THE LIBRARY OF THE UNIVERSITY OF CALIFORNIA LOS ANGELES PROFESSOR JOHN ELOF BOODIN MEMORIAL PHILOSOPHY COLLECTION & economic THE CAUSE AND EXTENT OF THE RECENT INDUS- TRIAL PROGRESS OF GERMANY. By Earl D. Howard. THE CAUSES OF THE PANIC OF 1893. By William J. Lauck. INDUSTRIAL EDUCATION. By Harlow Stafford Person, Ph.D. FEDERAL REGULATION OF RAILWAY RATES. By Al- bert N. Merritt, Ph.D. SHIP SUBSIDIES. An Economic Study of the Policy of Sub- sidizing Merchant Marines. By Walter T. Dunmore. SOCIALISM: A CRITICAL ANALYSIS. By O. D. Skelton. INDUSTRIAL ACCIDENTS ANDTHEIR COMPENSATION. By Gilbert L. Campbell, B. S. THE STANDARD OF LIVING AMONG THE INDUSTRIAL PEOPLE OF AMERICA. By Frank H. Streightoff. THE NAVIGABLE RHINE. By Edwin J, Clapp. HISTORY AND ORGANIZATION OF CRIMINAL STATIS- TICS IN THE UNITED STATES. By Louis Newton Robinson. SOCIAL VALUE. By B. M. Anderson, Jr. HOUGHTON MIFFLIN COMPANY BOSTON AND NEW YORK XI SOCIAL VALUE SOCIAL VALUE A STUDY IN ECONOMIC THEORY CRITICAL AND CONSTRUCTIVE BY B. M. ANDERSON, JR., PH.D. Instructor in Political Economy Columbia University BOSTON AND NEW YORK HOUGHTON MIFFLIN COMPANY 1911 COPYRIGHT, 1911, BY HART, SCHAFFNER ft MARX ALL RIGHTS RESERVED Published November zgii TO MY FATHER BENJAMIN M. ANDERSON OF COLUMBIA, MISSOURI MY FIRST TEACHER OF POLITICAL ECONOMY PREFACE THIS series of books owes its existence to the generosity of Messrs. Hart, Schaffner, and Marx of Chicago, who have shown a special interest in directing the attention of American youth to the study of economic and commercial subjects, and in encouraging the systematic investigation of the problems which vitally affect the business world of to-day. For this purpose they have dele- gated to the undersigned Committee the task of selecting topics, making all announcements, and awarding prizes annually for those who wish to compete. In the year ending June 1, 1910, the following topics were assigned : 1. The effect of labor unions on international trade. 2. The best means of raising the wages of the unskilled. 3. A comparison between the theory and the actual practice of protectionism in the United States. 4. A scheme for an ideal monetary system for the United States. 5. The true relation of the central government to trusts. viii PREFACE 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 ap- proval 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, com- posed chiefly of graduates of American colleges. The present volume was awarded the second prize. PROFESSOR J. LAURENCE LAUGHLIN, University of Chicago, Chairman. PROFESSOR J. B. CLARK, Columbia University. PROFESSOR HENRY C. ADAMS, University of Michigan. HORACE WHITE, ESQ., New York City. PROFESSOR EDWIN F. GAY, Harvard University. A NOTE THE following study is the outgrowth of investi- gations 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 theor- ists concerning the general theory of value, be- came very evident in the course of this investiga- tion; 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 prob- lem of value, laid aside for a time, forced itself upon me in the course of my teaching: my stu- dents 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 linsolved. 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 Fac- ulty 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 depart- ment of philosophy at the University of Califor- nia. 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 Pro- fessors Seligman and Dewey is, in part, indi- cated 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 revis- ion at every stage. My wife's services, in criti- cism, in bibliographical work, and in the mechani- cal 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 Uni- versity during the year 1910-11, I have been unable to talk over my criticisms with him, and so may have misinterpreted him at points. Of course, there is a similar danger with reference to every other writer mentioned in the book, but the reader will not be likely to think, in the case of others, that the interpretations have been passed on by the writers discussed, in advance of publication. I must also mention here Professor H. J. Davenport, whose name occurs frequently in the following pages. Chiefly he has evoked criticism in this discussion, but it goes without saying that his Value and Distribution is a most significant work in the history of economic theory, and my indebtedness to it will be manifest. THE AUTHOR. COLUMBIA UNIVERSITY, May. 1911. ANALYTICAL TABLE OF CONTENTS PART I. INTRODUCTION CHAPTER I PROBLEM AND PLAN OF PROCEDURE Social Value concept recently become important, chiefly in America, and primarily through the influence of Professor J. B. Clark Value and "social marginal utility" Relation of social- value theory to Austrian theory: Professor Clark's view; views of Bb'hm- 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 the- ory 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 soci- ology presupposed by current economic theory; reconstruction of these presuppositions; on the basis of the reconstruction, a posi- tive theory of social value 3 PART II. CRITIQUE OF CURRENT VALUE THEORY CHAPTER II FORMAL AND LOGICAL ASPECTS OF THE VALUE CONCEPT Value as ideal, and value as market fact Value as absolute, and value as relative Value as quantity Relation between quan- tity and quality Relative conception of value involves a vi- cious circle, if treated as ultimate Every "relative value" im- plies 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 doc- trine of relativity Value in current economic usage: value and wealth; money as a "measure of values " 13 CHAPTER m VALUE AND MARGINAL UTILITY Individualistic method of Jevons and the Austrians Such a method, applied to value problem in concrete social life, yields, not quantities of value, but rather, particular ratios between such quantities Value cannot be identified with marginal utility of a good to a marginal individual, even though we assume the com- mensurability and homogeneity of human emotions Clark's Law . 28 xiv CONTENTS CHAPTER IV JEVONS, PARETO AND BOHM-BAWERK When individualistic methods and assumptions are pushed to the extreme, the problem of a quantitative value becomes still more hopeless Jevons' psychological and epistemological assump- tions No objective value quantity for Jevons The same true of Pareto BShm-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 as- sumes a whole system of values predetermined 34 CHAPTER V DEMAND CURVES AND UTILITY CURVES Constant confusion of demand curves and utility curves in current economic literature has made necessary much of the foregoing criticism Confusions in the writings of Jevons, Bohm-Bawerk, Wieser, Pierson, Patten, Hadley, Ely, Schaeffle, Flux, Marshall, and Davenport 40 Extreme abstractness of the Austrian theory Abstraction legiti- mate and necessary, but must not be carried so far that the expla- nation phenomena are obliged to include the problem phenomenon Austrians explain value in terms of value, a vicious circle Circle explicit in Wieser Also explicit in Hobson's attempt to combine Austrian theory with cost theory of English School . 45 CHAPTER VII PROFESSOR CLARK'S THEORY OF SOCIAL VALUE All attempts to explain value in terms of the highly abstract factors of individual utility and individual cost, or any combination of them, must become similarly entangled Austrians have shown this of English theory Professor Clark's value theory, set forth in the Distribution of Wealth, intended to justify social value con- cept, really uses only these abstract individual factors, combined in arithmetical sums, and similarly falls into a circle Differ- ences 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 psycho- logy, will afford the basis for an organic conception of society, and a valid doctrine of social value 49 CONTENTS xv PART m. CHAPTER VIII THE PHILOSOPHICAL AND PSYCHOLOGICAL PRESUPPOSITIONS Connection between social philosophy and metaphysics and episte- mology always close Three stages in history of philosophy: dog- matic, 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 sociologi- cal monadism: Marshall, Pareto, Jevons, Veblen, Davenport Critique of sociological monadism, from standpoint of episte- mology and psychology 59 CHAPTER IX THE SOCIOLOGICAL PRESUPPOSITIONS Conceptions of the social unity: mechanical, biological, psychologi- cal DeGreef's criticism of mechanical and biological analogies Hierarchy of sciences: Comte and Baldwin Baldwin's psy- chical 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 So- cial Mind Summary of sociological doctrine Critique of Davenport 72 PART IV. A POSITIVE THEORY OF SOCIAL VALUE CHAPTER X VALUE AS GENERIC THE PSYCHOLOGY OF VALUE. Economic value a species, coordinate with ethical, legal, aesthetic, and other values Psychology of value, as manifested in indi- vidual 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; Ehrenf els and Davenport; Urban and Meinong "Presupposi- tions" 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 judg- ment: 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 '^functional aspect: the func- tion 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 Com- xvi CONTENTS plementary values Rival values: two cases: qualitatively com- patible, and qualitatively incompatible values In first case, quantitative marginal compromise often possible: generalization ef Austrian analysis So-called "absolute values" ("absolute" here used as in history of ethics) No sharp lines between dif- ferent sorts of values, as ethical, economic, aesthetic Differ- ent sorts of values do not constitute self-complete, separate sys- - terns Generalization of notion of price Suggestions as to analogues in the field of the social values 93 CHAPTER XI RECAPITULATION THE SOCIAL VALUES FUNCTIONS OF THE VALUE CONCEPT IN ECONOMICS Conclusions reached both in economic analysis and in sociological analysis point to values which correspond to no individual values, great social forces of motivation To individual, economic, legal, and moral values appear as external forces, over which his control is limited, and to which he must adapt his individual behavior Economic theory, often unconsciously, has assumed objectively valid, quantitative value, and economic theory valid only on the basis of such a concept: value the homogeneous element among the diversities of physical forms of goods, by virtue of which ra- tios, sums, and percentages may be obtained among them, and comparisons made Process of "imputation" assumes such a value concept Value used by economists to explain motivation of economic activity Such a value concept essential for the theory of money Implied in the term, "purchasing power" Such a concept has never been justified, but economists, more concerned about practical results than logical consistency, have found it essential, and used it Impossible to develop a social quantity by synthesis of abstract individual elements Correct procedure the reverse of this 115 CHAPTER XH SOCIAL VALUE: THE THEORIES OF URBAN AND TARDE Neither Urban nor Tarde primarily concerned with economic value Urban's important contributions Insists on conscious feel- ing as essential for social value But feeling may vary hi intens- ity 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 arithme- tic 124 CHAPTER XIII ECONOMIC SOCIAL VALUE How get out of Austrian circle? Temporal regressus vs. logical analysis of the concrete whole of the Social Mind Even in CONTENTS xvii Wieser's "natural" community, psychic elements other than "marginal utility" significant for the determination of economic values, especially legal and moral values concerned with distribu- tion 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, psy- chic forces "Pure economic" forces, working in vacua, would lead to anarchy; any concrete economic tendency depends on \ legal and moral forces quite as much as on "pure economic" / forces Illustrations 132 CHAPTER XIV ECONOMIC SOCIAL VALUE (continued) Abstract elements of the Austrian and English schools, individual "utilities" and "costs," have their place in the concrete whole of social intermental life Social causes largely determine them But this not enough for a theory of social value Intensity of a , man's feelings or desires has no relation whatever to value in mar- ket 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 con- crete whole of social-mental life Economics has failed to profit by example of other social sciences here No social science can explain its phenomena by reference to one or two abstract factors 148 CHAPTER XV SOME MECHANICAL ANALOGIES Mechanical analogies of limited use in revealing full complexity of social control, but of use for certain purposes Our argument can be put, in part, in terms of mechanical analogies Trans- formations of social forces Illustrations Marginal equilibria among social forces Illustrations Social forces of control take different forms under different conditions Mechanical analogies useful enough for economic price-analysis Our thesis involves no radical revision of economic methodology It is rather concerned with interpretation and validation of economic methodology 156 CHAPTER XVI PROFESSOR SELIGMAN'S PSYCHOLOGICAL DOCTRINE OF THE RELATIVITY OF VALUES Professor Seligman's contributions to value theory Points of dif- ference between his views and those here maintained His psy- chological 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 xviii CONTENTS / value can come only through decrease in other values Criti-' cism: psychological diflBculties; diminution of all values in times of panics and epidemics; decrease of economic values through in- crease of religious and other values Element of truth in Pro- fessor Seligman's doctrine Relation between Professor Selig- man's view and that of Professor Clark 162 CHAPTER XVH THE THEORY OF VALUE AND THE THEORY OF PRICES Price and Preis Price broadened to include all relations between values, whether money be involved or not History of price- concept in English economics Distinction between prices and values Generalization of notion of price Measurement of beliefs, etc., in terms of money "Qualitative analysis" and "quantitative analysis" Great bulk of economic theory, and virtually all that is valid and valuable hi economic theory, has so far been in theory of prices, and not in theory of value Meth- ods of price analysis Abstract units of value Price theory and practical problems 175 CHAPTER XVIII THE THEORY OF VALUE AND THE THEORY OF PRICES (cOTl- cluded) Great work of Austrians really done hi 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 treat- ment primarily from standpoint of fundamental value theory; later theories, as a rule, chiefly concerned with more superficial, but also more exact, price analysis of distributive problems Theory of value not a substitute for detailed price analysis, but, rather, a presupposition of it Prices have meanings, which only theory of value can explain 188 CHAPTER XIX THE THEORY OF VALUE AND THE SOCIAL OUTLOOK SUM- MART 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 pessim- istic, in theory here maintained. Theory of value does not con- tarn justification of existing social order Summary of Tnain argument of book 194 INDEX OF NAMES'. . 201 PART I INTRODUCTION SOCIAL VALUE CHAPTER I PBOBLEM AND PLAN OF PROCEDURE RECENT economic literature has had much to say about "social value." The conception, while not entirely new, 1 has become important only of late years, chiefly through the influence of Pro- fessor 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 1 The value concept of Marx is not, strictly speaking, a social value concept. Cf. Pareto, V., Cours d'Economie Politique, vol. i, p. 32. Rod- bertus, 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 ent- weder 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 gegentiber 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 fur die Oesammte Siaatsvrissenschaft, 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 hisHistory 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 techno- logical, ethical, and economic categories. See p. 241. 4 SOCIAL VALUE 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. 1 Gabriel Tarde, the brilliant French sociologist, has inde- pendently developed a social value doctrine, dif- ferent in many respects from that of the Ameri- cans named, which we shall later have occasion to consider. 2 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 1 Seligman, E. R. A., Principles of Economics, New York, 1905, espe- cially 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. in; "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. m; "The Total Utility Stand- ard of Deferred Payments," ibid., vol. IV. These articles by Professors Ross and Merriam were written in the course of an interesting contro- versy between the gentlemen named. Tuttle, C. A., "The Wealth Con- cept," ibid., vol. i; "The Fundamental Economic Principle," Quarterly Journal of Economics, 1901. 1 See chapter xn. PROBLEM AND PLAN OF PROCEDURE 5 parvo what society does, as an organic whole, on a bigger scale. 1 The precise relation of social value to social marginal utility is variously stated by the writ- ers named: for Professor Clark, value is the measure of effective, or marginal, utility; 2 for Professor Seligman, social value is the expression of social marginal utility; 3 for Professors Ross, Merriam, and Kinley, value is that social margi- nal utility itself. 4 These statements are more different in words than in ideas, though some significance is to be attached to Professor Selig- man's formulation, as will later appear. This conception is a bold one. It has, more- over, never been adequately developed or criti- cized. 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, 6 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 Selig- man, 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 1 See especially Professor Clark's Essentials of Economic Theory, New York, 1907, pp. 41-42. * See especially The Philosophy of Wealth, 1892 ed., pp. 73-74. 1 Principles, pp. 179-82. 4 The general references for Ross and Merriam have been given supra. Cf. p. 62 of Dean Kinley's Money. 6 "Ultimate Standard of Value." This article is substantially the same u chap, xxiv of The Distribution of Wealth, New York, 1899. 6 SOCIAL VALUE 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 be- tween individual and social marginal utility. 1 The most searching investigation of the theory has come from unfriendly critics, among whom may be especially named Professor H. J. Daven- port, and Professor J. Schumpeter of Vienna. 2 For the purposes of this discussion, Professor Clark will be considered as the representative of 1 In his discussion of social value in the Principles, Professor Selig- man modifies a statement made in his article, "Social Elements in the Theory of Value " (Quarterly Journal of Economies, vol. xv). The two discussions are parallel in part, the former being baaed 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. 1 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 fiir Gesetzgebung, Verwaltnng und Volksvrirtschaft im Deutschen Reich, 1910, pp. 913 et seq. In the last-named article (p. 926, n.) Pro- fessor 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. PROBLEM AND PLAN OF PROCEDURE ' 7 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 Aus- trian School, with which he is sometimes asso- ciated 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. Pro- fessor Clark has pointed out, however, in the pre- face 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 Aus- trians, for their part, have rejected the concep- tion that value and social marginal utility coin- cide, or that society, as an organic whole, puts a value on goods. Thus, Bb'hm-Bawerk: Man pflegt den objektiven Tauschwert im Gegensatz zu dem auf individuellen Schatzungen beruhenden subjek- tiven Wert haufig auch als den volkswirtschaftlichen Wert der Giiter zu bezeichnen. Ich halte diesen Gebrauch fiir nicht empfehlenswert. Zwar wenn man durch ihn nichts anders hervorheben wollte, alsdassdiese Gestalt des Wertes nur in der Gesellschaft und durch die Gesellschaft hervor- treten konne, dass er also das volks- und sozialwirtschaft- liche Wertphanomen 'per eminentiam sei, so ware dagegen nichts zu erinnern. Gewohnlich mischt sich aber mil jener Benennung auch die Vorstellung, dass der Tauschwert der Wert sei, den ein Gut fiir die Volkswirtschaft habe. Man deutet ihn als ein tiber den subjektiven Urteilen der ein- zelnen stehendes Urteil der Gesellschaft, welche Bedeu- tung ein Gut fiir sie im ganzen habe; gewissermassen als 8 SOCIAL VALUE Werturteil einer objektiven hoheren Instanz. Dies ist irrefiihrend. 1 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 what- ever for an estimate of the economic importance of the goods. We must go further and find out their relation to wants. But this relation to wants can only be realised and measured individually. . . . And the question how it is possible to unite those divergent individual valuations into one social valuation, is one that cannot be answered quite so easily as those imagine who are rash enough to conclude that price represents the social estimate of value. 2 Sax, likewise, expresses his dissent: Da fur die exacte Forschung die Psyche einer fabelhaften Collectiv-Persb'nlichkeit nicht existirt, so kann der Aus- gangspunkt unserer Untersuchung auch wieder nur der Individualwerth sein. 3 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 1 B6hm-Bawerk, "Grundzflge der Theorie des wirtschaftlichen Gliter- werts," Conrad's Jahrbucher, N. F., Bd. XIII. 1886, p. 478. * Natural Value, p. 51, n. 1 Sax, Emil, Grundlegung der theoretischen Staatswirtschaft, Vienna, 1887, p. 249. PROBLEM AND PLAN OF PROCEDURE 9 of Adolph Wagner, who accepts Rodbertus' notion. 1 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 com- panion notion of social marginal cost (consider- ing the latter as a "real cost," or pain-abstinence cost, concept), unsatisfactory and unilluminat- ing. 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 indi- vidual 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 analy- sis, and a conception which present-day psycho- logical and sociological theory abundantly war- rant us in accepting. I do not desire, at the outset of a compara- tively short book, to anticipate my arguments in detail, but a statement of the plan of procedure 1 See supra, p. 3, note 1. 10 SOCIAL VALUE may aid the exposition somewhat. I shall first, through an examination of the logical necessi- ties 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 combina- tions 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 presupposi- tions of the economic theory of to-day. Criti- cizing these faulty presuppositions, we shall endeavor to reconstruct them in the light of later epistemological, psychological, and sociological doctrine, and then, on the basis of the new presuppositions, we shall endeavor to develop a truly organic doctrine of social value, and to link it with what seems valuable that is to say, the greater part in the economic theory of to-day. PART II CRITIQUE OF CURRENT VALUE THEORY CHAPTER II FORMAL AND LOGICAL ASPECTS OF THE VALUE CONCEPT The study of wealth is meaningless, unless there be a unit for measuring it. The questions to be answered are quan- titative. . . . Reciprocal comparisons give no sums. . . . Ratios of exchange alone afford us no answer to the econo- mist's chief inquiries. 1 THIS quotation from Professor Clark raises an issue which we must examine in detail. Pro- fessor Clark proceeds, pointing out the need for a homogeneous element, among the diversities of the physical forms of goods, capable of abso- lute 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, 2 Professor Clark insists on the concep- tion of value as a quantity, an absolute magni- tude, and he consistently makes use of this con- ception. All of the exponents of the social value concept named, except Professor Seligman, fol- low him in this, and it may be considered an essential feature of the theory. Marginal utility 1 Clark, J. B.," Ultimate Standard of Value," Yale Review, 1892. p. 5858. , E. g. t The Philosophy of Wealth, chap. v. 14 SOCIAL VALUE 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 margi- nal utility, or the social value, of the money unit. It is important to contrast value as thus con- ceived, 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 neces- sary 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 con- ceptions 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 mediaeval conception of the justum pretium belongs to the first class, ASPECTS OF THE VALUE CONCEPT 15 as does also the conception of President Hadley : "The price of an article or service, in the ordi- nary 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." 1 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 "jso- cially necessary" labor embodied in it, while some things, as land, command a price in the market, even though embodying no labor. 2 Op- posed 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 ajact, and not an ideal. The second line of diyision is between the con- ceptions 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, ancT that value as a relative thing, not only measured by the process of exchanging, but 1 Economics, p. 92. See also the article by President Hadley on "Value" in Baldwin's Dictionary of Philosophy, etc., and "Misunder- standings about Economic Terms," Yale Review, vol. rv, pp. 156-70. The same ideas are expressed in all. * 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 vol- ume are being revised. Cf. his interesting chapter on the Marxian theory of value. , 16 SOCIAL VALUE 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. 1 Karl Marx and Henry George agree with them upon this latter point. Value is a quantity, and not a mere relation, for both. 2 Wieser would concur here. 3 Professor Carver, in a recent article in the Quarterly Journal of Economics* insists on the conception of value as a quantity. Gabriel Tarde states the matter illuminatingly in a passage in his Psychologie Economique: 6 1 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. 1 Marx, Capital and Capitalistic Production, London, 1896, pp. 2-4. George, Science of Political Economy, New York, 1898, chap. xi. Natural Value, p. 53, n. 4 "The Concept of an Economic Quantity," Q. J. K, May, 1907. Pro- fessor 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 him- self from the conception of relativity, for he continues to speak of value as "purchasing power" (pp. 438-39), and this term has usually the rela- tive, rather than the absolute, significance. Cf. his use of the term "pur- chasing 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. * Paris, 1902, vol. I, p. 63. ASPECTS OF THE VALUE CONCEPT 17 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 rela- tive conception follows naturally from their in- dividualistic 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, 1 and others, as a quantity of goods to be got in exchange, comes out in the statement, so common 1 Fisher, Irving, The Nature of Capital and Income, New York, 1906, pp. 13 el 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, inade- quately distinguished, and often confused in the treatment: (1) homo- geneous 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 plea- sure grounds and residence sites, the "general law of value" is declared to be that value measures marginal utility. Cf. the confusions of utility and demand pointed out infra, chapter v. This loose treatment of the value concept, while doubtless accentuated by the fact that four men have cooperated in the production of the book, is too much characteristic of most of the text-books. There is even to-day little uniformity or agree- ment as to what value means. 18 SOCIAL VALUE in the text-books, that, while there can be a gen- ^ ral 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 disturb- ing excliange 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 rela- tions, 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 com- modities in the market, the circle still remains: the value of A is its power over, or its ratio with, B; the value of B its relation to C; the value of C ... its relation to Z; and the value of Z, the last in the series, must come back to its relation to one of those named before. This circle is noted and sharply criticized by Wieser: 1 1 Natural Value, p. 53, n. ASPECTS OF THE VALUE CONCEPT 19 Theorists who have confined themselves to the examina- tion of exchange value, or, what comes to the same thing, of price, may have succeeded in discovering certain em- pirical 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 examina- ' tion 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. . . . Abso- lutely and by itself, value was not to be understood. It is significant of this conception to state that one thing can- not be an object of value in itself; that a second must be ' present before the first can be valued. Theory has only very gradually shaken itself free from this misconception, this circle. Where an absolute theory was attempted such as the labour theory, or that which explained value as usefulness some logical leap generally reconnected it with the relative conception. Now the validity of this reasoning might be admitted, in so far as it applies to "Crusoe eco- nomics" though Professor Seligman, with strict consistency, insists that even there value arises from a comparison in Crusoe's mind of apples with nuts * by those who would object 1 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 Phi- losophy 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 environ- ment. 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. 20 SOCIAL VALUE to its application to value in society. Value there, it would be insisted, is determined through ex- change, and does not have any meaning except as a ratio between physical commodities. 1 But 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 ob- ject is not for us a thing of value so long as it is dissolved in the sub- jective process as an immediate stimulator of feelings." Desire must encounter obstacles before a value can appear. "It is only the post- ponement 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 sub- ject 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 psy- chology of value. It is enough to point out here that this "distance be- tween subject and object" is adequately present, that there is surely "anxiety lest the object escape," if only the object be sufficiently limited in supply, independently of the existence of other objects so limited. Simmel undertakes to meet this objection by holding that "scarcity, purely as such, is only a negative quantity, an existence characterized by a non-existence. The non-existent, however, cannot be operative" (Phil, des G., p. 57). But the scarcity, I would reply, is not, as he holds, "the quantitative relation in which the object stands to the aggregate of its kind" (A. J, S., p. 592), but is rather a relation between the object and our wants. A bushel of wheat would be a scarcity, a bushel of diamonds a superabundance, for a man. There is a positive thing here, not a mere "non-existence," and that positive thing is the unsatisfied want. Cf. Pareto, Cours d'Economie Politique, vol. i, p. 34. See further, on the psychology of value, chapter x, and on Professor Seligman's theory of the relativity of value, chapter xvi, of the present volume. 1 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 ASPECTS OF THE VALUE CONCEPT 21 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 incom- mensurable units of Troy weight. The ratio, 4 :1, is not on the basis of any physical commensur- ability. 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 quanti- ties, 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, 1 "Value is a ratio of exchange between two goods, quantitatively specified." [Italics mine.] For the quantitative specification depends on the ex- tent 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 ex- change ratio will vary with the extent to which the common quality is present in each of the 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. t l Value and Distribution, p. 569. 22 SOCIAL VALUE goods. We can have no quantitative ratios be- tween 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 np 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 ab- stract value which we can apply abstractly in a measurement. Instead, we choose some valu- able 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 "eco- nomic quantities" as terms. 1 1 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. ASPECTS OF THE VALUE CONCEPT 23 The difficulty with the doctrine we are main- taining arises from the difficulty of isolating, jand 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, 1 have explicitly given it up as a hopeless task, and have deter- mined 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) 2 might serve our purpose bet- ter, except for the fact that we wish to reserve the term "positive value" to contrast with "nega- tive value" at a later stage of our discussion. Our objection to the relative conception of value N really gives our value more, rather than less 1 Value'and Distribution, pp. 330-31. a " Values, Positive and Relative." Annals, vol. rx. 24 SOCIAL VALUE 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 numer- ous 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 v 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, di- rect 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. 1 We must distinguish be- tween two confused meanings of the word "de- termine." It may mean "to. cause," and it may mean "to find out" or "to measure." We must 1 It is, of course, recognized that exchange modifies value in so far as exchange is a productive process. But the essential thing here is the transfer aspect of exchange, which would hold even in a communistic society where value relations might be found out by some process other than exchange. , ASPECTS OF THE VALUE CONCEPT 25 distinguish, in Kantian phrase, between the "ratio essendi" and the "ratio cognoscendi." Value and evaluation are two distinct things. Vajue, 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 quan- tity, and our precise knowledge of its amount, is brought out by several writers, among them, General F. A. Walker, 1 and the keen mathemati- cal economists, Pareto 2 and Edgeworth. 3 There are two further arguments for the pro- priety 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, 4 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. 5 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 1 Political Economy, New York, 1888, p. 84. 2 Cours d' Economic Politique, vol. i, pp. 8-9. 1 Edgeworth, F. Y., Mathematical Psychics, London, 1881, chapter on " Unnumerical Mathematics," pp. 83 et seq. 4 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. 6 Jevons, Principles of Economics, 1905 (posthumous), p. 50. 26 SOCIAL VALUE value differ as substance and attribute." (Senior, quoted with approval by F. A. Walker. 1 ) With this view, Marx 2 would concur. "Wealth is that which has_jfalue," Professor Laughlin states. 3 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." 4 And if we take a definition like that of Professor Selig- man, who defines wealth in terms which entirely ignore the ideas of comparison and exchange as consisting of those things which are (1) cap- able of satisfying desire, (2) external to man, and (3) limited in supply, 5 we find no basis for in- sisting 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 : 1 Walker, op. cit., p. 5. 2 Marx, op. cit., vol. i, chap. I. 3 Laughlin, Elements, p. 77. Cf. also, Ely, op. cit., 99-100. * 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.) 6 Principles, pp. 8-11. ASPECTS OF THE VALUE CONCEPT 27 I apprehend that this notion of money serving as a com- mon 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. 1 Only on the basis of a definition of value as a quantity is it proper to speak of a "measure of values." 2 I conclude that the value of a thing is a guan- tity, and not a ratio. It is^ a definite magnitude, and not a mere relation. What sort of a quan- tity remains to be seen. 1 Money, p. 288. 1 Cf. Kinley, op. cit., Merriam, loc. cit., and Carver, "The Concept of an Economic Quantity," loc. cit. Cf. also, Laughlin, Money, 1903, pp. 14- 16; and Davenport, Value and Distribution, p. 181, n. CHAPTER III VALUE AND MARGINAL UTILITY THE method of Jevons and the Austrians, and, for that matter, of the great majority of value theorists, including even the social value school, in seeking the determinants of value, is to start with individual "utilities" or psychic "costs" directly connected with the consumption or pro- duction 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 ex- actly measuring values. 1 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 par- ticular 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 sur- face ratios of exchange, difficulties at once arise. 1 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, xm, infra. VALUE AND MARGINAL UTILITY 29 What quantitative relation is there between the satisfaction which an individual man gets from a good and the value of that good? What quantita- tive relation does the sacrifice, in terms of dis- satisfactions 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 prob- lem, namely: what is the quantitative relation between psychic satisfaction, subjective individ- ual value, and psychic cost, connected with the commodity, in the mind of some hypothetical "normal" man, and market value in a hypo- thetical 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" per- haps, 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 Aus- trian analysis for this quantitative determina- tion. 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 Jev- ons, as will later be noted, rejects it, but it is necessary for Wieser's argument, and Bb'hm- Bawerk implies it clearly enough in places. 1 ) 1 For further discussion of this doctrine, see chapters iv and vin of this book. Bb'hm-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 30 SOCIAL VALUE 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 con- cept 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 analy- sis (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 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 dif- ferent 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. VALUE AND MARGINAL UTILITY 31 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 util- ity = 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 affec- tion 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 util- ity to whom? But this does not exhaust the difficulties of the analysis if the analysis be designed to show anything except what a par- ticular 'price is, and the utility theorists, when very careful, do not always claim to do more than that. 1 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 1 Bohm-Bawerk and Wieser are certainly seeking an objective value, but Jevons and Pareto are concerned simply with the ratio. See Wieser, Natural Vol., p. 53, n. Jevons, Pareto, and Bohm-Bawerk are discussed, with reference to this point, in chap. iv. 32 SOCIAL VALUE which we shall call "Clark's Law." 1 A detailed statement of this law is not necessary here, but its main meaning may be outlined, and its demon- stration left to Professor Clark himself. Any / good, except the poorest and simplest, is a com- plex, 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 transporta- tion 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 margi- nal 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 1 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. VALUE AND MARGINAL UTILITY 33 additional service of speed and exhilaration he is the marginal demander, and his margin fixes the price, say $2000, for that service. Now his auto- mobile 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 mar- ginal 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 util- ity 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 gen- eral 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 util- ity has something to do! And the quantitative relation between the feeling of any individual and valtie has become very uncertain indeed. CHAPTER IV JEVONS, PARETO AND BOHM-BAWERK IN the foregoing analysis, the assumption of the homogeneity and communicability of human wants was made. Only on this assumption could value as a quantity of utility appear even in Wieser's "natural" community. How hopeless the case becomes when individualistic methods and assumptions are pushed to the extreme, will appear from a consideration of Jevons and Pareto, both of whom insist on the entirely sub- jective and incommunicable nature of human wants. Thus, Jevons : 1 I see no means by which such a comparison [between the motives of one man and those of another] can be accom- plished. 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 per- sons 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 con- fined to the bosom of the individual. 1 Theory of Political Economy, 3d edition, p. 14. JEVONS, PARETO AND BOHM-BAWERK 35 This question as to the homogeneity and com- mtmicability 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 Wies- er's ideal society, where the complication of dif- ferences 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 1 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) es- teem, 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 in- dividual. The only one that can have social meaning is the third, and that, as Jevons explic- itly states, is a numerical ratio, an abstract num- ber. 2 This is brought out very clearly when he discusses the question of the concrete dimensions of these three quantities. Total utility has dimen- > Op. cit., pp. 76-84. * Ibid., p. 83. 36 SOCIAL VALUE sions, and so has final utility, but ratio of ex- change, which he considers the precise scien- tific 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. 1 He can find no definite mean- ing 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 ex- change. 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 2 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 sub- jective quality." (4.) "On ne doit pas oublier que le vigneron etablit 1'egalite des deux ophe- limites pour lui, et que le laboureur fait de mme, mais qu'il n'y a aucun rapport entre Pophelimite du vin pour le vigneron et pour le laboureur, ni entre I'opheliniite du ble pour le vigneron et pour le laboureur. II faut toujours se rapeller ce car- actere subjectif de rophelimite." (21.) Now no quantity of value, irrespective of the particular 1 Op. dt., p. 81. a Cours d'i&conomie Politique, vol. I, pp. 1-40. The numerals in the text refer to pages in this volume. JEVONS, PARETO AND BOHM-BAWERK 87 holder of the good, emerges for Pareto. Value is either a "rapport de convenance" between a man and a good, i.e., ophelimity, or is a "taux d'echange," a ratio between two goods. (30.) The older term, "puissance d'achat," power in ex- change, which John Stuart Mill makes synony- mous 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," 1 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 psy- chological assumption of subjective isolation un- reservedly, 2 reaches, as already indicated, the same conclusion regarding the nature of value. For him there is no social validity in value ex- cept as a ratio of exchange. 3 The same may be said for Bb'hm-Bawerk, so far as his formal analysis goes. It is true that he recognizes the existence of an "objective value in exchange" 4 in addition to "subjective value" 1 Value and Distribution, p. 444. 1 Professor Davenport's attitude on this point we shall discuss more fully in chapter vm. * Ibid., pp. 184, n., and 830-31. 4 It is not wholly clear whether or not BShm-Bawerk means his " ob- jective value in exchange" to be considered as an absolute or as a relative concept. His formal definition ("Grundztige der Theorie des wirtschaft- 38 SOCIAL VALUE and "subjective value in exchange," and in addi- tion to price, 1 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. 2 lichen GGterwerts," Conrad's Jahrbiicher, N. F., xm, 1886, p. 5) is as follows : "Hierunter ist zu verstehen die objective Geltung der G liter im Tausch, oder mil anderen Worten, die Moglichkeit filr sie im Austausch eine Quantitat anderer wirtschaftlicher Giiter zu erlangen, diese M8g- lichkeit als eine Kraft oder Eigenschaft der ersteren Giiter gedacht." The concluding phrase would seem to point to an absolute conception, as would also his criticism of the expressions, "ratio of exchange," "Aus- tauschverhaltnis," and " Tauschfuss" (Ibid., p, 478, n.) : "Diese Ausdriicke haben namlich eine Nflance an sich, die es unmoglieh macht, sie sprach- lich den Giitern als Eigenschaft beizulegen, oder von einer grosseren oder geringeren Hohe 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 pas- sages referred to) would seem to make the relative implication in the con- cept 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 xvm. 1 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. 1 Positive Theory, p. 132. JEVONS, PARETO AND BOHM-BAWERK 39 But (as will be elaborated more fully in chapter vi), Bohm-Bawerk's law of price does not ex- plain the why any more than do those of Jev- ons 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 expla- nation of the modus operandioi the determination of particular ratios in the market. It tells us nothing of quantitative values, and, in fact, as- sumes a whole system of values already prede- termined, before the question of any particular price can be approached. 1 , 1 See chapter vi, infra. CHAPTER V DEMAND CURVES AND UTILITY CURVES MUCH of the foregoing would be needless were it not for the fact that there has been, and is, in the writings of the Austrians and those who have followed them, a confusion of two very different things : on the one hand, the curve of utility for a single individual of a given good, measured in terms of money, on the assumption that the marginal utility of money remains constant to him; and, on the other hand, the demand-price curve of that commodity for a whole community or a "trading body," 1 made up of many individ- uals, differing in wealth and in tastes. 2 The for- mer curve does express a diminishing scale of absolute feeling-magnitudes, 3 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 in- tensely than does the rich man whose demand price is highest. These confusions, in the writ- ings of Bohm-Bawerk and Wieser, especially, have been adequately commented on by Pro- 1 See Jevons, Theory of Pol. Earn., 3d ed., pp. 88-90; 95-96. 1 See, especially, Pareto, op. cit., vol. i, pp. 36-37. 1 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. DEMAND CURVES AND UTILITY CURVES 41 fessor Davenport, 1 who adheres pretty carefully throughout to the distinction drawn above, and to the strictly individualistic, subjectivistic con- ception of price determination, with its correlate of relativity. Jevons's confusion on this point has been noted by Marshall. 2 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 conclu- sions based upon it. In truth, Professor Daven- port is not far wrong when he asserts that "the general understanding of Austrian theory has come to be that it explains market value by mar- ginal utility, and resolves market value into marginal utility.*' 3 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 : 4 There is nothing to prevent our treating a group of per- sons as a unit, and examining the position which commodi- ties 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 num- ber of cases in relation to the group. And the truth of this statement is greater in proportion to the size of the group. i Op. cit., pp. 300, 312, 313 et seq., 320, 325, n., 327, 328, n., 329, and chap. xvn. * Principles, 1898 ed., p. 176. Op. cit., p. 300. 4 Principles of Economics, London, 1902, p. 57. 42 SOCIAL VALUE Similar confusions appear in Professor Patten's Theory of Prosperity, in a number of places. 1 President Hadley's discussion of " Speculation " falls into this confusion, also. 2 Professor Ely's confusion on this point is instanced in his Out- lines of Economics, 1908 edition, pp. 358-59. 3 Schaeffle, in his Quintessence of Socialism,* 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 real- ized, 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." 5 It is somewhat disheartening, however, to find Professor Marshall, who has pointed out the confusion on the part of Jevons, allowing his mar- ginal notes to speak of "utility and cost" when the body of the text, to which they refer, is dis- cussing demand and supply. 6 And still more dis- heartening to find Professor Davenport, at the 1 Page 18, "The consumption of all the individuals in a community or nation can also be represented by this diagram if their feelings, senti- ments, 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. * Economic*, 1904 ed., pp. 101-104.] 1 See supra, p. 17, n. 4 English edition, London, 1889, pp. 90-91. 8 Flux, A. W., Economic Principles, London, 1904. Compare pp. 4, 29, and 27. Principles, 1907 ed., pp. 348-50. DEMAND CURVES AND UTILITY CURVES 43 end of his cautiously written volume, marked throughout by the greatest clearness of thought, and by especially painstaking care in the criti- cism 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 ulti- mately explained by human desires over against a limi- tation 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 suffi- cient explanation. This, as a separate, unqualified proposition in the "Summary of Doctrine," 1 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 dis- satisfactions 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 defi- nite without which they would be hanging in the air. 2 1 Op. cit., p. 569. 1 As shown in chapter n. 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 The- ory of Value and Prices," Trans, of the Connecticut Academy of Arts and Sciences, vol. DC, p. 87. The theory of marginal utility in relation to prices 44 SOCIAL VALUE "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, Bb'hm-Bawerk's view, "Grund- Eiige," Conrad's Jahrbucher, K. F., XHI, 1886, pp. 516 et seq. CHAPTER VI THE VICIOUS CIRCLE OF THE AUSTRIANS THE great and permanent service of the Aus- trian 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 ab- stracts from the "individual mind" thus ab- stracted, 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 eco- nomic goods. Now it is at once conceded that a science, in explaining its phenomena, must ignore some of the relations which those phe- nomena bear to other phenomena. No science is called upon to link its facts with all the other facts in the universe. Some abstraction, 1 much abstraction, is legitimate and necessary. Where to draw the line is often a perplexing question, 1 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 qual- ity" (p. 4). 46 SOCIAL VALUE 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 ex- planation assumes value. Rather, we are reason- ing in a circle. Now have the Austrians done this? Wieser explicitly rejects the older circle in the definition of value, 1 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 abso- lute thing, independent of the particular exchange that happens to be made. He even works out an explanation of value in purely psychical terms, 2 as it would exist in a hypothetical individual economy, or in a hypothetical "natural" com- munistic 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 der sire it? No, that is not enough: the men who 1 See supra, chap. n. * But as later indicated (infra, chap, xiu), the apparent simplicity of his analysis simply covers up, and does not eliminate, the complexity of the situation. THE VICIOUS CIRCLE OF THE AUSTRIANS 47 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 quan- tity 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 solu- tion, 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 exist- ence 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. 1 [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. 2 The circle becomes still more explicit in Hobson. 3 Hobson attempts to coordinate the Austrian the- ory with the older cost theory, and in this con- nection gives a table analyzing the forces that lie 1 Op. cit., pp. 61-652. * See supra, chap. n. * Economics of Distribution, p. 81. 48 SOCIAL VALUE 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 determi- nation 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 sell- ers 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. CHAPTER VII PROFESSOR CLARK'S THEORY OF SOCIAL VALUE AND all attempts to explain value in terms of these abstract factors must become similarly en- tangled. The Austrians themselves have pointed out that the explanation of value from the stand- point of individual costs involves a circle, that costs resolve themselves into value-complexes, and that the cost theorists are really explaining value by value. 1 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 explana- tions, as shown, and the same could be shown of at least the earlier writings of Professor Marshall. 2 There is another attempt to work out the expla- nation of value, still in terms of sacrifices in pro- duction and satisfactions in consumption, but no longer from the same standpoint, which de- serves 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 Dis- tribution of Wealth), has attempted so to add up individual units of cost and individual units of 1 See inter alia Bohm-Bawerk, "Ultimate Standard of Value," Annals of the American Academy, vol. v; also his " Grundziige," p. 516, n.; Wieser, op, cit., bk. v. 1 See Laughlin, J. L., "Marshall's Theory of Value and Distribution," Q. J. E., vol. i, pp. 5827-32. See also Marshall's reply in the same volume. 50 SOCIAL VALUE utility, as to get absolute social units of utility and cost either of which might serve as the ulti- mate 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 1 of value is the sacrifice entailed by a quan- tity of distinctively social labor (p. 261). Pro- fessor Clark avoids the complication that labor and capital work together, by isolating labor at the margin, in the manner made familiar in his Distribution of Wealth. Assume capital constant, introduce or subtract a small quantity of labor, and whatever of product is added or subtracted is due to that labor only (p. 263). This virtually unaided labor is the only kind that can measure values. Attempts to use the labor standard have come short of success, because of their failure to isolate from capital the labor to which products are due. Work, however, is miscellaneous and hetero- geneous. There is needed "a pervasive element 1 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 vindi- cation 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, xvn, pp. 183-84. CLARK'S THEORY OF SOCIAL VALUE 51 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 dis- satisfactions 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 52 SOCIAL VALUE 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 com- posite, 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 con- suming his part of the composite not the same part ! the problem still remains as to the con- nection 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 be- tween 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, then, between the value of the good and social labor? It is at this point, I venture to suggest, that Professor Clark's argu- ment 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 prod- uct 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 stone- breaker. Here and there are "prisoners of poverty," put- ting life itself into products of which a wagon load can lit- erally 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 CLARK'S THEORY OF SOCIAL VALUE 53 producer, and the value in the market. Compare the labor involved in maintaining telephones with the rates de- manded 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 pa- tent right, or any other of the innumerable forms that monopoly takes? Can these monopoly prod- ucts then call forth a definite amount of social labor? Or can they merely call out a definite amount of value? 1 "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 1 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 pro- duced entirely by competitive labor (assuming that such goods exist, which I deny) can fulfill this function only by virtue of being themselves taluable 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, McCulIoch edition, 1852, p. 213. 54 SOCIAL VALUE how that pervasive element can in any way be an ultimate explanation or measure of value. The rich worker stops producing early, while the sac- rifice 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 effi- ciency that figures in the case is power and willingness to produce a certain effect. The willingness is as essential as' 4 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 expla- nation 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 CLARK'S THEORY OF SOCIAL VALUE 55 analysis just criticized is that it has not been an analysis of an organic process, but rather, a math- ematical 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 plea- sure, and the social unit of pain or pleasure has been treated as simply a sum of these. But it is characteristic of an organism that the simple rules of arithmetic do not hold precisely in its activity. The whole is more than the sum of its parts, and something different from that sum. Professor Clark elsewhere says : But the owner is a part of the social body, and is the organic whole indifferent to his suffering? If so, society is an imperfect and nerveless organism. It ought to feel, as a whole, the sufferings of every member, and what makes or mars the happiness of every slightest molecule, should make or mar the happiness of all. A sympathetic connection between members of society exists, etc. 1 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 sum- mation of the results of many individual psycholo- gies. But the line along which the true nature of value is to be found is clearly indicated in the 1 Philosophy of Wealth, 1892 ed., p. 83. 50 SOCIAL VALUE 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, 1 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. 1 Tarde, The Laws of Imitation ; Psychologic Economique, 2 vols., Paris, 1902. Cooley, C. H., Human Nature and the Social Order ; Social Organiza- tion. 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 exhaus- tive list here, nor are the writers mentioned to be held accountable for the views maintained in the text, though their point of view is in general that which I shall maintain. PART III THE PRESUPPOSITIONS OF ECONOMIC THEORY CHAPTER VIII THE PHILOSOPHICAL AND PSYCHOLOGICAL PRESUP- POSITIONS 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 of ten "ignore" philosophy, holding that their concern is simply with the world of phenomenal "facts," and that the injec- tion 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 induc- tive, and the data are got from sense observa- tion. But in the social sciences, where the pro- cedure 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 assump- tions will creep in, and the scientist has no option about it. The only thing he can do is to be criti- cal, and know definitely what philosophical as- sumptions he is making, and most of our trea- tises on economic theory do not bear evidence that this critical work has been done. 60 SOCIAL VALUE There may be traced in the history of phi- losophy, 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 dis- tinguishing these three stages, in showing the relation of each to social philosophy, and espe- cially in tracing a parallel between the philosophy of the ancients and that of modern times, I recognize the grave dangers of giving a superfi- cial 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 pre- sented 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, Anaxim- enes, and Anaximander, who, with perfect con- fidence in the power of their minds to solve the riddles of the universe, or rather, without ques- tioning 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 diver- THE PHILOSOPHICAL PRESUPPOSITIONS 61 gences 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 be- gins with Socrates, who sought for a common principle of truth and justice in the midst of divergences, and this critical movement, contin- ued 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 soli- darity and upon a unified, organic conception of society, a society which is paramount to in- dividual 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 rela- tions 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 62 SOCIAL VALUE very real, to be sure, but still real only in his so- cial relationships. Individual activities are facts, but social activity is more than a mere sum of individual activities. Society and the individual are alike abstractions, if viewed separately. The mediaeval conflict over realism and nom- inalism really derives its interest from the prac- tical social issues involved, for the reality of the Church, as more than a mere aggregate of its members, and the validity of Christian doc- trine, as more than the sum of individual beliefs, are at stake. The cycle began again in modern times. As representatives of the dogmatic period in mod- ern philosophy, Des Cartes and Spinoza may be chosen. They were not, of course, naively dog- matic, for philosophy had learned much from its many disappointments, and DesCartes, espe- cially, starts out with reflections which would seem to make him very much a skeptic. And yet each believed in the power of the mind to draw absolute truth from itself, and each proceeded in a highly rationalistic way to build up his system. The very title of Spinoza's great work indicates this attitude of mind: "Ethica more geometrico demonstrata." The conception of society which characterizes this period is, again, not naive, but still has a supernatural, or at least a superhuman, basis, for it is in a Law of Nature (capitalized and personified) that social institutions find their origin and justification. Critical reflections, starting with Locke, and passing through Berke- ley to the absolute skepticism of Hume, bring in THE PHILOSOPHICAL PRESUPPOSITIONS 63 the second, or skeptical, period, in which the rationalistic-dogmatic certitude of Spinoza and DesCartes is banished. And going with this move- ment 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 connec- tions 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 hun- dred 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 charac- terize the period in which economics began to be a differentiated science, the skeptical doc- trines of David Hume, the close friend of Adam Smith. 1 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 1 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. 64 SOCIAL VALUE 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 domi- nated 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 psy- v chology, and have accepted uncritically the as- sumptions of the founders of the science. Doc- trines 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, 1 mechanically connected with his fellows, 1 It is easy for "analysis" to separate society into "individual" mon- ads, and impossible for "synthesis" once the validity of the analytic THE PHILOSOPHICAL PEESUPPOSITIONS 65 who are to him "a part of the non-ego" 1 but spiritually self-sufficient and inaccessible. The doctrine appears in Marshall's statement: 2 "No one can compare and measure accurately against one another even his own mental states at differ- ent times, and no one can measure the mental states of another at all, except indirectly and con- jecturally , by their effects." Pareto I have quoted, as also Jevons, in chapter rv. The doctrine ap- pears in Professor Veblen's recent article in criti- cism of Professor Clark: 3 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 hed- onistic phenomena lie each within the consciousness of a distinct person. There is, in fact, no continuity of nervous process is accepted to put society together again. In fact, once the ana- lytic 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 Wil- liam 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 Brad- ley's Appearance and Reality, esp. chaps, n and in. The most useful view- point 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. 1 Jevons, Theory of Pol. Econ., 3d ed., p. 14. 1 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. 1 " Professor Clark's Economics," Q. J. E., 1908, p. 170. 66 SOCIAL VALUE tissue [italics mine] over the interval between consumer and producer, and a direct comparison, equilibrium, equal- ity, 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 Dis- tribution, by Professor H. J. Davenport, the the- ories 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 Jpresuppositions are explicitly premised. The following quotation from Thackeray's Pendennis is given as a foot- note, 1 in which Professor Davenport's own con- ception 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 know- 1 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 Pro- fessor 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. THE PHILOSOPHICAL PRESUPPOSITIONS 67 ledge 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 emo- tions, 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 conclu- sions of all sciences, physical as well as psychical. Certainly psychology would be impossible on this assumption, except in so far as the psycholo- gist 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 con- cerned with the laws and behavior of minds in general, with the "typisch und allgemeingultig" and not with the mental idiosyncrasies of the particular individual. But the doctrine can be met from the stand- point 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 espe- cially would they grant a degree, at least, of objective currency to clearly phrased conceptual 68 SOCIAL VALUE thought. Now I base myself upon the present day pragmatic philosophy, 1 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 mys- tical, absolute truth, but because of our experi- ences ..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. 2 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, voli- tional side. 3 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 1 See, especially, William James, Pragmatism, and The Meaning of Truth ; John Dewey, Es$ay in Logical Theory ; and F. C. S. Schiller, Humanism. * The utter impossibility of adequately summing up a philosophic doc- trine in two or three sentences will excuse this statement to those prag- matists who would prefer a somewhat different formulation. 1 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 The- ory, pp. 322-23. THE PHILOSOPHICAL PRESUPPOSITIONS 69 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, tbe^power of reaction, but certainly all of our most important stimuli. 1 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 "infer- ences" 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 intellec- tualistic psychology that such a sub jectivistic con- ception is possible. If the voluntaristic psycho- logy 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 2 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 mo- ment. The "stream of consciousness" is but a narrow thing, and the unity of the individual 1 Cf. Baldwin, Social and Ethical Interpretations, passim, and Cooley, Human Nature and the Social Order, passim. 2 The most interesting discussion of these topics I know is that of Fried- rich Paulsen, in his Introduction to Philosophy (translated by Professor Frank Thilly). 70 SOCIAL VALUE T mind is a unity, not of consciousness, but of func- tion. As Goethe somewhere says, we know our- selves 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 feel- ings. But, in much the same sense, our know- ledge of their actions, or of their voices, is infer- ence 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. 1 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 doc- trine under criticism. The feelings of men with reference to economic goods are facts of definite, 1 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. THE PHILOSOPHICAL PRESUPPOSITIONS 71 tangible nature, and subject-matter of social knowledge. But we have not yet reached a stand- ard or source of social value. No homogeneous "labor jelly," or "pain jelly," or "utility jelly," * made up by averaging arithmetically, or adding arithmetically, individual efforts or pains or plea- sures, will solve our problem for us as indeed I have been at pains to show in what has gone be- fore. The purpose of the foregoing criticism is pri- marily to clear the ground for a conception of so- cial organization which is more than mechanical, and in which the individual is both less and more than a self-sufficient monad. 1 Davenport, op. cit., p. 331. CHAPTER IX THE SOCIOLOGICAL PRESUPPOSITIONS CONCEPTIONS of the social unity fall, in the main, into three classes: the mechanical, the biological, and the psychological. Each of these concep- tions 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 pheno- mena of which can be studied as concrete things in detail. And there are gradations here, and com- binations. The following extract, freely translated and substantially abridged, is taken from chapter I of DeGreef 's Introduction a la Sociologie: It is in vain that Spencer protests against the accusa- tion 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 Intel- lectual 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 THE SOCIOLOGICAL PRESUPPOSITIONS 73 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 (T 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 con- sciousness 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 hier- archy in science, proceeding from the more gen- eral to the less general, depending on the nature of the phenomena studied. This hierarchy has been variously stated. Comte puts it thus: math- ematics, astronomy, physics, chemistry, physio- logy, social physics (sociology). Baldwin, 1 writ- ing much later, of course, puts it thus: 1 Baldwin, Mark, Social and Ethical Interpretations, 1906 ed. r pp. 8-9. 74 SOCIAL VALUE 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 conscious- ness 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 phe- nomena 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; 1 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. Analo- gies are helpful, but are not ultimate. Similarly, the biological conception, which likens society to a man, has its contributions. The biological analogy has been pushed very far: thus Novikow calls the social intellectual elite the social sen- sorium; 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. 2 But this, though suggestive, is not an ultimate social philosophy or even an approach 1 Cf. John Stuart Mill's Logic, book vi, on the nature of social laws. ,* Cited by Baldwin, op. cit., p. 495, n. THE SOCIOLOGICAL PRESUPPOSITIONS 75 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 struc- ture. 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. 1 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 hu- man 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 psy- chology is a reaction, was its failure to take pro- per account of physical processes connected with consciousness. Now society, according to Bald- win, is best described as analogous to a psycho- logical organization, and such an organization as is found in the individual in ideal thinking. 2 But surely this is an abstraction, and not a fact. So- ciety does not cease to be physical, chemical, bio- logical, subconscious, merely because it has also attained in part a higher form of psychical activ- ity (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 1 See Giddings, Principles of Sociology, 1905 ed., p. 194. x Op. tit., p. 571. 76 SOCIAL VALUE analysis of facts represents a great advance but it is not satisfactory : 1 Since unconsciousness, instinct, and reflex action char- acterize 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 aston- ished, 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 func- tions, 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 organ- ism 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, 2 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 1 Op. cit., chap. xm. 1 Cf. Elwood, C. A., Some Prolegomena to Social Psychology, Chicago, 1901. Cf. infra in this chapter the note on Professor Elwood's view. THE SOCIOLOGICAL PRESUPPOSITIONS 77 valid for all purposes, and that many social the- ories have value for some particular purposes is that of Professor C. H. Cooley, as set forth, par- ticularly, in the opening chapters of his Social Organization. As this book, however, presup- poses certain doctrines set forth in Professor Cooley 's earlier book, Human Nature and the So- cial 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 cen- tres his attention upon the mental side. His pur- pose 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 view- point. In the following pages, attention will be centred almost exclusively upon the psychical forces involved, upon what we shall call the "so- cial mind." In this, however, it is explicitly rec- ognized 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 psy- chical forces which we shall study, in the deter- mination of any concrete social situation. I have no intention whatever of giving an inde- pendent, 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 78 SOCIAL VALUE problems, make allowance for the extent to which it is untrue. In his earlier book, 1 Professor Cooley objects to the customary antithesis between "individual" and "social." They are simply two aspects of the same thing. He discriminates three mean- ings of the word, social, none of which, he says, is properly to be contrasted with "individual": (1) that pertaining to the collective aspect of hu- manity, in its widest and vaguest meaning; (2) that pertaining to immediate intercourse; (3) con- ducive to collective welfare, and so nearly equiv- alent to moral. But none of these meanings has "individual" as its natural or logical antithesis. There are several forms of individualistic views : (1) Mere Individualism. The distributive phase of human life is almost exclusively regarded. Each person is thought of as a separate agent; all social phenomena originate in the action of such agents. This view is much discredited by evolu- tionary 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 ordi- narily the view met with in social and ethical dis- cussions. There is here the same premise of the individual as a separate, unrelated agent; but over against him is set a vaguely conceived collec- tive interest or force. People are so accustomed to think of themselves as uncaused causes, special ^ Human Nature, etc., chap. L_ THE SOCIOLOGICAL PRESUPPOSITIONS 79 creators on a small scale, that when general phe- nomena 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 so- cialism, considered as philosophical notions, rather than as names for social programs, among the forgotten debris of speculation. (3) The third view he calls Primitive Individualism. The individual is prior in time to society. This view is a variety of the preceding, perhaps formed by mingling individualistic preconceptions with a rather crude evolutionary philosophy. Individ- uality 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 ap- plied only to the higher forms of mental life, it should be opposed, not to individual, but to ani- mal 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 in- dividualistic. Some writers have treated intelli- gence 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, 80 SOCIAL VALUE or fellow feeling. But that these sociable emotions are essentially higher, or pertain peculiarly to col- lective life, is very doubtful. Cooley holds that no such division of human nature is possible. So- cial or moral progress consists less in the aggran- dizement 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. Person- ality is an essentially social thing. The "I" feel- ing is a thing which only social influences can develop. 1 The thought process within the "indi- vidual mind" is a social process, we think in words, and, indeed, in conversations. 2 I shall not develop these notions at length. They are of simi- lar nature to those in Professor Baldwin's Social and Ethical Interpretations, when he discusses the "dialectic of personal growth." They are inter- esting and pertinent as showing in a concrete way the tremendous and comprehensive sweep of social factors in the creation of the individual mind. Social Organization, which appeared in 1909, takes up the collective aspect of human-mental life. Mind is an organic whole, made up of cooperating indi- vidualities, in somewhat the same way that the music of an 1 Op. cit., chaps, v and vi. Ibid., pp. 52 et seq. THE SOCIOLOGICAL PRESUPPOSITIONS 81 orchestra is made up of divergent but related sounds. 1 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 asso- ciates, 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 or- chestra, it gives forth harmony may be a matter of dispute, but that its sound, pleasing or otherwise, is the expression of a vital cooperation, cannot well be denied. 2 Professor Cooley stresses the unconscious char- acter of many of these social relations. "Al- though the growth of social consciousness is per- haps 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 1 This analogy is unhappy, if pushed very far like most analogies between physics and psychics. It serves as a useful figure of speech, how- ever, which is all Professor Cooley designs it for. 1 Social Organization, pp. 3-4. 82 SOCIAL VALUE think," is just as obvious. 1 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 en- lightened common sense as individuality." 2 I pause here to contrast this view of the "so- cial mind" with that of some other writers, of whom I may take Professor Giddings as represen- tative. I quote from page 134 of the 1905 edi- tion of Professor Giddings' Principles of Socio- logy : 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 comple- mentary activity. Professor Cooley's concep- tion, thus, takes in all minds, while that of Pro- fessor Giddings would exclude the dissenters. Further, Professor Giddings emphasizes the ele- ._ * Social Organization, pp. 6-9. J Ibid., p. 9. THE SOCIOLOGICAL PRESUPPOSITIONS 83 merit 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 ex- position of the classroom, does not stress either the agreement or the consciousness in the abso- lute fashion that the brief passage quoted would indicate, and readily concedes that for theoreti- cal purposes the more inclusive conception of Professor Cooley's is a very useful one. The dif- ference between his viewpoint, as set forth in the classroom, and that of Professor Cooley, is pri- marily a matter of emphasis. 1 1 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 conno- tation: (a) an organism has different parts, with different functions; (6) these parts are interde- pendent; (c) an organism is alive, in the sense in which Spencer defined life, that is, an organism has the power of making appropriate inner ad- justments to the external environment; (d) an organism has a central theme, not externally im- posed, to the working-out of which the differ- ent parts contribute; but the organism or the 1 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. , ' 84 SOCIAL VALUE parts is not necessarily conscious of this cen- tral theme; (e) an organism is constantly chang- ing 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 per- sonal growth," or by Cooley, in his Human Nature and the Social Order.) (/) An organism grows, by progressive differentiations and inte- grations. (2) There is a mind of society, a psychical or- ganism. 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 lo- cate it is the brains and nervous systems of in- dividual 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 Junction, however. 1 1 Professor C. A. Elwood, in the essay mentioned supra, Some Prolego- mena 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. With- THE SOCIOLOGICAL PRESUPPOSITIONS 85 (3) The fact of individual differences among the minds of men, does not vitiate the concep- tion of a mind of society. It rather proves the organic character of the social mind, by introduc- ing 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 includ- ing 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 out 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 so- cial mind, there are points of identity among individual minds, common ideals, and a common even though small body of knowledge, espe- cially 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 soci- ety is not intended to read into the social mind any of the hypothetical character which an abs9lutistic, preevolutionary metaphysics ascribed to the individual mind, but rather in so far as the issue is raised at all to divest the individual mind of just that hypothetical character. Cf. Friedrich Paulsen's Introduction to Philosophy, on "soul-substance," and Wundt's V'olker-Psychologie, vol. i, chap. I. 86 . SOCIAL VALUE 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 in- dividual. 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 "infer- ential " element in our perception of mental pro- cesses 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 so- cially given, apart from social intercourse his human-mental life would be mere potentiality. (9) The worth of this conception of social re- ality, like the worth of other scientific hypotheses, is to be determined by a pragmatic test: does it relate phenomena the connection between which was previously obscure, without introducing greater difficulties of its own? I believe that, for the problem of value theory at least, it will find such a pragmatic justification. This lengthy excursion into a field not com- monly counted as part of the economist's terri- tory is to be justified on the ground that the economist has not only failed to take account THE SOCIOLOGICAL PRESUPPOSITIONS 87 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 be- hind 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. 1 That this is true of the biological analogy, which made society an ani- mal, 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 schemat- ism 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 con- ceiving 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, 2 and if the individ- * Davenport, op. cit., pp. 467-68. 1 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 88 SOCIAL VALUE ual be an isolated monad, then Professor Daven- port's criticisms will hold. But if the individual 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 coopera- tion; they are simply similar roughly simultaneous and are thought of in block. True, one man eats rapidly and another slowly, some little and others much, and a few sick ones not at all; but the expression serves, and implies its own limitations of accuracy. . . . But when it comes to asserting that the army is brushing its teeth, or has stubbed its toe, or has a stomach ache, there is obvious difficulty. These things are not done jointly, cooperatively, by aggregates, and will not bear thinking over into this form. "And so we may speak of public opinion, the preference, or habit, or custom, or convention, of society; and no harm need come of it, despite the fact that some men neither think nor choose in the manner implied, but have their own peculiar judgments or choices or wishes, and yet are members of society, entitled to be included in any exact formulation; every one knows that the thought really runs upon majorities of ' 'most everybodies ' ; that is, no harm need come of it, if only there were not people to take the notion of a 'social mind' seriously, and to import into cases calling for accurate analysis, and to accept as sober fact, a mere figure of speech, or at best a loose analogy drawn from biological science. For to the biologist and the sociologist it is to be charged or credited that the society-as-an-organism formula has found its way into economic thought. And thus hereby a doctrine long since abandoned in economic reasonings is in the way of reappearing; for have we not need of normals and averages? Else our doctrine in getting accurate and actual will get difficult also. And so, by the aid of the sociologist, through the magic of the society-as-an-organism incantation, a resurrection miracle has lately been worked; we salute the average man." Whether any serious advocate of the organic conception of society will recognize in this caricature the doctrine which he maintains may well be doubted. Certainly it would never occur to us to construct an organism by averaging its organs ! Nor do we try to get a social mind by adding a sum of similar physical activities, or even similar mental activities. An organism is a functional unity of different and complementary parts. THE SOCIOLOGICAL PRESUPPOSITIONS 89 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 complemen- tary individual activities, spiritual as well as phys- ical, 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 conven- iently 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. PART IV A POSITIVE THEORY OF SOCIAL VALUE CHAPTER X VALUE AS GENERIC. THE PSYCHOLOGY OF VALUE WE return, then, to the problem of the 'nature of value. Value is more than the total utility of a good, or the marginal utility of a good, to an individual, and it is more than a ratio of ex- change. Economic value is a species of the genus value, which runs through other social sciences, as ethics, aesthetics, jurisprudence, etc. Some- times 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 Ger- manic jurisprudence, when a wergeld was accepted as compensation for killing a man? Ethical and legal values we recognize as some- thing very different from the feelings of single in- dividuals, and also as something very different from abstract ratios. In fact, the idea of quanti- tative 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 is n't half as bad as that." But we do not go into re- finements, 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 94 SOCIAL VALUE 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 ex- change 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 depreda- tions, 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 deal- ing with negative values). If a particular crime (as "Black-Handing") increases rapidly, we in- crease 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, 1 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, 2 have 1 See the discussion of Simmel's contention, supra, p. 19, n. 8 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 PSYCHOLOGY OF VALUE 95 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 psy- chological or ethical interest, has also made some illuminating suggestions. The most comprehen- sive 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 * to Simmel's views. There is, in fact, a rich litera- ture 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 psy- chological aspects, but rather, as to what individ- ual values (and in what relations) are significant for the explanation of the particular sort of value 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. f "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., *. v. "Worth" (article by W. M. Urban); Simmel, G., Philosophic des Geldes, Leipzig, 1900, "A Chapter in the Philosophy of Value," Amer. Jour, of Sociology, vol. v; Urban, W. M., Valuation, Lon- don, 1909. These titles are representative of an extensive literature on the subject. 1 Supra, p. 19, n. 96 SOCIAL VALUE with which the economist is concerned. The ex- position 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 prob- lem 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 ex- perience, a value is a quality of the object valued. 1 Values are "tertiary qualities" (to borrow an ex- pression from Professor Santayana's Life of Rea- son 2 ), 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 ob- ject for the experience. When we have suffi- ciently reflected upon the situation to be able to separate subject and object, and to divest the ob- ject 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 al- ready over our fear when we can separate it from 1 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 phi- losophy have, in my judgment, more to learn from him than from any other contemporary philosopher. *Pp. 141-42. THE PSYCHOLOGY OF VALUE 97 the object. These qualities are intensive quali- ties, may be greater or less in degree, i.e., are quantities. 1 And they must first exist, as such quantities, before any reflective process of evalua- tion and comparison can put them in a scale, and make clear their relative values. 2 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 abstrac- tions, the elements with which we finally come out, put together in a synthesis, will not give us our concrete experienced value again. But, recog- nizing this, we may still distinguish what seem to be the more important aspects of the value ex- perience, 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. emo- tional- volitional, side of mind. A pure intellect, if we may imagine it, would understand logical necessity, would contemplate the "world of de- scription," but could know nothing of the "world of appreciation," or of values. 3 (It is precisely because intellect is never "pure," because it al- ways has its emotional accompaniment and pre- suppositions, that we can objectively communi- cate our values, as urged in chapter vm.) But 1 Cf. Gabriel Tarde, Psychologic ficonomique, vol. i, p. 63, and Urban, Valuation, p. 73. * Urban, op. cit., p. 32. * Paulsen, Friedrich, Ethics, passim. 98 SOCIAL VALUE 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 * and Professor Davenport, 2 have made desire, rather than feel- ing, the worth-fundamental. The psychology lying back of this conception represents a great advance over the passive, associationalistic, ele- ment psychology of the hedonists, and is espe- cially significant as emphasizing the impulsive, dynamic nature of value, but it is still too ab- tract, indeed, it abstracts from a very funda- mental 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 pos- sessed, 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. 3 Hed_onism 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 misinter- preted 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 1 System der Werttheorie, vol. i, chap. i. * Op. cit., p. 311.] ' Cf. Urban, op. cit., p. 36; Meinong, op. cit., pp. 15-16. THE PSYCHOLOGY OF VALUE 99 feeling and desire as the value-fundamental, we must, I think, with Meinong and Urban, 1 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 psycjiosis. Value is not to be understood apart from what Urban calls its "presuppositions." 2 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 uncon- scious at the borders. Every value is linked with the whole body of ideas, emotions, habits, in- stincts, impulses, which, in their organic Jx>tality, we call the personality. Back of the value stands a long history, wnich 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 sim- ple 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, vir- tually the whole personality is essentially in- 1 Meinong, op. tit., pt. i, chap, i; Urban, op. cit., pp. 38-39. * Op. dt., pp. 14-16, and following chapter. 100 SOCIAL VALUE volved. Of these presuppositions, or "funded meaning," we need not be conscious in any de- tail. The value, which is the emotional-volitional aspect of this funded meaning, is, of course, suffi- cient, so long as it is unchallenged by an opposing value, for the motivation of our activity which is the essential function of values. The presup- positions 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 introspec- tive mind. A frequent result of conflicts among values is a sort of mechanical "haul and strain," producing "more heat than light." The ques- tion 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 dis- tinguish both desire and feeling. The feelings, in Professor Dewey's phrase, are "absolutely plu- ralistic" and cannot be reduced to any one type, or two types, as pleasure and pain. The desjres may be either intense or slight, without reference to the amount of the value, depending on circum- stances. As stated, if we have the object we value, the element of desire must be reduced to an atti- tude, to a disposition to desire, in the event the object should be lost. It remains a vague back- ground of concern, of "anxiety lest the object es- cape," capable, of course, of springing into full THE PSYCHOLOGY OF VALUE 101 intensity if need be. In esthetic values, and in the values of mystical repose, we have cases where desire is, 1 thus, at a minimum. Strictly speaking, desire, as a conscious fact, has in it always a nega- tive aspect, a privative aspect, we desire wnen we are incomplete, when we lack. It is this nega- tive aspect of desire which the Greek philosophers, as Aristotle, stressed, and which has led abso- lute idealism to eliminate desire from its concep- tion of the Absolute Spirit. But desire has also a positive or active aspect, and in this aspect it re- mains in all values. Where the activity is per- fectly unjfted, a situation which we sometimes approximate, we may not be conscious of de- sire, 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..jun- easiness. 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-accom- paniment of intense desire is extraneous to the value-moment: that it is, in fact, kinsesthetic feel- 1 Urban, op. cit., p. 39. 102 SOCIAL VALUE ing, due to the stress of opposing muscular reac- tions, 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 pro- duced 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 moti- vate one's conduct, are present in consciousness all the time, we must recognize that neither de- sire nor feeling'need be actual, present, conscious facts, for the value to be effective. It may hap- pen 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 recog- nition, with desire and feeling both at a mini- mum, 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 "presupposi- tion" of another value, which is consciously felt at the moment. Mind is economical. Conscious- ness 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.J;here. A further element is necessary. Meinong in- sists upon an existential judgment, a judgment that the object valued is real, as essential to THE PSYCHOLOGY OF VALUE 103 value. 1 Gabriel Tarde 2 makes a similar conten- tion, holding that belief, as well as desire, is in- volved 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. 3 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 ob- vious 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. 4 But explicit affir- mation, even there, is not necessary, provided the question of reality is not raised at all. A "re- ality-feeling," however, is essential. It should be noticed, too, that this "reality-feeling" is an es- sentially 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 dis- pensed with. In the value experience, as a conscious experi- ence, and from the structural side, we may distin- 1 Psychologisch-ethische Untersuchungen zur Werttheorie, Graz, 1894, pt. I, chap, i, esp. p. 21. * "La psychologic en Economic politique," RevuelPhttosophique, vol. xii, pp. 337-38. 1 Op. cit., pp. 41 el seq. * See chapter xvi, infra. 104 SOCIAL VALUE guish 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 motiva- tion. 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 con- cerned, 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 I 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 com- pared, not in order that they may be! From the functional side, then, the testxxf a value is its influence upon activity. The "common dejaomi- nator," or, better, the abstract essence, of values, is, not feeling, nor desire, but power in motiva- tion, and the expression of this is of course the THE PSYCHOLOGY OF VALUE 105 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 dis- cussed, 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 qual- ity. 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 dis- criminated. The value is, not in the subject, but mjhe^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 sub- ject 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 nevez separate. But I do contend that this is the^essential and universal element in values, and that for an indi- vidual engaged in the active conduct of life, this 106 SOCIAL VALUE 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 rac- ing": 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 expe- rience itself, may be relegated to the sphere of the implicit. A necessary limitation has been definitely indi- cated in what has gone before, but, to avoid mis- understanding, 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 crea- tures 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. 1 A "fear- ful sight" repels us, has a negative value, tends, 1 The German, with its facility in compounding, offers a convenient nomenclature here: Wert and TJnwert. Cf. Ehrenfels, op. eit., for a brief discussion of negative values (pp. 53-54). THE PSYCHOLOGY OF VALUE 107 to the extent of its strength, to make us with- draw. 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 at- tracting us, the negative values repelling us. The question of the relations among values we shall discuss rather briefly, not that it is unimpor- tant, 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 re- garded as qualitative. Values may be in their nature quite conjpatible, 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 qualita- tively 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_yalues, 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 base- 108 SOCIAL VALUE ball in the case of an orthodox "fan," we may have, as before indicated, a mere mechanical haul and stress, in which one or the other wins by sheer force, to the very considerable discomfort of the uneasy victim. But the conflict may lead to a reexamination of the presuppositions of each value, to a process of bringing each into more organic relation to the whole system of values. In this process, other values may be called into play, may reenforce one or the other of the two alternative values. And, after such a process, both values may be different from what they were. There may emerge some higher value which comprehends them both, or one may be reduced to a minor place, and the other may prevail. Values are no more permanent than any other phase of the mental life. Constant trans- formations, 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 gen- eralize it, despite its antiquated psychology, may be accepted with little modification. 1 The la,w_of "diminishing utility" as we increase the incre- 1 For this generalization, see Urban, op. dt., chap, vi ; Ehrenfels, op. cii., vol. n, chap, in, esp. p. 86. THE PSYCHOLOGY OF VALUE 109 ments 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 in- compatible values must not be made too abso- lute. Human nature is accommodating and prac- tical, 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_yalues may jcohere 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 satis- fied, 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 (c&teris paribus) the negative value rises the obverse of the law of "dimin- ishing (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 qual- itatively incompatible values, where a quantita- 110 SOCIAL VALUE tive 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 procjess 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 nega- tive 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. 1 The case of the conflict between qualitatively incompatible values is the typical case of the con- flict 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 absolute- ness" 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 2 ) . The most 1 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 here- tics become the dominant element in the society. Then since their position is far from certain new recruits to the heresy have a high posi- tive value, but, as the heresy still further spreads, additional recruits count for less and less. * Cf. Urban, op. cit., passim ; Ehrenfels, op. cit,, vol. i, pp. 43 et seq. ; THE PSYCHOLOGY OP VALUE 111 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 educa- tion that they are vital parts of the personality, and that any compromise where they are in- volved 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 lib- erty 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, reli- gious, personal, etc., in the sphere of the'Jndivid- ual's psychology. Such lines do not exist. There are shadiijgs, gradations, quantitative differ- ences which become distinct enough to justify a Mackenzie, criticism of Ehrenfela and Meinong in Mind, Oct., 1899. Cf. also, Wicksteed, The Common Sense of Political Economy, London, 1910, pp. 402 ct seq. 112 SOCIAL VALUE 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 "commpn denominator" of power in motivation. And especially is that a false ab- straction which would separate the different sorts of value, ethical, economic, etc., into sepa- rate, 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 con- stantly reinforce economic values, economic val- ues 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 them- selves, and finding their place in the scale, and getting their "margins" fixed, extensive mar- gins and intensive margins. But this is so ob- viously 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 PSYCHOLOGY OF VALUE 113 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 mate- rial good which one takes in return for an im- moral 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." l The Austrian analysis was essentially faulty, then, not so much in its hedonistic psychology for it can be freed from that 2 as in its ab- straction 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. 3 The other abstraction of the Austrians, the abstraction olTthe individual from his vital, organic connec- tion with the social whole, we shall treat more fully later. So far, we have kept pretty strictly within the field of "individual psychology" and "individ- ual 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 1 The generalization of the idea of price, while not original with Wick- steed, is interestingly developed by him in chaps. I and II of his Com- mon Sense of Political Economy, London, 1910. 2 Davenport, op. cit., pp. 303-11, gives a good summary of economic discussions of hedonism. His own view is that the Austrians are not essen- tially bound up with hedonism. 1 Supra, chaps, vi and vu. 114 SOCIAL VALUE analogy between the individual mind and the social mind is a very close one, and the corre- spondences 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 un- necessary for the vindication of our thesis to do so. CHAPTER XI RECAPITULATION. THE SOCIAL VALUES. FUNCTIONS OF THE VALUE CONCEPT IN ECONOMICS OUR conclusions reached in previous chapters, from the standpoint of economic theory, and from the standpoint of sociological theory, alike for- bid 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 in- dividual 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 in- *" directly, 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 in- dependent system, either in their origin, in their interactions, or in their consequences for action. In our psychological phrase, their "presupposi- tions" 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 cor- respond to the values of no individual mind, great social values, whose presuppositions aretre- 116 SOCIAL VALUE mendously complex, including individual values in the minds of many men, as well as other fac- tors which we shall have to analyze in considera- ble detail, great social values whose motivating power directs the activities of nations, of great industries, of literary and artistic "schools," of churches and other social organizations, as well as the daily lives of every man and woman impelling them in paths which no individual man foresaw or purposed. In Urban's phrase, between the subjectively desired and the objectively de- sirable in ethics, between subjective utility and sacrifice and objective value and price in economic reckoning, between the subjectively effective and the objectively beautiful in art, there is a difference for feeling so potent that in naive and unreflective experience the feelings with such objectivity of reference are spoken of as predicates of the objects themselves. 1 And our theory carries us even further than Professor Urban cares to go here. Naive and unreflecting experience is perfectly justified in treating these objective values as qualities of the objects themselves. To the individual man, an objective value, say the value of an economic good, is "as a rule, a quality almost wholly inde- pendent 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 1 Op. cit., p. 17. RECAPITULATION SOCIAL VALUES 117 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 in- dividual 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 sub- stantially 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 Hull campaign, behave in a most surprising and disconcerting manner ! 1 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 ad- just himself to them. They have been described and elaborated in innumerable books. 2 That 1 Cf. Royce, J., The World and the Individual, New York. 1901, vol. I. pp. 209-10, and 225. 2 I may refer here particularly to Durkheim, De la division du travail social, Paris, 1893. In giving this reference, of course, I do not commit myself to the "mediaeval realism" of which Durkheim has been, perhaps justly, accused. Cf., also, Professor Ross's admirable Social Control. 118 SOCIAL VALUE 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, 1 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 econ- omists speaking of value as the essential char- acteristic or quality of wealth. We find theo- rists 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 1 Cf. Ely, Outlines of Economics, 1908 ed., pp. 99-100, and Tarde, Psychologic Economique, vol. i, p. 85, n. See supra, chap. n. RECAPITULATION SOCIAL VALUES 119 Austrians, undertaking the problem of "Impu- tation," breaking up the value of a consumption good into different parts, one part being assigned to the labor immediately concerned in its pro- duction, 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 re- moter ranks, the whole process possible only if the original value be an objective quantity of the sort described. We find a differential por- tion 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 mone- tary theory. We may ignore, sometimes, the element of value when dealing with non-mone- tary 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 120 SOCIAL VALUE upon to explain the motivation of the economic activity of society, and value has been conceived of as a motivating force. 1 Schseffle, especially, has stressed this phase of the matter in his criti- cism of the socialistic theories of value. "Util- ity value," he holds, does direct industry into proper channels, but a value based on labor- time would get supply and needs into a hopeless discrepancy. 2 No ratio "between objective articles" will serve these functions which the economists have put upon the value concept. Value as a purely in- dividual phenomenon, varying from man to man, will in no way 3 serve these purposes of the econo- mists. Value as a mere brute quantity of physi- cal 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 in- dividual judgment or desire. A strong feeling that this is so is manifested in the term which the 1 Cf. Wieser. Natural Value, pp. 65, 162-63, 210-12, and 36; Flux, Economic Principles, chap. n. 2 Quintessence of Socialism, London, 1898, pp. 55-59, 91 et seq., 123-24. 1 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." Pro- fessor 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 statisti- cian. See his article, "Index Numbers and the Standard of Value," Jour, of Pol Econ., vol. x, 1901-02, pp. 11 and 18-19. RECAPITULATION SOCIAL VALUES 121 English School so often uses as the equivalent of value, namely, "purchasing power" 1 a term which Bohm-Bawerk approves. 2 The notion of relativity which has, historically, been bound up with this term, we have criticized in chapter u, and it is not necessary to repeat the argument here. But the other aspect of it, its recognition of the dynamic character of value, ancL of the quantitative character of value, even though often confusedly and vaguely, seems very much to strengthen the case for the thesis I am main- taining. 3 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 1 Even Professor H. J. Davenport finds a quantitative value concept necessary in places. For example, on page 573 of his Value and Distribu- tion, 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 enter- prise." 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 appar- ently 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." 2 "Grundzilge," etc., Conrad's Jahrbucher, 1886, pp. 5 and 478, n. * 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. xvin. 122 SOCIAL VALUE 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 pro- cess 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 syn- thesis? 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 ele- ments of subjective utility, etc. But the major- ity 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 quan- titative concept, with satisfactory results so far as practical problems are concerned, but with- out 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 prob- lem, 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 RECAPITULATION SOCIAL VALUES 123 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. CHAPTER XH SOCIAL VALUE: THE THEORIES OF URBAN AND TARDE OUR point of view will be more adequately de- fined 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 dis- tinctive 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, in- sisting 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 THEORIES OF URBAN AND TARDE 125 values appear when many individuals, through "sympathetic participation,"/^/ the same value. With our conclusion (chapter vm) that we can share each other's emotional life he is in thorough accord. His argument in this connection is ad- mirable. 1 His interest is primarily in morahsocial values, and he attempts no detailed treatment of economic social values, seeming to hold that the Austrian treatment of objective value is ade- quate. 2 Both moral and economic values are "ob- jective and social." 3 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 mayT)e described as the resultants of social synergies. The intro- duction of this term has for its purpose the clearest possible distinction between social forces as conscious and as sub- conscious. It is with the former that we are here concerned. 4 Conscious collective fueling is thus insisted upon as an essential in social values, and Pro- fessor Urban insists 5 that the value ceases to be a value as this conscious feeling wanes even though conceding 6 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 1 Op. cit., chap, vm, esp. p. 243. Ibid., p. 319. * Ibid., p. 312. Ibid., p. 318. Ibid., pp. 333-36. Ibid., p. 335. 126 SOCIAL VALUE 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 deter- mined. He does, indeed, undertake something of the sort 1 (he is speaking of ethical values), making the quantity of value depend on "supply and demand," the supply depending on the num- ber of people willing to supply a given moral act, and the intensity of their willingness to do it extension and intention both being recog- nized. 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 wouldjdepend, 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 Tor 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 deter- mining 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 in- dividual "marginal utilities," has to assume value in the background as the validating force behind these individual elements. The error here, 1 Op. cit., pp. 329-30. THEORIES OF URBAN AND TARDE 127 as there, comes from an abstraction, from cen- tring 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 prob- lem, 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 con- scious psychological factors, gets explicit recog- nition, even though no real explanation, at the hands of Gabriel Tarde, 1 to whose theory of so- cial value we now turn. I quote chiefly from his Psychologie Economique, and the numerals which follow refer to pages in volume i. (63-64) Value understood in its largest sense, takes in the whole of social science. It is a quality which we attribute to things, like color, 2 mit 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, be- lieved, desired, or admired. This quality is thus of that peculiar species of qualities which present nunaerical degrees, and mount or descend a scale without essentially changing their nature, and hence merit the name of quantities. 1 "La croyance et le desir: possibility de leur mesure," Rev. phUoso- phique, vol. x (1880), pp. 150, 264. "La psychologic en economic poli- tique," Ibid., vol. xn (1881), pp. 232, 401. " Les deux sens de la valeur," Rev. d' economic politique, 1888, pp. 526, 561. "L'idee de valeur," Rev. politique et litteraire (Rev. Bleue), vol. xvi, 1901. Psychologie Economique, Paris, 1902. * Cf. Conrad, Grundriss zum Studium der politischen Oekonomie, Jena, 1902, Erster Teil, p. 10. 128 SOCIAL VALUE There are three great categories of value: "valeur-verite" "valeur-utilite" and "valeur- beaute." To ideas, to goods (in a generic sense of the term), and to things considered as sources "de voluptes collectives," we attribute a truth, a utility, a beauty, greater or less. Quite as much as utility, beauty and truth are children of the opinion of the mass, in accord, or at war, with the reason of an elite which influences it. (It may be noted in passing that Tarde's " trinitarian " conception of value is not as arti- ficial as it seems. It is simply a method of classi- fication, 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" "mmfes, >r ~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 sig- nifies three things diversely combined : the greater or smaller number, the greater or less social im- portance ("poids," " consideration," "competence " "reconnue") of the people who believe it, and the greater or less intensity of their belief in it. The greater or less utility of an object expresses the greater or less numBer of people who desire it in a given society at a given time, the greater or less social "poids" (" ici poids veut dire pouvoir et droit") of the persons who desire it, and the greater or less intensity of their desire for it. And so with beauty. THEORIES OF URBAN AND TARDE 129 Here is, then, an explicit recognition of the element of the social weight of ..those who create a social value, as a factor coordinate with their nuniber 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, follow- ing 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 dif- ferent sort of explanation. He is seeking a * ' glorio metre," or measure of glory for glory is a social value too. He finds that to determine a man's_glory we must take account of two things : one his notoriety, and the other, the admiration in which he is held (71-72). The first is simple: we will count the number who watch him and talk about what he does. The second is harder, for we must not merely count the number who admire him, but also determine the importance of each as an admirer. But how get at this? Tarde suggests that the study of the cephalic index will throw light upon the problem no satis- factory solution, I think ! but says that any- how the problem is practically solved every day in university and administrative examinations. Apart from the fact that conscious^ desire (or conscious belief, etc.), rather tEan functional power, is made the basis of Tarde's social value, and apart from the failure to give any real ac- 130 SOCIAL VALUE count 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 analy- sis 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 politi- cal parties, combining their influence, may secure wonderful results, leading both parties to agree on a programme, and carrying it through. Two equally great leaders, but both within the same party, may be unable to accomplish anything by combining their efforts. And it may happen that two men, each with great weight in his own sphere, would be so incongruous if they tried to cooperate, that their joint weight would be less than the weight of either alone. It is not a mat- ter 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 con- nections 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 131 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 consciousjntensity, but on motiyating^DOwer. The social consciousness, as the individual con- sciousness, is economical. And the need for con- sciousjeeling, for conscious desire, in connection with social, as with individual, values, arises wheja, 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 es- tablished, conscious feeling and desire with ref- erence 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. CHAPTER ECONOMIC SOCIAL VALUE How are we to get out of our circle: * 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 de- parture seems to be the simple situation which Wieser has assumed in his Natural Value. 2 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 cer- tainly would not be convincing. In the first place, there is no unbroken sequence of uninterrupted economic causation from that far away hypo- 1 See chaps, vi and vii, tupra. * Bk. n, chap. vi. ECONOMIC SOCIAL VALUE '133 thetical 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 indus- trious where others have been idle, and so have accumulated a surplus of value, which, used to back their desires, makes the wants of the in- dustrious 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 emo- tion felt ten thousand years ago could scarcely have any very direct or certain quantitative con- nection 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 de- pend every moment upon the force of live minds, and need to be constantly renewed. And there would have been, of course, many "non-econo- mic" disturbances, wars and robberies, frauds and benevolences, political and religious changes a host of historical occurrences affecting the weight of different elements in society in a way that, by historical methods, it is impossible to treat quantitatively. 1 1 Cf. Davenport, op. cit., p. 560. "For, in truth, not merely the distri- bution 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 154 SOCIAL VALUE What is called for is, not a temporal regressus, which, starting with an hypothesis, picks up ab- stractions 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 prob- lems call for further refinement. And, indeed, we shall include them in our theory, under a lump name, namely, the rest of the "presuppo- sitions" of value. 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. . . . Bid 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 Daven- port, seeing clearly and speaking frankly, makes the extent of the ab- straction 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 man- ner with a synthetic theory which tries to construct an existing situation out of existing elements. Our plan of a logical analysis of existing psychic forces makes it possible to treat these facts which have come to us from the past, not as facts of different nature from the "utilities" with which the value theorists have dealt, but rather as fluid psychic forces, of the same nature, and in the same system, as those "utilities." ECONOMIC SOCIAL VALUE 135 Our reason for choosing a logical analysis of existing psychic forces instead of a temporal re- gressus instead, even, of an accurate historical study of the past is a twofold one : first, we wish to coordinate the new factors we are to em- phasize 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 tem- poral regressus. But, more fundamental than this logical point, is this: the forces which have his- torically begot a social situation are not, neces- sarily, the forces which sustain it. The rule doubt- less is that new institutions have to win their way against an opposition which grows simply out of the fact that we are, through mental in- ertia, 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 them- selves are not concerned with. The great mass of activities of all men, even the most progres- sive, 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 main- taining and controlling a social situation, there- 136 SOCIAL VALUE fore, are not necessarily the ones which histori- cally brought it into being. 1 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 sup- poses. 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 effi- cient in the determination of economic values as are the results of our present system of distri- bution. 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 1 I do not, of course, mean to question the immense light which his- tory throws upon the nature of existing social forces. ECONOMIC SOCIAL VALUE 137 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. 1 But this, it is evi- dent, would give them an excess of that same vexatious "purchasing power" 2 whether em- bodied in gold or commodities or labor-checks matters little and so would destroy the effi- ciency of the principle of "marginal utility" as the ruler of values. As phases in the "presuppositions " of economic value, then, coordinate with "marginal utility," our theory puts the legal and ethical values con- cerned with distribution, which rule in a com- munity at a given time. Reinforcing and vali- dating the values of goods are the social values of men. President F. A. Walker 3 defines value as "the power an article confers upon its possessor irrespective of legal authority or personal senti- ments., 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 1 Wieser, op. cit., pp. 79-80. * Ibid., p. 62. 1 Pol. Econ., 1888 edition, p. 5. 138 SOCIAL VALUE distribution were primarily a physically deter- mined 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 1 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 commu- nity 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 so- 1 Principles, bk. n, chap. i. ECONOMIC SOCIAL VALUE 139 cial classes. Economists of an earlier school took these factors for granted, when they thought of them at all, and assumed that they are con- stant, relatively unchangeable things, a sort of fixed framework within which the forces of a Malthusian biology, or the forces of "self -inter- est'* 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 dis- tribution, which either exclude the non-economic factors, 1 or else relegate them to the "pound 1 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 per- manent as the law that should create it and that, too, in a social con- dition 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 par- ticle 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 vacua 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 con- 140 SOCIAL VALUE of 'cceteris paribus.'" l If ours were a stagnant civilization, this procedure might be safe, but stant 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 in- creases; (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 cer- tainly 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-the- ory, 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 abstrac- tionism 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 Nationald- konomie (Leipzig, 1908), in the Journal of Political Economy, 1909, pp. 363 et seq. His dynamics is also to be " reinvnrtschaftlich." An essay in economic dynamics, the introduction to which sets forth his general point of view, appears in the Austrian Zeitschrift fur Volksunrtschaft, etc., 1910, under the title, "Das Wesen der Wirtschaftskrisen." In this Professor Schum- peter narrows, by a process of exclusion, the conception of what would constitute a "pure economic" explanation of crises virtually to a pin- point and then fails to carry out his program of giving us a "rein- wirtschaftlich" theory. For, in order to get any periodicity into his eco- nomic 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" (Videesp. pp. 298-99.) Pro- fessor Schumpeter very explicitly recognizes the existence of factors other than the " reinunrtschaftlich," but counts them as "external" factors. 1 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). ECONOMIC SOCIAL VALUE 141 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 continu- ally changing them with the principles, machin- ery 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 or- ganization of society and industry, and, assum- ing 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, assum- ing 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," 142 SOCIAL VALUE 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 fac- tor, 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 Rus- sian Jews, or of native Americans, or of negroes, significant from the standpoint of distribu- tion, of the values of economic goods, and the direction of economic activity. 1 Reduce your labor force to "efficiency units," so that from the standpoint of productive power of the addi- tions no difference is made whether they be of the one class or the other, and still it is a matter of 1 The danger of the abstract individualistic study, from the entre- preneur'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 pro- ducers, and are therefore only potentially directing forces. The problem of production and of marginalship is, accordingly, an entrepreneur prob- lem." (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, trac- ing the subtler forces that underlie values, and so motivate the direction of industry, should know more, rather than less, than the entrepreneur. ECONOMIC SOCIAL VALUE 143 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 organiza- tion, 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, deter- mines 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 "free- dom of the will" here. But it is a matter into which law and morals and personal friendship and monopoly privilege and charity and benevo- lence 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 situa- tion which Professor Clark treats in his Dis- tribution of Wealth. That his system should hold, 144 SOCIAL VALUE we must have, of course, private property, and personal freedom. We must have perfectly free competition. We must have absolutely no mono- poly 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 so- ciety 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 ob- tain 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 competi- tion mean? Why do we have such varied esti- mates 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 compe- tition as a system where each is free to follow his "pure economic" tendencies in the short- est and simplest manner, I think there can be no question but that we must condemn it. The "pure economic impulse," namely, the im- ECONOMIC SOCIAL VALUE 145 pulse to get the maximum of wealth with the minimum of effort, left unchecked and un- guided 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 "rein- wirtschaftlich" 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 de- creased outlay of human effort and physical re- sources, and with kindly feeling among com- petitors (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." 1 That is to say, it depends on the extent to which the system in- cludes 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, in- 1 Principles, 1905 ed., pp. 147 et seq. 146 SOCIAL VALUE evitable tendencies towards a divine "economic harmony." On the other hand, inevitable ten- dencies 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 does n't work in vacuo. And the question as to where the in- finite complex of social forces may lead us is not one that can be settled " reinwirtschqftlich." We can only say that economic values, at a given moment, are the focaj 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 moti- vating 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 condi- tion of a degraded class may be divided, tend- ing indirectly by raising the value of a certain sort of economic good, to encourage its produc- tion, and tending directly to prevent its pro- ECONOMIC SOCIAL VALUE 147 duction. 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 moraljyalue 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 econ- omic value which includes these other social forces, we have no right to speak of "inevitable economic tendencies." Socialjife 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 exclu- sive 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. CHAPTER XIV ECONOMIC SOCIAL VALUE (continued) BACK to the concrete whole, then, of social-men- tal 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, 1 fashion, custom how powerfully they mould our wants. And individual "cost," like- wise: 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 individ- ual 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 1 Vide Ross, Foundations of Sociology, chapter on the "Sociological Frontier of Economics," and Tarde, Psychologic Economique, passim. ECONOMIC SOCIAL VALUE 149 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 sociaj ranging of the men who feel them, till we know how much the men who have them count for in the scale of fun- damental human values. 2thd their effect on "sup- ply 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 prerevo- lutionary French monarch may command untold resources, while the useful and productive mil- lions 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 lajsvs 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 condi- tions of pay for labor and to compensation for accidents which promptly reflect themselves in the values of the goods produced in the indus- tries affected, and in the increased values through increased "demand " of the goods con- sumed by these classes. The ideal of "no pay without function" may 150 SOCIAL VALUE 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 un- stable, 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 distribu- tion. The legal value of private property one of those social "absolute values" which do not readily lend themselves to the "marginal pro- cess" 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 pluto- cratic 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 con- flict 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 de- feat of the other, still, we may hope to get a result like that which often comes in the case of con- flicts between values in the individual psychology a fuller appreciation of the significance of both values, which will get us away from the ECONOMIC SOCIAL VALUE 151 "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 com-\ plex 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 individ- uals and of society converge, and the maximum of social welfare is attained by the individual's at- taining 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 152 SOCIAL VALUE the weak, and the social outlook is gloomy in- deed. 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 1 of our economic values. Economics 1 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 recip- rocal causation. An organic situation must be circular in this sense. The parts are interdependent. 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. Bohm-Bawerk recognizes very well that the charge of circular reasoning, if it could be brought home to the Aus- trians, would vitiate their system. Vide "Grundziige," Conrad's Jahr- bucher, 1886, p. 516. And Professor Clark likewise recognizes that value ECONOMIC SOCIAL VALUE 153 has failed to profit by the example of the other social sciences here. Ethics has frankly recog- nized 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 situa- tion. But economic theory has sought to make itself too much a thing apart, to isolate its phe- nomena from other phases of social life, and has busied itself exclusively with "utility "and "cost" and "prices," and the like. And where the eco- nomist 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 inter- pretation of the other fields has much to com- mend it is certain, but it is equally certain that law and morality react on economic values, es- pecially in the higher stages of civilization. This has been so fully and convincingly stated by Professor Seligman, in his Economic Interpreta- tion 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 theory of the sort he is treating is spoiled by circular reasoning, as indi- cated by his criticism of a certain form of the labor theory in his Distribu- tion 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 recti- linear causation is implied. And a rectilinear process has no right to get into a circle! 154 SOCIAL VALUE economic technique are of ultimate ruling sig- nificance for the direction of social progress, it is still a far cry from that doctrine to the doc- trine that the "utilities" and "costs" directly connected with the production and consump- tion 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 so- ciety and of social values has a similar signifi- cance for politics and ethics. There is no one distinctive emotion, as fear, or the love of domina- tion, 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 com- partments. It is one whole, of which the differ- ent 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 * no science has 1 Pareto, in the introductory chapter of his Cours d' Economic Politique, defines economics in terms of the narrow abstraction which he has chosen for the explanation phenomenon, as the "science of ophelimity" (p. 6), ECONOMIC SOCIAL VALUE 155 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. 1 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. 1 I am indebted to Professor E. C. Hayes, of the Department of Soci- ology of the University of Illinois, for this distinction. CHAPTER XV S'OME MECHANICAL ANALOGIES IT may help the exposition if we throw the ar- gument, briefly, into terms of the more familiar mechanical analogies, and speak of the equi- libria 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 con- ceiving 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 trans- formed into electricity, or into motion, or mo- tion into heat, etc. Professor Clark, with his dis- tinction between "capital" and "capital goods," has shown how economic value may undergo constant transformation, as to its physical em- bodiment, and yet remain generically the same. But the possibilities of transformation are not confined to the economic sphere. We may gen- eralize the notion. A man may use economic value to attain political power; having the politi- cal power, he may use it to get economic value SOME MECHANICAL ANALOGIES 157 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 hu- man power" (in Professor Cooley's phrase), 1 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 pur- poses? 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 re- ligious 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 2 has often a definitely recognized economic value as well. Economic value, spent in an educational campaign, may 1 Social Organization, p. 264. * 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. 158 SOCIAL VALUE 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 ana- logy 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 polit- ical office, and a great deal of waste in the pro- cess. 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 transform- ations, the original power may be suddenly wiped out as if a great political leader should under- take 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 pro- duction, between intensive and extensive mar- gins, etc. But we may also have equilibria be- tween, 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 SOME MECHANICAL ANALOGIES 159 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 en- trepreneurs seeking to produce at the minimum expense, even at the cost of the lives and health of their employees, and law and morals 1 draw- ing 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 in- ternal 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. 2 Not "utility and cost," but an infinite complex of social forces are in equilibrium in the economic situation. And the social forces in equilibrium at focal points are themselves composites of many forces, cooperating and reinforcing each other, each of 1 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. 2 Intrinsically, there is no more reason why the economist should con- cern himself with measuring quantitatively the effect of tariff laws than with a similar treatment of other legal values. Tariffs do not affect in- dustry any more intimately than hosts of other laws. The obvious rea- son why the economic laws of taxation have been worked out and the others ignored, in our economic analyses, is that the tax laws, being them- selves expressed in money terms, are more easily handled by the econo- mist. 160 SOCIAL VALUE these forces having its own equilibria with other minor forces a net resultant sending the un- neutralized energy of both in a common direc- tion, 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 sys- tems 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 differ- ent form of social organization. Thus the reg- ulation 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 so- cial energy frequently more efficacious. Now we depend primarily on economic social values, under a competitive system, to motivate the economic activities of society, to determine whether this piece of land shall be planted in wheat, or in some other crop, or fertilized in this or that manner; in the mediaeval English manor, many questions like these were settled by vote of the manor court. SOME MECHANICAL ANALOGIES 161 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 uncon- genial 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 situ- ation which is so complex that he can give at- tention to only one set of forces, or tendencies, at a time, and where quantitative measurement is essential, it is often highly necessary to ab- stract 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. CHAPTER XVI PROFESSOR SELIGMAN'S PSYCHOLOGICAL DOCTRINE OF THE RELATIVITY OF VALUES PROFESSOR SELIGMAN'S discussion of value theory has been extremely fertile in suggestions for me, and I find the spirit of the positive theory outlined in this book much closer to the general point of view of his doctrines than to those of any other economic writer. His recognition of the generic character of value, of the fact that economic value is but a species within a genus, 1 his contention that, while ethical principles de- pend on economic considerations in primitive life, they still, in later and higher stages, attain a relative independence, and react on economic life, 2 his recognition of the essentially social nature of even the individual's wants, 3 his dis- cussion of the legal and moral "level of com- petition," 4 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 1 Principles, 1905. p. 174. 1 Economic Interpretation of History, passim. Principles, p. 175. Ibid., pp. 147-48. SELIGMAN'S PSYCHOLOGICAL DOCTRINE 163 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 1 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: 2 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 1 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 remem- bered. 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. 1 Pp. 342-43. 164 SOCIAL VALUE 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 soci- ety a piano is worth far more than a suit of clothes. Since value, as we know, is simply an expression for marginal util- ity, 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. Val- ues considered as mutual relations between two goods cannot both fall a fall in one means that it goes lower than the other, whence in- evitably the other must rise, as a matter of logi- cal 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. 1 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 1 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 re- lations between value and utility, etc. The distinction between a utility curve and a price curve does not affect the argument here. SELIGMAN'S PSYCHOLOGICAL DOCTRINE 165 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 de- finition. Professor Seligman, in conversation with the writer, has so distinguished it, and has indicated that, rejecting the logical doctrine of relativity, he now holds this psychological doctrine of relativity, as distinct, both from the absolute conception of Professor Clark, and the relative conception of the English School. As preliminary to a criticism of Professor Seligman's doctrine, certain distinctions must be made. Values may be relative in Professor Seligman's sense without being relative in the sense in which the English School uses the term : the English School thought only of the relations among, say, a unit of wheat and a unit of corn, a unit of woolen goods, a unit of wine, etc.: Professor Seligman is thinking of the total stocks of these various commodities. Assume, for simplicity, that the stocks of all commodities were doubled, and that the demand curves for all the commodities have the same shape, and that form is the rectangular hyperbola, 1 so that 1 Analytically expressed xy=c. This curve, by definition, leaves the "value area" (xy) constant. 166 SOCIAL VALUE the absolute value of each unit of each com- modity would be exactly cut in half. The Eng- lish 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 con- cede at once that every unit has had its value cut in half. 1 Another distinction must be made. There is, to be sure, at any given time, a pretty definitely limited 2 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 ne- cessarily 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 with- drawn from the old objects precisely equal to that which is attached to the new object? This 1 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. 1 But the limitation is not absolute. New incentives may call out sub- stantial increases in productive activity. SELIGMAN'S PSYCHOLOGICAL DOCTRINE 167 doctrine is deliberately affirmed, so far, at least, as the individual is concerned, in the article on "Worth" 1 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 quan- tity 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 1 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. 168 SOCIAL VALUE identification of "energy of valuation" with "nervous energy." That the two are identical would be maintained only by the crudest ma- terialism. The one is a physical force; the other is a psychical force. While nervous energy and energy of valuation may be connected, the na- ture of the connection is surely not so well known as to justify the assumption that definite limita- tion in the one implies a precisely corresponding limitation in the other. 1 There is no justifica- tion at least in the present state of psycho- logical knowledge for holding that the law of the "conservation of energy" applies to psychi- cal energy. 2 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 every- thing 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 oppor- tunity 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, as- sume that a crop failure on a large scale occurs. 1 In this view I am sustained by Professor John Dewey. 1 Cf. Stuart, "Valuation as a Logical Process," in Dewey's Studiet in Logical Theory, pp. 828, n., and 380. SELIGMAN'S PSYCHOLOGICAL DOCTRINE 169 Will not the value of the total existing supply of the articles hi 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. 1 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 common- places 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 argu- ment 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 1 See tupra, p. 165, n. 170 SOCIAL VALUE curve for the totality of commodities should take the particular form of a rectangular hyper- bola, instead of some other form. A priori, the presumption would seem to be that its form would be irregular. There is another point of view which seems to support Professor Seligman's contention, and that is the money-price viewpoint. At a given moment, each man has a definite quantity of money or of bank-credit which he can use in purchasing commodities. If he spends it for some commodities, he cannot spend it for others. As he joins one group, demanding one com- modity, he must at least to the extent of that amount of money withdraw from other groups demanding other commodities. At a given in- stant, 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 commodi- ties 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? SELIGMAN'S PSYCHOLOGICAL DOCTRINE 171 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, be- lief, 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 activ- ity, 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 manu- factured 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 radi- cally upset the existing scale of values with a sad reaction following shortly after. And, in the absence of belief, the most rational justifica- 172 SOCIAL VALUE tion for belief is impotent. Witness the bank- ruptcies, 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 con- trol, is presented by widespread epidemics. Gabriel Tarde, criticizing Mill's contention that all values cannot rise or fall, instances the gen- eral fall in all values which an epidemic occa- sions, and the recovery of values after the epi- demic. 1 This criticism of Tarde's will not, of course, hold as against Mill's doctrine (inde- fensible on other grounds) which bases the re- lativity of values upon a logical definition, but it will hold as against the psychological doctrine of relativity under discussion. A further point is to be noted. Even granting that the sum total of social power of motiva- tion is definitely limited, it still does not follow that the sum total of economic value is so limited. For not all of this social psychic energy goes into economic values. Religious, aesthetic, patriotic, moral values, all call for their share of this energy, and the amount given to each varies from time to time. This phase of the matter is discussed 1 "La psychologic en conomie politique," Rec. Philosophique, vol. xn, p. 238. SELIGMAN'S PSYCHOLOGICAL DOCTRINE 173 in detail by Professor Ross, in the chapter on "The Social Forces" in his Foundations of So- ciology, and I shall not expand the discussion here. The doctrine that there is a definite, unchang- ing 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 produc- tion (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 re- frain from using it to increase the value of an- other. In the long run, these quantities are sub- ject 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 ele- ment. 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 quan- tity. It is not changed merely in consequence 174 SOCIAL VALUE 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 n, I am in hearty accord, in so far as the issues raised in that chapter are concerned. CHAPTER XVII THE THEORY OP VALUE AND THE THEORY OF PRICES IN most English treatises on economics, a price means a sum of money given in exchange for a commodity, or the ratio between the money and the commodity, or the ratio between the value of the money and the value of the commodity. In any case, price as a rule involves the idea of money. With the Germans, on the other hand, Prels 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. 1 The conception of price has been broadened by some later writers in English, however, to correspond with the German usage, notably by Professor Patten, 2 and by Professor Schumpeter, 3 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 1 Cf. Davenport, op. cit., pp. 296-97. * Theory of Prosperity, New York, 1902, pp. 16-17, 89. 1 "On the Concept of Social Value," Quar. Jour. Econ., Feb., 1909, pp 226-27. 176 SOCIAL VALUE familiar usage. But, on the other hand, since I am convinced that ratios of exchange in gen- eral, and money prices in particular, are generi- cally 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. 1 The conception of absolute values is 1 See Wealth of Nations, introductory part of chap, vm of bk. i (pp. 66-67 of the Cannan ed.) For Ricardo, see Works, McCuIloch ed., London, 1852, p. 15. Adam Smith seems occasionally to use value in the relative sense, as on p. 183 of vol. n of the Cannan ed. Ricardo, though in- dicating that he is concerned only with relative values on the page cited gupra, still speaks of values as simultaneously falling, in ch. xx, on "Value and Riches," which, of course, is impossible on the basis of the relative concept. There is no point to torturing these passages unduly, however, in the effort to find our distinctions in them. Professor Seligman calls my attention to a most interesting forty-page discussion of the theory of value by W. F. Lloyd, A Lecture on the Notion of Value, as Distinguishable not only from Utility, but also from Value in Exchange. The lecture was delivered before the University of Oxford, in Michaelmas Term, 1833, and published, in accordance with the rules of the foundation which provided funds for the lecture, in London, 1834. The writer insists on the conception of value as absolute, and devotes pp. 30^iO 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, vm 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 subject- ive 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' (for- merly Foxwell) Library in London, are known to exist. It seems to have made no impression upon the economists of the time of its publics- THEORY OF VALUE AND OF PRICES 177 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. 1 In Cairnes, the two conceptions are hopelessly confused on a single page, 2 while Marshall's whole treatment runs in terms of price. In what follows, I wish to generalize the con- ception of price, to show the function of the price concept in economics, to distinguish care- fully 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 n, the distinction between "abso- lute and relative values," or, in our present phrase, between values and prices, was suffi- ciently 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 meas- ured, and the value of the good which is to serve as the measure, must first exist, as abso- lute quantities, before a price-ratio can be made tion. 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. xm, esp. pp. 357-63. 1 Principles, bk. m, chap, xv, par. 2. * Leading Principles, editions of 1878 and 1900, pp. 12-13. 178 SOCIAL VALUE 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 gen- eral 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 ar- range 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 eco- nomic 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 signi- ficant of the correctness of our general point of THEORY OF VALUE AND OF PRICES 179 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 1 points out that by comparing the theatre receipts of theatres representing different dramatic schools we may compare the vogues of each, or that by comparing the income of the clergy in different periods we may get some index of the variations of religious sentiments. He suggests that while money as a measure of economic values usually functions in exchange, it may, as a measure of beliefs or other social forces, function through gifts, through popular subscriptions to build this or that statue, for the support of scientific work or philanthropies, or even through thefts: "Quelquefois meme c'est par des vols ou se montre la perversion d'un esprit sectaire, 1'aber- ration et la profondeur de ses convictions pas- sionees." Commonly, indeed, money performs even this function, that of measuring currents of be- lief, passion, enthusiasms, etc., through the pro- cess 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 sin- gle factor stands out so prominently that we can s 1 Psychologic Economique, vol. I, pp. 77-78. 180 SOCIAL VALUE abstract from the rest, and let money changes measure changes in it alone. For example, dur- ing 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. 1 For the market, this means simply a change in the eco- nomic 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 tri- umph of the Federal arms a belief that at once affected economic values, and was measured in terms of money. Or, the economist may abstract a single legal factor, as a tax law, and measure its influence on the assumption that the rest of the situation is constant, in the well-known laws of shifting and incidence. Such clean-cut instances are not the rule, however. The organic complexity of the social forces lying back of economic values makes it difficult to disentangle single elements, and measure their force. For one thing, variations in one factor usually mean movements in the others. If we may borrow terms from chemistry, while the economist may give us a qualitative analysis of these forces, it is hard for him to give us a quantitative analysis. And the charac- teristic 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 1 Scott, Money and Banking, 1903 ed., p. 60. THEORY OF VALUE AND OF PRICES 181 complexity that lies behind it), a value quan- tity in which the net outcome of social inter- actions 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 dif- ferent goods and services as these manifest them- selves in the market, and submit themselves to economic measurement. In a word, his chief interest is, not in value, but in prices. 1 And the great bulk of pure economic theory, and prac- tically 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 ac- curate to speak of the price of money in terms of commodities, or of a composite of commodities, as to speak of prices of commodities in terms of money. That is to say, the economist gives himself little concern, in his quasi-mathematical study, as to the ultimate nature of the social forces that manifest themselves in the market. A host of forces lie back of demand, but the economist puts the phenomena of demand into a curve which is the function of two variables, one a quantity of money, and the other a quantity of goods. Lying back of these quantities of goods and money, and giving meaning to the curve, are the more fundamental quantities, the value of 1 Cf. Schumpeter, Quar. Jour. Econ., Feb., 1909, pp. 226-27. 182 SOCIAL VALUE the goods and the value of the money. Further than this, for the purposes of his quasi-mathe- matical, pure theory, the pure economist has no real occasion to go in proof of which it need be remarked simply that the most diver- gent 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 use- ful 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 be- tween 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, Pro- fessor Marshall's procedure in a large part of his great work. Professor Davenport's con- tention that, from the standpoint of the entre- preneur, 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- THEORY OF VALUE AND OF PRICES 183 prices of labor and capital, any more than in- dividual "utilities" will explain demand-sched- ules. 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 es- sential 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. In- stead of explaining social value, it would itself present a problem. 1 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 ab- stract units of value, and uses arithmetical numbers which designate no particular com- modities, or algebraic symbols, or even ordinary speech, to indicate quantitative relations among different sums of these abstract units. Such pro- cedure is thoroughly correct, and often highly convenient, if one be dealing with highly gen- eral laws, or if one wish to avoid any complica- tions from changes in the value of any concrete 1 See supra, p. 163, a. ,. 184 SOCIAL VALUE commodity which might be chosen as the stand- ard 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 con- crete, must be the value of some particular con- crete good, which is chosen as the standard. What good is chosen is a purely arbitrary matter, deter- mined by convenience. Abstract value, apart from valuable things, is an utter impossibility only a Platonic idealism or mediaeval realism could hold the contrary view. And, in order to show how many units of value there are in a good, we must compare it with another good, whose value is the unit, unless, indeed, we arbitrarily choose as our unit the good in question, and say that its value is one unit, or several units, in case we arbitrarily define the unit as a fraction of its value. But clearly this latter procedure would tell us nothing after all as to the amount of the value in the good. It would be a purely formal process like renaming a " hocus-pocus " and calling it two "Abracadabras." Any real meas- uring 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 con- ception, and presupposes it. 1 1 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. THEORY OF VALUE AND OF PRICES 185 A valid price procedure, in my view, is essen- tially this: we take our quantitative value con- cept, 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, 1 as a sort of frozen framework within which our economic values are to operate, and which shall remain constant during the in- vestigation : 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 as- sumption 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 1 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" af- fected by the patriotic feelings of purchasers, and even brokers, etc. 186 SOCIAL VALUE as are the economic values. They change be- cause of changes in the economic values; they initiate changes in the economic values; and they initiate changes which deflect the tenden- cies 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 ac- count for changes in the non-economic values working to deflect the tendencies which the eco- nomic values would lead to if the other values had remained constant. This last, of course, most economists in prac- tice constantly try to do. Present day discus- sions 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 ex- plain 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 ac- count 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 privi- lege, etc. Or, at least, he usually tries to make THEORY OF VALUE AND OF PRICES 187 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 busi- ness man knows how these various forces operate on values. He studies them, tries to estimate their force in quantitative price terms, and ad- justs his plans to them. If a religious wave sweeps over a large section of the country, the whole- saler sends in larger orders for Bibles, and smaller orders for playing cards. If a rate-reduction agi- tation is going on, the manufacturer of steel rails and railroad supplies plans to cut down his output. If trades-unionism grows strong, em- ployers of labor recognize that they must read- just their budgets. CHAPTER XVIII THE THEORY OF VALUE AND THE THEORY OP PRICES (concluded) MY strictures upon the Austrian, or "utility" theory of value in what has gone before seem to call for further qualification here. As a theory of value., as a theory to explain the nature and origin of value, I am convinced that the Austrian theory is utterly and hopelessly inadequate. And yet, for the work of the Austrian economists, taken by and large, I have the highest admira- tion. Their treatment of margins, their concep- tion 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 marvel- ously accurate, sound, and useful. Having no logical warrant for an objectively valid quan- titative value concept, they have none the less assumed and used one and used it marvel- ously well. Sometimes that objective value is called by the name, "objective value." Some- times they call it "marginal utility," and yet it is clearly anything but the feeling of an individual, THEORY OF VALUE AND OF PRICES 189 for it is broken up into different parts, and re- flected back and back through different pro- ductive 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 pro- duction, not of material things, but of "utili- ties" 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, 1 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 im- mense 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 distri- bution 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 funda- mental social values. Indeed, it is through the 1 Vide supra, chaps, v and xi. 190 SOCIAL VALUE machinery of distribution that the non-econo- mic values most vitally affect economic values. Wages, interest, competitive profits, are surely legal categories, and are possible only in a so- ciety where there is free labor and private con- trol of industry. We may agree with Wieser l that, as categories of economic causation, in- terest, rent, and wages will remain even in a com- munistic 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 civili- zation 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 so- cial 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 injunc- tion, or a law for the exclusion of certain classes of immigrants. If we wish to handle distribu- tion quantitatively, we must do it superficially, studying in the market the effects which the underlying social forces manifest there with re- ference to the rewards of the different factors of production. This has been increasingly the case 1 Natural Value, passim. THEORY OF VALUE AND OF PRICES 191 with later theories of distribution. If, on the other hand, we take the discussion which J. S. Mill gives in book n 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. 1 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 criti- cism of Professor Seligman: "As soon as we turn from the value problem to the separate treat- ment of the distributive shares, we find our- selves to have descended from the cloud-land mysteries of transcendental economics to the old and beaten paths of the traditional analy- sis." 2 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 (logi- cally) to take up price analysis. 1 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 denned, 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 j>roblem. *_, Value and Distribution, p. 451. 192 SOCIAL VALUE 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 pro- blems 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 dis- cussed, 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 Bohm-Bawerk's contention that the solving of the price problem ipso facto solves the value problem. 1 The purpose of this book is, not de- structive, but reconstructive. A detailed criticism of the various economic theories that have ap- i Vide supra, chap. iv. THEORY OF VALUE AND OF PRICES 193 peared, as theories of prices, is manifestly too big a task to be undertaken here. All of them can- not, 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 dis- tinction between value theory and price theory, and of the confusions that result from mixing the two, will remove many seemingly irrecon- cilable differences between opposing schools, and that existing price theories are less to be criti- cized 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 chap- ter to it. CHAPTER XIX THE THEORY OP VALUE AND THE SOCIAL OUTLOOK. SUMMARY THE belief that social optimism and social pes- simism are in an essential way linked with the theory of value is one that finds expression in a good many writers. The socialist theory of value is supposed to serve as a condemnation of the existing social regime; Professor Clark's system of value and distribution is often in- terpreted as justifying an optimistic outlook. This view is expressed by Professor Frank Fetter, for one, who especially stresses this aspect of value theory. 1 Professor Joseph Schumpeter, in his article on social value several times men- tioned, 2 indicates that an optimistic social out- look is a necessary corollary of the theory of social value. Wieser's objection to the doctrine that economic value signifies social importance 3 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 1 Principles of Economics, New York, 1905, pp. 415 et seq. * "On the Concept of Social Value," Quar. Jour. Econ., 1909, pp. 222-523. 1 Nat. Vol., p. 52, n. Quoted supra, chap. i. THEORY OF VALUE SOCIAL OUTLOOK 195 at least, the inspiration of Professor Davenport's attack in his recent article in the Quarterly Journal. 1 1 " 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 unproduc- tive 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 com- petitive regime, the test of productivity is competitive gain." If only my conception of social value is granted, I may safely enough concede Professor Davenport all the depravity he can find in society, and recognize that that depravity has its part in the determination of the concrete values. Only, I would insist, virtue as well as depravity is a fac- tor in the social will, and plays its r61e 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 Profes- sor 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 pre- suppositions. 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 196 SOCIAL VALUE It is not necessary to discuss here the question as to whether Professor Clark means that his theory should be so interpreted. 1 What I wish to insist upon is that no implication, either opti- mistic 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 wel- fare 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 states- men and inventors. The values of goods depend on the more fundamental values of men, even though the values of men, under abstract eco- of existing value theory, I am in hearty accord. The chief difference be- tween 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 pre- suppositions 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! 1 I regret exceedingly that Professor Clark's absence from Columbia University during the academic year, 1910-11, has prevented my discuss- ing this, and a host of other questions raised in this book, with him. THEORY OF VALUE SOCIAL OUTLOOK 197 nomic 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 so- ciety there be, and for a society where corruption is rampant, and wolves prey. The justification of the existing social order is to be sought else- where 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 ex- change, 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 com- binations 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 in- dividual mind only those emotions which are directly concerned with the consumption and production of economic goods; this abstraction 198 SOCIAL VALUE is necessitated by the individualistic, subjectiv-i istic conception of society, which, growing out of the skeptical philosophy of Hume, has domi- nated economic theory ever since; present day sociology has rejected this conception of society, and has reestablished the organic conception of society in psychological (rather than biological) terms, which make it possible to treat society as a whole as the source of the values of goods; this does not obviate the necessity for close analy- sis, 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 arithmeti- cally, but also all the other volitional factors in the intermental life of men in society not an arithmetical synthesis of elements, but an or- ganic whole; legal and ethical values are especially to be taken into account in a theory of economic value, particularly those most immediately con- cerned with distribution; the theory of value and the theory of prices are to be sharply dis- tinguished. The function of economic values is the motiva- tion 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 guid- ing, 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 THEORY OF VALUE SOCIAL OUTLOOK 199 are just as helpless in explaining the motivation of social activity. Every man's course is made for him far more by outside forces than by his own individual motives. Economic activity in society is an intricate, complex thing, for the motivation of which no individual's motives can suffice. If motivated at all its guidance comes from something superindividual, and that something is social value. Ends, aims, purposes, desires, of many men, mutually interacting and mutually determining each other, modifying, stimulating, creating each other, take tangible, determinate shape, as economic values, and the technique of the social economic organization responds and carries them out. THE END INDEX OF NAMES INDEX OF NAMES Adams, T. S., 120, n. Anaximander, 60. Anaximenes, 60. Aristotle, 61, 101. Austrian School, 7, 8, 16, n., 17, 28, 29, SO, 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. Bohm-Bawerk, E. von, 7, 29, 31, n., 37-39, 40, 44, n., 49, n., 121, 152, n., 192. Bradley, P. 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, vn, 65, 139, n., 143-44, 152, n. 156, 165, 173, 174, 194, 196. Clow, F. R., 20, n. Commons, J. R., 157, n. Comte, A., 73. Conrad, J., 15, n., 127, n. Cooley, C. H., 56, 69, n., 77 et seq., 84, 157. Darwin, Charles, 63. Davenport, H. J., 6, 21, 22, n., 23, 27, n., 37, 41, 42, 66, 71, n., 87-89, 98, 113, n., 121, n., 122, 133, n., 140, n., 142, n., 175, n., 182, 191, 194, 195, n. DeGreef, G., 72-76. DesCartes, Rene", 62, 63, 81. Dewey, J., 65, n., 68, n., 84, n., 95, n., 96, n., 100, 168, n. Draper, J. W., 72. Durkheim, E., 117, n. Edgeworth, F. Y., 25. Ehrenfels, C., 94, 98, 106, n., 108, n., 110, n., Ill, 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. 204 INDEX OF NAMES 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., Ill, 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, xn, 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., Ill, n., 113, n. Wieser, F. von, 8, 16, 17, 18, 28, 29. 81, n., 34, 35, 40, 46, 47, 49, n., 120, n., 132, 133, 136, 137, 143, 190, 194. Wundt, W., 85, n. CAMBRIDGE . MASSACHUSETTS U . S . A UC SOUTHERN REGIONAL LIBRARY FACILITY A 000 689 429 9