _Op. cit._, pp. 445-46. (The reference is given to Professor
+Davenport's book for the convenience of the reader. The original article
+appears in the _Journal of Political Economy_ for March, 1906.) "Some
+linguistic uses connected with collective nouns will offer a point of
+departure. When thought of merely as indicating an aggregate, a unit, the
+collective noun takes a singular verb; if regarded as a collection of
+units, it takes the plural verb....
+
+"Now, in many cases, though the act or the situation asserted is really one
+of each individual by himself, there is no occasion for insisting upon
+this; no ambiguity or inaccuracy or misapprehension is involved in saying
+that 'the battalion is eating its dinner'; it is a shorthand fashion of
+speech, but it is perfectly intelligible; it is common enough to think of a
+battalion as a unit, and the act of dining is a simple one in which all
+join, and in which all comport themselves in pretty much the same way; from
+the point of view adopted, the interest proceeded upon, the purpose in
+hand, no importance attaches to the fundamental separateness of the
+activities, and to their entire lack either of psychical unity or of
+purposive cooperation; they are simply similar--roughly simultaneous--and
+are thought of in block. True, one man eats rapidly and another slowly,
+some little and others much, and a few sick ones not at all; but the
+expression serves, and implies its own limitations of accuracy.... But when
+it comes to asserting that the army is brushing its teeth, or has stubbed
+its toe, or has a stomach ache, there is obvious difficulty. These things
+are not done jointly, cooperatively, by aggregates, and will not bear
+thinking over into this form.
+
+"And so we may speak of public opinion, the preference, or habit, or
+custom, or convention, of society; and no harm need come of it, despite the
+fact that some men neither think nor choose in the manner implied, but have
+their own peculiar judgments or choices or wishes, and yet are members of
+society, entitled to be included in any exact formulation; every one knows
+that the thought really runs upon majorities of ''most everybodies'; that
+is, no harm need come of it, if only there were not people to take the
+notion of a 'social mind' seriously, and to import into cases calling for
+accurate analysis, and to accept as sober fact, a mere figure of speech, or
+at best a loose analogy drawn from biological science. For to the biologist
+and the sociologist it is to be charged--or credited--that the
+society-as-an-organism formula has found its way into economic thought. And
+thus hereby a doctrine long since abandoned in economic reasonings is in
+the way of reappearing; for have we not need of normals and averages? Else
+our doctrine in getting accurate and actual will get difficult also. And
+so, by the aid of the sociologist, through the magic of the
+society-as-an-organism incantation, a resurrection miracle has lately been
+worked; we salute the average man."
+
+Whether any serious advocate of the organic conception of society will
+recognize in this caricature the doctrine which he maintains may well be
+doubted. Certainly it would never occur to us to construct an organism by
+averaging its organs! Nor do we try to get a social mind by adding a sum of
+similar physical activities, or even similar mental activities. An organism
+is a functional unity of _different_ and _complementary parts_.
+
+
+
+
+PART IV
+
+A POSITIVE THEORY OF SOCIAL VALUE
+
+
+
+
+CHAPTER X
+
+VALUE AS GENERIC. THE PSYCHOLOGY OF VALUE
+
+
+We return, then, to the problem of the nature of value. Value is more than
+the total utility of a good, or the marginal utility of a good, to an
+individual, and it is more than a ratio of exchange. Economic value is a
+species of the _genus_ value, which runs through other social sciences, as
+ethics, aesthetics, jurisprudence, etc. Sometimes these various values are
+so intermingled that it is impossible to tell them apart: thus, what kind
+of value did a human life have in early Germanic jurisprudence, when a
+_wergeld_ was accepted as compensation for killing a man?
+
+Ethical and legal values we recognize as something very different from the
+feelings of single individuals, and also as something very different from
+abstract ratios. In fact, the idea of quantitative ratios in connection
+with moral values is somewhat startling--though we do apply the "times
+judgment" pretty far, and say, "he's twice the man the other fellow is," or
+"this isn't half as bad as that." But we do not go into refinements,
+ordinarily, and try to make the ratios more exact, as by saying that the
+value of this noble deed is three and three eighths times as great as that.
+The quantitative measure of legal value is a more familiar idea. Thus, a
+man gets five dollars fine for a plain drunk, and twenty-five dollars for
+getting drunk and "cussin' around" (a scale of "prices" recently
+established in the court of a Missouri Justice of the Peace), or three
+years in the penitentiary for one crime, and ten years for another. Here we
+have quantitative measurements of values, but still it is rather strange to
+our thought to speak of a ratio of exchange between them. We have no
+occasion to exchange them ordinarily, even though it may happen that a
+criminal, in contemplating the chances of success in two alternative
+depredations, will weigh the penalties to which he would be liable in the
+two cases against each other; and, indeed, the law of supply and demand
+holds here also (though inversely applied, for we are dealing with negative
+values). If a particular crime (as "Black-Handing") increases rapidly, we
+increase the penalty on it to bring it to a stop. But this generalization
+of the idea of value ought to make clear one thing: exchange, at least in
+its ordinary meaning,[119] is not the essence of value. Exchange is a
+factor in estimating value only in economic life. And even there, values
+are often estimated without actual exchange, and the art of accountancy has
+arisen for that purpose.
+
+An exhaustive study of this generic aspect of value lies, of course,
+outside the scope of this book. Ehrenfels, Meinong, and others,[120] have
+made fruitful investigations in the psychology of value, with primary
+reference to the problems of ethical value, while Gabriel Tarde,
+approaching the subject with a sociological, rather than psychological or
+ethical interest, has also made some illuminating suggestions. The most
+comprehensive work in English, from the psychological point of view, is by
+Professor W. M. Urban, whose _Valuation_ appeared in 1909. His interest is
+also chiefly in ethical, rather than economic, value. Reference has been
+made in an earlier footnote[121] to Simmel's views. There is, in fact, a
+rich literature on the subject. The theory of economic value to be
+developed in this volume, however, is relatively independent of many of the
+theories treated in this literature, since, as will appear later, the
+question I wish to raise is, not so much as to the fundamental nature of
+value, in its psychological aspects, but rather, as to _what_ individual
+values (and in what _relations_) are significant for the explanation of the
+particular sort of value with which the economist is concerned. The
+exposition which follows will be clearer, however, if a psychological
+theory of value be premised, and the discussion of social economic value
+will gain from a consideration of ethical and other forms of value, in
+their sociological aspects, as treated by some of the writers named. The
+rest of this chapter will be concerned with the problem of value as it
+presents itself in individual psychology, and later chapters will treat the
+problem of social value.
+
+_For_ the experience, and at the time of the experience, a value is a
+_quality_ of the object valued.[122] Values are "tertiary qualities" (to
+borrow an expression from Professor Santayana's _Life of Reason_[123]),
+just as real and objective as the "primary" and "secondary" qualities. We
+speak of a gloomy day, or a fearful sight, and the gloom is a quality of
+the day, and the fearfulness is really in the object--for the experience.
+When we have sufficiently reflected upon the situation to be able to
+separate subject and object, and to divest the object of the quality, and
+put the fear in ourselves, or the gloom in our own emotional life, then the
+experience is already past, and the value, as the value of that object, has
+ceased to be. We are already over our fear when we can separate it from
+the object. These qualities are intensive qualities, may be greater or less
+in degree, i.e., are quantities.[124] And they must first _exist_, as such
+quantities, before any reflective process of evaluation and comparison can
+put them in a scale, and make clear their _relative_ values.[125]
+
+So much for the experience as an immediate fact. If we break up the
+experience analytically, however, we of course first distinguish subject
+and object, and we throw the "tertiary quality," of value, over to the side
+of the subject. It is a phase of the subject's emotional life. In this
+analytical process we necessarily make abstractions,--the elements with
+which we finally come out, put together in a synthesis, will not give us
+our concrete experienced value again. But, recognizing this, we may still
+distinguish what seem to be the more important aspects of the value
+experience, on its psychological side, and set forth the criteria by which
+a value is to be recognized. First of all, then, value has its roots in the
+emotional-volitional side of mind. A pure intellect, if we may imagine it,
+would understand logical necessity, would contemplate the "world of
+description," but could know nothing of the "world of appreciation," or of
+values.[126] (It is precisely because intellect is never "pure," because it
+always has its emotional accompaniment and presuppositions, that we can
+objectively communicate our values, as urged in chapter VIII.) But what
+phases of the emotional-volitional side of mind are most significant? For
+hedonism, an abstract element, a _feeling_, a pleasure or a pain, is the
+essence of the value,--in fact, _is_ the value. Critics of hedonism, as
+Ehrenfels[127] and Professor Davenport,[128] have made _desire_, rather
+than feeling, the worth-fundamental. The psychology lying back of this
+conception represents a great advance over the passive, associationalistic,
+element psychology of the hedonists, and is especially significant as
+emphasizing the impulsive, dynamic nature of value, but it is still too
+abstract,--indeed, it abstracts from a very fundamental aspect of the value
+as _experienced_, namely, the feeling itself. Moreover, in many cases,
+value may be great with desire at a minimum, else we must say that value
+ceases when an object is _possessed_, and desire is satisfied. I may value
+my friend greatly, may be vividly conscious of that value, and yet, because
+he _is_ my friend, because I already possess him, may find the element of
+desire a minor phase in his value, even if it be present at all.[129]
+Hedonism abstracts a prominent and important phase of the value experience,
+and while it errs in making that phase the whole of the experience, and
+while it has sadly misinterpreted that phase (for feelings of value cannot
+be reduced to pleasure and pain feelings), still we cannot afford to
+disregard it. Just because the hedonistic analysis is crude, it has to
+seize on something obvious. If we must choose between feeling and desire
+as _the_ value-fundamental, we must, I think, with Meinong and Urban,[130]
+settle on feeling rather than desire. Our point will be, however, to
+protest against the identification of value with either of these, and to
+distinguish both of them as _moments_, or phases, in value, and value
+itself as a moment or phase in the total psychosis. Value is not to be
+understood apart from what Urban calls its "presuppositions."[131] Every
+value presupposes a going on of activity, and is intimately linked with the
+total psychosis,--a moving focal point of clear consciousness, with a
+surrounding area of vaguer processes, gradually shading off into the
+subconscious and unconscious at the borders. Every value is linked with the
+whole body of ideas, emotions, habits, instincts, impulses, which, in their
+organic totality, we call the personality. Back of the value stands a long
+history, which persists into the present in the form of dispositions and
+activities, of which we are unconscious so long as they are unimpeded, but
+which spring into consciousness at once if arrested. If the object be one
+that appeals to simple biological impulses, we may, as a rule, safely
+abstract from most of these "presuppositions," and centre attention upon
+the biological impulse and its accompanying feelings and ideas. But as we
+rise to objects that appeal to wider and higher interests, the essential
+presuppositions include more and more till, in vital ethical values,
+virtually the whole personality is essentially involved. Of these
+presuppositions, or "funded meaning," we need not be conscious in any
+detail. The value, which is the emotional-volitional aspect of this funded
+meaning, is, of course, sufficient, so long as it is unchallenged by an
+opposing value, for the motivation of our activity--which is the essential
+function of values. The presuppositions tend to become explicit when the
+value is challenged by another value, though they never come entirely into
+light, in the case of the higher values, and to make them even
+approximately clear is the work of long conflict in an introspective mind.
+A frequent result of conflicts among values is a sort of mechanical "haul
+and strain," producing "more heat than light." The question of the
+relations among values is a separate topic, which will be discussed for its
+own sake later. We are here interested in it as making clearer the nature
+of the "presuppositions" of value.
+
+Now in the value, as has been said, we may distinguish both desire and
+feeling. The feelings, in Professor Dewey's phrase, are "absolutely
+pluralistic" and cannot be reduced to any one type, or two types, as
+pleasure and pain. The desires may be either intense or slight, without
+reference to the amount of the value, depending on circumstances. As
+stated, if we _have_ the object we value, the element of desire must be
+reduced to an _attitude_, to a disposition to desire, in the event the
+object should be lost. It remains a vague background of concern, of
+"anxiety lest the object escape," capable, of course, of springing into
+full intensity if need be. In aesthetic values, and in the values of
+mystical repose, we have cases where desire is,[132] thus, at a minimum.
+Strictly speaking, desire, as a conscious fact, has in it always a negative
+aspect, a privative aspect,--we desire when we are incomplete, when we
+lack. It is this negative aspect of desire which the Greek philosophers, as
+Aristotle, stressed, and which has led absolute idealism to eliminate
+desire from its conception of the Absolute Spirit. But desire has also a
+positive or active aspect, and in this aspect it remains in all values.
+Where the activity is perfectly unified,--a situation which we sometimes
+approximate,--we may not be conscious of desire, even though intense
+activity is going on. Since, however, the human mind is rarely in this
+state, and never completely in it, we may hold that desire, in its
+privative aspect, is always to some degree present, if only as a vague
+uneasiness. And as a disposition to activity, if the value should be
+threatened, desire is always present.
+
+Conversely, desire may be at a maximum, and feeling at a minimum. If we do
+_not_ possess the object, if we are striving for it, while there may be and
+doubtless is feeling in connection with the desire, it cannot, obviously,
+be the _same_ feeling that we would experience if the object were present
+and quenching the desire. Indeed, it may be held that much of the
+feeling-accompaniment of intense desire is extraneous to the value-moment:
+that it is, in fact, kinaesthetic feeling, due to the stress of opposing
+muscular reactions, etc. The disposition to feel is there, and, if the
+object of desire be one that is familiar, the mere anticipation of it may
+call up traces of the feeling that its presence has in the past produced
+and will produce again. But the feeling element in such a situation is a
+minor phase.
+
+Finally, unless we mean to insist that all the objects which one values,
+and whose values motivate one's conduct, are present in consciousness all
+the time, we must recognize that neither desire nor feeling need be actual,
+present, conscious facts, for the value to be effective. It may happen that
+the object of value is one reserved for later use, and that it is not
+threatened. In such a case we may accord its value intellectual
+recognition, with desire and feeling both at a minimum, and that
+recognition may serve as a term in a logical process which may lead to a
+practical conclusion of significance for action. Or, a value may form part
+of the unconscious "presupposition" of another value, which is consciously
+felt at the moment. Mind is economical. Consciousness is not wasted, when
+there is no function to be served by it. The essential thing about value is
+that it motivate our conduct. If a satisfactory set of habits be built up
+about a value, it may serve this purpose perfectly, without coming into
+consciousness very often. But both desire and feeling must be potentially
+there.
+
+A further element is necessary. Meinong insists upon an existential
+judgment, a judgment that the object valued is real, as essential to
+value.[133] Gabriel Tarde[134] makes a similar contention, holding that
+belief, as well as desire, is involved in value, and that a diminution of
+either means a lessening of the value. Urban's opinion, which seems to me
+the correct one, is that we need not and cannot go so far as this.[135] In
+many cases such judgments are explicit and the value could not exist if the
+object were explicitly judged unreal. But the mere unconscious assumption
+or presumption of the reality of the object, the mere "reality-feeling," is
+sufficient,--as is obvious enough from the fact that we value the objects
+of our imagination. We shall often find, especially in the field of the
+social values to which we shall shortly turn, that Tarde's contention is
+highly significant, particularly with reference to economic values, and
+there, particularly in the matter of credit phenomena.[136] But explicit
+affirmation, even there, is not necessary, provided the question of reality
+is not raised at all. A "reality-feeling," however, is essential. It should
+be noticed, too, that this "reality-feeling" is an essentially emotional,
+rather than intellectual, fact. It is the emotional "tang" which
+distinguishes _belief_ from mere ideation, and, if it be present, the
+ideation and explicit judgment may be dispensed with.
+
+In the value experience, as a conscious experience, and from the structural
+side, we may distinguish these phases: feeling, desire, and the
+reality-feeling, each present at least to a minimal degree. And yet it
+seems to me that we have in none of these, considered as phases _in
+consciousness_, the most essential aspect of value. For our purposes the
+structural aspect is not the most significant. The _functional_ aspect is
+of more importance. And the function of values is the function of
+_motivation_. That value is greatest which counts for most in motivating
+activity. A well-established and unquestioned value, which in a concrete
+situation has the _pas_ over all the others concerned, has little need to
+awaken the emotional intensity that other, less certain, values, whose
+position in the scale is as yet undetermined, may require. A girl is
+arranging a dinner-party. Whom shall she invite? Well, her chum of course
+must be there. No question arises. There is no need for conscious emotion.
+One or two others are settled upon almost as readily, and with as little
+emotional intensity. But now comes the problem _at the margin_! For eight
+or ten others are almost equally desirable, and there are only six places.
+The lower values, compared with each other, must show themselves for what
+they are, must come vividly into consciousness, must be felt and desired
+_in order that_ they may be _compared_,--not in order that they may be!
+From the functional side, then, the test of a value is its influence upon
+activity. The "common denominator," or, better, the abstract essence, of
+values, is, not feeling, nor desire, but power in motivation, and the
+expression of this is of course the activity itself. The _functional_
+significance of the consciously realized desire and feeling aspects of
+values comes in when values are to be compared and weighed against one
+another, and--a phase that was stressed in a preceding section, and will
+again be adverted to shortly--when values are to be _shared_ consciously by
+different individuals, when they are to be communicated and
+discussed,--that is to say, are to become objects of a group consciousness.
+
+The significant thing about value, then, from this functional point of view
+is its dynamic quality. Value is a _force_, a motivating force. But now we
+must revert to our original point of view,--the total situation. We have,
+by an analytical process, sundered subject and object, and then, within the
+subject, have discriminated phases which psychological analysis reveals.
+But in the course of activity, these elements are not discriminated. The
+value is, not in the subject, but in the _object_. The object is an
+embodiment of the force. It has power over us, over our actions. If the
+object be a person, we are under his control--to the extent of the value.
+If the object be a thing controlled by another person, we are subject to
+his control--to the extent of the value. I do not wish to be understood as
+picking out this abstract phase of value as the whole of the story, or
+thinking that it is possible for value to exist in this abstract form.
+Qualities are never separate. But I do contend that this is the essential
+and universal element in values, and that for an individual engaged in the
+active conduct of life, this aspect is so significant that it may often be
+the sole feature to engage his attention--because it is the sole feature
+that _need_ engage his attention for the activity to go on in harmony with
+his values. Here, then, is value "stripped for racing": _a quantity of
+motivating force, power over the actions of a man, embodied in an object_.
+All the other phases, in the course of the active experience itself, may be
+relegated to the sphere of the implicit.
+
+A necessary limitation has been definitely indicated in what has gone
+before, but, to avoid misunderstanding, it may be well to indicate it more
+explicitly. Not every form of impulse is to be counted a value. Every state
+of consciousness is motor, and tends to pass into action, even vague,
+undefined feelings, and half-conscious fancies. A value must have its
+organic presuppositions, as indicated before, and must be embodied in an
+_object_. The objects of value may be infinitely various: they may be
+economic goods, they may be persons, they may be activities, they may be
+other values, they may be ideal objects, the creatures of our imaginations,
+they may be social utopias or the Kingdom of Heaven. But there must be an
+object, and the value is a quality of the object. But, functionally, the
+essential thing about this value is its dynamic character.
+
+Values are positive and negative.[137] A "fearful sight" repels us, has a
+negative value, tends, to the extent of its strength, to make us withdraw.
+A bad act, an ugly woman, a cruel man,--here we have negative values.
+Little need be said further with reference to this point. They alike are
+motivating forces, the positive values attracting us, the negative values
+repelling us.
+
+The question of the relations among values we shall discuss rather briefly,
+not that it is unimportant, but that much of it is familiar. Values may be
+complementary--as when several objects are all essential to one another if
+any of them are to be of use. Values may depend on other values, as the
+value of the means depends on the value of the end, which is its essential
+"presupposition." Values may antagonize each other, and here two cases are
+to be distinguished, which differ so much in degree that the difference may
+be regarded as qualitative. Values may be in their nature quite compatible,
+so that nothing in their character prevents the realization of both, but
+there may not be _room_ enough for both, owing to the limitation of our
+resources,--as when the young lady of our illustration had only six seats
+at her dinner, and so was obliged to exclude some of her friends. But the
+values may be qualitatively incompatible. We may be unable to realize them
+both because the one involves a different sort of _self_ from the self that
+could realize the other. This is the typical case in ethical values, where
+the presuppositions, especially in ethical crises, involve the whole
+personality. In case of such conflicts, say between the value of Sabbath
+observance and the allurement of Sunday baseball in the case of an
+orthodox "fan," we may have, as before indicated, a mere mechanical haul
+and stress, in which one or the other wins by sheer force, to the very
+considerable discomfort of the uneasy victim. But the conflict may lead to
+a reexamination of the presuppositions of each value, to a process of
+bringing each into more organic relation to the whole system of values. In
+this process, other values may be called into play, may reenforce one or
+the other of the two alternative values. And, after such a process, both
+values may be different from what they were. There may emerge some higher
+value which comprehends them both, or one may be reduced to a minor place,
+and the other may prevail. Values are no more permanent than any other
+phase of the mental life. Constant transformations, even though not always
+fundamental transformations, take place.
+
+There is another case which is so familiar to economists that it need
+merely be adverted to. Where objects of value are indivisible, we must take
+one _or_ the other, if there be a conflict. But, in the case of
+qualitatively compatible objects, a different situation is the rule. We may
+have _part_ of one, _and_ part of the other, and the question arises as to
+_how much_ of each. Here the Austrian analysis gives us an answer, which,
+when we generalize it, despite its antiquated psychology, may be accepted
+with little modification.[138] The law of "diminishing utility" as we
+increase the increments of each object, holds, and the problem is that of
+a marginal equilibrium. The young lady of our illustration would certainly
+have her chum if she have only one dinner, but if she have a number of
+dinners, the "marginal utility" of her chum's presence may sink so low that
+she may find the presence of some one hitherto excluded more valuable at
+the sixth or seventh dinner. And, indeed, our conception of qualitatively
+incompatible values must not be made too absolute. Human nature is
+accommodating and practical, and a little wickedness may be tolerated by a
+good man for the sake of a value which would not induce him to tolerate
+more. He may find the "final increment" of his Sabbath observance lower
+than the "initial increment" of his Sunday baseball.
+
+Two antagonistic values may cohere in the same object. Our _fearful_ sight
+may also be an _interesting_ sight. And the initial increment of the
+interest may outweigh the initial increment of the fear. But, as the
+interest is partially satisfied, the fear may grow, until it finally
+overcomes the interest, and we flee. Indeed, it may be laid down as the law
+of negative values that as the "supply" increases (_caeteris paribus_) the
+negative value rises--the obverse of the law of "diminishing (positive)
+utility"--a doctrine recognized, in one of its aspects, in the economic
+doctrine of "increasing (psychic) costs."
+
+A further point is to be noted in the case (especially though not
+exclusively) of these qualitatively incompatible values, where a
+quantitative compromise of the sort described is worked out between them.
+The personality itself may change, through a growing familiarity with the
+negative value. It may cease to be a negative value, and may become
+positive. And if, as may happen, this change takes place quickly, in the
+course of a moral crisis, our process would be, first, a gradually
+increasing negative value, as the "supply" of the objects of negative value
+is increased; next, a sudden shift from a high negative to a high positive
+value, as the personality changes, and we come to love what we have hated;
+then a gradual sinking of the new positive value as the supply is still
+further increased.[139]
+
+The case of the conflict between qualitatively incompatible values is the
+typical case of the conflict between "duty and pleasure," between
+"obligation and inclination," etc. Certain values present themselves as
+"categorical imperatives," as "absolute universals," and refuse, or tend to
+refuse, any compromise. Our analysis would tend to cast doubt on the
+"absolute absoluteness" of these values (taking absolute in the sense in
+which it has been used in the history of ethics, as distinguished from the
+sense in which I have earlier used it in this book[140]). The most
+significant thing about these "absolute" values from the standpoint of our
+present inquiry, seems to be the resistance which they offer to the
+"marginal process." They seem to insist that their objects be taken _in
+toto_ or not at all. They tend to universalize themselves, attaching to the
+remotest possible increment of the "supply" quite as strongly as to the
+initial increments. They refuse to place their objects in a scale of
+"diminishing utility." Such values are those which have been so fortified
+by habit and education that they are vital parts of the personality, and
+that any compromise where they are involved seems treason to the inmost
+self. If we wish to make precise analogies between our social and our
+individual values, we shall find here the nearest approach in the
+individual field to those fundamental legal values which determine the
+inmost character of the state, and which present themselves as "practical
+absolutes" in the legal value system, e.g., democracy, or personal
+liberty--or fundamental sociological values, like the "color line."
+
+It will be noted, further, that our analysis draws no hard and fast lines
+between the different sorts of value, ethical, economic, esthetic,
+religious, personal, etc., in the sphere of the individual's psychology.
+Such lines do not exist. There are shadings, gradations, quantitative
+differences which become distinct enough to justify a classification of
+values. But values never become, on the functional side, so fundamentally
+different in character that there can be no reduction of them to the
+"common denominator" of power in motivation. And especially is that a false
+abstraction which would separate the different sorts of value, ethical,
+economic, etc., into separate, water-tight systems, and let each system
+have its own equilibrium and its own interactions, uninfluenced by the
+other systems. The fact is, simply, that ethical and esthetic values may
+constantly reinforce economic values, economic values reinforce ethical
+values, or economic and ethical or other values may oppose each other, and
+marginal equilibria are constantly worked out between them. Or, better,
+_among_ them, for, while in the consciousness of the moment we may have
+only _two_ opposing values in mind, and may have our equilibrium apparently
+between just two, yet in fact the whole system of values is constantly
+tending toward equilibrium, ethical, religious, economic, esthetic, all
+asserting themselves, and finding their place in the scale, and getting
+their "margins" fixed,--extensive margins and intensive margins. But this
+is so obviously merely a generalization of well-known economic laws, that
+further detail is needless. One point may be mentioned, however. _Price_ is
+to be generalized in the same way as value. Since this equilibrium among
+values holds, then any object of value may be used to _measure_ the value
+of any other. If the presence of her chum at the fifth dinner is in
+equilibrium with the presence of some hitherto excluded friend, for our
+young lady, then the one is the _price_ of the other, and measures her
+value. A material good which one takes in return for an immoral act is the
+price of that act. And if, in a moment of fundamental ethical crisis, a man
+surrenders a cherished purpose about which his whole life has been built,
+to the allurement of some dazzling temptation, it is much more than a
+metaphor to speak of "the price of a soul."[141]
+
+The Austrian analysis was essentially faulty, then, not so much in its
+hedonistic psychology--for it can be freed from that[142]--as in its
+abstraction of the economic from other aspects of the individual's value
+system. Equilibria among economic values will not explain even the
+individual's economic behavior--do not by any means constitute a
+self-complete system. This abstraction has been noted before.[143] The
+other abstraction of the Austrians, the abstraction of the individual from
+his vital, organic connection with the social whole, we shall treat more
+fully later.
+
+So far, we have kept pretty strictly within the field of "individual
+psychology" and "individual values." But we shall find, when we come to the
+field of the social values, that essentially the same laws hold. On the
+_functional_ side, the analogy between the individual mind and the social
+mind is a very close one, and the correspondences on the _structural_ side
+are numerous also. While we shall not try to find analogies in the social
+field for all these laws of individual value, it is not because of any
+difficulty that the problem presents, but rather, because it is unnecessary
+for the vindication of our thesis to do so.
+
+FOOTNOTES:
+
+[119] See the discussion of Simmel's contention, _supra_, p. 19, n.
+
+[120] Ehrenfels, C., _System der Werttheorie_, Leipzig, 1897; Kreibig, J.
+C., _Psychologische Grundlegung eines Systems der Werttheorie_, Vienna,
+1902; Kallen, H. M., "Dr. Montague and the Pragmatic Notion of Value,"
+_Jour. of Philosophy_, etc., Sept., 1909; Montague, W. P., "The True, the
+Good and the Beautiful, from a Pragmatic Standpoint," _Ibid._, April 29,
+1909; Meinong, A., _Psychologisch-ethische Untersuchungen zur Werttheorie_,
+Graz, 1894; Paulsen, Friedrich, _Introduction to Philosophy_, and _System
+of Ethics_; Stuart, H. W., "The Hedonistic Interpretation of Subjective
+Value," _Jour. of Pol. Econ._, vol. IV, "Valuation as a Logical Process,"
+in Dewey's _Studies in Logical Theory_, Chicago, 1903; Shaw, C. C., "The
+Theory of Value, and its Place in the History of Ethics," _International
+Jour. of Ethics_, vol. XI; Slater, T., "Value in Moral Theology and
+Political Economy," _Irish Eccles. Rec._, ser. 4, vol. X, Dublin, 1901;
+Tufts, J. H., "Ethical Value," _Jour. of Philosophy_, etc., vol. XIX;
+Baldwin's _Dictionary of Philosophy_, etc., _s. v._ "Worth" (article by W.
+M. Urban); Simmel, G., _Philosophie des Geldes_, Leipzig, 1900, "A Chapter
+in the Philosophy of Value," _Amer. Jour. of Sociology_, vol. V; Urban, W.
+M., _Valuation_, London, 1909. These titles are representative of an
+extensive literature on the subject.
+
+[121] _Supra_, p. 19, n.
+
+[122] I am indebted to Professor John Dewey for many valuable suggestions
+and criticisms in connection with this part of my study. My more general
+obligations to him will be manifest to any one who is familiar with his
+epoch-marking point of view. Economic, sociological and political
+philosophy have, in my judgment, more to learn from him than from any other
+contemporary philosopher.
+
+[123] Pp. 141-42.
+
+[124] _Cf._ Gabriel Tarde, _Psychologie Economique_, vol. I, p. 63, and
+Urban, _Valuation_, p. 78.
+
+[125] Urban, _op. cit._, p. 32.
+
+[126] Paulsen, Friedrich, _Ethics_, _passim_.
+
+[127] _System der Werttheorie_, vol. I, chap. I.
+
+[128] _Op. cit._, p. 311.
+
+[129] _Cf._ Urban, _op. cit._, p. 36; Meinong, _op. cit._, pp. 15-16.
+
+[130] Meinong, _op. cit._, pt. I, chap. I; Urban, _op. cit._, pp. 38-39.
+
+[131] _Op. cit._, pp. 14-16, and following chapter.
+
+[132] Urban, _op. cit._, p. 39.
+
+[133] _Psychologisch-ethische Untersuchungen zur Werttheorie_, Graz, 1894,
+pt. I, chap. I, esp. p. 21.
+
+[134] "La psychologie en economie politique," _Revue Philosophique_, vol.
+XII, pp. 337-38.
+
+[135] _Op. cit._, pp. 41 _et seq._
+
+[136] See chapter XVI, _infra_.
+
+[137] The German, with its facility in compounding, offers a convenient
+nomenclature here: _Wert_ and _Unwert_. _Cf._ Ehrenfels, _op. cit._, for a
+brief discussion of negative values (pp. 53-54).
+
+[138] For this generalization, see Urban, _op. cit._, chap. VI; Ehrenfels,
+_op. cit._, vol. II, chap. III, esp. p. 86.
+
+[139] An analogue in the field of social values is readily suggested. A new
+heresy starts, opposed by the dominant element in the social will, _i.e._,
+having a negative value for the majority. As the heresy increases, the
+negative value rises till, in a crucial point, the tide turns, and the
+heretics become the dominant element in the society. Then--since their
+position is far from certain--new recruits to the heresy have a high
+positive value, but, as the heresy still further spreads, additional
+recruits count for less and less.
+
+[140] _Cf._ Urban, _op. cit._, _passim_; Ehrenfels, _op. cit._, vol. I, pp.
+43 _et seq._; Mackenzie, criticism of Ehrenfels and Meinong in _Mind_,
+Oct., 1899. _Cf._ also, Wicksteed, _The Common Sense of Political Economy_,
+London, 1910, pp. 402 _et seq._
+
+[141] The generalization of the idea of price, while not original with
+Wicksteed, is interestingly developed by him in chaps. I and II of his
+_Common Sense of Political Economy_, London, 1910.
+
+[142] Davenport, _op. cit._, pp. 303-11, gives a good summary of economic
+discussions of hedonism. His own view is that the Austrians are not
+essentially bound up with hedonism.
+
+[143] _Supra_, chaps. VI and VII.
+
+
+
+
+CHAPTER XI
+
+RECAPITULATION. THE SOCIAL VALUES. FUNCTIONS OF THE VALUE CONCEPT IN
+ECONOMICS
+
+
+Our conclusions reached in previous chapters, from the standpoint of
+economic theory, and from the standpoint of sociological theory, alike
+forbid us to stop with the results so far obtained as to the nature of
+value. From the standpoint of social theory, we are unable to consider the
+individual values discussed in the last chapter as completely accounted for
+on the psychical side by what goes on in the individual mind: every
+individual mind is a part of a larger whole; every thing in the individual
+mind has been influenced by processes in the minds of others; every process
+in the individual mind influences, directly or indirectly, processes in the
+minds of others. There is a social mind. And the values in the mind of an
+individual constitute no self-complete and independent system, either in
+their origin, in their interactions, or in their consequences for action.
+In our psychological phrase, their "presuppositions" include elements in
+the minds of other men, and they themselves constitute part of the
+"presuppositions" of the values in the minds of other men. Finally, there
+are values which correspond to the values of no individual mind, great
+social values, whose presuppositions are tremendously complex, including
+individual values in the minds of many men, as well as other factors which
+we shall have to analyze in considerable detail, great social values whose
+motivating power directs the activities of nations, of great industries, of
+literary and artistic "schools," of churches and other social
+organizations, as well as the daily lives of every man and woman--impelling
+them in paths which no individual man foresaw or purposed. In Urban's
+phrase,--
+
+     between the subjectively desired and the objectively
+     desirable in ethics, between subjective utility and
+     sacrifice and objective value and price in economic
+     reckoning, between the subjectively effective and the
+     objectively beautiful in art, there is a difference for
+     feeling so potent that in naive and unreflective
+     experience the feelings with such objectivity of
+     reference are spoken of as predicates of the objects
+     themselves.[144]
+
+And our theory carries us even further than Professor Urban cares to go
+here. Naive and unreflecting experience is perfectly justified in treating
+these objective values as qualities of the objects themselves. To the
+individual man, an objective value, say the value of an economic good, _is_
+as a rule, a quality almost wholly independent of his personal subjective
+feelings or point of view. The average man, "by taking thought," can no
+more affect the value of wheat or corn or other big staple than he can "add
+a cubit to his stature." For the great mass of men, and the great mass of
+commodities, this holds true. The individual finds the world of economic
+values a part of the brute universe, like the force of gravity, or the
+weather, or the law against murder--less invariable than the force of
+gravity, and less variable, as a rule, than the weather--to which he must
+adapt his individual economy. He is not wholly impotent to change this
+world of economic values, nor is he wholly without influence on the balance
+of cosmic forces. And, if possessed of enough social _power_ (which we
+shall find to constitute the essence of these social values) he may
+substantially modify the action of the law against murder, or the values of
+those commodities about which the rich may be capricious; or even, if
+intelligent in the use of his power, he may undertake a successful "bull"
+campaign, and force up the value of wheat or cotton. But even in such
+cases, he deals with objective facts,--which often, in the midst of a bull
+campaign, behave in a most surprising and disconcerting manner![145] The
+existence of external constraining and directive forces are matters of
+every day experience. Laws, moral values, social constraints of a thousand
+subtle and obvious kinds, are facts so well known that education has made
+it its central task to teach the individual how to adjust himself to them.
+They have been described and elaborated in innumerable books.[146] _That_
+they exist is certain. Their origin, nature and function we shall study in
+what is to follow.
+
+We were led to a similar conclusion by the analysis of the necessities of
+economic theory. Economic value as a quality, present in a good in
+definite, quantitative degree, regardless of the idiosyncrasy of the
+particular holder of the good, we found a necessity of economic thought.
+The argument may be briefly recapitulated, and a few points added. If goods
+are to be added together and a sum of wealth obtained, there must be a
+homogeneous element in them by virtue of which the addition can be made. We
+do not add a crop of wheat and a lead-pencil,[147] and a gold watch, and
+twenty dollars and a theatre ticket, on the basis of length or weight or
+other physical quality. Only by picking out the homogeneous quality, value,
+can we add them. We cannot compare two economic goods, and put them into a
+ratio, except on the basis of such a homogeneous quality. We have no terms
+for our ratios apart from quantities of value, and yet our ratios must have
+terms. We find economists speaking of value as the essential characteristic
+or quality of wealth. We find theorists speaking of money as a "measure of
+values"--a conception only possible if value be a quality of the sort of
+which we speak, present both in the money measure and in the thing measured
+in definite quantitative degrees. A point or two may be added. We find
+economists, notably the Austrians, undertaking the problem of
+"Imputation," breaking up the value of a consumption good into different
+parts, one part being assigned to the labor immediately concerned in its
+production, and other parts of that value to goods of the next
+"rank"--owned by people different from those who consume the good--and this
+value further subdivided among goods of remoter ranks,--the whole process
+possible only if the original value be an objective quantity of the sort
+described. We find a differential portion of a crop of wheat compared with
+the land which produced it, and spoken of as a percentage of the land,
+which is true only if the _value_ of each be considered--and indeed is
+meaningless, else. Or, we find merchants reckoning their gains in the form
+of money at the end of the year, as a certain percentage of their
+capital--which has consisted throughout the year of goods of various sorts.
+Everywhere in the economic analysis this conception of value has been
+essential for the validity of the analysis, and this is especially true
+when we come to the ultimate problems of monetary theory. We may ignore,
+sometimes, the element of value when dealing with non-monetary problems, in
+terms of quantities of money, simply because it is not necessary to refer
+to fundamental principles explicitly all the time. But when we come to the
+problem of money itself, we must make use of the value concept, and the
+value concept is implicit in the whole procedure.
+
+Further, the value concept has been called upon to explain the motivation
+of the economic activity of society, and value has been conceived of as a
+motivating force.[148] Schaeffle, especially, has stressed this phase of
+the matter in his criticism of the socialistic theories of value. "Utility
+value," he holds, does direct industry into proper channels, but a value
+based on labor-time would get supply and needs into a hopeless
+discrepancy.[149]
+
+No ratio "between objective articles" will serve these functions which the
+economists have put upon the value concept. Value as a purely individual
+phenomenon, varying from man to man, will in no way[150] serve these
+purposes of the economists. Value as a mere brute quantity of physical
+objects given in exchange for other physical objects, could in no way serve
+these purposes. Value must be an objective quality, a _power_, embodied in
+the object, independent of the individual judgment or desire. A strong
+feeling that this is so is manifested in the term which the English School
+so often uses as the equivalent of value, namely, "purchasing
+power"[151]--a term which Boehm-Bawerk approves.[152] The notion of
+relativity which has, historically, been bound up with this term, we have
+criticized in chapter II, and it is not necessary to repeat the argument
+here. But the other aspect of it, its recognition of the dynamic character
+of value, and of the quantitative character of value, even though often
+confusedly and vaguely, seems very much to strengthen the case for the
+thesis I am maintaining.[153]
+
+The effort of the Austrians, and of other schools of economic theory, to
+explain and justify this notion of value as an objective quantity, has
+already been considered, and our conclusion has been that, through a too
+narrow delimitation of their determinants, they have been led into
+circular reasoning. A further criticism is now possible, in the light of
+our sociological and psychological conclusions: the picking out of _any_
+abstract elements, however numerous, with the effort, by a synthesis, to
+combine them into a concrete social quantity, must fail. In the process of
+abstraction we leave out vital elements of the concrete social situation;
+how shall we expect these vital elements left out to reappear when we put
+the abstract elements into a synthesis? They cannot, if the synthesis be
+logically made. And it is precisely because Professor Davenport is so
+accurate in his logic that he fails to get a social quantity out of the
+abstract elements of subjective utility, etc. But the majority of
+economists, less careful in their formal logic, but more impressed by the
+facts of social life and by the exigencies of getting a working set of
+concepts, have assumed and used the quantitative concept, with satisfactory
+results so far as practical problems are concerned, but without fundamental
+theoretical consistency. The elements which the abstract theories suppress
+persist, under the guise of economic value itself, in the facts of life,
+and take their vengeance on the theory by forcing it into a circle. Our
+problem, then, is not to find out certain elements out of which to
+construct social value by a synthesis. The proper procedure will be the
+reverse of that: to take social value as we find it--i.e., as it
+_functions_ in economic life,--and then to analyze it, picking out certain
+prominent and significant phases, or moments, in it, which, taken
+abstractly, are not the whole story, but which furnish the criteria of
+social value, and control over which is significant for the purpose of
+controlling social values.
+
+In subsequent chapters, we shall, carrying out this plan, try to put
+concrete meaning into our abstract formulation of the problem.
+
+FOOTNOTES:
+
+[144] _Op. cit._, p. 17.
+
+[145] _Cf._ Royce, J., _The World and the Individual_, New York, 1901, vol.
+I, pp. 209-10, and 225.
+
+[146] I may refer here particularly to Durkheim, _De la division du travail
+social_, Paris, 1893. In giving this reference, of course, I do not commit
+myself to the "mediaeval realism" of which Durkheim has been, perhaps
+justly, accused. _Cf._, also, Professor Ross's admirable _Social Control_.
+
+[147] _Cf._ Ely, _Outlines of Economics_, 1908 ed., pp. 99-100, and Tarde,
+_Psychologie Economique_, vol. I, p. 85, n. See _supra_, chap. II.
+
+[148] _Cf._ Wieser, _Natural Value_, pp. 65, 162-63, 210-12, and 36; Flux,
+_Economic Principles_, chap. II.
+
+[149] _Quintessence of Socialism_, London, 1898, pp. 55-59, 91 _et seq._,
+123-24.
+
+[150] I take pleasure in availing myself of the privilege which Professor
+W. A. Scott, of the University of Wisconsin, accords me, of quoting him to
+the effect that "such a conception of value [a value concept which makes
+the value of a commodity a quantity, socially valid, regardless of the
+individual holder of the coin or the commodity, and regardless of the
+particular exchange ratio into which the value quantity enters as a term]
+is absolutely essential to the working-out of economic problems." Professor
+Scott has been driven to this conclusion in the course of his studies in
+the theory of money. Dean Kinley expresses a somewhat similar view in his
+_Money_, p. 62. It is, of course, in the theory of money that the need for
+such a concept makes itself most acutely felt. But the same view is
+expressed by Professor T. S. Adams, from the standpoint of the
+statistician. See his article, "Index Numbers and the Standard of Value,"
+_Jour. of Pol. Econ._, vol. X, 1901-02, pp. 11 and 18-19.
+
+[151] Even Professor H. J. Davenport finds a quantitative value concept
+necessary in places. For example, on page 573 of his _Value and
+Distribution_, he speaks of capital, considered as a cost concept, as
+standing "for the total invested fund of value, inclusive of all
+instrumental values, and of all the general purchasing power devoted to the
+gain-seeking enterprise." It might be unkind to remind him of his
+definition of value on page 569, and ask him what a "fund" of "ratio of
+exchange" might mean! And the notion of value as a quantity, instead of a
+ratio, is involved, as indicated in the text, in the term, "purchasing
+power," which he also uses in the passage quoted. This term, "purchasing
+power," as apparently a substitute for value, Professor Davenport uses in
+several instances, where the ratio notion clearly will not work: on page
+561, "distribution of purchasing power," page 562, "redistribution of
+purchasing power," and page 571. I say "apparently," for I do not think
+Professor Davenport anywhere in the volume gives a formal definition of
+"purchasing power."
+
+[152] "Grundzuege," etc., Conrad's _Jahrbuecher_, 1886, pp. 5 and 478, n.
+
+[153] This line of argument, drawn from the usage of the economists in the
+treatment of other terms, and in the handling of problems, might be almost
+indefinitely expanded. Almost everybody has a quantitative value concept in
+mind when he is reasoning about practical problems. The trouble comes only
+when a value theory has to be constructed! _Cf._ the discussion of
+production as the "creation of utilities," _infra_ chap. XVIII.
+
+
+
+
+CHAPTER XII
+
+SOCIAL VALUE: THE THEORIES OF URBAN AND TARDE
+
+
+Our point of view will be more adequately defined if we consider briefly
+the theories of social value, set forth from the angle of a general (as
+opposed to a specifically economic) conception of value, by Professor W. M.
+Urban and Gabriel Tarde. These theories contain some elements which we
+shall need, and our criticism of them will bring into clearer light the
+need for the distinctive point of view of this book.
+
+Professor Urban's conception as to the nature of value, in its individual
+manifestation, has been already indicated, in part, in chapter X. Stressing
+the organic nature of the relations of a value to other phases of the
+mental life, insisting on a recognition of the "presuppositions" of value,
+and recognizing that both feeling and desire (or desire-disposition) are
+involved in value--our cursory account cannot begin to do justice to the
+subtlety and exhaustiveness of his masterly analysis--he still insists on
+finding the fundamental nature of value in a phase of its _structure_
+(rather than in its function), namely, in the _feeling_. From this part of
+his doctrine we have found it necessary to differ. When he comes to the
+problem of social value, he carries over the same conception of value, and
+he finds that social values appear when many individuals, through
+"sympathetic participation," _feel_ the same value. With our conclusion
+(chapter VIII) that we can share each other's emotional life he is in
+thorough accord. His argument in this connection is admirable.[154] His
+interest is primarily in moral social values, and he attempts no detailed
+treatment of economic social values, seeming to hold that the Austrian
+treatment of objective value is adequate.[155] Both moral and economic
+values are "objective and social."[156]
+
+     Collective desire and feeling, when it has acquired
+     this "common meaning," when the object of desire and
+     feeling is consciously held in common, we may describe
+     as Social Synergy; and the objective, over-individual
+     values may be described as the resultants of social
+     synergies. The introduction of this term has for its
+     purpose the clearest possible distinction between
+     social forces as conscious and as subconscious. It is
+     with the former that we are here concerned.[157]
+
+Conscious collective feeling is thus insisted upon as an essential in
+social values, and Professor Urban insists[158] that the value ceases to be
+a value as this conscious feeling wanes--even though conceding[159] that it
+retains the power of influencing the _felt_ values, after it has passed
+into the realm of "things taken for granted."
+
+But this stressing of the conscious element of feeling--which as I have
+previously shown is a variable element even within the individual
+psychology, and has no necessary quantitative relation to the functional
+significance, the amount of _motivating power_, of the value--makes it
+really impossible for him to resolve the question of how the _strength_ of
+a social value is to be determined. He does, indeed, undertake something of
+the sort[160] (he is speaking of ethical values), making the quantity of
+value depend on "supply and demand," the supply depending on the number of
+people willing to supply a given moral act, and the intensity of their
+willingness to do it--extension and intention both being recognized. And
+demand is similarly determined. The thing seems to be nothing more than an
+arithmetical sum of intensities of individual feelings, or, most justly,
+individual values. But this leaves us no wiser than before as to the social
+_weight_, the social _validity_, of these social values. An infinite deal
+would depend, both in the case of supply and demand, on _who_ the
+individuals are. A demand for a given act from a poor group of fanatics,
+however intense, might count for little, while such a demand coming from a
+group with great prestige, with great social _power_, might have a very
+great significance. If we are trying to get an objective quantity of social
+value, which shall have a definite weight in determining social action--the
+function of social values--we are as poorly off as we were with the
+Austrian analysis which, in order to get an objective quantity of economic
+value out of individual "marginal utilities," has to assume value in the
+background as the validating force behind these individual elements. The
+error here, as there, comes from an abstraction, from centring attention
+upon the conspicuous conscious elements. And it comes in stressing the
+structure, the content, of social values, to the exclusion of their
+functional _power_. Here is our real problem, if we would determine the
+social validity of values. This lurking element of social power remains an
+unexplained residuum.
+
+This residuum of _power_, backing up the conscious psychological factors,
+gets explicit recognition, even though no real explanation, at the hands of
+Gabriel Tarde,[161] to whose theory of social value we now turn. I quote
+chiefly from his _Psychologie Economique_, and the numerals which follow
+refer to pages in volume I. (63-64) Value understood in its largest sense,
+takes in the whole of social science. It is a quality which we attribute to
+things, like color,[162] but which, like color, exists only in
+ourselves.... It consists in the accord of the collective judgments ... as
+to the capacity of objects to be more or less, and by a greater or less
+number of persons, believed, desired, or admired. This quality is thus of
+that peculiar species of qualities which present numerical degrees, and
+mount or descend a scale without essentially changing their nature, and
+hence merit the name of quantities.
+
+There are three great categories of value: "_valeur-verite_,"
+"_valeur-utilite_," and "_valeur-beaute_." To ideas, to goods (in a generic
+sense of the term), and to things considered as sources "_de voluptes
+collectives_," we attribute a truth, a utility, a beauty, greater or less.
+Quite as much as utility, beauty and truth are children of the opinion of
+the mass, in accord, or at war, with the reason of an _elite_ which
+influences it.
+
+(It may be noted in passing that Tarde's "trinitarian" conception of value
+is not as artificial as it seems. It is simply a method of classification,
+and there are many subdivisions under each head. Economic value, e.g., is a
+subspecies within the group of utility values--"goods" include
+"_pouvoirs_," "_droits_," "_merites_," and "_richesses_" (66). Our own
+conception is, of course, that values are thoroughly "pluralistic" as to
+their structure, and are "monistic" in their function.)
+
+(64) The greater or less truth of a thing signifies three things diversely
+combined: the greater or smaller number, the greater or less social
+importance ("_poids_," "_consideration_," "_competence_," "_reconnue_") of
+the people who believe it, and the greater or less intensity of their
+belief in it. The greater or less utility of an object expresses the
+greater or less number of people who desire it in a given society at a
+given time, the greater or less social "_poids_" ("_ici poids veut dire
+pouvoir et droit_") of the persons who desire it, and the greater or less
+intensity of their desire for it. And so with beauty.
+
+Here is, then, an explicit recognition of the element of the social
+_weight_ of those who create a social value, as a factor coordinate with
+their number and the intensity of their desires, etc. Toward resolving it,
+however, Tarde makes no real contribution. If enough be read into the
+parenthetical expressions given above, following the word "_poids_" in each
+case, they would be found to harmonize with the theory of the writer,
+shortly to be set forth. As it happens, however, Tarde attempts to resolve
+this factor of the social weight of a participant in a social value, in an
+analogous case, and gives us a different sort of explanation. He is seeking
+a "_glorio metre_," or measure of glory--for glory is a social value too.
+He finds that to determine a man's glory we must take account of two
+things: one his notoriety, and the other, the admiration in which he is
+held (71-72). The first is simple: we will count the number who watch him
+and talk about what he does. The second is harder, for we must not merely
+count the number who admire him, but also determine the importance of each
+as an admirer. But how get at this? Tarde suggests that the study of the
+cephalic index will throw light upon the problem--no satisfactory solution,
+I think!--but says that anyhow the problem is practically solved every day
+in university and administrative examinations.
+
+Apart from the fact that conscious desire (or conscious belief, etc.),
+rather than functional power, is made the basis of Tarde's social value,
+and apart from the failure to give any real account of the origin of this
+"social weight," of the individuals in the group which creates the social
+value, there is a further defect in Tarde's analysis which cannot be
+strongly objected to. It is his effort to treat organic processes as if
+they were an arithmetical sum of elements. A sum of abstractions will not
+give you a concrete reality. A man's social weight is not a thing
+independent of relations, a thing which can be thrown now here and now
+there with the same results in each case. And two men, each with a definite
+social weight, do not have precisely twice that social weight when they
+combine with each other. Two great leaders of opposing, evenly balanced
+political parties, combining their influence, may secure wonderful results,
+leading both parties to agree on a programme, and carrying it through. Two
+equally great leaders, but both within the same party, may be unable to
+accomplish anything by combining their efforts. And it may happen that two
+men, each with great weight in his own sphere, would be so incongruous if
+they tried to cooperate, that their joint weight would be less than the
+weight of either alone. It is not a matter of arithmetical addition. Social
+power can be used in certain ways, and in certain organic connections. If
+we care to use a mechanical phrase, the effort to use it out of organic
+connections is apt to result in so much "friction" that much of the power
+is lost.
+
+The objection to the insistence on the amount of conscious desire or
+feeling as a criterion of the amount of value holds for social values
+quite as much as for individual values. The social value of the gold
+standard, judging by the amount of desire and feeling involved, by the
+degree to which it was a factor in consciousness, was vastly greater during
+the campaign of 1896, while its validity was still in question, than it was
+after it had been validated, and made a really effective fact. Social value
+depends, not on conscious intensity, but on motivating power. The social
+consciousness, as the individual consciousness, is economical. And the need
+for conscious feeling, for conscious desire, in connection with social, as
+with individual, values, arises when values must be compared, when they are
+in question, when they must show themselves for what they are, that they
+may be brought into equilibrium with antagonistic values. And the amount of
+consciousness will not be greater than the need for it--and, alas, is
+rarely as great as the need! When a value becomes accepted, when its place
+is secure, when the equilibrium is established, conscious feeling and
+desire with reference to it tend to pass away, and peace comes.
+
+Tarde seems to recognize this, indeed, when he says (72, n.):--
+
+     Of nobility, as of glory, it is proper to remark that
+     it is a force, a means of action, for him who possesses
+     it, but that it is a faith, a peace, for the people who
+     accept it, and who, in believing in it, create it.
+
+FOOTNOTES:
+
+[154] _Op. cit._, chap. VIII, esp. p. 243.
+
+[155] _Ibid._, p. 319.
+
+[156] _Ibid._, p. 312.
+
+[157] _Ibid._, p. 318.
+
+[158] _Ibid._, pp. 333-36.
+
+[159] _Ibid._, p. 335.
+
+[160] _Op. cit._, pp. 329-30.
+
+[161] "La croyance et le desir: possibilite de leur mesure," _Rev.
+philosophique_, vol. X (1880), pp. 150, 264. "La psychologie en economie
+politique," _Ibid._, vol. XII (1881), pp. 232, 401. "Les deux sens de la
+valeur," _Rev. d'economie politique_, 1888, pp. 526, 561. "L'idee de
+valeur," _Rev. politique et litteraire (Rev. Bleue)_, vol. XVI, 1901.
+_Psychologie Economique_, Paris, 1902.
+
+[162] _Cf._ Conrad, _Grundriss zum Studium der politischen Oekonomie_,
+Jena, 1902, Erster Teil, p. 10.
+
+
+
+
+CHAPTER XIII
+
+ECONOMIC SOCIAL VALUE
+
+
+How are we to get out of our circle:[163] The value of a good, A, depends,
+in part, upon the value embodied in the goods, B, C, and D, possessed by
+the persons for whom good A has "utility," and whose "effective demand" is
+a _sine qua non_ of A's value? The most convenient point of departure seems
+to be the simple situation which Wieser has assumed in his _Natural
+Value_.[164] Here the "artificial" complications due to private property
+and to the difference between rich and poor are gone, and only "marginal
+utility" is left as a regulator of values. But what about value in a
+situation where there are differences in "purchasing power"? How assimilate
+the one situation to the other?
+
+A temporal _regressus_, back to the first piece of wealth, which, we might
+assume, depended for its value solely upon the facts of utility and
+scarcity, and the existence of which furnished the first "purchasing power"
+that upset the order of "natural value," might be interesting, but
+certainly would not be convincing. In the first place, there is no unbroken
+sequence of uninterrupted economic causation from that far away
+hypothetical day to the present, in the course of which that original
+quantity of value has exerted its influence. The present situation does not
+differ from Wieser's situation simply in the fact that some, more provident
+than others, have saved where others have consumed, have been industrious
+where others have been idle, and so have accumulated a surplus of value,
+which, used to back their desires, makes the wants of the industrious and
+provident count for more than the wants of others. And even if these were
+the only differences, it is to be noted that private property has somehow
+crept in in the interval, for Wieser's was a communistic society. And
+further, an emotion felt ten thousand years ago could scarcely have any
+very direct or certain quantitative connection with value in the market
+to-day. Even if there had been no "disturbing factors" of a non-economic
+sort, the process of "economic causation" could not have carried a value so
+far. It is the living emotion that counts! Values depend every moment upon
+the force of live minds, and need to be constantly renewed. And there would
+have been, of course, many "non-economic" disturbances, wars and robberies,
+frauds and benevolences, political and religious changes--a host of
+historical occurrences affecting the weight of different elements in
+society in a way that, by historical methods, it is impossible to treat
+quantitatively.[165]
+
+What is called for is, not a _temporal regressus_, which, starting with an
+hypothesis, picks up abstractions by the way, and tries to synthesize them
+into a concrete reality of to-day, but rather a _logical analysis_ of
+existing psychic forces, which shall abstract from the concrete social
+situation the phases that are most significant. This method will not give
+us the whole story either. Value will not be completely explained by the
+phases we pick out. But then, we shall be aware of the fact and we shall
+know that the other phases are there, ready to be picked out as they are
+needed, for further refinement of the theory, as new problems call for
+further refinement. And, indeed, we shall include them in our theory, under
+a lump name, namely, the rest of the "presuppositions" of value.
+
+Our reason for choosing a logical analysis of existing psychic forces
+instead of a temporal _regressus_--instead, even, of an accurate historical
+study of the past--is a twofold one: first, we wish to coordinate the new
+factors we are to emphasize with factors already recognized, and to emerge
+with a value concept which shall serve the economists in the accustomed
+way--it is illogical to mix a logical analysis with a temporal _regressus_.
+But, more fundamental than this logical point, is this: the forces which
+have historically _begot_ a social situation are not, necessarily, the
+forces which _sustain_ it. The rule doubtless is that new institutions have
+to win their way against an opposition which grows simply out of the fact
+that we are, through mental inertia, wedded to what is old and familiar. We
+resist the new _as_ the new. Even those who are most disposed to innovate
+are still conservative, with reference to propaganda that they themselves
+are not concerned with. The great mass of activities of all men, even the
+most progressive, are rooted in habit, and resist change. When, however, a
+new value has won its way, has become familiar and established, the very
+forces which once opposed it become its surest support. Or, waiving this
+unreflecting inertia of society, as things become actualized they are seen
+in new relations. What, prior to experiment, we thought might harm us, we
+find beneficial after it has been tried, and so support it--or the reverse
+may be true. The psychic forces maintaining and controlling a social
+situation, therefore, are not necessarily the ones which historically
+brought it into being.[166]
+
+We turn, therefore, to a logical analysis of existing social psychic forces
+for our explanation of social economic value, and for the explanation of
+the motivation of the economic activity of society. It will still pay us,
+however, to halt for a moment in Wieser's hypothetical "natural" community,
+for we shall find there that many of the concrete complexities which he
+sought to eliminate have really persisted in slight disguise. Really there
+is no such simplicity as Wieser supposes. The "natural" society has,
+indeed, no private property, or differences between rich and poor, but it
+has, none the less, _legal_ and _ethical_ standards of _distribution_,
+which are just as efficient in the determination of economic values as are
+the results of our present system of distribution. The term, "natural," has
+misled Wieser, when it leads him to say that marginal utility alone will
+rule. For "natural" here means, not "simple," but "ethically ideal." The
+word has--as Wieser and others who have used it often fail to see--a
+positive connotation of its own: a definite set of legal and ethical values
+are bound up in it in this case. That such a society should exist, and that
+in it "marginal utility" should be the only _variable_ affecting value
+(apart from the limitations of physical nature), implies the legal rule of
+equality in distribution, and such a set of moral values actually ruling
+the behavior of the people as to make this legal rule effective,--or else
+the most extraordinary activity on the part of the government to maintain
+the rule. Wieser himself fails to see this, for he concedes that the
+"moral" principle of distribution in such a society would recognize the
+superior merits of the leaders who furnish ideas and direction, as
+entitling them to a higher reward than the merely mechanical laborers.[167]
+But this, it is evident, would give them an excess of that same vexatious
+"purchasing power"[168]--whether embodied in gold or commodities or
+labor-checks matters little--and so would destroy the efficiency of the
+principle of "marginal utility" as the ruler of values.
+
+As phases in the "presuppositions" of economic value, then, coordinate with
+"marginal utility," our theory puts the legal and ethical values concerned
+with distribution, which rule in a community at a given time. Reinforcing
+and validating the values of _goods_ are the social values of _men_.
+President F. A. Walker[169] defines value as "the power an article confers
+upon its possessor _irrespective of legal authority or personal
+sentiments_, of commanding, in exchange for itself, the labor, or the
+products of the labor, of others." [Italics are mine.] In our view, this
+definition is precisely wrong. A change in laws or in morals respecting the
+social ranking of men, respecting property rights, will at once affect
+economic values. Earlier economists often wrote as if distribution were
+primarily a physically determined matter, and so we got from them an "Iron
+Law of Wages," etc. But it is pertinent to quote from one who, though in
+many ways allied to the older school, and in value theory avowedly their
+follower, still stands as a bridge between the theories I am criticizing
+and my own. John Stuart Mill[170] says:--
+
+     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 interfere _en
+     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 social
+classes. 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 "pound of '_caeteris 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 of _voters_ of 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 of consequence, 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 his
+_Distribution 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 impulse to 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, inevitable tendencies 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 work _in
+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. VI and VII, _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 a _long 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 historical _regressus_ will 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 a _logical_
+analysis 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 his _Distribution 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 a _perfect fluidity, but no flow_; and in like manner the
+industrial groups are in a truly static state when the industrial agents,
+labor and capital, show _a 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 working _in vacuo_ in 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,
+and _Distribution_, pp. 56 _et 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 his _Distribution of Wealth_ and that of
+his earlier _Philosophy 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, _vide_ Professor Alvin S. Johnson's review of Schumpeter's
+_Das Wesen und der Hauptinhalt der theoretischen Nationaloekonomie_
+(Leipzig, 1908), in the _Journal 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 Austrian _Zeitschrift fuer 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 any _periodicity_ into
+his economic movement, he is obliged to bring in, from the field of
+sociological theory, the factor of _imitation_--he does not use the term,
+imitation, though he does use the verb, "_kopieren_." (_Vide_ esp. 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. 147 _et seq._
+
+
+
+
+CHAPTER XIV
+
+ECONOMIC SOCIAL VALUE (_continued_)
+
+
+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 houses and 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
+fundamental _human_ values. 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" may attain--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
+upon the 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. Economics has 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 his
+_Economic 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 of economic
+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 the _explanation_ phenomena[177]--no science has any monopoly
+on any set of forces which may be used for the purpose of explanation--but
+in the phenomena to be explained, in the _problem_ phenomena.[178]
+
+FOOTNOTES:
+
+[175] _Vide_ Ross, _Foundations of Sociology_, chapter on the "Sociological
+Frontier of Economics," and Tarde, _Psychologie Economique_, _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 truly _organic_ situation, we have the phenomenon of
+_reciprocal causation_. An organic situation _must_ be circular in this
+sense. The parts are _inter_dependent. And our objection to the theories
+criticized is based on the fact that they are essentially efforts to
+describe a process in _rectilinear causation_--in the case of the
+Austrians, _e.g._, the process is _from_ subjective utility, _to_ objective
+value of consumption goods, then _to_ the values of the production goods of
+the nearest rank, and then on and on to goods of remoter ranks, etc.
+Boehm-Bawerk recognizes very well that the charge of circular reasoning, if
+it could be brought home to the Austrians, would vitiate their system.
+_Vide_ "Grundzuege," Conrad's _Jahrbuecher_, 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 his _Distribution of Wealth_, p. 397. Whenever
+a small set of abstractions is picked out, as _the source_ and _cause_ of
+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 his _Cours d'Economie
+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.
+
+
+
+
+CHAPTER XV
+
+SOME MECHANICAL ANALOGIES
+
+
+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 value
+back 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, may result 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, of certain
+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, cooperating and reinforcing each other, each of
+these 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
+of _men_, 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 mediaeval 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 value _is_ a
+value, to the extent that it is an effective _power 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.
+
+
+
+
+CHAPTER XVI
+
+PROFESSOR SELIGMAN'S PSYCHOLOGICAL DOCTRINE OF THE RELATIVITY OF VALUES
+
+
+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 certain stages, 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 the _Quarterly Journal_ of May, 1901:[188]--
+
+     Progress consists in reducing costs, so that we
+     gradually approach gratuity. But, in reducing the value
+     of certain things, we necessarily increase the value of
+     other things. By diminishing the efforts required to
+     satisfy one want, we liberate the efforts needed to
+     satisfy a new want; it is only when we can satisfy this
+     new want that the means of satisfaction acquires
+     value. For the pioneer who with difficulty is able to
+     clothe and feed himself a piano has no value. It is
+     only as clothing and food take up less of his
+     energy--that is, become of less value to him--that he
+     will appreciate the new want, until finally in
+     civilized society a piano is worth far more than a suit
+     of clothes. Since value, as we know, is simply an
+     expression for marginal utility, we cannot affirm that
+     value in general ever increases or decreases. As pianos
+     are worth more, clothing is worth less.
+
+The relativity of value is here made to depend on a ground different from
+that which lies at the basis of the English School's doctrine of
+relativity. The ground of the latter is _logical_; the ground for Professor
+Seligman's view is _psychological_. Values considered as mutual relations
+between two goods cannot both fall--a fall in one means that it goes lower
+_than the other_, whence inevitably the other must rise, as a matter of
+logical definition. For Professor Seligman, on the other hand, value is a
+quantity of marginal utility. So far as the logic of the situation is
+concerned, an increase in the supply of good diminishes _their_ marginal
+utility, and so their value.[189] But, as soon as that is done, a new want
+springs into existence, a new object receives value therefrom, and the
+total quantity of value remains as before. In the article from which the
+quotation is taken, the doctrine is merged to some extent with the English
+doctrine of logical relativity, as indicated by the discussion on page
+343, and by the footnote on page 344. The English doctrine is also
+suggested by the treatment in the _Principles of Economics_ (pp. 184-85),
+where it is stated that "prices may rise or fall with reference to this
+standard, but we cannot speak of a general rise or fall of values, because
+there is no fixed point." It is clear, however, that the argument for
+relativity in the passage first quoted, is wholly distinct from, and
+independent of, the logical relativity of definition. Professor Seligman,
+in conversation with the writer, has so distinguished it, and has indicated
+that, rejecting the logical doctrine of relativity, he now holds this
+psychological doctrine of relativity, as distinct, both from the absolute
+conception of Professor Clark, and the relative conception of the English
+School.
+
+As preliminary to a criticism of Professor Seligman's doctrine, certain
+distinctions must be made. Values may be relative in Professor Seligman's
+sense without being relative in the sense in which the English School uses
+the term: the English School thought only of the relations among, say, a
+_unit_ of wheat and a unit of corn, a unit of woolen goods, a unit of wine,
+etc.: Professor Seligman is thinking of the _total stocks_ of these various
+commodities. Assume, for simplicity, that the stocks of all commodities
+were doubled, and that the demand curves for all the commodities have the
+same shape, and that form is the rectangular hyperbola,[190] so that the
+absolute value of each unit of each commodity would be exactly cut in half.
+The English School would say that there had been no change in the values of
+the units; Professor Seligman would say that there had been no change in
+the value of the _stocks_, but would concede at once that every unit has
+had its value cut in half.[191]
+
+Another distinction must be made. There is, to be sure, at any given time,
+a pretty definitely limited[192] amount of social _productive energy_. This
+energy can be distributed among only a limited number of products. Hence,
+there can be only a limited number of objects to receive value from the
+mental energies of society. But does it follow from this that what we may
+call the social energy of value-giving is a limited thing? Or, granted that
+it is limited, does it necessarily follow that the limits are fixed and
+rigid? Cannot circumstances arise which will make it vary in amount? If a
+new want arises, does it necessarily follow that all the old wants become
+less intense in the exact degree that the new want is intense? Must a
+quantum of value be withdrawn from the old objects precisely equal to that
+which is attached to the new object? This doctrine is deliberately
+affirmed, so far, at least, as the individual is concerned, in the article
+on "Worth"[193] in Baldwin's _Dictionary of Philosophy_, etc.:--
+
+     The struggle for existence among dispositions, which
+     are at once the objects of ethical valuation and the
+     source of value reactions, springs out of the nervous
+     conditions of these dispositions. While there dwells in
+     each the tendency to utmost activity under the given
+     conditions, yet, since the valuing subject is master of
+     only a limited energy of valuation, i.e., nervous
+     energy, the increase of value of any given disposition
+     must necessarily cause others to decrease. In any case
+     increase of values is always relative.
+
+Now two lines of criticism suggest themselves. In the first place, the
+concluding sentence of the quotation is a _non-sequitur_. If there be a
+definite, absolute quantity of energy, then its distribution among objects
+can give absolute quantities of value. Reservoirs connected by pipes may
+among them contain a definite quantity of water, and increase in the volume
+of water in one may be at the expense of all the others. But still the
+amount of water in each is an absolute amount. This criticism, I may note,
+Professor Seligman concurs in. Conceding that a definite amount of value
+may exist in each object, he holds that there is, none the less, a
+relativity about value in the sense that increase in the value of one item
+can only come from a decrease in the value of another, and _vice versa_.
+The other line of criticism calls attention to the identification of
+"energy of valuation" with "nervous energy." That the two are identical
+would be maintained only by the crudest materialism. The one is a physical
+force; the other is a psychical force. While nervous energy and energy of
+valuation may be connected, the nature of the connection is surely not so
+well known as to justify the assumption that definite limitation in the one
+implies a precisely corresponding limitation in the other.[194] There is no
+justification--at least in the present state of psychological
+knowledge--for holding that the law of the "conservation of energy" applies
+to psychical energy.[195]
+
+Some concrete illustrations will make clearer the difficulties of the
+doctrine, as applied to economic life. Assume a group of men on board a
+whaling vessel, who suddenly discover that they will be obliged to spend
+the winter in the ice-zone, instead of reaching home in the fall as they
+had planned. Will not the value of everything in their store of provisions
+be increased? Will not their whole stock of wealth have a greater value?
+But this, Professor Seligman objects, is because they are in a situation
+such that opportunity for reproduction is lacking, and he raises the
+question as to whether the same situation is possible in economic life on a
+large scale, where wealth is being constantly produced. Well, assume that a
+crop failure on a large scale occurs. Will not the value of the total
+existing supply of the articles in which there is a failure be raised? And
+will not other competing articles of food have their values increased also?
+But, Professor Seligman would retort, these increases would be at the
+expense of the values of the half-grown fields of grain, and at the expense
+of articles other than food. Granted: but what evidence is there of exact
+equivalence? And further, assume that half of every existing stock of
+commodities, of every sort, were suddenly wiped out. Would the sum total of
+values remain the same? Only on the assumption that the social value curve
+for this totality of commodities is a rectangular hyperbola.[196] That this
+particular shape of the curve holds for any particular commodity would be
+difficult to prove. That it does not hold at all for the necessities of
+life is one of the commonplaces of economic analysis. Initial items in a
+stock of necessities have a very great value, when there are no other items
+of the stock, and the curve often descends very abruptly. Gregory King has
+undertaken to show, in terms of money, the shape of this curve for wheat in
+the England of his day. Other commodities have curves which behave very
+differently. While the argument from the part to the whole is not a valid
+argument in the presence of specific reasons making the whole obey
+different laws from the parts, it still, in the absence of such special
+considerations, does raise a strong presumption. And I must confess that I
+see no reasons why the curve for the totality of commodities should take
+the particular form of a rectangular hyperbola, instead of some other form.
+_A priori_, the presumption would seem to be that its form would be
+irregular.
+
+There is another point of view which seems to support Professor Seligman's
+contention, and that is the money-price viewpoint. At a given moment, each
+man has a definite quantity of money--or of bank-credit--which he can use
+in purchasing commodities. If he spends it for some commodities, he cannot
+spend it for others. As he joins one group, demanding one commodity, he
+must--at least to the extent of that amount of money--withdraw from other
+groups demanding other commodities. At a given instant, therefore, there is
+a definite demand-situation with reference to every item of every stock,
+and one can increase its money-price only by drawing upon the demand for
+others. But let a panic now come. Let these bank credits become unstable:
+let _social confidence_ be wiped out, and what happens to general prices
+and values? Does the value that leaves the general range of commodities all
+betake itself to the gold supply? That cannot be, for the supply of gold,
+as compared with the supply of other commodities, is well-nigh
+infinitesimal, and if the whole of the values that left the commodities
+went into gold, then every unit of gold would be tremendously increased in
+value, and prices in terms of gold would fall, not two-thirds, but a
+thousandfold. What has become of the values? They have simply been wiped
+out. A psychical change has taken place, a malady has afflicted the social
+mind, its integrity is shattered, doubt has taken the place of confidence,
+panic fear has replaced buoyant expectation, demoralization and
+disorganization have lessened the social psychic energy--or dissipated it
+in inchoate, unorganized individual activities. The sum total of values is
+lessened. Of course, the reverse may happen. Let confidence be restored,
+let the social psychic organization function normally once more and values
+rise again. As we have indicated in our discussion of the psychology of
+value, _belief_, as well as desire and feeling, may often be a very
+significant phase in the value situation, and have a motivating power quite
+as great as the other phases. _Credit_, while it exists, is a real addition
+to the sum of values--has, that is to say, a real power in motivating
+economic activity, calling forth new productive efforts, and directing
+labor, capital, and enterprise to new channels. This is not, of course,
+asserting the doctrine of John Law. Credit cannot be manufactured out of
+whole cloth. Beliefs, at least to some extent, follow rational laws, and,
+except in moments of hysteria, there must be something for people to
+believe in before strong belief can emerge. Sometimes, of course, an
+unstable but momentarily powerful belief, based on nothing rational, may
+dominate a situation, and radically upset the existing scale of
+values--with a sad reaction following shortly after. And, in the absence of
+belief, the most rational justification for belief is impotent. Witness
+the bankruptcies, in times of panic, of men whose assets turn out later
+perfectly adequate, but who are unable to liquidate them at the time of the
+panic. Note, too, in this connection, the tendency in times of panic to
+turn to government for aid in sustaining values--to substitute for the
+waning social force of belief the power of a new legal force.
+
+A case parallel to the panic, as inducing a diminution of the total psychic
+energy of control, is presented by widespread epidemics. Gabriel Tarde,
+criticizing Mill's contention that all values cannot rise or fall,
+instances the general fall in all values which an epidemic occasions, and
+the recovery of values after the epidemic.[197] This criticism of Tarde's
+will not, of course, hold as against Mill's doctrine (indefensible on other
+grounds) which bases the relativity of values upon a logical definition,
+but it will hold as against the psychological doctrine of relativity under
+discussion.
+
+A further point is to be noted. Even granting that the sum total of social
+power of motivation is definitely limited, it still does not follow that
+the sum total of economic value is so limited. For not all of this social
+psychic energy goes into economic values. Religious, aesthetic, patriotic,
+moral values, all call for their share of this energy, and the amount given
+to each varies from time to time. This phase of the matter is discussed in
+detail by Professor Ross, in the chapter on "The Social Forces" in his
+_Foundations of Sociology_, and I shall not expand the discussion here.
+
+The doctrine that there is a definite, unchanging sum of economic values,
+therefore, cannot, in my judgment, be maintained. And yet, it must be
+conceded, there is a substantial element of truth in Professor Seligman's
+contention. At a given time, or through a considerable period, assuming
+social conditions to change slowly, there are fairly definite amounts of
+social energy, both of production and of control over production
+(value-giving energy). The surface fact here is that men have definite
+incomes. If this energy is disposed of in one way, it cannot be disposed of
+in another. If men elect to have one good, they must dispense with
+something else. And in using their control over social forces to increase
+the value of one good, they must refrain from using it to increase the
+value of another. In the long run, these quantities are subject to change.
+At a given moment, a sudden disturbance may radically change them. But, as
+a statement of tendency, Professor Seligman's doctrine must be admitted.
+
+Professor Seligman's view differs from that of Professor Clark simply in
+that it adds an element. On its logical side, it conceives value in the
+same way. Value is a quality, with degrees, i.e., a quantity. This quantity
+in a particular good is an absolute fraction of an absolute quantity. It is
+not changed merely in consequence of being compared with some other
+good--it remains the same, regardless of what price-ratio it is put into.
+On its formal and logical side, therefore, Professor Seligman's concept is
+to be classed with that of Professor Clark--with which, as indicated in
+chapter II, I am in hearty accord, in so far as the issues raised in that
+chapter are concerned.
+
+FOOTNOTES:
+
+[183] _Principles_, 1905, p. 174.
+
+[184] _Economic Interpretation of History_, _passim_.
+
+[185] _Principles_, p. 175.
+
+[186] _Ibid._, pp. 147-48.
+
+[187] It might be possible to put the argument into terms which would give
+an analogical meaning to "social utility" and "social cost." The diagram
+representing the intersection of the demand curve and the supply curve,
+fixing price, may be taken equally well to represent the balance of social
+forces which lies back of the market phenomena in the case of a given
+commodity. The demand curve might then be called a "social utility" curve,
+and the supply curve a "social cost" curve, if only it be remembered that
+cost and utility here have only a vague, analogical meaning, and cover up a
+host of factors which, while they fall conveniently into two opposing
+groups, like the individual's "cost" and "utility," are yet much more than
+the latter. But they are really so very much more than the latter, that it
+seems to me misleading to continue the use of the terms, utility and cost,
+when the associations of these terms in economic theory are remembered. The
+tendency would be to make the student feel that value depends on two
+abstract phases of social-mental life, instead of being an outcome of the
+organic whole.
+
+[188] Pp. 342-43.
+
+[189] The reader will understand that I am using accustomed phraseology and
+making customary assumptions, not because I approve of them, but because
+the point at issue here is not affected by the question as to the relations
+between value and utility, etc. The distinction between a utility curve and
+a price curve does not affect the argument here.
+
+[190] Analytically expressed _xy_ = _c_. This curve, by definition, leaves
+the "value area" (_xy_) constant.
+
+[191] A complication must be noticed here, due to my use of the term,
+"demand curve." I am tacitly assuming that the absolute value of the money
+unit remains the same in this process, and so must say that the English
+School would concede that the value of the money unit has doubled even
+though holding that all the other values remain unchanged, except with
+reference to the money unit. For Professor Seligman, the value of money
+(_i.e._, the total stock) has not changed.
+
+[192] But the limitation is not absolute. New incentives may call out
+substantial increases in productive activity.
+
+[193] Written by Professor W. M. Urban, author of _Valuation_, to which
+frequent reference has been made. _Vide Valuation_, p. 4, n. The article
+was, of course, written several years before the book.
+
+[194] In this view I am sustained by Professor John Dewey.
+
+[195] _Cf._ Stuart, "Valuation as a Logical Process," in Dewey's _Studies
+in Logical Theory_, pp. 328, n., and 330.
+
+[196] See _supra_, p. 165, n.
+
+[197] "La psychologie en economie politique," _Rev. Philosophique_, vol.
+XII, p. 238.
+
+
+
+
+CHAPTER XVII
+
+THE THEORY OF VALUE AND THE THEORY OF PRICES
+
+
+In most English treatises on economics, a price means a sum of money given
+in exchange for a commodity, or the ratio between the money and the
+commodity, or the ratio between the value of the money and the value of the
+commodity. In any case, price as a rule involves the idea of money. With
+the Germans, on the other hand, _Preis_ means any exchange ratio (or a
+quantity of commodities of any sort given in exchange for a good), whether
+or not one of the terms of the ratio involves money, and the distinction
+between price and value (_Preis_ and _Wert_) is, commonly, the distinction
+between the measure and the thing measured, or between "relative value" and
+"absolute value" in Ricardian phrase.[198] The conception of price has been
+broadened by some later writers in English, however, to correspond with the
+German usage, notably by Professor Patten,[199] and by Professor
+Schumpeter,[200] in an English article contributed recently to the
+_Quarterly Journal_. I do not care to argue a merely terminological
+question, and I readily concede that there are disadvantages in departing
+from familiar usage. But, on the other hand, since I am convinced that
+ratios of exchange in general, and money prices in particular, are
+generically the same, while ratios of exchange and values are generically
+as unlike as it is easily possible for two things to be, I shall use the
+term price in this wider meaning, and confine the word value, in the
+exposition of my own theory, to the non-relative meaning.
+
+The distinction between prices in this sense and absolute values appears in
+Adam Smith and in Ricardo. These writers do not adhere very strictly to
+either meaning of the term, value, however.[201] The conception of absolute
+values is lost by J. S. Mill, and the distinction which he draws in
+connection with the problem of the standard of deferred payments (not so
+called by Mill) is between values (relative) and _cost of production_.[202]
+In Cairnes, the two conceptions are hopelessly confused on a single
+page,[203] while Marshall's whole treatment runs in terms of price.
+
+In what follows, I wish to generalize the conception of price, to show the
+function of the price concept in economics, to distinguish carefully
+between the theory of value and the theory of prices, and to see what light
+the theory of value outlined in this book throws upon the problems of the
+price analysis.
+
+In chapter II, the distinction between "absolute and relative values," or,
+in our present phrase, between values and prices, was sufficiently
+indicated not to need further elaboration here. The relation between them
+was made clear--the absolute value must first exist before the price, which
+is the expression of the value of a good in terms of some other valuable
+object which is chosen as a measure, can be determined. In fact, _two_
+values, the value of the good measured, and the value of the good which is
+to serve as the measure, must first exist, as absolute quantities, before a
+price-ratio can be made between them, and their "relative values" shown.
+In the chapter on the psychology of value, the notion of price was
+generalized, and we spoke of the price measure of values of non-economic
+sort. This notion is one of very general application and one of
+significance for the whole realm of social and psychical phenomena: not
+merely where the question of exchanging economic goods is involved, but
+wherever choice among alternative goods, or courses of action, or men, or
+institutions, or works of art, or other objects of value, is necessary, we
+_compare_ them with each other, we _measure_ them by each other, we _price_
+them in terms of each other. We arrange them in _scales_ of value, or in
+series, seeing which is higher and which lower. Where only two goods are
+involved, we may call either the measure, depending on the point of view.
+But where many goods are to be compared, it is highly convenient to pick
+out some one as the common measure of all, so that they may be reduced to
+common terms. For measuring economic goods, money is, of course, the
+standard, or common measure _par excellence_, for most purposes. If we are
+measuring the value of the political institutions of various countries, we
+usually take the institutions of our own country, with which we are most
+familiar, as the common measure or standard. Or, in measuring the moral
+systems, or the literary masterpieces, of other countries, we again find
+those of our own people the most convenient standard. But it is significant
+of the correctness of our general point of view that values of different
+species may be measured in terms of each other. _Money_, in particular, is
+a very general measure, which may serve for many values outside the
+economic sphere. Thus, I have pointed out how legal values may be measured
+in terms of money, as when the fine for one offense is five dollars, and
+that for another twenty-five. Gabriel Tarde[204] points out that by
+comparing the theatre receipts of theatres representing different dramatic
+schools we may compare the vogues of each, or that by comparing the income
+of the clergy in different periods we may get some index of the variations
+of religious sentiments. He suggests that while money as a measure of
+economic values usually functions in exchange, it may, as a measure of
+beliefs or other social forces, function through gifts, through popular
+subscriptions to build this or that statue, for the support of scientific
+work or philanthropies, or even through thefts: "Quelquefois meme c'est par
+des vols ou se montre la perversion d'un esprit sectaire, l'aberration et
+la profondeur de ses convictions passionees."
+
+Commonly, indeed, money performs even this function, that of measuring
+currents of belief, passion, enthusiasms, etc., through the process of
+exchange, and, ordinarily, it is difficult to get any single current
+separately. We simply get the resultant of an equilibrium of a complex of
+forces in economic values. But sometimes a single factor stands out so
+prominently that we can abstract from the rest, and let money changes
+measure changes in it alone. For example, during the three days of the
+battle of Gettysburg, the premium on gold, as measured in terms of Federal
+paper, fell from forty-five per cent to twenty-three and a fourth per
+cent.[205] For the market, this means simply a change in the economic value
+of Federal paper. But for one who cares to look even superficially behind
+the scenes, it means an increased volume of belief in the triumph of the
+Federal arms--a belief that at once affected economic values, and was
+measured in terms of money. Or, the economist may abstract a single legal
+factor, as a tax law, and measure its influence on the assumption that the
+rest of the situation is constant, in the well-known laws of shifting and
+incidence.
+
+Such clean-cut instances are not the rule, however. The organic complexity
+of the social forces lying back of economic values makes it difficult to
+disentangle single elements, and measure their force. For one thing,
+variations in one factor usually mean movements in the others. If we may
+borrow terms from chemistry, while the economist may give us a
+_qualitative_ analysis of these forces, it is hard for him to give us a
+_quantitative_ analysis. And the characteristic of pure economic theory has
+been its effort to get quantitative, quasi-mathematical laws. The "pure
+theorist," therefore, does well to start with a quantitative value concept
+(a convenient shorthand or symbol for the infinite complexity that lies
+behind it), a value quantity in which the net outcome of social
+interactions does precisely manifest itself, and study the laws which it
+manifests. His chief interest is, not in the origin of economic value
+itself, but in the changes in quantities in value in different goods and
+services as these manifest themselves in the market, and submit themselves
+to economic measurement. In a word, his chief interest is, not in value,
+but in _prices_.[206] And the great bulk of pure economic theory, and
+practically all that is of greatest importance in pure theory, is in the
+theory of prices, and not in the theory of value. Lest I be misunderstood,
+the qualification must be repeated: prices here mean, not money-prices, but
+prices in the generic sense. In this sense of the word price, it is just as
+accurate to speak of the price of money in terms of commodities, or of a
+composite of commodities, as to speak of prices of commodities in terms of
+money.
+
+That is to say, the economist gives himself little concern, in his
+quasi-mathematical study, as to the ultimate nature of the social forces
+that manifest themselves in the market. A host of forces lie back of
+demand, but the economist puts the phenomena of demand into a curve which
+is the function of two variables, one a quantity of money, and the other a
+quantity of goods. Lying back of these quantities of goods and money, and
+giving meaning to the curve, are the more fundamental quantities, the value
+of the goods and the value of the money. Further than this, for the
+purposes of his quasi-mathematical, pure theory, the pure economist has no
+real occasion to go--in proof of which it need be remarked simply that the
+most divergent theories as to the nature of value, none of them adequate if
+the theory set forth in this book be true, have not prevented the
+development of a vast, highly organized, and immensely useful body of price
+doctrine, shared by economists of many schools. If only the economist have
+a quantitative value concept, he can do wonders. And, if the question be
+regarding relations between factors where the question of the value of
+money may be ignored, he may often safely abstract from the idea of value,
+and speak simply of money quantities, and relative changes in these money
+quantities. Such is, indeed, Professor Marshall's procedure in a large part
+of his great work. Professor Davenport's contention that, from the
+standpoint of the entrepreneur, the whole thing may be looked at in
+pecuniary terms, is true of many problems. Cost for the entrepreneur is
+simply a money matter. And while, for the more fundamental analysis, we of
+course must insist that a host of psychic forces determine what those money
+costs shall be, our analysis will justify the contention that it is
+impossible to treat them in any but price terms, in a precise and
+quantitative manner. They are too complex. Certainly labor-pain and
+abstinence, looked on as abstract individual feeling-magnitudes, will not
+explain the supply-prices of labor and capital, any more than individual
+"utilities" will explain demand-schedules. And we may add that the terms
+"social cost" and "social utility" can, in our scheme, get no meaning that
+will make them useful. The social value concept seems to us absolutely
+essential for the validation of the whole procedure of the price analysis,
+and to be implied in every step in it, but the only meaning we can find for
+the concept of social marginal utility would be one which would make it
+identical with social value; and against that there are two objections:
+first, it would be superfluous, and second, it would be misleading. "Social
+utility" can get only a vague, analogical meaning in our scheme. Instead of
+explaining social value, it would itself present a problem.[207] A measure
+of social economic value in terms of a feeling-magnitude which an
+individual can appreciate is not to be had. Value can be measured and
+quantitatively handled only in terms of _price_.
+
+In saying this, I do not mean to impeach that more abstract procedure which
+speaks of abstract units of value, and uses arithmetical numbers which
+designate no particular commodities, or algebraic symbols, or even ordinary
+speech, to indicate quantitative relations among different sums of these
+abstract units. Such procedure is thoroughly correct, and often highly
+convenient, if one be dealing with highly general laws, or if one wish to
+avoid any complications from changes in the value of any concrete
+commodity which might be chosen as the standard of value. Only, I would
+insist, such procedure is simply an abstraction from the price concept, and
+so presupposes it. A unit of value, in the concrete, must be the value of
+some particular concrete good, which is chosen as the standard. _What_ good
+is chosen is a purely arbitrary matter, determined by convenience. Abstract
+value, apart from valuable things, is an utter impossibility--only a
+Platonic idealism or mediaeval realism could hold the contrary view. And, in
+order to show how many units of value there are in a good, we must compare
+it with another good, whose value is the unit, unless, indeed, we
+arbitrarily choose as our unit the good in question, and say that its value
+is one unit, or several units, in case we arbitrarily define the unit as a
+fraction of its value. But clearly this latter procedure would tell us
+nothing after all as to the amount of the value in the good. It would be a
+purely formal process--like renaming a "hocus-pocus" and calling it two
+"Abracadabras." Any real measuring--and real measuring is essential for any
+quantitative manipulation--implies _two_ things, one of which shall serve
+as the measure of the other. The conception of abstract _units_ of value,
+therefore, is an abstraction from the price conception, and presupposes
+it.[208]
+
+A valid price procedure, in my view, is essentially this: we take our
+quantitative value concept, summing up the multitudinous social forces
+which determine values: then we assume a given set of ethical, legal, and
+social values of a non-economic sort,[209] as a sort of frozen framework
+within which our economic values are to operate, and which shall remain
+constant during the investigation: then, measuring the economic values in
+terms of a common unit, we let them exert their influence on the situation,
+and see what results follow. We vary first one and then the other, and see
+what readjustments any change involves. Since the situation is so
+infinitely complex, we bring about this artificial simplicity in thought,
+that we may study the tendencies one by one. But a given economic change
+will work out its consequences fully only on the assumption that other
+economic changes are not occurring. We can in thought let them vary one by
+one, but they do in fact all vary at once. And further--and for this fact
+price theory has made no allowance--the "frozen framework" of legal, moral,
+and other non-economic social values, is not "frozen." Changes in economic
+values lead to readjustments, not only in the other economic values, but
+also in the legal, ethical, and other values of the framework. These last
+are fluid, psychic forces, just as truly as are the economic values. They
+change because of changes in the economic values; they initiate changes in
+the economic values; and they initiate changes which deflect the tendencies
+of changes in the economic values. So that, even though we premise a
+thoroughly organic theory of social value, in which the influence of the
+non-economic social values, working _through_ the economic values, is
+carefully provided for, we still have to correct the results of our price
+analysis, before applying it to practice, to account for changes in the
+non-economic values working to deflect the tendencies which the economic
+values would lead to if the other values had remained constant.
+
+This last, of course, most economists in practice constantly try to do.
+Present day discussions of practical economic problems are rich in data of
+a non-economic sort. In practice the economist recognizes that his mission
+is, not to see how far a few abstract factors will go in the explanation of
+economic life, but rather, to _explain_ that economic life by any means in
+his power, though he ransack heaven and earth in the process.
+
+Of course, it is but a commonplace to add that the economist, in practice,
+does try to take account of the extent to which his assumptions as to the
+legal and social "framework" hold: how far there is real freedom of
+competition, how far real "intelligent self-interest," how far mobility of
+labor and of capital, how far monopoly privilege, etc. Or, at least, he
+usually tries to make himself think that he has done so. It still remains
+lamentably true that a great deal of reasoning even on practical problems
+is an effort to apply theories without any adequate understanding of the
+extent to which the theories grow out of abstractions made for purposes of
+study, or any effort to put back the concrete facts from which the
+abstraction was made. The practical business man knows how these various
+forces operate on values. He studies them, tries to estimate their force in
+quantitative price terms, and adjusts his plans to them. If a religious
+wave sweeps over a large section of the country, the wholesaler sends in
+larger orders for Bibles, and smaller orders for playing cards. If a
+rate-reduction agitation is going on, the manufacturer of steel rails and
+railroad supplies plans to cut down his output. If trades-unionism grows
+strong, employers of labor recognize that they must readjust their
+budgets.
+
+FOOTNOTES:
+
+[198] _Cf._ Davenport, _op. cit._, pp. 296-97.
+
+[199] _Theory of Prosperity_, New York, 1902, pp. 16-17, 89.
+
+[200] "On the Concept of Social Value," _Quar. Jour. Econ._, Feb., 1909,
+pp. 226-27.
+
+[201] See _Wealth of Nations_, introductory part of chap. VIII of bk. I
+(pp. 66-67 of the Cannan ed.) For Ricardo, see _Works_, McCulloch ed.,
+London, 1852, p. 15. Adam Smith seems occasionally to use value in the
+relative sense, as on p. 183 of vol. II of the Cannan ed. Ricardo, though
+indicating that he is concerned only with relative values on the page cited
+_supra_, still speaks of values as simultaneously falling, in ch. XX, on
+"Value and Riches," which, of course, is impossible on the basis of the
+relative concept. There is no point to torturing these passages unduly,
+however, in the effort to find our distinctions in them.
+
+Professor Seligman calls my attention to a most interesting forty-page
+discussion of the theory of value by W. F. Lloyd, _A Lecture on the Notion
+of Value, as Distinguishable not only from Utility, but also from Value in
+Exchange_. The lecture was delivered before the University of Oxford, in
+Michaelmas Term, 1833, and published, in accordance with the rules of the
+foundation which provided funds for the lecture, in London, 1834. The
+writer insists on the conception of value as absolute, and devotes pp.
+30-40 to a defense of the absolute conception. He cites the passage in Adam
+Smith referred to _supra_, in which Smith distinguishes real dearness from
+apparent dearness (introductory part of chap. VIII of bk. I). The most
+striking thing about this lecture, however, is its anticipation of Jevons's
+doctrine of marginal utility, and its emphasis upon the subjective
+character of value. The word, margin, is used in virtually the sense in
+which Jevons uses it, on p. 16.
+
+The book is very rare,--only three copies, one in Professor Seligman's
+library, one in the British Museum, and one in the Goldsmiths' (formerly
+Foxwell) Library in London, are known to exist. It seems to have made no
+impression upon the economists of the time of its publication. A reprint
+to-day would enable the economic world to do belated justice to a very
+acute and original thinker. _Cf._ Professor Seligman's article "On Some
+Neglected British Economists" in the _Economic Journal_, vol. XIII, esp.
+pp. 357-63.
+
+[202] _Principles_, bk. III, chap. XV, par. 2.
+
+[203] _Leading Principles_, editions of 1878 and 1900, pp. 12-13.
+
+[204] _Psychologie Economique_, vol. I, pp. 77-78.
+
+[205] Scott, _Money and Banking_, 1903 ed., p. 60.
+
+[206] _Cf._ Schumpeter, _Quar. Jour. Econ._, Feb., 1909, pp. 226-27.
+
+[207] See _supra_, p. 163, n.
+
+[208] _Cf._ p. 50, n. It is sufficiently clear, I trust, that this argument
+is concerned with the relativity of _knowledge_, and not with the
+relativity of _value_. We can _know_ things only in terms of our
+"apperceptive mass," but that does not mean that things _exist_ only by
+virtue of our apperceptive mass. And even knowledge is relative only when
+it is "_Knowledge-about_." _Cf._ James, _Principles of Psychology_, vol. I,
+p. 221, and _The Meaning of Truth_, p. 4, n.
+
+[209] Marshall accords a limited recognition to our doctrine. See
+_Principles_, 1907 ed., p. 35, where he indicates that certain parts of the
+theory of value assume the prevailing ethical standards of our Western
+civilization, and that prices of various stock exchange securities are
+"normally" affected by the patriotic feelings of purchasers, and even
+brokers, etc.
+
+
+
+
+CHAPTER XVIII
+
+THE THEORY OF VALUE AND THE THEORY OF PRICES (_concluded_)
+
+
+My strictures upon the Austrian, or "utility" theory of value in what has
+gone before seem to call for further qualification here. As a theory of
+_value_, as a theory to explain the nature and origin of value, I am
+convinced that the Austrian theory is utterly and hopelessly inadequate.
+And yet, for the work of the Austrian economists, taken by and large, I
+have the highest admiration. Their treatment of margins, their conception
+of the motivating function of value, and their new stress on the demand
+side of the price-problem, constitute a marked advance over the point of
+view of the earlier English School, even though perhaps too extreme a
+reaction. And their detailed work in the price analysis, despite the
+utterly inadequate basis which the utility theory of value affords for it,
+has been marvelously accurate, sound, and useful. Having no logical warrant
+for an objectively valid quantitative value concept, they have none the
+less assumed and used one--and used it marvelously well. Sometimes that
+objective value is called by the name, "objective value." Sometimes they
+call it "marginal utility," and yet it is clearly anything but the feeling
+of an individual, for it is broken up into different parts, and reflected
+back and back through different productive goods of remoter and remoter
+rank till it has got very far from the individual who may be supposed to
+feel it. Production is the production, not of material things, but of
+"utilities"--and yet these utilities, as treated in the analysis, are
+anything but individual feeling-magnitudes, and the actual reasoning on the
+basis of them would not be different if they were called quantities of
+value outright. By logical leaps, by confusing "utility" with demand, or by
+confusing "marginal utility" with objective value,[210] the Austrians have
+got what the practical exigencies of price theory demand. A detailed
+estimate of the work of the Austrian School is, of course, out of place
+here, but I do not wish to be understood as failing to recognize the
+immense value of the work of men who have given so great an impetus to
+economic thought as has been the case with the Austrian masters.
+
+There is a further topic in connection with the relation between value
+theory and price theory that calls for more explicit attention here, though
+frequent reference has been made to it already. What is the relation of the
+distributive problem to value theory and to price theory? Is distribution a
+price problem or a value problem?
+
+It may be looked at from either angle, and treated in either way. A
+complete theory of distribution involves many of the most fundamental
+social values. Indeed, it is through the machinery of distribution that
+the non-economic values most vitally affect economic values. Wages,
+interest, competitive profits, are surely legal categories, and are
+possible only in a society where there is free labor and private control of
+industry. We may agree with Wieser[211] that, as categories of economic
+causation, interest, rent, and wages will remain even in a communistic
+society (and, doubtless, also profit and loss), but that is far from saying
+(as Wieser of course recognizes) that they would remain as distributive
+shares. Each social system has its own distributive scheme.
+
+But, in a system like that of Western civilization to-day, where human
+services and the uses of land and instrumental goods are offered in the
+market like other commodities, we may treat them in terms of the price
+analysis with as much propriety as the other commodities. The prices paid
+for them measure a complex of social forces, but we cannot always
+disentangle these social forces and measure them separately. It is hard to
+tell precisely how much influence on the price of labor has been exerted by
+a speech from Mr. Gompers, or a Federal injunction, or a law for the
+exclusion of certain classes of immigrants. If we wish to handle
+distribution quantitatively, we must do it superficially, studying in the
+market the effects which the underlying social forces manifest there with
+reference to the rewards of the different factors of production. This has
+been increasingly the case with later theories of distribution. If, on the
+other hand, we take the discussion which J. S. Mill gives in book II of his
+_Principles_, we shall find that the price analysis plays relatively little
+part, and that he considers chiefly the influence of the more fundamental
+social values.[212]
+
+A failure to recognize the distinction between value theory and price
+theory seems to lie behind the complaint which Professor Davenport makes
+against the "Social Value School" in his criticism of Professor Seligman:
+"As soon as we turn from the value problem to the separate treatment of the
+distributive shares, we find ourselves to have descended from the
+cloud-land mysteries of transcendental economics to the old and beaten
+paths of the traditional analysis."[213] To this complaint the obvious
+answer is that we have turned from fundamental value theory to abstract,
+quantitative price analysis. And the social value theorist has as much
+right to do this as has any other economist--in fact, if our theory be
+true, only on the basis of a social value doctrine has any economist a
+right (logically) to take up price analysis.
+
+The theory of value, as I conceive it, is, then, not a substitute for
+detailed price analysis, but rather a presupposition of it. The theory of
+value is to interpret, validate, and guide the theory of prices. If the
+theory here outlined be true, it will have significant consequences for the
+theory of prices, in that it will open up new problems for the price
+analysis to attack. There are many social forces which can be measured with
+substantial accuracy, and many more which can be, for purposes of theory,
+disentangled from the complex in which they appear, and treated by the
+methods of price analysis already discussed, which economic theory has not
+yet thought it worth while to attack. The economist must emulate the
+practical business man, in trying to treat in price terms the various
+social changes which affect economic values. There is much left for the
+theory of prices to do. The theory defended here, with its sharp sundering
+of values and prices, will, of course, criticize the mixing of the two. One
+chief criticism of the Austrian theory, and also of the theory of the
+English School in so far as it attempts to give a "real cost" doctrine, is
+that they are attempts to give both a theory of value and a theory of
+prices at the same time. Certainly we must object to Boehm-Bawerk's
+contention that the solving of the price problem _ipso facto_ solves the
+value problem.[214] The purpose of this book is, not _destructive_, but
+_reconstructive_. A detailed criticism of the various economic theories
+that have appeared, as theories of prices, is manifestly too big a task to
+be undertaken here. All of them cannot, of course, be accepted _in toto_,
+for there are, doubtless, irreconcilable differences among them at points.
+But it is the belief of the writer that the great bulk of what has been
+done in the study of the quasi-mathematical laws of prices is of
+substantial worth, that a recognition of the distinction between value
+theory and price theory, and of the confusions that result from mixing the
+two, will remove many seemingly irreconcilable differences between opposing
+schools, and that existing price theories are less to be criticized for
+what they affirm than for what they ignore and deny.
+
+Much of the significance of the theory of value for the interpretation of
+price theory has been indicated from time to time, in what has gone before.
+Prices have _meanings_. They express _values_. To understand the meanings
+of prices, we must know what the values mean. There is one further point in
+this connection which is so important that we shall give a separate chapter
+to it.
+
+FOOTNOTES:
+
+[210] _Vide supra_, chaps. V and XI.
+
+[211] _Natural Value_, _passim_.
+
+[212] Mill's self-congratulation on having written two books of his
+treatise without taking up the theory of value has been commented on by
+many economists. He was able to do this, because value theory meant price
+theory for him. Value theory in the sense of the theory of the forces of
+social control and motivation does appear in plenty in Mill's first two
+books, and also the wealth concept, which he connects with the idea of
+value, and a quantitative value concept, not formally defined, but probably
+all the more useful on that account. It was a sound instinct that led Mill
+to take up the problem of distribution before taking up the problem of
+"value." Really, in discussing distribution as he did, he was making a very
+real contribution to the ultimate value problem.
+
+[213] _Value and Distribution_, p. 451.
+
+[214] _Vide supra_, chap. IV.
+
+
+
+
+CHAPTER XIX
+
+THE THEORY OF VALUE AND THE SOCIAL OUTLOOK. SUMMARY
+
+
+The belief that social optimism and social pessimism are in an essential
+way linked with the theory of value is one that finds expression in a good
+many writers. The socialist theory of value is supposed to serve as a
+condemnation of the existing social _regime_; Professor Clark's system of
+value and distribution is often interpreted as justifying an optimistic
+outlook. This view is expressed by Professor Frank Fetter, for one, who
+especially stresses this aspect of value theory.[215] Professor Joseph
+Schumpeter, in his article on social value several times mentioned,[216]
+indicates that an optimistic social outlook is a necessary corollary of the
+theory of social value. Wieser's objection to the doctrine that economic
+value signifies social importance[217] seems to be based on the belief that
+the doctrine means, not merely that society is responsible for the existing
+value situation, but also that that situation is consequently a just and
+righteous one. And the same notion seems to be, in part at least, the
+inspiration of Professor Davenport's attack in his recent article in the
+_Quarterly Journal_.[218]
+
+It is not necessary to discuss here the question as to whether Professor
+Clark means that his theory should be so interpreted.[219] What I wish to
+insist upon is that no implication, either optimistic or pessimistic, as to
+the existing social order, can be drawn from the theory defended in this
+book. Whether or not economic values in particular cases correspond with
+ethical values, whether or not goods are ranked on the basis of their
+import for the ultimate welfare of society, and the extent to which this is
+the case, will depend on the extent to which the ethical forces in society
+prevail over the anti-ethical forces. The theory as such is neutral. Assume
+our existing society, modified in the one particular that competition shall
+henceforth be perfectly free, and still the conclusion does not follow.
+Idle sons of our multimillionaires may inherit ill-gotten wealth, may
+invest it and draw an endless income from it. With this income to back
+their desires, they may make the services of panders worth more than the
+services of statesmen and inventors. The values of goods depend on the more
+fundamental values of men, even though the values of men, under abstract
+economic laws, depend upon the value productivity of their labor or their
+possessions. The theory is a theory of economic value, even though the
+tremendous influence of ethical and other values be recognized as entering
+into economic values. They may be overpowered by opposing forces. The
+theory is a general theory, and holds for a decadent as well as for an
+improving society; for a society where justice reigns, if such a society
+there be, and for a society where corruption is rampant, and wolves prey.
+The justification of the existing social order is to be sought
+elsewhere--the theory of economic value, as such, does not contain it.
+
+       *       *       *       *       *
+
+The main steps of our argument may be briefly recapitulated here: Value is
+a quantity, socially valid; value is not logically dependent upon exchange,
+but is logically antecedent to exchange; a circle in reasoning is involved
+if the relative conception of value be treated as ultimate; the Austrian
+theory, and the cost theory, and combinations of the two, all fail alike to
+lead us to an ultimate quantity of value; they fall into another circle,
+that of explaining value in terms of value, if they attempt to do so; the
+defect is in the highly abstract nature of the determinants of value which
+these theories start from; they abstract the individual mind from its
+connection with the social whole, and then abstract from the individual
+mind only those emotions which are directly concerned with the consumption
+and production of economic goods; this abstraction is necessitated by the
+individualistic, subjectivistic conception of society, which, growing out
+of the skeptical philosophy of Hume, has dominated economic theory ever
+since; present day sociology has rejected this conception of society, and
+has reestablished the organic conception of society in psychological
+(rather than biological) terms, which make it possible to treat society as
+a whole as the source of the values of goods; this does not obviate the
+necessity for close analysis, nor does it, in itself, solve the problem,
+but it does give us an adequate point of view; the determinants of value
+include not only the highly abstract factors which the value theories here
+criticized have undertaken to handle arithmetically, but also all the other
+volitional factors in the intermental life of men in society--not an
+arithmetical synthesis of elements, but an organic whole; legal and ethical
+values are especially to be taken into account in a theory of economic
+value, particularly those most immediately concerned with distribution; the
+theory of value and the theory of prices are to be sharply distinguished.
+
+The function of economic values is the motivation of the economic
+activities of society. Value as treated by the cost theories, or value as a
+sum of money costs, is a blind thing, a product rather than an end, and
+fails utterly as a guiding, motivating principle for economic activity. It
+is the merit of the Austrian School to have pointed this out. But the
+abstract individual factors which the Austrians have substituted are just
+as helpless in explaining the motivation of social activity. Every man's
+course is made for him far more by outside forces than by his own
+individual motives. Economic activity in society is an intricate, complex
+thing, for the motivation of which no individual's motives can suffice. If
+motivated at all its guidance comes from something superindividual, and
+that something is social value. Ends, aims, purposes, desires, of many men,
+mutually interacting and mutually determining each other, modifying,
+stimulating, creating each other, take tangible, determinate shape, as
+economic values, and the technique of the social economic organization
+responds and carries them out.
+
+THE END
+
+FOOTNOTES:
+
+[215] _Principles of Economics_, New York, 1905, pp. 415 _et seq._
+
+[216] "On the Concept of Social Value," _Quar. Jour. Econ._, 1909, pp.
+222-23.
+
+[217] _Nat. Val._, p. 52, n. Quoted _supra_, chap. I.
+
+[218] "Social Productivity _vs._ Private Acquisition," _Quar. Jour. Econ._,
+Nov., 1910, pp. 112-13. "Economic productivity is not a matter of piety or
+merit or deserving, but only of commanding a price. Actors, teachers,
+preachers, lawyers, prostitutes, all do things that men are content to pay
+for. So wages may be earned by inditing libels against a rival candidate,
+or by setting fire to a competitor's refinery, or by sinking spices. The
+test of economic activity in a competitive society is the fact of private
+gain, irrespective of any ethical criteria, and unconcerned with any social
+accountancy.... If whiskey is wealth, distilleries are capital items. If
+Peruna is wealth, the kettle in which it is brewed must be accepted as
+capital. Then so is the house rented as a dive; and if the house is
+productive, and is therefore capital, so, also, must the inmates be
+producers according to their kind. The test of social welfare is invalid to
+stamp as unproductive any form of wealth, or any kind of labor. If jimmies
+are capital, being productive for their purpose, so also is burglary
+productive; if sandbags, so highway robbery.... Always and everywhere, in
+the competitive _regime_, the test of productivity is competitive gain."
+
+If only my conception of social value is granted, I may safely enough
+concede Professor Davenport all the depravity he can find in society, and
+recognize that that depravity has its part in the determination of the
+concrete values. Only, I would insist, virtue as well as depravity is a
+factor in the social will, and plays its role in determining economic
+values, and motivating economic activities. Legal values are not "absolute"
+values, in the sense that everybody obeys the law, but laws as well as
+lawlessness affect economic values.
+
+It may be well at this point for me to make clear my relation to Professor
+Davenport. Throughout this book, his theories have been subject to frequent
+criticism. The obvious reason is, of course, that he has made himself the
+leading critic of the social value concept, and hence, if that concept is
+to be defended, his point of view must be met. But, if that were all, he
+would have occupied far less of our space than has been the case. The fact
+is, in my judgment, that Professor Davenport is one of the commanding
+figures in economic theory. I think no economist has even approximated the
+clearness and explicitness with which he has set forth the presuppositions
+of the view which this book opposes, and that no economist has ever
+reasoned more clearly upon the basis of these presuppositions. Professor
+Davenport thus presents the very best object of attack, if one is to
+justify the social viewpoint in economic theory. My indebtedness to him is
+marked, and I have tried to indicate the fact from time to time in notes.
+His book has aided me greatly in clarifying my own ideas, and has also
+substantially abridged my bibliographical labors. With many of his
+criticisms of existing value theory, those criticisms, especially, which
+are concerned with the internal logical contradictions of existing value
+theory, I am in hearty accord. The chief difference between us at this
+point will be, I think, that I try to go further than he has gone. And the
+fundamental differences between his view and mine grow out of the different
+psychological, philosophical, and sociological presuppositions with which
+we start. I feel that the individualistic method of approaching the value
+problem is foredoomed, provided it be logically carried out, and I think
+Professor Davenport has logically carried it out!
+
+[219] I regret exceedingly that Professor Clark's absence from Columbia
+University during the academic year, 1910-11, has prevented my discussing
+this, and a host of other questions raised in this book, with him.
+
+
+
+
+INDEX OF NAMES
+
+
+Adams, T. S., 120, n.
+
+Anaximander, 60.
+
+Anaximenes, 60.
+
+Aristotle, 61, 101.
+
+Austrian School, 7, 8, 16, n., 17, 28, 29, 30, 31, 38, n., 39, 40, 41,
+chap. VI, 49, 108, 113, 119, 121, 125, 126, 152, n., 188-89, 192, 197, 198.
+
+
+Baldwin, M., 15, n., 56, 69, n., 73, 74, n., 75, 80, 84, 95, n., 167.
+
+Berkeley, G., 62.
+
+Boehm-Bawerk, E. von, 7, 29, 31, n., 37-39, 40, 44, n., 49, n., 121,
+152, n., 192.
+
+Bradley, F. H., 65, n.
+
+Buckle, H. T., 153.
+
+Bullock, C. J., 4.
+
+
+Cairnes, J. E., 65, n., 177.
+
+Carey, H. C., 73.
+
+Carver, T. N., 16, 27, n.
+
+Clark, J. B., 3, 4, 5, 6, 7, 8, 13, 16, 30, n., 31-33, 39, chap. VII,
+65, 139, n., 143-44, 152, n. 156, 165, 173, 174, 194, 196.
+
+Clow, F. R., 20, n.
+
+Commons, J. R., 157, n.
+
+Comte, A., 73.
+
+Conrad, J., 15, n., 127, n.
+
+Cooley, C. H., 56, 69, n., 77 _et seq._, 84, 157.
+
+
+Darwin, Charles, 63.
+
+Davenport, H. J., 6, 21, 22, n., 23, 27, n., 37, 41, 42, 66, 71, n., 87-89,
+98, 113, n., 121, n., 122, 133, n., 140, n., 142, n., 175, n., 182, 191,
+194, 195, n.
+
+DeGreef, G., 72-76.
+
+DesCartes, Rene, 62, 63, 81.
+
+Dewey, J., 65, n., 68, n., 84, n., 95, n., 96, n., 100, 168, n.
+
+Draper, J. W., 72.
+
+Durkheim, E., 117, n.
+
+
+Edgeworth, F. Y., 25.
+
+Ehrenfels, C., 94, 98, 106, n., 108, n., 110, n., 111, n.
+
+Elwood, C. A., 56, n., 76, n., 84, n.
+
+Ely, R. T., 17, n., 42, 118, n.
+
+English School, 17, 38, n., 47, 121, 164, 165, 166, 188, 192.
+
+
+Fetter, F., 194.
+
+Fisher, I., 17, 26, n., 43, n.
+
+Flux, A. W., 42, 120, n.
+
+
+George, Henry, 16.
+
+Giddings, F. H., 75, n., 82, 83.
+
+Goethe, J. W. von, 70.
+
+Gompers, S., 190.
+
+
+Hadley, A. T., 15, 42.
+
+Hayden, E. A., 56, n.
+
+Hayes, E. C., 155, n.
+
+Hegel, G. W. F., 63.
+
+Hermann, F. B. W. von., 38, n.
+
+Hesiod, 73.
+
+Hobson, J. A., 47, 49.
+
+Hume, David, 62, 63, 198.
+
+
+Ingram, J. K., 3, n.
+
+
+James, Wm., 65, n., 68, n., 184, n.
+
+Jevons, W. S., 4, 7, 25, 28, 29, 31, n., 34-36, 39, 40, 41, 42, 65, 73,
+176, n.
+
+Johnson, A. S., 140, n.
+
+
+Kallen, H. M., 94, n.
+
+Kant, Immanuel, 25, 63, 67.
+
+King, Gregory, 169.
+
+Kinley, D., 4, 5, 27, n., 120, n.
+
+Kreibig, J. C., 94, n.
+
+
+Laughlin, J. L., 20, n., 26, 27, n., 49, n.
+
+Law, John, 171.
+
+Lilienfeld, P. von, 74.
+
+Lloyd, W. F., 176, n.
+
+Locke, John, 62.
+
+
+Mackenzie, J. S., 111, n.
+
+Malthus, T. R., 139.
+
+Marshall, A., 41, 42, 49, 65, 140, n., 177, 182, 185, n.
+
+Marx, Karl, 3, n., 15, 16, 26, 153.
+
+Meinong, A., 94, 95, n., 98, n., 99, 102, 111, n.
+
+Merriam, L. S., 4, 5, 27, n.
+
+Mill, James, 63, n.
+
+Mill, J. S., 37, 63, n., 74, n., 138, 143, 172, 177, 191.
+
+Montague, W. P., 94, n.
+
+
+Novikow, J., 74.
+
+
+Pantaleoni, M., 19, n.
+
+Pareto, V., 3, n., 20, n., 25, 31, n., 34, 36-37, 39, 40, n., 45, n., 65,
+154, n.
+
+Patten, S. N., 42, 175.
+
+Paulsen, Friedrich, 69, n., 85, n., 95, n., 97, n.
+
+Perry, R. B., 70, n.
+
+Pierson, N. G., 41.
+
+Plato, 61, 184.
+
+
+Ricardo, David, 53, n., 175, 176.
+
+Rodbertus, J. K., 3, n., 8, 9.
+
+Ross, E. A., 4, 5, 117, n., 148, n., 173.
+
+Rousseau, J. J., 63.
+
+Royce, J., 117, n.
+
+
+Santayana, G., 96.
+
+Sax, E., 8.
+
+Schaeffle, A., 42, 120.
+
+Schiller, F. C. S., 68, n.
+
+Schumpeter, J., 6, 140, n., 175, 181, 194.
+
+Scott, W. A., 120, n., 180, n.
+
+Seligman, E. R. A., 4, 5, 6, n., 13, 16, 19, 20, n., 26, 32, n., 87, 145,
+153, chap. XVI, 176, n., 177, n., 191.
+
+Senior, N. W., 26.
+
+Shaw, C. C., 95, n.
+
+Simiand, F., 74.
+
+Simmel, G., 19, n., 20, n., 94, n., 95.
+
+Skelton, O. D., 15, n.
+
+Slater, T., 95, n.
+
+Small, A. W., 63, n.
+
+Smith, Adam, 63, 176.
+
+Socrates, 61.
+
+Sophists, 60.
+
+Spencer, Herbert, 72, 83.
+
+Spinoza, Benedict de, 62, 63.
+
+Stuart, H. W., 68, n., 95, n., 168, n.
+
+
+Tarde, G., 4, 16, 56, 95, 97, n., 103, 118, n., chap. XII, 148, n.,
+172, 179.
+
+Taylor, W. G. L., 16, n., 23.
+
+Thackeray, W. M., 66.
+
+Thales, 60.
+
+Tufts, J. H., 95, n.
+
+Tuttle, C. A., 4.
+
+
+Urban, W. M., 70, n., 95, 97, n., 98, n., 99, 101, n., 103, 108, n., 110,
+n., 116, chap. XII, 167, n.
+
+
+Veblen, T., 30, n., 65.
+
+
+Wagner, Adolph, 3, n., 9.
+
+Walker, F. A., 25, 26, 137.
+
+Wicksteed, P. H., 111, n., 113, n.
+
+Wieser, F. von, 8, 16, 17, 18, 28, 29, 31, n., 34, 35, 40, 46, 47, 49, n.,
+120, n., 132, 133, 136, 137, 143, 190, 194.
+
+Wundt, W., 85, n.
+
+
+The Riverside Press
+
+CAMBRIDGE. MASSACHUSETTS
+
+U. S. A
+
+
+
+
+
+
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