Socialism: A Summary and Interpretation of Socialist Principles Part 13

[159] I note that my friend, Mr. J. R. Macdonald, M.P., "Whip" of the Labour Party in the British House of Commons, so misrepresents Marx in his admirable little book, _Socialism_, page 54.

[160] Italics mine.--J. S.

[161] The italics are mine. The pa.s.sage occurs on page 186, Vol. I, of _Capital_, Kerr edition. In the last of the series of lectures printed in his book, Mr. Mallock attempts a reply to the criticism of an American Socialist, Mr. Morris Hillquit who quoted this pa.s.sage from Marx to show that Mr. Mallock was in error in saying that Marx regarded manual labor as the sole source of wealth. He evades the real point, namely, that Marx clearly included mental as well as physical labor in his use of the term, and with an ingenuity equaled only by the disingenuousness of the argument, seeks refuge in the fact that it does not cover the special "directive ability" which is a special function, "a productive force distinct from labor." The trick will not do. The fact is that Marx clearly and precisely covers that point in another place. The reader is referred to Chapter XIII of Part IV, Vol. I, of _Capital_, pages 363-368, Kerr edition, for a brilliant and honest treatment of the whole subject of the place of the "directing few" in modern industry. We shall treat the matter briefly later on.

[162] Italics mine.--J. S. The pa.s.sage occurs in Lecture III, page 36.

CHAPTER VIII

OUTLINES OF SOCIALIST ECONOMIC THEORY

I

The _geist_ of social and political evolution is economic, according to the Socialist philosophy. This view of the importance of man's economic relations involves some very radical changes in the methods and terminology of political economy. The philosophical view of social and political evolution as a world-process, through revolutions formed in the matrices of economic conditions, at once limits and expands the scope of political economy. It destroys on the one hand the idea of the eternality of economic laws and limits them to particular epochs. On the other hand, it enhances the importance of the science of political economy as a study of the motive force of social evolution. With Marx and his followers, political economy is more than an a.n.a.lysis of the production and distribution of wealth; it is a study of the princ.i.p.al determinant factor in the social and political progress of society, consciously recognized as such.

The sociological viewpoint appears throughout the whole of Marxian economic thought. It appears, for instance, in the definition of a commodity as the unit of wealth _in those societies in which the capitalist mode of production prevails_. Likewise wealth and capital connote special social relations or categories. Wealth, which in certain simpler forms of social organization consists in the owners.h.i.+p of use-values, under the capitalist system consists in the owners.h.i.+p of exchange-values. Capital is not a thing, but a social relation between persons established through the medium of things. Robinson Crusoe's spade, the Indian's bow and arrow, and all similar ill.u.s.trations given by the "orthodox" economists, do not const.i.tute capital any more than an infant's spoon is capital. They do not serve as the medium of the social relation between wage-worker and capitalist which characterizes the capitalist system of production. The essential feature of capitalist society is the production of wealth in the commodity form; that is to say, in the form of objects that, instead of being consumed by the producer, are intended to be exchanged or sold at a profit. Capital, therefore, is wealth set aside for the production of other wealth with a view to its exchange at a profit. A house may consist of certain definite quant.i.ties of bricks, timber, lime, iron, and other substances, but similar quant.i.ties of these substances piled up without plan will not const.i.tute a house. Bricks, timber, lime, and iron become a house only in certain circ.u.mstances, when they bear a given ordered relation to each other. "A negro is a negro; it is only under certain conditions that he becomes a slave. A certain machine, for example, is a machine for spinning cotton; it is only under certain defined conditions that it becomes capital. Apart from these conditions, it is no more capital than gold _per se_ is money; capital is a social relation of production."[163]

This sociological principle pervades the whole of Socialist economics.

It appears in every economic definition, practically, and the terminology of the orthodox political economists is thereby often given a new meaning, radically different from that originally given to it and commonly understood. The student of Socialism who fails to appreciate this fact will most frequently land in a mora.s.s of confusion and difficulty, but the careful student who fully understands it will find it of great a.s.sistance. Take, as an ill.u.s.tration, the phrase "the abolition of capital" which frequently occurs in Socialist literature.

The reader who thinks of capital as consisting of _things_, such as machinery, materials of production, money, and so on, finds the phrase bewildering. He wonders how it is conceivable that production should go on if these things were done away with. But the student who fully understands the sociological principle outlined above comprehends at once that it is not proposed to do away with the _things_, but with _certain social relations expressed through them_. He understands that the "abolition of capital" no more involves the destruction of the physical things than the abolition of slavery involved the destruction of the slave himself. What is aimed at is the social relation which is established through the medium of the things commonly called capital.

II

In common with all the great economists, Socialists hold that wealth is produced by human labor applied to appropriate natural objects. This, as we have seen, does not mean that labor is the sole source of wealth.

Still less does it mean that the mere expenditure of labor upon natural objects must inevitably result in the production of wealth. If a man spends his time digging holes in the ground and filling them up again, or dipping water from the ocean in a bucket and pouring it back again, the labor so expended upon natural objects would not produce wealth of any kind. Nor is the productivity of mental labor denied. In the term "labor" is implied the totality of human energies expended in production, regardless of whether those energies be physical or mental.

In modern society wealth consists of social use-values, commodities.

We must, therefore, begin our a.n.a.lysis of capitalist society with an a.n.a.lysis of a commodity. "A commodity," says Marx, "is, in the first place, an object outside us, a thing that by its properties satisfies human wants of some sort or another. The nature of such wants, whether, for instance, they spring from the stomach or from fancy, makes no difference. Neither are we here concerned to know how the object satisfies these wants, whether directly as means of subsistence, or indirectly as means of production."[164] But a commodity must be something more than an object satisfying human wants. Such objects are simple use-values, but commodities are something else in addition to simple use-values. The manna upon which the pilgrim exiles of the Bible story were fed, for instance, was not a commodity, though it fulfilled the conditions of this first part of our definition by satisfying human wants. We must carry our definition further, therefore. In addition to use-value, then, a commodity must possess exchange-value. In other words, it must have a social use-value, a use-value to others, and not merely to the producer.

Thus, things may have the quality of satisfying human wants without being commodities. To state the matter in the language of the economists, use-values may, and often do, exist without economic value, value, that is to say, in exchange. Air, for example, is absolutely indispensable to life, yet it is not--except in special, abnormal conditions--subject to sale or exchange. With a use-value that is beyond computation, it has no exchange-value. Similarly, water is ordinarily plentiful and has no economic value; it is not a commodity. A seeming contradiction exists in the case of the water supply of cities where water for domestic use is commercially supplied, but a moment's reflection will show that it is not the water, but the social service of bringing it to a desired location for the consumer's convenience that represents economic value. Over and above that there is, however, the element of monopoly-price which enters into the matter. With that we have not, at this point, anything to do. Under ordinary circ.u.mstances, water, like light, is plentiful; its utility to man is not due to man's labor, and it has, therefore, no economic value. But in exceptional circ.u.mstances, as in an arid desert or in a besieged fortress, a millionaire might be willing to give all his wealth for a little water, thus making the value of what is ordinarily valueless almost infinite.

What may be called natural use-values have no economic value. And even use-values that are the result of human labor may be equally without economic value. If I make something to satisfy some want of my own, it will have no economic value unless it will satisfy the want of some one else. So, unless a use-value is social, unless the object produced is of use to some other person than the producer, it will have no value in the economic sense: it will not be _exchangeable_.

A commodity must therefore possess two fundamental qualities. It must have a use-value, must satisfy some human want or desire; it must also have an exchange-value arising from the fact that the use-value contained in it is social in its nature and exchangeable for other exchange-values. With the unit of wealth thus defined, the subsequent study of economics is immensely simplified.[165]

The trade of capitalist societies is the exchange of commodities against each other, through the medium of money. Commodities utterly unlike each other in all apparent physical properties, such as color, weight, size, shape, substance, and so on, and utterly unlike each other in respect to the purposes for which intended and the nature of the wants they satisfy, are exchanged for one another, sometimes equally, sometimes in unequal ratio. The question immediately arises: what is it that determines the relative value of commodities so exchanged? A dress suit and a kitchen stove, for example, are very different commodities, possessing no outward semblance to each other, and satisfying very different human wants, yet they may, and actually do, exchange upon an equality in the market. To understand the reason for this similarity of value of dissimilar commodities, and the principle which governs the exchange of commodities in general, is to understand an important part of the mechanism of modern capitalist society.

This is the problem of value which all the great economists have tried to solve. Sir William Petty, Adam Smith, David Ricardo, John Stuart Mill, and Karl Marx developed what is known as the labor-value theory as the solution of the problem. This theory, as developed by Marx, not in its cruder forms, is one of the cardinal principles in Socialist economic theory. The Ricardian statement of the theory is that the relative value of commodities to one another is determined by the relative amounts of human labor embodied in them; that the quant.i.ty of labor embodied in them is the determinant of the value of all commodities. When all their differences have been carefully noted, all commodities have at least one quality in common. The dress suit and the kitchen range, toothpicks and snowshoes, pink parasols and sewing-machines, are unlike each other in every other particular save one--they are all products of human labor, crystallizations of human labor-power. Here, then, say the Socialists, as did the great cla.s.sical economists, we have a hint of the secret of the mechanism of exchange in capitalist society. The amount of labor-power embodied in their production is in some way connected with the measure of the exchangeable value of the commodities.

Stated in the simple, crude form, that the quant.i.ty of human labor crystallized in them is the basis and measure of the value of commodities when exchanged against one another, the labor theory of value is beautifully simple. At least, the formula is simplicity itself.

At the same time, it is open to certain very obvious criticisms. It would be absurd to contend that the day's labor of a coolie laborer is equal in productivity to the day's labor of a highly skilled mechanic, or that the day's labor of an incompetent workman is of equal value to that of the most proficient. To refute such a theory is as beautifully simple as the theory itself. In all seriousness, arguments such as these are constantly used against the Marxian theory of value, notwithstanding that they do not possess the slightest relation to it. Marxism is very frequently "refuted" by those who do not trouble themselves to understand it.

The idea that the quant.i.ty of labor embodied in them is the determinant of the value of commodities was held by practically all the great economists. Sir William Petty, for example, in a celebrated pa.s.sage, says of the exchange-value of corn: "If a man can bring to London an ounce of silver out of the earth in Peru in the same time that he can produce a bushel of corn, then one is the natural price of the other; now, if by reason of new and more easy mines a man can get two ounces of silver as easily as formerly he did one, then the corn will be as cheap at ten s.h.i.+llings a bushel as it was before at five s.h.i.+llings a bushel, _caeteris paribus_."[166]

Adam Smith, following Petty's lead, says: "The real price of everything, what everything really costs to the man who wants to acquire it, is the toil and trouble of acquiring it. What everything is really worth to the man who has acquired it, and who wants to dispose of it or exchange it for something else, is the toil and labor which it can save to himself, and which it can impose on other people.... Labor was the first price, the original purchase money, that was paid for all things.... If among a nation of hunters, for example, it usually costs twice the labor to kill a beaver which it does to kill a deer, one beaver would naturally be worth or exchange for two deer. It is natural that what is usually the produce of two days' or two hours' labor, should be worth double of what is usually the produce of one day's or one hour's labor."[167]

Benjamin Franklin, whose merit as an economist Marx recognized, takes the same view and regards trade as being "nothing but the exchange of labor for labor, the value of all things being most justly measured by labor."[168] From the writings of almost every one of the great cla.s.sical economists of England it would be easy to compile a formidable and convincing volume of similar quotations, showing that they all took the same view that the quant.i.ty of human labor embodied in commodities determines their value. One further quotation, from Ricardo, must, however, suffice. He says:--

"To convince ourselves that this (quant.i.ty of labor) is the real foundation of exchangeable value, let us suppose any improvement to be made in the means of abridging labor in any one of the various processes through which the raw cotton must pa.s.s before the manufactured stockings come to the market to be exchanged for other things; and observe the effects which will follow. If fewer men were required to cultivate the raw cotton, or if fewer sailors were employed in navigating, or s.h.i.+pwrights in constructing, the s.h.i.+p in which it was conveyed to us; if fewer hands were employed in raising the buildings and machinery, or if these, when raised, were rendered more efficient; the stockings would inevitably fall in value, and command less of other things. They would fall because a less quant.i.ty of labor was necessary to their production, and would therefore exchange for a smaller quant.i.ty of those things in which no such abridgment of labor had been made."[169]

It is evident from the foregoing quotations that these great writers regarded the quant.i.ty of human labor crystallized in them as the basis of all commodity values, and their real measure. The great merit of Ricardo lies in his development of the idea of social labor as against the simple concept of the labor of particular individuals, or sets of individuals. In the pa.s.sage cited, he includes in the term "quant.i.ty of human labor" not merely the total labor of those immediately concerned in the making of stockings, from the cultivation of the raw cotton to the actual making of stockings in the factory, but all the labor indirectly expended, even in the making and navigating of s.h.i.+ps, and the building of the factories. One does, indeed, find hints of the social labor concept in Adam Smith, but it is Ricardo who first clearly develops it. Marx further developed this principle, and all criticisms of the labor-value theory in Marxian economic theory which are based upon the a.s.sumption that quant.i.ty of labor means the simple, direct labor embodied in commodities fall of their own weight.

Thus, if we take any commodity, we shall find that it is possible to ascertain with tolerable certainty the amount of direct labor embodied in it, but that it is equally as impossible to ascertain the amount of the indirect expenditure of labor power which entered into its making.

In the case of a table, for example, it may be possible to trace with some approximation to accuracy the labor involved in felling the tree and preparing the lumber out of which the table was made; the labor directly spent in bringing the lumber to the factory, and the direct labor expended in making out of the lumber a finished table; allowance may also be made for the labor embodied in the nails, glue, stain, and other articles used in making the table. So we have a fairly accurate statement of the direct labor embodied in the table. But what of the labor used to make the tools of the men who felled the trees and prepared the lumber? What of the coal miner and the iron miner and the tool maker? And what of the numerous and incalculable expenditures of labor to make the railroads, the railway engines, and to provide these with steam-power? What, also, of the machinery in the factory, and of the factory buildings themselves, and, back of them, again, the tool makers and the providers of raw materials? It is obvious that no human intellect could ever unravel the tangled skein of human labor, and that in actual exchange there can be no calculation of the respective labor content of commodities. If the law of value holds good, it must operate mechanically, automatically. And this it does, through the incidence of bargaining and the law of supply and demand.

We have noted elsewhere the variations in human capacity and productiveness. Superficial critics still frequently charge Marx with having overlooked this very obvious fact, whereas it has not only been fully treated by him, but was actually covered by Smith and Ricardo before Marx! With these writers and their followers it is the law of averages which solves the difficulties arising from variations in individual capacity and productivity. It is the _average_ amount of labor expended in killing the beaver which counts, not the actual individual labor in a specified case. Nor did these writers overlook the important differentiation between simple, unskilled labor and labor that is highly skilled. If A in ten hours' labor produces exactly double the amount of exchange-value which B produces in the same time devoted to labor of another kind, it is obvious that the labor of B is not equal in value to that of A. Quant.i.ty of labor cannot, therefore, be measured, in individual cases, by time units. Despite a hundred pa.s.sages which, detached from their context, seem to imply the contrary, Adam Smith recognized this very clearly, and attempted to solve the riddle by a differentiation of skilled and unskilled labor in which he likens skilled labor to a machine; and insists that the labor and time spent in acquiring the skill which distinguishes skilled labor must be reckoned.[170]

Another frequent criticism of the Marxian theory has not only been answered by Marx himself--is, in fact, ruled out by the terms of the theory itself--but was amply replied to by Ricardo.[171] The criticism in question consists in the selection of what may be called "unique values," or scarcity values, articles which cannot be reproduced by labor, and whose value is wholly independent of the quant.i.ty of labor originally necessary to produce them. Such articles are unique specimens of coins and postage stamps, autograph letters, rare ma.n.u.scripts, Stradivarius violins, Raphael pictures, Caxton books, articles a.s.sociated with great personages--such as Napoleon's snuffbox--great auks' eggs, and so on _ad infinitum_. No possible amount of human labor could reproduce these articles, reproduce, that is to say, the exact utilities in them. Napoleon's snuffbox might be exactly duplicated so far as its physical properties are concerned, but the a.s.sociation with Napoleon's fingers, the sentimental quality which gives it its special utility, is not reproducible. But the trade of capitalist society does not consist in the manufacture and sale of these things, which, after all, form a very insignificant part of the exchange-values of the world.

III

Marx saw the soul of truth in the labor-value theory, as propounded by his predecessors, especially Ricardo, and devoted himself to its development and systematization. He has been accused of plagiarizing his theory from the Ricardians, but it is surely not plagiarism when a thinker sees the germ of truth in a theory, and, separating it from the ma.s.s of confusion and error which envelops it, restates it in scientific fas.h.i.+on with all its necessary qualifications. This is precisely what Marx did. He developed the idea of social labor which Ricardo had propounded, disregarding entirely individual labor. He recognized the absurdity of the contention that the value of commodities is determined by the amount of labor, either individual or social, _actually embodied in them_. If two workers are producing precisely similar commodities, say coats, and one of them expends twice as much labor as the other and uses tools and methods representing twice the social labor, it is clearly foolish to suppose that the exchange-value of his coat will be twice as great as that of the other worker, regardless of the fact that their utility is equal. Labor, Marx pointed out, has two sides, the qualitative and the quant.i.tative. The qualitative side, the difference in quality between specially skilled and simply unskilled labor, is easily recognized, though the relative value of the one compared with the other may be somewhat obscured. The secret of that obscurity lies hidden in the quant.i.tative side of labor. Here we must enter upon an abstract inquiry, that part of the Marxian theory which is most difficult to comprehend. Yet, it is not so very difficult, after all, to understand that the years devoted to learning his trade, by a mechanical engineer, for instance, during all of which years he must be provided with the necessities of life, must be reckoned somewhere and somehow; and that when they are so reckoned, his day's labor may be found to contain, concentrated, so to speak, an amount of labor time equivalent to two or even many days' simple unskilled labor time. It may be, and in fact is, quite impossible to set forth mathematically the relation of the two, for the reason that the process of developing skilled labor is too complex to be unraveled. Of the fact, however, there can be no doubt.

The real law of value, then, according to Marx, is as follows: Under capitalism, _in free compet.i.tion_, the value of all commodities, other than those unique things which cannot be reproduced by human labor, is determined by the amount of _abstract_ labor embodied in them; or, better, by the amount of social human labor power necessary, on the average, for their production. We may conveniently ill.u.s.trate this theory by a concrete example. Let us, therefore, return to our coat-makers. Now, always a.s.suming their equal utility, no one will be willing to pay twice as much for the coat produced by the slow worker with poor tools as for the other. If the more economical methods of production employed by the man who makes his coats in half the time taken by the other man are the methods usually employed in the manufacture of coats, and the time he takes represents the average time taken to produce a coat, then the average value of coats will be determined thereby, and coats produced by the slower, less economical process will command only the same price in the market, the fact that they may embody twice the amount of actual labor counting for nothing.

If we reverse the order of this proposition, and suppose the slower, less economical methods to be those generally prevailing in the manufacture of coats, and the quicker, more economical methods to be exceptional, then, all other things being equal, the exchange-value, of coats will be determined by the amount of labor commonly consumed, and the fortunate producer who adopts the exceptional, economical methods will, for a time, reap a golden harvest. Only for a time, however. As the new methods prevail, compet.i.tion being the impelling force, they become less and less exceptional, and, finally, the regular, normal methods of production and the standard of value.

It is this very important qualification, fundamental to the Marxian theory, which is most often lost sight of by the critics. They persist in applying to individual commodities the test of comparing the amounts of labor-power actually consumed in their production, and so confound the Marxian theory with its crude progenitors. In refuting this crude theory, they are quite oblivious of the fact that Marx himself accomplished that by no means difficult feat. To state the Marxian theory accurately, we must qualify the bald statement that the exchange-value of commodities is determined by the amount of labor embodied in them, and state it in the following manner: _The exchange-value of commodities is determined by the amount of average labor at the time socially necessary for their production._ This is determined, not absolutely in individual cases, but approximately in general, by the bargaining and higgling of the market, to adopt Adam Smith's well-known phrase.

Now, this theory applies to those things, exclusive of the category of "unique values," which cannot be made by labor and are commonly supposed to owe their value to their rarity. For example, we may take diamonds. A man walking along the great wastes of the African _karoo_ comes across a little stream. As he stoops to drink, he sees in the water a number of glittering diamonds. To pick them out is the work of a few minutes only, but the diamonds are worth many thousands of dollars. The law of value above outlined applies just as much to them as to any other commodity.

The value of diamonds is determined by the amount of labor expenditure necessary _on an average_ to procure them. If the normal method of obtaining diamonds were simply to go to the nearest stream and pick them out, their value would fall, possibly to zero:--

"When we have nothing else to wear But cloth of gold and satins rare, For cloth of gold we cease to care-- Up goes the price of shoddy."

IV

Most writers do not distinguish between price and value with sufficient clearness, using the terms as if they were synonymous and interchangeable. Where utilities are exchanged directly one for another, as in the barter of primitive society, there is no need of a price-form to express value. In highly developed societies, however, where the very magnitude of production and exchange makes direct barter impossible, and where the objects to be exchanged are not commonly the product of individual labor, a medium of exchange becomes necessary; a something which is generally recognized as a safe and stable commodity which can be used to express in terms of its own weight, size, shape, or color, the value of other commodities to be exchanged. This is the function of money. In various times and places wheat, sh.e.l.ls, skins of animals, beads, powder, tobacco, and a mult.i.tude of other things, have served as money, but for various reasons, more or less obvious, the precious metals, gold and silver, have been most favored.

In all commercial countries to-day, one or other of these metals, or both of them, serves as the recognized medium of exchange. They are commodities also, and when we say that the value of a commodity is a certain amount of gold, we equally express the value of that amount of gold in terms of the commodity in question. As commodities, the precious metals are subject to the same laws as other commodities. If gold should be discovered in such abundance that it became as plentiful and easy to obtain as coal, its value would be no greater than that of coal. It might, conceivably, still be used as the medium of exchange, but it would--unless protected by legislation or otherwise from the operation of economic law, and so given a monopoly-price--have an exchange-value equal to that of coal, a ton of the one being equal to a ton of the other--provided, of course, that its utility remained. Since the scarcity of gold is an important element in its utility valuation, creating and fostering the desire for its possession, that utility-value might largely disappear if gold became as plentiful as coal, in which case it would not have the same value as coal, and might cease to be a commodity at all.

Price, then, is the expression of value in terms of some other commodity, which, generally used for that purpose of expressing the value of other commodities, we call money. It is only an approximation of value, and subject to a much greater fluctuation than value itself.

It may, for a time, fall far below or rise above value, but in a free market--the only condition in which the operation of the law may be judged--sooner or later the equilibrium will be regained. Where monopoly exists, the free market condition being non-existent, price may be constantly elevated above value. Monopoly-price is an artificial elevation of price above value, and must be considered separately as the abrogation of the law of value.

Failure to discriminate between value and its price-expression, or symbol, has led to endless difficulty. It lies at the bottom of the nave theory that value depends upon the relation of supply and demand.

Lord Lauderdale's famous theory has found much support among later economists, though it is now rather unpopular when stated in its old, simple form. Disguised in the so-called Austrian theory of final utility, it has attained considerable vogue.[172] The theory is plausible and convincing to the ordinary mind. Every day we see ill.u.s.trations of its working: prices are depressed when there is an oversupply, and elevated when the demand of would-be consumers exceeds the supply of the commodities they desire to buy. It is not so easy to see that these effects are temporary, and that there is an automatic adjustment going on. Increased demand raises prices for a while, but it also calls forth an increase in supply which tends to restore the old price level, or may even force prices below it. In the latter case, the supply falls off and prices find their real level. The relation of supply to demand causes an oscillation of prices, but it is not the determinant of value. When prices rise above a certain level, demand slackens or ceases, and prices are inevitably lowered. Prices may and do fall with a decreased demand, but it is clear that unless the producers can get a price approximately equal to the value of their commodities, they will cease to produce them, and the supply will diminish or cease altogether. Ultimately, therefore, the fluctuations of price through the lack of equilibrium between supply and demand adjust themselves, and prices must tend constantly to approximate values.

Monopoly-price is, as already observed, an artificial price in the sense that the laws of free market exchange do not apply to it. The "unique utilities," things not reproducible by human labor, command what might be termed natural monopoly-prices. There are many other commodities, however, the price of which is not regulated by the quant.i.ty of social human labor necessary to produce them, but simply by the desire of the purchasers and the means they have of gratifying it and the power of the sellers to control the market and exclude effective compet.i.tion. Since Karl Marx wrote, the exceptions to his law of value have become more numerous, as a result of the changes in industrial and commercial conditions. The development of great monopolies and near-monopolies has greatly increased the number of commodities which, for considerable periods, are placed outside the sphere of the labor-value theory, their price depending upon their marginal utility, irrespective of the labor actually embodied in them or necessary to their reproduction. It may, in the opinion of the present writer, be said in criticism of the followers of Marx that they have not carried on his work, but largely contented themselves with repeating generalizations which, true when made, no longer fit all the facts. But that is not a criticism of Marx, or of his work. What he professed to make was an a.n.a.lysis of the methods of production and exchange in compet.i.tive capitalist society. His followers have largely failed to allow for the enormous changes which have taken place, and go on repeating, unchanged, his phrases.

Professor Seligman has pointed out that Ricardo's contention that value is determined by the cost of production, and the contention of Jevons that value is determined by marginal utility, are not mutually exclusive, but, on the contrary, complementary to each other.[173] The present writer has long contended that the marginal utility theory and the Marxian labor-value theory are likewise not antagonistic but complementary.[174] This is not the place to enter into the elaborate discussion which this contention involves. Only a brief indication of the argument for the claim is here and now possible. First, as we have seen, Marx is very careful to insist that utility is essential to value, and that the utility must be a social utility. But social utility does not come of itself, from the skies or elsewhere. It is, so far as the vast majority of commodities is concerned, the product of labor. It is true that the value of a thing is never independent of its social utility; it is likewise true that this is determined by the social labor necessary to the reproduction of that utility. To regard the two theories as antagonistic, it seems to be necessary to say either (1) that the quant.i.ty of social labor necessary to produce certain commodities determines their value, utterly regardless of the amount of their social utility, or (2) that we estimate the social utility of commodities, estimate what we are willing to pay for them, utterly regardless of the labor necessary, on an average, for their reproduction. The latter contention would be absurd, and the former would involve the abandonment of the initial premises of the Marxian theory, contained in his definition of a commodity. In so far as the basis of social utility is the social labor necessary for its production, the labor-value theory of Marx may be said, I think, to include the marginal utility law, as one of the forms in which it operates.

V