Social Value Part 4

[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 ill.u.s.tration of this general conclusion as to the significance of the results based on the individualistic a.n.a.lysis 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, Bohm-Bawerk's view, "Grundzuge," Conrad's _Jahrbucher, N. F._, XIII, 1886, pp. 516 _et seq._

CHAPTER VI

THE VICIOUS CIRCLE OF THE AUSTRIANS

The great and permanent service of the Austrian a.n.a.lysis 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 a.n.a.lysis 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 a.s.sumes 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 quant.i.ty 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 a.n.a.lysis 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 a.n.a.lyzing 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 a.n.a.lysis attempt nothing more than the determination of particular prices, one at a time, on the a.s.sumption 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 a.s.sumption 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 a.n.a.lysis 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 quant.i.tative 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 quant.i.ty 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_. a.s.sume capital constant, introduce or subtract a small quant.i.ty 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 ill.u.s.trated 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 apt.i.tude, 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, a.s.suming 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 a.n.a.lysis just criticized is that it has not been an a.n.a.lysis 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 a.n.a.lysis 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_ Bohm-Bawerk, "Ultimate Standard of Value," _Annals of the American Academy_, vol. V; also his "Grundzuge," 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 quant.i.tative 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 compet.i.tive labor (a.s.suming 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 quant.i.ty of labour, or, which is the same thing, the value of the produce of a greater quant.i.ty 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.