Social Value: A Study in Economic Theory, Critical and Constructive. Benjamin M. Anderson
Laughlin, J. L., Elements of Political Economy, rev. ed., copyright 1902, p. 18: "Value ... is a ratio between two objective articles." See also Professor Laughlin's rejoinder to Clow's "The Quantity Theory and its Critics," Journal of P. E., 1902, where Professor Laughlin insists that exchange value is "something physical." Professor Davenport, Value and Distribution, Chicago, 1908, p. 569, defines value similarly.
[28] Value and Distribution, p. 569.
[29] Professor Davenport, caught between two apparently invincible logical difficulties, accepts this situation frankly, as, seemingly, the only thing possible. See Value and Distribution, p. 184, n. The ratio has no terms for him.
[30] Value and Distribution, pp. 330-31.
[31] "Values, Positive and Relative." Annals, vol. ix.
[32] It is, of course, recognized that exchange modifies value in so far as exchange is a productive process. But the essential thing here is the transfer aspect of exchange, which would hold even in a communistic society where value relations might be found out by some process other than exchange.
[33] Political Economy, New York, 1888, p. 84.
[34] Cours d'Économie Politique, vol. i, pp. 8-9.
[35] Edgeworth, F. Y., Mathematical Psychics, London, 1881, chapter on "Unnumerical Mathematics," pp. 83 et seq.
[36] A fuller discussion of the functions of the value concept is given in chapter xi where this argument is materially strengthened. The points here made, however, seem adequate.
[37] Jevons, Principles of Economics, 1905 (posthumous), p. 50.
[38] Walker, op. cit., p. 5.
[39] Marx, op. cit., vol. i, chap. i.
[40] Laughlin, Elements, p. 77. Cf. also, Ely, op. cit., 99-100.
[41] Ibid., p. 18. It is interesting to note that Professor Irving Fisher so defines wealth and value as to divorce the two concepts. Wealth includes free human beings, who cannot be exchanged, while the idea of value is derived from that of price, which, in turn, comes from the ideas of exchange and transfer. (Nature of Capital and Income, chap. i.)
[42] Principles, pp. 8-11.
[43] Money, p. 288.
[44] Cf. Kinley, op. cit., Merriam, loc. cit., and Carver, "The Concept of an Economic Quantity," loc. cit. Cf. also, Laughlin, Money, 1903, pp. 14-16; and Davenport, Value and Distribution, p. 181, n.
CHAPTER III
VALUE AND MARGINAL UTILITY
The method of Jevons and the Austrians, and, for that matter, of the great majority of value theorists, including even the social value school, in seeking the determinants of value, is to start with individual "utilities" or psychic "costs" directly connected with the consumption or production of goods. Such a study, if confined to an isolated individual economy, or if confined to an ideal communistic economy, like that for which Wieser works out his laws of "natural value," seems to yield us quantities of "utility," which may properly be called values, or quantities of sacrifice which may be properly treated as exactly measuring values.[45] But when applied to a competitive society, or to any society where there are inequalities among men in their power to attain the gratification of their wants, it yields us, not quantities of value, but only particular ratios between such quantities, or prices. An examination of the Austrian procedure will make this clear.
If the Austrian analysis be taken as meaning anything more than a method of determining surface ratios of exchange, difficulties at once arise. What quantitative relation is there between the satisfaction which an individual man gets from a good and the value of that good? What quantitative relation does the sacrifice, in terms of dissatisfactions endured and satisfactions foregone, of the individual producer bear to the value of his product? Now in thus positing the problem, I wish to distinguish it clearly from another problem, namely: what is the quantitative relation between psychic satisfaction, subjective individual value, and psychic cost, connected with the commodity, in the mind of some hypothetical "normal" man, and market value in a hypothetical market, where only "normal" men are found, and where there is an equality of wealth among these men? The problem is a concrete one: how are the actual desires and aversions of living men and women, no one of them "normal" perhaps, living in a world where inequalities of wealth are everywhere manifest, quantitatively related to value in the market?
Let us consider the inadequacy of the old Austrian analysis for this quantitative determination. I assume, without trying to prove here, the homogeneity and commensurability of human desires and aversions. (The Austrians, be it noted, do not explicitly postulate this, and Jevons, as will later be noted, rejects it, but it is necessary for Wieser's argument, and Böhm-Bawerk implies it clearly enough in places.[46]) This does not mean that any two men have, necessarily, the same desire for any particular good, or the same aversion from any particular piece of work, but simply that the desires and aversions of one man are comparable with those of another, and may be fractions or multiples of them, even though not exactly equal. My object in this assumption is to justify the use of the concept of units of desires and aversions, which are not the desires and aversions of a hypothetical "normal" man, but are some particular concrete desire and some particular concrete aversion of any man you choose to take. Now let us assume the market as treated in the usual Austrian analysis (somewhat simplified): five men have horses to sell, and five buyers appear in the market also.
A B C D E
Sellers will take: $20 $30 $40 $50 $60
Buyers will give: $60 $50 $40 $30 $20
Price is then fixed at forty dollars. Now if all these men were "normal" men, and if all had equal wealth, we could say here, marginal utility = value. But such is not the case in real life. Our marginal buyer and marginal seller may be as different as you please. Let us assume that the marginal buyer is a very rich man: forty dollars