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Title: Social Value - A Study in Economic Theory Critical and Constructive
Author: Anderson, Benjamin M. (Benjamin McAlester), 1886-1949
Language: English
As this book started as an ASCII text book there are no pictures available.

*** Start of this LibraryBlog Digital Book "Social Value - A Study in Economic Theory Critical and Constructive" ***





_Instructor in Political Economy Columbia University_

The Riverside Press Cambridge



_Published November 1911_







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

     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

     5. The true relation of the central government to

     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.

_University of Chicago, Chairman_.

_Columbia University_.

_University of Michigan_.

New York City.

_Harvard University_.


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.


May, 1911.





    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 Böhm-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




    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



    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



    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--Böhm-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



    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, Böhm-Bawerk, Wieser, Pierson, Patten, Hadley,
    Ely, Schaeffle, Flux, Marshall, and Davenport              40



    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



    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




    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



    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




    Economic value a species, coördinate with ethical,
    legal, æsthetic, 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,
    æsthetic--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



    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



    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



    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



    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



    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



    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



    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



    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



    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






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

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, Böhm-Bawerk:--

     Man pflegt den objektiven Tauschwert im Gegensatz zu
     dem auf individuellen Schätzungen beruhenden
     subjektiven Wert häufig auch als den
     _volkswirtschaftlichen Wert_ der Güter zu bezeichnen.
     Ich halte diesen Gebrauch für 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
     könne, dass er also das volks- und
     sozialwirtschaftliche Wertphänomen _per eminentiam_
     sei, so wäre dagegen nichts zu erinnern. Gewöhnlich
     mischt sich aber mit jener Benennung auch die
     Vorstellung, dass der Tauschwert der Wert sei, den ein
     Gut _für_ die Volkswirtschaft habe. Man deutet ihn als
     ein über den subjektiven Urteilen der einzelnen
     stehendes Urteil der Gesellschaft, welche Bedeutung ein
     Gut für sie im ganzen habe; gewissermassen als
     Werturteil einer objektiven höheren Instanz. Dies ist

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 £100 is not only ten times as dear as B
     whose market price is £10, 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

Sax, likewise, expresses his dissent:--

     Da für 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


[1] The value concept of Marx is not, strictly speaking, a social value
concept. _Cf._ Pareto, V., _Cours d'Économie 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 gegenüber
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 für 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
für 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] Böhm-Bawerk, "Grundzüge der Theorie des wirtschaftlichen Güterwerts,"
Conrad's _Jahrbücher_, 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.





     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

     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

     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

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

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.


[15] Clark, J. B., "Ultimate Standard of Value," _Yale Review_, 1892. p.

[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 coöperated 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'Économie 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

[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

[33] _Political Economy_, New York, 1888, p. 84.

[34] _Cours d'Économie 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,



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 Böhm-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.


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

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

[48] This law is first set forth by Professor Clark in an article in 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.



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 établit l'égalité des deux ophélimités pour lui, et
que le laboureur fait de même, mais qu'il n'y a aucun rapport entre
l'ophélimité du vin pour le vigneron et pour le laboureur, ni entre
l'ophélimité du blé pour le vigneron et pour le laboureur. Il faut toujours
se rapeller ce caractère subjectif de l'ophélimité." (21.) Now no quantity
of value, irrespective of the 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'échange_," a ratio between two
goods. (30.) The older term, "_puissance d'achat_," power in exchange,
which John Stuart Mill makes synonymous with value in exchange, is, at
bottom, nothing but a vague conception of ophelimity. (30.) The two
conceptions, ratio of exchange and ophelimity, are to be sharply
distinguished, power in exchange is ruled out as a vague and confused
conception, and value as an objective quantity does not appear at all.

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

The same may be said for Böhm-Bawerk, so far as his formal analysis goes.
It is true that he recognizes the existence of an "objective value in
exchange"[57] in addition to "subjective value" and "subjective value in
exchange," and in addition to price,[58] but he makes no effort to exhibit
its nature, or to show its origin. His study has to do with individual
subjective ratios, between the marginal utilities of two goods, and the
market ratio, or price, that results from the meeting of these individual
ratios--_not utilities_--in the market. The nature of his objective
exchange value is expected to become clear, somehow, from this surface
determination of price:--

     Exchange Value is the capacity of a good to obtain in
     exchange a quantity of other goods. Price is that other
     quantity of goods. But the laws of these two coincide.
     So far as the law of price explains that a good
     actually obtains such and such a price, and why it
     obtains it, it affords at the same time the explanation
     that the good 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), Böhm-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]


[49] _Theory of Political Economy_, 3d edition, p. 14.

[50] _Op. cit._, pp. 76-84.

[51] _Ibid._, p. 83.

[52] _Op. cit._, p. 81.

[53] _Cours d'Économie Politique_, vol. I, pp. 1-40. The numerals in the
text refer to pages in this volume.

[54] _Value and Distribution_, p. 444.

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

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

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



Much of the foregoing would be needless were it not for the fact that there
has been, and is, in the writings of the Austrians and those who have
followed them, a confusion of two very different things: on the one hand,
the curve of utility for a single individual of a given good, measured in
terms of money, on the assumption that the marginal utility of money
remains constant to him; and, on the other hand, the demand-price curve of
that commodity for a whole community or a "trading body,"[61] made up of
many individuals, differing in wealth and in tastes.[62] The former curve
does express a diminishing scale of absolute feeling-magnitudes,[63]
concerned with the consumption of the good. The latter does not. The latter
is not necessarily a diminishing utility curve at all, for the poor man
whose price offer is lowest may easily desire the good more intensely than
does the rich man whose demand price is highest. These confusions, in the
writings of Böhm-Bawerk and Wieser, especially, have been adequately
commented on by 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]


[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, Böhm-Bawerk's view,
"Grundzüge," Conrad's _Jahrbücher, N. F._, XIII, 1886, pp. 516 _et seq._



The great and permanent service of the Austrian analysis is in the fact
that it looks for the explanation of value--a psychical fact--in human
minds. Its essential defect is that it takes only a small part of the human
mind for that explanation. It makes two abstractions, neither of which is
allowable: first, it abstracts the "individual mind" from its vital and
organic union with the 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 coördinate
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.


[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.



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

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

     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.


[82] See _inter alia_ Böhm-Bawerk, "Ultimate Standard of Value," _Annals of
the American Academy_, vol. V; also his "Grundzüge," 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

[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.

[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 Économique_, 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.





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

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 mediæval 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

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, naïvely 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 naïve, 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 allgemeingültig_" 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.


[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,

[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.



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 à 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

     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 _élite_
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

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 _débris_ 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 coöperating
     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
     coöperation, 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_,

(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

       *       *       *       *       *

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.


[101] Baldwin, Mark, _Social and Ethical Interpretations_, 1906 ed., pp.

[102] _Cf._ John Stuart Mill's _Logic_, book VI, on the nature of social

[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

[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,
preëvolutionary 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 _Völker-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 coöperation; 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, coöperatively, 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_.





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, æsthetics, 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 æsthetic 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, kinæsthetic 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

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 reëxamination 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 reënforce 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 (_cæteris 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.


[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 Économique_, 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 économie 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.



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

     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 naïve and unreflective
     experience the feelings with such objectivity of
     reference are spoken of as predicates of the objects

And our theory carries us even further than Professor Urban cares to go
here. Naïve 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

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 Böhm-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.


[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 "mediæval 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 Économique_, 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._,

[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] "Grundzüge," etc., Conrad's _Jahrbücher_, 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.



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 Économique_, 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-vérité_,"
"_valeur-utilité_," and "_valeur-beauté_." To ideas, to goods (in a generic
sense of the term), and to things considered as sources "_de voluptés
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 _élite_ 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_," "_mérites_," 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_," "_considération_," "_compétence_," "_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 coördinate 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 mètre_," 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 coöperate, 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.


[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 désir: possibilité de leur mésure," _Rev.
philosophique_, vol. X (1880), pp. 150, 264. "La psychologie en économie
politique," _Ibid._, vol. XII (1881), pp. 232, 401. "Les deux sens de la
valeur," _Rev. d'économie politique_, 1888, pp. 526, 561. "L'idée de
valeur," _Rev. politique et littéraire (Rev. Bleue)_, vol. XVI, 1901.
_Psychologie Économique_, Paris, 1902.

[162] _Cf._ Conrad, _Grundriss zum Studium der politischen Oekonomie_,
Jena, 1902, Erster Teil, p. 10.



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

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 coördinate 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, coördinate 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 '_cæteris paribus_.'"[172] If ours were a
stagnant civilization, this procedure might be safe, but in a highly
"dynamic" society, where laws, morals, class relations, the very
fundamentals of organization, are being made the subjects of scrutiny,
agitation, class struggle, etc., are being subjected to "transvaluations,"
and are continually changing them with the principles, machinery and
results of distribution, and so one of the biggest factors lying back of
economic values, no study of value can afford to ignore them.

It is of course recognized that a purely ethical and legal theory of
distribution would be as much an abstraction as the "_reinwirtschaftlich_"
theory of distribution--and probably a much less useful abstraction. Either
abstraction is legitimate, if it do not seek to abolish the other factors.
We may safely enough define a set of legal and moral values, concerned with
the organization of society and industry, and, assuming them constant, a
sort of frozen framework, let man's values with reference to the immediate
consumption and production of economic goods ("utilities and costs" in
current phrase) vary, and see what the consequences, both on the ranking of
men, and the ranking of goods, will be. Or, assuming "utilities and costs"
constant, we may let the legal and moral values vary, and see what
consequences would follow. Or, assuming all other factors constant, we may
vary the size of the population, or vary the proportions between labor and
productive instruments, or between land and population, or pick out any
other factor of the concrete situation we happen to be interested in, as
the "standard of living," and let it change, and see what consequences
flow therefrom. But, in doing this, we must not forget that the other
factors remain essential, equally potent in the general situation with the
one on which we have centred our attention. And we must not forget that
changes in one factor, while we may in thought allow it to occur alone,
cannot occur without bringing in changes in the others as well. An increase
in the number of laborers, e.g., may also mean an increase 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.


[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

[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 Nationalökonomie_
(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 für Volkswirtschaft_, etc.,
1910, under the title, "Das Wesen der Wirtschaftskrisen." In this Professor
Schumpeter narrows, by a process of exclusion, the conception of what would
constitute a "pure economic" explanation of crises virtually to a
pinpoint--and then fails to carry out his program of giving us a
"_reinwirtschaftlich_" theory. For, in order to get 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._



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]


[175] _Vide_ Ross, _Foundations of Sociology_, chapter on the "Sociological
Frontier of Economics," and Tarde, _Psychologie Économique_, _passim_.

[176] It may be objected that instead of "breaking the circle," we have
simply widened it--that economic values, working through other forms of
value, affect other economic values still. In a sense, of course, this is
true. In any 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.
Böhm-Bawerk recognizes very well that the charge of circular reasoning, if
it could be brought home to the Austrians, would vitiate their system.
_Vide_ "Grundzüge," Conrad's _Jahrbücher_, 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'Économie
Politique_, defines economics in terms of the narrow abstraction which he
has chosen for the explanation phenomenon, as the "science of ophelimity"
(p. 6), and ophelimity is "an entirely subjective quality" (p. 4). There
are two objections to this procedure: you neither completely explain your
problem phenomena, nor do you exhaust the possibilities of your explanation
phenomena--for the same sort of mental facts have bearing on ethical and
other social problems as well as on economic problems.

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



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

Social values may be transformed into other forms of social value--as heat
may be transformed into electricity, or into motion, or motion into heat,
etc. Professor Clark, with his distinction between "capital" and "capital
goods," has shown how economic value may undergo constant transformation,
as to its physical embodiment, and yet remain generically the same. But the
possibilities of transformation are not confined to the economic sphere. We
may generalize the notion. A man may use economic value to attain political
power; having the political power, he may use it to get economic 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, coöperating 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 mediæval English manor, many
questions like these were settled by vote of the manor court.

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

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


[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.



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

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

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

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, æsthetic, 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.


[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 économie politique," _Rev. Philosophique_, vol.
XII, p. 238.



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 même c'est par
des vols où se montre la perversion d'un esprit sectaire, l'aberration et
la profondeur de ses convictions passionées."

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

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

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 mediæval 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

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


[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
Michælmas 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 Économique_, 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.



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 Böhm-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.


[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.



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 _régime_; 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 reëstablished 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.



[215] _Principles of Economics_, New York, 1905, pp. 415 _et seq._

[216] "On the Concept of Social Value," _Quar. Jour. Econ._, 1909, pp.

[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 _régime_, 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 rôle 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.


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.

Böhm-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, René, 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.

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