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£arbarti College fttbrars 


Established in :8oi by Room Wolcott (H. U. 187c 
memory of his father, for " the purchase of books 

works of History, Political Economy, and 

Sociology," and increased io reni by 

a bequest in his will. 


V* A 

|>att f *t&affaer £ jtl&x? 
flifee (Economic ©c^apa 



INDUSTRIAL EDUCATION. By Harlow Stafford Person. 

bert N. Merritt, Ph.D. 

SHIP SUBSIDIES. An Economic Study of the Policy of Sub- 
sidizing Merchant Marines. By Walter T. Dunmore. I 


By Gilbert L. Campbell, B. S. 

PEOPLE OF AMERICA. By Frank H. Streightoff. 



SOCIAL VALUE. By B. M. Anderson, Jr. 

Boston and Nbw Yor* 

%axt t £c§afftt£t & (HUt* Cpri^e 6«Mf« 





B. M. AKDEESON, Je., Ph.D. 

Instructor in Political Economy 
Columbia Univtrtity 



«br Rfcntfbf pretf €axaMo«x 


APR 1 1920 



Published November iqii 







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 

In the year ending June 1, 1910, the following 
topics were assigned : — 

1. The effect of labor unions on international 


2. The best means of raising the wages of the 


3. A comparison between the theory and the 

actual practice of protectionism in the 
United States. 

4. A scheme for an ideal monetary system for 

the United States. 

5. The true relation of the central government 

to trusts. 


6. How much of J. S. Mill's economic system 


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 


Professor J. Laurence Laughiin, 

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. 


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 
I 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 
1 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 rv 
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 proof sheets. 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. 




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 Btihm- 
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 S 




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 



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 



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 — Bffhm-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 


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 




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 






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 


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 7£ 




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; 
Ehrenfels 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 itsfunctional 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- 



plementary values — Rival values: two cases: qualitatively com- 
patible, and qualitatively incompatible values — In first case, 
quantitative marginal compromise often possible: generalization 
of Austrian analysis — So-called "absolute values" ("absolute" 
here used as in history of ethics) — No sharp lines between dif- 
ferent sorts of values, as ethical, economic, esthetic — 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 03 



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 

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 in 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 


How get out of Austrian circle? — Temporal regressus vs. logical 
analysis of the concrete whole of the Social Mind — Even in 


Wieser's "natural" community, psychic elements other than 
"marginal utility" significant for the determination of economic 
values, especially legal and moral values concerned with 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, m 
any case, are of same nature as economic forces, — fluid, psy- 
chic forces — "Pure economic" forces, working in vacuo, would 
lead to anarchy; any concrete economic tendency depends on 
legal and moral forces quite as much as on "pure economic" 
forces — Illustrations 132 

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 


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 




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 


6. How much of J. S. Mill's economic system 


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 foiir 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 


Professor J. Laurence Laughiin, 

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. 


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 
t' 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 




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., Court d'&xmomie 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 fiibt nur Eine Art Wert h unddas 
ist der Gebrauchswerth. . ^j ^Aber aieser Eine Gebrauchswerth ist ent- 
weder mdividueller Uebrauchswerth 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 gegenttber 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 Oesammie Staaisunssensckaft, 1878, pp. 
223-24. Wagner indicates his approval of this concept, though he makes 
little use of it, in his Grundlegung der politischen Oekonomie, Leipzig, 1892, 
pp. 329-30. Ingram, in his History of Political Economy (New York, 1888), 
although he takes no account of social value theories of other writers, 
suggests one of his own — which is, however, a vague one, mixing techno- 
logical, ethical, and economic categories. See p. 241. 


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. in; "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. 

* See chapter xii. 


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; 8 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, 5 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. 79-74. 

» Principles, pp. 179-82. / 

4 The general references for Ross and Merriam have been given supra. 
Cjf. p. 62 of Dean Kinley's Money. 

1 "Ultimate Standard of Value." This article is substantially the same 
as chap, zxiv of The Distribution of Wealth, New York, 1899. 


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 Economics, vol. xv). The two 
discussions are parallel in part, the former being based upon the latter. 
The passage quoted is from the Q. J. E. article, pp. 323-24. The same 
passage is essentially reproduced in the Principles (first edition, p. 180), 
with the exception of the passages in italics: "I not only measure the 
relative satisfaction that I can get from apples or nuts, but the quantity 
of apples I can get for the nuts depends upon the relative estimate put 
upon them by the rest of society. Some individuals may prize a commodity 
a little more, some a little less ; but its real value is the average estimate, the 
estimate of what society thinks it is worth. If an apple is worth twice as 
much as a nut, it is only because the community, after comparing and 
averaging individual preferences," etc. The conception of social value as 
an average of individual values is withdrawn in the second treatment* and 
no substitute is offered for it. 

* 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 Oesetzgebung, VerwaUnng und Volkswirtschaft im Deutschen 
Reich, 1910, pp. 913 et seq. In the last-named article (p. 925, 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. 


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 
Wealthy 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, B6hm-Bawerk: — 

Man pflegt den objektiven Tauschwert im Gegensatz zu 
dem auf individuellen Schatzungen beruhenden subjek- 
tiven Wert haufig auch als den volksmrtschafttichen Wert 
der Giiter zu bezeichnen. Ich halte diesen Gebrauch filr 
nicht empfehlenswert. Zwar wenn man durch ihn nichts 
anders hervorheben wollte, als dass diese Gestalt des Wertes 
nur in der Gesellschaft und durch die Gesellschaft hervor- 
treten konne, dass er also das volks- und sozialwirtschaft- 
liche Wertphanomen per eminentiam sei, so wfire dagegen 
nichts zu erinnern. Gewohnlich mischt sich aber mit jener 
Benennung auch die Vorstellung, dass der Tauschwert der 
Wert sei, den ein Gut filr die Volkswirtschaf t habe. Man 
deutet ihn als ein liber den subjektiven Urteilen der ein- 
zelnen stehendes Urteil der Gesellschaft, welche Bedeu- 
tung ein Gut filr sie im ganzen habe; gewissermassen als 


Werturteil einer objektiven httheren 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- 
^ver for an estimate of the economic importance . ot the 
gooSs. We must go further ajad find out their relation to 
s ^cafltr^^Ut this relation to wants can only be realised 
and. measured mdiyiduallly. . . . 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.* 

Sax, likewise, expresses his dissent: — 

Da f iir die exacte Forschung die Psyche einer fabelhaften 
Collectiv-Personlichkeit nicht existirt, so kann der Aus- 
gangspunkt unserer Untersuchung auch wieder nur der 
Individualwerth sein.* 

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 B&hm-Bawerk, "Grundzttge der Theorie des wirtschaftlichen Guter- 
werts," Conrad's Jahrbiicher, N. F., Bd. XIII, 1886, p. 478. 

1 Natural Value, p. 52, n. 

' Sax, Emil, OrundUgung der theoretuchen Staatstrirtschaft, Vienna* 
1887, p. 249. - 


of Adolph Wagner, who accepts Rodbertus' 
notion. 1 / 

It may be well, at the outset, for the writer tcf^^'t 
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. ^e jjhall find no use for the social 
utility concept. in our B3gij^^~'On'ihe'atEeT 
hand, we shall findJJteconception of social value 
a necessitSLfoiithe validation of economic analy- 
sis, ancL 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. 8, note 1. 


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 

part n 




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.^, 
pqwer,isjaffective asocial utility* the quantitative 
measure of - which fojalpe- Elsewhere in his 
writings, 2 Professor Clark insists on the concept 
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. 258. 
, * E. g. t The Philosophy of Wealth, chap. v. . 



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, 

i 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, 


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." l 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 
vdbufi^oLA..yimg for .him depends on the. "son 
gaily nece ssary "_ labor .embodied in it, while 
some things, as land, commandTa 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 Jbhat value is a fact, and not an \(\es\\ x 
The second line of division is between the con- 
ceptions of value as a quantity and value as a • j 
ratio, or, to put the thing more generally and 
more accurately, between the value of a thing as 
a definite magnitude, independent of exchange 
relations, and that value as a relative thing, not 
only measured by the process of exchanging, but 

1 Economics, p. 92. See also the article by President Hadley on 
44 Value" in Baldwin's Dictionary of Philosophy, etc., and "Misunder- 
standings about Economic Terms/' Yale Review, vol. iv, pp. 156-70. 
The same ideas are expressed in all. 

1 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. 1, pp. 17-18. 
Professor 0. 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. , ,-•■ 



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. 8 
Professor Carver, in a recent article in the 
Quarterly Journal of Economics, 4, insists on the 
conception of value as a quantity. Gabriel Tarde 
states the matter illuminatingly in a passage in 
his Psychologie Economique:* — 

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, 1806, pp. 2-4. 
George, Science of Political Economy, New York, 1898, chap. xi. 

* Natural Value, p. 58, 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. 

1 Paris, 1902, vol. I, p. 63. 


Value is a quality which we attribute to things, like 
color, but which, like color, exists only in ourselves. • • • ( . I 
This quality is of that peculiar species of qualities which) i\X ; 7 
present numerical degrees, and mount or descend a scale/ I 

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 et seq. Ely, R. T. (and others), Outlines of Economics, New York, 
1906, pp. 156-57. Professor Ely uses the term in a different sense on pp. 
80-100; 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. 09-100. 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 (00-100); (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. 358-50, 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 «s to what value means. 


in the text-books, that, while there can be a gen- 
eral 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 exchange ratios at all — 12 :6 : :6 :3. All values 
might be cut in half, or multiplied by any factor, 
and, provided all decreased or increased in the 
same degree, exchange relations would not change. 
Now this difference is fundamental. Vastly 
more than terminology and definition is involved. 
Is value a quantity or a relation? Is value a 
thing which determines causally exchange rela- 
tions, or is value determined causally by them? 
To the writer, the iormer. conception seem&jk 
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. 



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, Philosophic des Geldes, Erster TeU, 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. 577-60S. 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.) Simmers contention is that, even j 
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. Inl 
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. 84). But later, 


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. S3). 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. SI, 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, t 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 tie 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. t 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 tflZconomie 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 

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 


even here, it seems to me, the same reasoning 
must hold. We reall y d o not find a ratio betwggg 
pl^^cal_cOTcm^dities at all. Four gallons of 
milk exchange f of onS^oIBarror 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. t 1902, where Professor Laughlin insists that 
exchange value is "something physical." Professor Davenport, Value and 
Distribution, Chicago, 1908, p. 569, defines value similarly. 
. * Value and Distribution, p. 569. 


goods. We can have no^quantitative mtips be- 
tween unlike tiuugs* And yet, we must, have 
terms _for pur ratios. The situation here is not 
unlike the situation that arises when we compare 
two weights. We have no unit of weight in the 
abstract. Weight never appears as an isolated 
quality, but always along with other qualities, 
as extension, color, and the like. And when we 
compare weights, we really compare two heavy 
objects, and make our weight ratio between the 
object to be weighed and _the phys ical ^t flttdard 
of_jKcight. 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. 


The difficulty with the doctrine we are main- / 
taining arises from the difficulty of isolating and * 
defining this quality of value. It is not a quality 
"inherent" in the good (whatever "inherent" 
may mean). It does not arise from the simple 
relation between our senses and the object, or 
even from an intellectual elaboration thereof. 
ItX^tber gso^§jsiiUit ^^ relation hfttwwn ^Qur . 
e motional-volitional l ife and the object, and the 
delinition of this relation, an3 tEelffetennihation 
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. Eelaiiyity 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/ 5 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. 
0u£ objection to the relative conception of value 
realljLjpyes our value more, rather than less 

1 Vdue'and Distribution, pp. 880-31. 

* "Values, Positive and Relative," Annals, vol. ex. 



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 
valueis absolute onJy in thig genag: its amount is 
net determined by the particular exchange ratio 
m which it happens to be put, and is not chang ed 

J eo i vsoey^ Ty time a new comparison is made. 

Further, it is in the process of exchange, andby 

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 mto 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 fe 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. ..- 


distinguish, in Kantian phrase, between the 
"ratio essendi" and the "ratio cognoscendi" 
Value and evaluation are two distinct things. 
V^lue, to anticipate a later part of the study, 
is~pnmaiy* md grows out of the action of the 
volitional-emotional side of human-social life; 
evaluation is_ secondary, and is the intellectual 
sprocess 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. 8 

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. 6 It is clear that a 
mere abstract ratio, which Jevons two pages 
later declares value to be, cannot serve such a 
purpose. Aljstract ratios are subject-matter for 
iQathematics/nbt for wbnomlcs. "Wealth and 

1 Political Economy, New York, 1888, p. 84. 

1 Court (T Economic Politique, vol. i, pp. 8-9. 

' 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. 

1 Jevons, Principles of Economics, 1905 (posthumous), p. 50. 


valuexiiffer as substance and Attribute/ 5 (Senior,' 
quoted with approval by F. A. Walker. 1 ) With 
this view, Marx 2 would concur. "Wealth is that 
which has value/ 5 Professor Laughlin states.' 
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. 9 p. 5. 

2 Marx, op. cit., vol. i, chap. i. 

* Laughlin, Elements, p. 77. Cf. also, Ely, op. cit., 99-100. 

4 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. , 


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.* 

Only ftp tl^ ham's of a de finit i o n .ofc-ya luo a s a 
quantity is it proper to speak of a " measure of 

1 conclude that the value of a thing is a quan- 
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. t Merriam, loc. cit., and Carver, "The Concept of 
an Economic Quantity/' loc. cit. Cf. also, Laughlin, Money, 1908, pp. 14- 
16; and Davenport, Value and Distribution, p. 181, n. 



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. 


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 Bohm- 
Bawerk implies it clearly enough in places. 1 ) 

1 For further discussion of this doctrine, see chapters iv and vm of 
this book. BtShm-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 


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 


A B C D E 

Sellers will take: $20 $30 $40 $50 $60 

Buyers will give: $60 $50 $40 $30 

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. 9 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. 


Price is then fixed at forty dollars. Now if all 
these-meiLjffere "normal" men, and if all had 
equ al wealth , we could say here, marginal util- 
it}L= value. Bu t such is not the case in real life. 
Uurli)^^ mayT>e 

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 
^dll 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-4h^tnaarginaL utility to an individual is 
not the same as value, Professor Clark's clean- 
ci^^fmatysis "amending the Austrian theory 

1 Bdhm-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. nr. 


which we shall call "Clark's Law." l 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. vm f "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. 


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 to gethe r, wortliV 
to him $5000 plus $8UUU plus $4UUU'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? I 
Not to the marginal buyer ! To whom, then ? I 
Professor Clark says, to society, without further I 
defining what he means by that, except in gen- 1 
eral terms of social organism, etc. But it seems j 
to me clear that, except on the basis of some such I 
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 value has become very uncertain indeed. 



In the foregoing analysis, the assumption of the 
homogeneity and communicability of human 
j 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 : * — 

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. . . . Rut 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. 


This question as to the homogeneity and com- 1 
municability 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 I 
homogeneous and can interact — even in Wies-' 
er 5 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 l three distinct meanings, for each of 
which he employs both a "popular" and a 
"scientific 55 name: (1) value in use ("popular 55 
name) — total utility ("scientific 55 name); (2) es- 
teem, or urgency of desire ("popular 55 name) 
-final degree of utility ("scientific 55 name); 
(8) purchasing power ("popular 55 name) - 
ratio of exchange ("scientific 55 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. tit., pp. 70-84. ^ * Ibid., p. 83. % 


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 6tablit T6galite des deux oph6- 
limites pour lui, et que le laboureur fait de mgme, 
mais qu'il n'y a aucun rapport entre roph61imit6 
du vin pour le vigneron et pour le laboureur, ni 
entre Tophelimit6 du bl6 pour le vigneron et pour 
le laboureur. II faut toujours se rapeller ce car- 
actere subjectif de PophelimitS." (21.) Now no 
quantity of value, irrespective of the particular 

1 Op. ci/., p. 81. 

* Cours <T Economic Politique, vol. i, pp. 1-40. The numerals in the text 
refer to pages in this volume. .. 


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. 
(80.) 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 himjhergjs jao social validity in value ex- 
cepES&~^xatio~ef e x c hange. * 

The same may be said for B8hm-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. 
''• s Professor Davenport's attitude on this point we shall discuss more 
fully in chapter vm. 

* lbid. 9 pp. 184, n., and 380-31. 

* 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 ("Grundztlge der Theorie des wirtschaft- 


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 Gttterwerts," Conrad's Jahrbucher, N. F., xm, 1886, p. 5) is as 
follows : "Hierunter ist zu verstehen die objective Geltung der Gtiter im 
Tausch, oder mit anderen Worten, die Moglichkeit ftlr sie im Austausch 
eine Quantit&t anderer wirtschaftlicher Gtiter zu erlangen, diese Mttg- 
lichkeit als eine Kraft oder Eigenschaft der ersteren Gtiter gedacht." The 
concluding phrase would seem to point to an absolute conception, as 
would also his criticism of the expressions, "ratio of exchange," "Ans* 
tauschverhaltnis" and " Tauschfuss" (Ibid., p, 478, n.): "Diese Ausdrttcke 
haben namlich eine Nuance an sich, die es unmoglich macht, sie sprach- 
lich den Gtitern als Eigenschaft beizulegen, oder von einer grosseren 
oder geringeren H5he 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. ~ ^ 

^ * Positive Theory, p. 182. 


But (as will be elaborated more fully in chapter 
vi), Bfihm-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 fiodus operandi of the determination 
of jHirtiv filar ratios in thejnarket. 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 

^ * See chapter yu infra. 




Much of the foregoing would be needless were 
it not for the fact that/£here has been, and is, in 
the writings of the Austrians and those who have 
followed them, a confusion of two very different 
j 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," l 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. Econ., 3d ed., pp. 88-90; 95-96. 

* See, especially, Pareto, op. cit., vol. I, pp. 86-37. 

* Our question here is primarily a logical, and not a psychological, 01169 
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. 


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- J 
ginal utility, and resolves market value into/ 
marginal utility." 8 ' 

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. 

* Op. cti. t pp. 800, 312, 313 et seq., 320, 325, n. v 327, 328, n„ 320, and 
chap. xvn. 

» Principles, 1808 ed, p. 176. 

• Op. eU^ p. 300. 

4 Principles of Economies, London, 1002, p. 57. 




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.* 
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. 

* Economics, 1904 ed., pp. 101-104.] 

* See supra, p. 17, n. 

4 English edition, London, 1889, pp. 90-91. 

6 Flux, A. W., Economic Principles, London, 1904. Compare pp. 4, 
29, and 27. 
N ° Principles, 1907 ed., pp. 348-50. 


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," * is hardly to be 
counted anything but a lapsus, even though W 
recognition is later accorded to the necessity off 
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. 
* * 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. ee, p. 87. The theory of marginal utility in relation to prices 


"is not, as sometimes stated : 'the marginal utilities to the same individual - 
of all articles are equal/ much less is it: 'the marginal utilities of the same 
article to all consumers are equal;' but the marginal utilities of all articles 
CONSUMED [capitals mine] by a given individual are proportional to the 
marginal utilities of the same series of articles for each other consumer, and 
this uniform continuous ratio is the scale of prices for those articles." This 
conception of Professor Fisher's is clear as far as it goes, but it by no means ,* 
explains the action of individual desires upon prices. It rather explains I 
how an already established set of prices controls individual expenditure 
and consumption. Compare, however, Btthm-Bawerk's view, "Grund- 
sttge," Conrad's JahrbUeher, N. F. f xni, 1886, pp. 516 et seq. 



The great and permanent service of the Aus- 
trian analysis is in the fact that it looks for th< 
explanation of value — a psychical fact — 
human minds. Its essential defect is that il 
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). 


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 j 
enough in our explanation phenomena to enable j 
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 de- 
sire it? No, that is not enough: the men who 

1 See supra, chap. n. 

* But as later indicated (infra, chap, xm), the apparent simplicity of 
his analysis simply covers up, and does not eliminate, the complexity of 
the situation. 


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 I 
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. 61-62. * See supra, chap. n. 

* Economies of Distribution, p. 81. 


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. 


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. 3 
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 Btthm-Bawerk, "Ultimate Standard of Value," Annals 
of ike American Academy, vol. v; also his "Grundztlge," p. 516, n.; Wieser, 
op, ciL, bk. v. 

* See Laughlin, J. L., "Marshall's Theory of Value and Distribution/' 
Q. J. E. 9 vol. i, pp. 227-32. See also Marshall's reply in the same volume. 


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 Profes sor Clark stands as the leadi ng 

fa ct, "is social and subjectiv e "***<? ynlnr pitfj nn 
goo ds by the social org anism. 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. 


in the actions, and one that can be measured/ 9 
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. 864-65). 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 ail 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 


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 I — 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. Profe ssor Clark concedes at 
onc e that there is no necessary connection be- 
tweaLJ ^utility of the good to him wh o enjoys 
it, and the pain of making i t to him who makes It . 
WEa tc^necrion4arlJiere;Then. between the value 
of the^gooa and social la bor? It is at this point,! 
venture to suggest, that Jrrofessor 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) : — 

r The bu rden o f labor entai led on the man who makes an 
artjde stands in no relation to its market value. TJbfl prSL 
uct oLonp hour « labor of an pm uientlawyer, an artist , a 
business managfir. fitr,., may aril forasmuch as that of a 
month s work of an engine st oker, a seamstress or a stone- 
Qi^aker. 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 



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 axe bought with monopolized 
products, and suppose that a monopoly dement 
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? l "Differences in wealth between 
different producers cause the cost of products to vary 
from their value. 39 (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 TTie issue appears to beshif ted here. If an ultimate cause of value k 
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 monopolised 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 
valuable — and that they serve this purpose no better than other goods 
into which a monopoly element enters. The doctrine here criticized goes 
back to Bicardo: " 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.) Bicardo, Works, 
McCulloch edition, 1852, p. 213. 


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 tffficieney 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^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 


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. 


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 

1 Tarde, The Laws of Imitation ; Psychologie ficonomique, 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 in 





The connection between social philosophy, on 
the one hand, and metaphysics and epistemology 
on the other hand, has always been a close one, 
— a fact not always adequately recognized by 
writers in the field of social science, in economics, 
especially. Scientists often "ignore" philosophy, 
holding that their concern is simply with the 
world of phenomenal "facts," and that the 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. 


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, bj{ 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- 


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/ 5 
applied to the social problem, finds the individual 


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, DesCartes 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: "Etkica 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 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. 61. 


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- 
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 


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: 8 — 

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 nervo us ^/ 

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 fails, 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 m. 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- 
20. Cf. also the writings of Professor John Dewey. 
1 Jevons, Theory of Pol. Econ., 3d ed., p. 14. 

* 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. 

* " Professor Clark's Economics," Q. J. E„ 1908, p. 170. 


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 philosophicaljpresuppositions 
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 300-801 
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. 


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 sick" — 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 attgemeingiittig" 
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 


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. 8 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, Essays in Logical Theory ; and F. C. S. Schiller, 

1 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 beginnings of life on our planet. And then, 
we are born into the same society, and it has 
given us, not, to be sure, the power of reaction, 
but certainly all of our most important stimuli. 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. 

* 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). 


mind is a unity, not of consciousness, but oi 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, 

* Cf. Perry, R. B„ "The Hiddexmess 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, 
1&09. Urban, W. M., Valuation, p. 243. K 


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. 881. 



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- 

The following extract, freely translated and 
substantially abridged, is taken from chapter I of 
DeGreef *s Introduction d, la Soeiologie: — 

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 


sort of thing makes sociology wholly unnecessary. The 
attempt of Stanley Jevons to explain economic crises by 
sun-spots, so far from being an effort of genius, is simply 
a jeu d' esprit. It is simply a recognition of the common fact 
that climate is one of the factors that influence man in 
society. According to Hesiod, physical forces first engender 
each other, then in turn the gods and man. Since then, 
social science has in turn been founded on the laws of 
astronomy, chemistry and biology. To-day it is the last, 
vitiated, further, by false psychological notions about the 
power and unlimited liberty of the reason, and the 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., pp. 8-0. 


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 
gi es are h elpful, but are not ultimate. Similarly 1 
the biological C6flC6]ption, 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. cU. f p. 495, n. 


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. 
 Op. c&, p. 571. 


analysis of facts represents a great advance — 
but it is not satisfactory : l — 

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 

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? 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. cii. f chap. xm. 

* Cf. Elwood, C. A., Some Prolegomena to Social Psychology, Chicago, 
1901. Cf. infra in this chapter the note on Professor Elwood's view. 


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- 
rial 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, att ention w\\ \ he 
ce ntred almost exclusively upon the psychic al 
fornffl involved^ up 01 * what we shall call me "so - 
cial mind. ** In tins, 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 


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 

J Human Nature, etc-, chap, x^ , 


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, 


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 

Social Organization, which appeared in 1909, 
takes up the collective aspect of human-mental 

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 vx. * Ibid., pp. 62 et seq. 


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. 

* Social Organization, pp. 3-4. 


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 

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- 

L * Social Organization, pp. 6-9. * Ibid., p. 9. 


ment 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 , 

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) Soc iety is an orga nism. 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. 


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 outjof 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- 

(2) There is a mind of soc iety, 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 function, 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, 
n of his book contains a very excellent brief discussion of this point. With- 


(S) 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 
Ai element is found in the points which individual 
(1 minds have in common. 

(4) The mind of s ociety, 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 absolutistic, 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. 
Qf. Friedrich Paulsen's Introduction to Philosophy, on "soul-substance," 
and Wundt's Volker-Psychologie, vol. i, chap. i. . -- 


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 

(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 


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- 

1 Davenport, op. cit. t pp. 467-68. 

* 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 



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. 


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. 





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. F^iffnfr vaIup f« ft gppcies qf the jpni* 
v alue, w hichTruns 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 '& 
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 



five dollars fine for a plain drunk, and twenty-five 
dollars for getting drunk and "cussin 5 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. 

1 Ehrenfels, G, System der Werttheorie, Leipzig, 1897; Kreibig, J. C* 
Psychologische Grundlegung ernes 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, 


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 Simmers 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,"j/&itf., April 29, 
1009; Meinong, A., Psychologiseh-ethische Untersuchungen zur Werttheorie, 
Gnus* 1894; Paulsen, Friedrich, Introduction to Philosophy, and System of 
Ethics; Stuart, H. W., "The Hedonistic Interpretation of Subjective 
Value,*' Jour, of Pol, Econ., vol. iv, "Valuation as a Logical Process," in 
Dewey's Studies in Logical Theory, Chicago, 1903; Shaw, C. C, "The 
Theory of Value, and its Place in the History of Ethics," International 
Jour, of Ethics, vol. xi; Slater, T., "Value in Moral Theology and Political 
Economy," Irish Eccles. Rec. f 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 Oeldes, 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. 


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 Rear 
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 fearf illness 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 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 viii.) But 

1 Cf. Gabriel Tarde, Psychologie Sconomique, vol. I, p. 63, and Urban, 
Valuation, p. 73. 
> Urban, op. cit., p. 32. * Paulsen, Friedrich, Ethics, passim. 


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, w the value. 
Critics of hedonism, as Ehrenf els l 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 Hedonism abstracts a prominent 
and important phase of the value experience, and 
while it errs in making that phase the whole of 
the experience, and while it has sadly 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 Werttkeorie, vol. i, chap. I. * Op. cit., p. 811.] 

• Cf. Urban, op, cit,, p. 86; Meinong, op. cit., pp. 15-16. 



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 
psychosis. Value is not to be understood apart 
from what Urban calls its "presuppositions." 2 
Every value presupposes a going onof 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. E very value is linked with . 
the whole body of ideas, emotions, habits^ in- u ^ 
stinftfg impulses- which, in their organic totality, 
call the personalis Back of the value stands 
a long history; "which persists into the present in 
the form of dispositions and activities, of which 
we are unconscious so long as they are unimpeded, 
but which spring into consciousness at once if 
arrested. If the object be one that appeals to 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. cit., pt. i, chap, i; Urban, op, cii. f pp. 38-39. 
* Op. cit., pp. 14-16, and following chapter. ~" 


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 

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 desires 
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 


intensity it 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 when 
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 unified, — 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 un- 
easiness. And as a disposition to activity, if the 
value should be threatened, desire is always 

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, kinesthetic feel- 

1 Urban, op. cit., p. 39. 


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 eco nomica l. Conscious- 
ness is not wasted, when there is no function to 
be served by it. Th e essential thing about va lue 
is that it motivatejp^onrfiifit^ g^^atisfoctory 
set o£ hahit.s be .built-up -about .a.yalue^it.may 
serve this piupose perfect ^ into 

consciau3ness very often. But both desire and 
feeling must be potentially Ah ere. 

A further element is necessary. Meinong in- 
sists upon an existential judgment, a judgment 
that the object valued is real, as essential to 


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. 8 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 Psycholoffisch-ethische Untersuchungen zur Werttheorie, Graz, 1894. 
pt. i, chap, i, esp. p. 21. 

* "La psychologie en economie politique," RevuiPhilo8<yphique t vol. 
xn, pp. 337-38. 

• 0p. eU. t pp. 41 et seq. 4 See chapter xvi, infra. 


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. Fo rour purpo ses 
the structural aspect is n ot the most significant. 
T he fu nctional as pect is of more importan ce. And 
the function of values is the function QfrnoT' 

tioh. "TKn>~yg[m» fa gT^+flftti which COUntfl f or 

mn&t in TnntJYfitipg *M*-i^*y- 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 jiQ3SL. gQmes n th g 
problem.a£i&£ margin.! For eight or ten others are 
almost equally desirable, and there are only six 
places. The lower values, compared with each 
other, must show themselves for what they are, 
must come vividly into consciousness, must be 
felt and desired in order that they may be com- 
pared, — not in order that they may be I From 
the functi onal side, then, the test of a value is its 
influence upon activity. "The "common denomi- 
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 


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- I ^ 
ity. Value is a force 9 a motivating fo rce. But now 
we must revert to our original point 61 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 
in the object. The object is an embodiment of the 
force. It has power over us, over our actions. If 
the object be a person, we are under his control 
— to the extent of the value. If the object be a 
thing controlled by another person, we are 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 never 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 




aspect is so significant that it may often be the 
Bole 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 
A necessary limitation has been definitely indi- 
/ cated in what has gone before, but, to avoid mis- 
j 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 Unwert. Cf, Ehrenfels, op, cit., for a brief 
discussion of negative values (pp. 53-54). ~ 


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 compatible, so that nothing in their 
character prevents the realization of both, but 
there may not be room enough for both, owing to 
the limitation of our resources, — as when the 
young lady of our illustration had only six seats 
at her dinner, and so was obliged to exclude some 
of her friends. But the values may be 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 values, 
where the presuppositions, especially in ethical 
crises, involve the whole personality. In case of 
such conflicts, say between the value of Sabbath 
observance and the allurement of Sunday base- 



ball in the case of an orthodox "fan/ 5 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 reenf orce 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 law of 
"diminishing utility" as we increase the incre- 

1 For this generalization, see Urban, op. cit., chap, vi ; Ehrenfels, op. 
cit., vol. ii, chap, in, esp. p. 86. 


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 

Two antagonistic values may cohere in the 
same object. Our fearful sight may also be an 
interesting sight. And the initial increment of the 
interest may outweigh the initial increment of 
the fear. But, as the interest is partially 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 (cceteris 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- 


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 process would be, 
first, a gradually increasing negative value, as 
the "supply" of the objects of negative value is 
increased ; next, a sudden shift from a high 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. 

2 Cf. Urban, op. cit., passim ; Ehrenfels, op. cii. t vol. I, pp. 43 et seq. • 


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'individ- 
uaFs psychology. Such lines do not exist. There 
are shadings, gradations, quantitative differ- 
ences which become distinct enough to justify a 

Mackenzie, criticism of Ehrenfels and Meinong in Mind, Oct., 1899. Cf. 
also, Wicksteed, The Common Sense of Political Economy, London, 1910, 
pp. 402 et seq. ^ 


/ r 


classification of values. But values never become, 
on the functional side, so fundamentally different 

' in character that there can be no reduction of 
them to the "common denominator " of power in 
motivation. And especially is that a false 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, 

I 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 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." * 

The Austrian analysis was essentially faulty, 
then, not so much in its hedoni stic psychol ogy — 
for it can be freed from thatT 2 — as Th 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 • 
of the 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 n of his Com- 
mon Sense of Political Economy, London, 1910. 

* Davenport, op. cit. t 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 vn. 


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. 




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 are tre- 


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. 


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 bull 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 Qf. Royce, J., The World and the Individual, New York, 1901, vol. i, 
pp. 209-10, and 225. 

: * 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. C/., also, Professor Ross's admirable Social Control. 

4 ' 



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. 09-100, and Tarde, 
Psychologic ficonomique, vol. I, p. 85, n. See supra, chap. n. 



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 
Further, the value concept has been called 


upon to explain the motivation of the economic 
activity of society, and value has been conceived 
of as a motivating force. 1 Schaeffle, 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 8 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. 
Valuem power, 

effibodialin the object, independent ^of t]be 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 86; Flux, 
Economic Principles, chap. n. 

* Quintessence of Socialism, London, 1898, pp. 55-59, 91 et seq., 123-24. 

* 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. 


English School so often uses as the equivalent 
of value, namely, "purchasing power" 1 — a 
term which B6hm-Bawerk approves. 2 The notion 
of relativity which has, historically, been bound 
up with this term, we have criticized in chapter 
ii, and it is not necessary to repeat the argument 
here. But the other aspect of it, its recognition 
of the dynamic character of value, and of the 
quantitative character of value, even though 
often confusedly and vaguely, seems very much 
to strengthen the case for the thesis I am main- 
taining. 8 

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." 

* "Grundztige," etc., Conrad's Jahrbiicher, 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. 


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 
v 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 
J 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 


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 

In subsequent chapters, we shall, carrying 
out this plan, try to put concrete meaning into our 
abstract formulation of the problem. 


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 


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 moral social 
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." 8 

Collective desire and feeling, when it has acquired this 
"common meaning," when the object of desire and feeling 
is consciously held in common, we may describe as Social 
Synergy; and the objective, over-individual values may be 
described as the resultants of social synergies. The 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 feeling is thus insisted 
upon as an essential in social values, and Pro- 
fessor Urban insists 6 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. s Ibid,, p. 319. 

• Ibid., p. 312. « Ibid., p. 318. 

• Ibid., pp. 333-36. « Ibid., p. 335. 


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 l (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 would depend, both in the case 
of supply and demand, on who the individuals 
are. A demand for a given act from a poor group 
of fanatics, however intense, might count for 
little, while such a demand coming from a group 
with great prestige, with great social power, 
might have a very great significance. If we are 
trying to get an objective quantity of social 
value, which shall have a definite weight in 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. 


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 
Psyckologie ficonomique, 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 but which, like 
color, exists only in ourselves. ... It consists 
in the accord of the collective judgments . . . 
as to the capacity of objects to be more or less, 
and by a greater or less number of persons, be- 
lieved, desired, or admired. This quality is thus 
of that peculiar species of qualities which present 
numerical degrees, and mount or descend a scale 
without essentially changing their nature, and 
hence merit the name of quantities. 

1 "La croyance et le desir: possibility de leur mesure," Rev. phUoso- 
pkique, vol. x (1880), pp. 150, 264. "La psychologie en economie poli- 
tique," Ibid., vol. xn (1881), pp. 232, 401. " Les deux sens de la valeur," 
Rev. (Ticonomie politique, 1888, pp. 526, 561. "L'idee de valeur," Rev. 
politique et liiUraire (Rev. Bleue), vol. xvi, 1901. Psychologie itconomique, 
Paris, 1902. 

* Cf. Conrad, Qrundrise sum Studium der polHiechen Oekonomie, Jena, 
1902, Erster Teil, p. 10. -. 


' There are three great categories of value: 
"valeur-veritS" " valeur - viilite" and "valeur- 
beavie" To ideas, to goods (in a generic sense of 
the term), and to things considered as sources 
"cfe 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" "metrites" 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 (" jgqds" " 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" ("id poids vent dire pouvoir et 
droit") of the persons who desire it, and the 
greater or less intensity of their desire for it. And 
so with beauty. 


Here is, then, an explicit recognition of the 
element of the social weight of those who create 
a social value, as a factor coordinate with their 
number and the intensity of their desires, etc. 
Toward resolving it, however, Tarde makes no 
real contribution. If enough be read into the 
parenthetical expressions given above, 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 
mkre," 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 than functional 
power, is made the basis of Tarde's social value, 
and apart from the failure to give any real ac- 


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 
1/ 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 
J 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 


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 

In subsequent chapters, we shall, carrying 
out this plan, try to put concrete meaning into our 
abstract formulation of the problem. 


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 


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 moral social 
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." 8 

Collective desire and feeling, when it has acquired this 
"common meaning/' when the object of desire and feeling 
is consciously held in common, we may describe as Social 
Synergy; and the objective, over-individual values may be 
described as the resultants of social synergies. The 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 feeling is thus insisted 
upon as an essential in social values, and Pro- 
fessor Urban insists 6 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. s Ibid., p. 319. 

• Ibid., p. 312. « Ibid., p. 318. 

• Ibid., pp. 333-36. * Ibid., p. 335. 


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 


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 moral social 
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." 8 

Collective desire and feeling, when it has acquired this 
"common meaning," when the object of desire and feeling 
is consciously held in common, we may describe as Social 
Synergy; and the objective, over-individual values may be 
described as the resultants of social synergies. The 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 feeling is thus insisted 
upon as an essential in social values, and Pro- 
fessor Urban insists 6 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. s Ibid., p. 319. 

• Ibid., p. 312. « Ibid., p. 318. 

• Ibid., pp. 333-36. « Ibid., p. 335. 


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 bd 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 
coSperate, 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 


as much as for individual values. The social 
value of the gold standard, judging by the amount 
of desire and feeling involved, by the degree to 
which it was a factor in consciousness, was 
vastly greater during the campaign of 1896, 
while its validity was still in question, than it 
was after it had been validated, and made a 
really effective fact. Social value depends, not 
on conscious intensity, but on motivating power. 
The social consciousness, as the individual con- 
sciousness, is economical. And the need for con- 
scious feeling, for conscious desire, in connection 
with social, as with individual, values, arises when 
values must be compared, when they are in 
question, when they must show themselves for 
what they are, that they may be brought into 
equilibrium with antagonistic values. And the 
amount of consciousness will not be greater than 
the need for it — and, alas, is rarely as great as 
the need ! When a value becomes accepted, when 
its place is secure, when the equilibrium is 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. 



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 vn, suyrcu ' Bk. n, chap. vi. 


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. c&, 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 


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. . . . But there being 
no apparent method of bringing this doss of facte within the orderly sequence*, 
of economic law, we shall — perhaps — do weU 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." 


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* 


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 
}d ail to see — a positive connotation of its own : a 
ldefinite set of legal and ethical values are bound 
Jup 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. 


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, coSrdinate 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. 7^-80. f Ibid., p. 62. 

* Pol. Econ., 1888 edition, p. 5. 


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 

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. 


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 u 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 vacuo in Professor Clark's static 
state — if "unhindered" is to be taken literally. It is probably a juster 
interpretation, however, to hold that Professor Clark has in mind a con- 


of 'cceteris paribus. 999 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 €ive 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 iheoretischen Nationald- 
konomie (Leipzig, 1908), in the Journal of Political Economy, 1909, pp. 363 
et seq. His dynamics is also to be "reinwirtschaftlich." An essay in economic 
dynamics, the introduction to which sets forth his general point of view, 
appears in the Austrian Zeiischrift fUr Volkswirtschaft, 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 "retn- 
wirUchaftlich" 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" (Vide esp. pp. 298-99.) Pro- 
fessor Schumpeter very explicitly recognizes the existence of factors other 
than the "reinudrtschafUich," 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 (^alue and Distribution, pp. 514-15). 


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," 


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 y 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. 


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, 


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- 


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- 
rmrtschaftlich" 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." * 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 Principle*, 1905 ed., pp. 147 et *eq. 


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 " reinmrtschaftlick" 
We can only say that economic values, at a given 
moment, are the focal points at which the laws 
and moral values and loves and hates, and 
"utilities" and "costs" directly connected with 
economic goods, and the multitudinous other 
values of concrete social life exert their 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- 


duct ion. Let us assume, for example, that this 
moral value leads to an increase in the income of 
the degraded class, and so tends to increase the 
demand for liquor; but assume, further, that 
this same moral value is the force leading to a 
prohibition law, that forbids the production and 
sale of liquor. Ethical, religious, legal, esthetic, 
and other values may indirectly motivate the 
economic activity of men through entering into 
economic values, or they may directly, in their I 
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." Social life is one organic 
whole. There is no phase of social activity which 
is wholly directed by one set of values, and there 
is no one set of values that exclusively depends 
on one sort of motive. And when we give 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. 


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, Foundation* of Sociology, chapter on the "Sociological 
Frontier of Economics," and Tarde, Psychologic tconomique, passim. 



and clothing must be "in style," — facts well 
enough recognized, though not in themselves 
enough for a theory of "social value." These 
individual "utilities" and "costs" have little 
meaning till we know the social ranking of the 
men who feel them, till we know how much the 
men who have them count for in the scale of fun- 
damental human values. And 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 laws shortening 
the hours of all labor, laws prohibiting child labor, 
laws restricting the labor of women, laws for the 
protection of miners, laws relating to the 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 


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 



"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 



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 l 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. t 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- 
biicher, 1886, p. 516. And Professor Clark likewise recognizes that value 


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! 


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 Court d'Economie Politique, 
defines economics in terms of the narrow abstraction which he has chosen 
for the explanation phenomenon, as the "science of ophelimity" (p. 6), 


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. 



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 


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. 


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 


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 * 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 potoer 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. 

* 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- 


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. 


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. 

s/ I 




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 

* Principles, 1905, p. 174. 

1 Economic Interpretation of History, passim, 

• Principles, p. 175. « Ibid., pp. 147-48. 


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 theoiy 
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 M \ 
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 i 
up a host of factors which, while they fall conveniently into two opposing i *"^ 
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 J 
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. 
. f Pp. 842-43. 





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 
J -j 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 

i 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. 



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. 


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 a 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. 


doctrine is deliberately affirmed, so far, at least, 
as the individual is concerned, in the article on 
" Worth " l 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. 


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 Studies in 
Logical Theory, pp. 828, n., and 830. 


Will not the value of the total existing supply of 
the articles in which there is a failure be raised? 
And will not other competing articles of food 
have their values increased also? But, Professor 
Seligman would retort, these increases would 
be at the expense of the values of the half -grown 
fields of grain, and at the expense of articles other 
than food. Granted : but what evidence is there 
of exact equivalence? And further, assume that 
half of every existing stock of commodities, of 
every sort, were suddenly wiped out. Would 
the sum total of values remain the same? Only 
on the assumption that the social value curve 
for this totality of commodities is a rectangular 
hyperbola. 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 iupra, p. 165, n. 


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 
i 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? 


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- 


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 

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 psyohologie en eoonomle politique," Rev. Pkilosophique, vol. 
xn, p. 238. 


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 

The doctrine that there is a definite, unchang- 
ing sum of economic values, therefore, cannot, / v 
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 j 
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 


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. 



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 i 
the money and the value of the commodity. In / 
any case, price as a rule involves the idea of 
money. With the Germans, on the other hand, 
Preis means any exchange ratio (or a quantity of j 
commodities of any sort given in exchange for a J 
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, 8 
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 

[ l Cf. Davenport, op. c&, pp. 296-97. 
1 Theory of Prosperity, New York, 1902, pp. 16-17, 89. , 

• "On the Concept of Social Value," Quar. Jour. Earn., Feb., 1909, // 

pp 226-27. /■'""'■ 


» I 




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, vra of bk. i (pp. 
66-67 of the Caiman ed.) For Ricardo, see Works, McCulloch ed., 
London, 1852, p. 15. Adam Smith seems occasionally to use value in the 
relative sense, as on p. 183 of vol. n of the Cannan ed. Ricardo, though in- 
dicating that he is concerned only with relative values on the page cited 
supra, still speaks of values as simultaneously falling, in ch. xx, on 
"Value and Riches," which, of course, is impossible on the basis of the 
relative concept. There is no point to torturing these passages unduly, 
however, in the effort to find our distinctions in them. 

Professor Seligman calls my attention to a most interesting forty-page 
discussion of the theory of value by W. F. Lloyd, A Lecture on the Notion 
of Value, as Distinguishable not only from Utility, but also from Value in 
Exchange. The lecture was delivered before the University of Oxford, 
in 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. 30-40 to a defense of the absolute conception. He cites the passage 
in Adam Smith referred to supra, in which Smith distinguishes real 
dearness from apparent dearness (introductory part of chap, vin 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 publico* 


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 

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. xin, esp. pp. 357-63. 

1 Principles, bk. in, chap, xv, par. 2. 

* Leading Principles, editions of 1878 and 1900, pp. 12-19. 


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 


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 m&ne c'est par des vols oA se 
montre la perversion d'un esprit sectaire, Taber- 
ration et la profondeur de ses convictions pas- 

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 

1 Psychologie Boommique^ vol. I, pp. 77-78. 


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. 


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 

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 

. f l Cf. Schumpeter, Quar. Jour. Earn., Feb., 1909, pp. 220-27. 

i \f 



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 
j 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- 


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/ A measure of social economic 
value in terms 01 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, n. , 


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- 
7 mined by convenience. Abstract value, apart from 
l 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 " KnowUdge-about." 
Cf. James, Principles of Psychology, vol. i, p. 221, and The Meaning 
of Truth, p. 4, n. 


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 ! \J 
values, is not "frozen." Changes in economic 
values lead to readjustments, not only in the 
other economic values, but also in the legal, 
ethical, ajid 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. 


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 "frame work' * 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 


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. 




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 
I 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, 


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 auj/ra, chaps, v and xx. 



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 * 
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 
I 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. 


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 redognize the distinction between 
value theory and price theory seems to he 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 defined, but 
probably all the more useful on that account. It was a sound instinct 
that led Mill to take up the problem of distribution before taking up the 
problem of "value." Really, in discussing distribution as he did, he 
was making a very real contribution to the ultimate valuej>roblem. 

1 , Value and Distribution, p. 451. 


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 
Biihm-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- 

1 Vide myra, chap. IV. 


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- I 
tinction between value theory and price theory, i 
and of the confusions that result from mixing j 
the two, will remove many seemingly irrecon- ! 
cilable differences between opposing schools, and j 
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. 




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 menr 
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. 
1 "On the Concept of Social Value/' Quar. Jour. Econ., 1909, pp. 
1 Nat. Vol., p. 52, n. Quoted supra, chap. i. 


at least, the inspiration of Professor Davenport's 
attack in his recent article in the Quarterly 
Journal. 1 j 

1 " Social Productivity vs. Private Acquisition, " Quar Jour. Econ., Nov., (/i&*c 
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 i$ a fac- 
tor in the social will, and plays its r6le 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 



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. 


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 pthe 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 


is necessitated by the individualistic, subjective 
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- 

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 


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. 









Adams, T. S.» 120, n. 

Anaximander, 60. 

Anaximenes, 60. 

Aristotle, 61, 101. 

Austrian School, 7, 8, 16, n., 17, 28, 
29, 30, 31, 38, n., 39, 40, 41, chap. 
VI, 49, 108, 113, 119, 121, 125, 
126, 152, n., 188-89, 192, 197, 198. 

Baldwin, M., 15, n., 56, 69, n., 73, 
74, n., 75, 80, 84, 95, n., 167. 

Berkeley, G., 62. 

Btthm-Bawerk, £. von, 7, 29, 31, n., 
37-39, 40, 44, n., 49, n., 121, 152, 
n., 192. 

Bradley, F. H., 65, n. 

Buckle, H. T., 153. 

Bullock, C. J., 4. 

Cairnes, J. E.,~65, n., 177. 
Carey, H. C, 73. 
Carver, T. N., 16, 27, n. 
Clark, J. B., 3, 4, 5, 6, 7, 8, 13, 16, 
30, n., 31-33, 39, chap, 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, £., 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. 

Eallen, H. M., 94, n. 
Kant, Immanuel, 25, 63, 67. 



King, Gregory, 109. 
Kinley, D„ 4, 5, 27, n., 120, n. 
Kreibig, J. C, 04, n. 

Laughlin, J. L* 20, n„ 26, 27, n„ 

49, n. 
Law, John, 171. 
Lilienfeld, P. tod, 74. 
Lloyd, W. P., 176, n. 
Locke, John, 62. 

Mackenzie, J. S., Ill, n. 

Malthas, 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, £. A., 4, 5, 117, n., 148, n., 

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, 

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, in, 176, n., 177, n., 

Senior, N. W., 26. 
Shaw, C. C 95, n. 
Simiand, F., 74. 

Simmel, G., 19, n., 20, n., 94, n., 95. 
Slater, T., 95, n. 
Small, A. W., 63, n. 
Smith, Adam, 63, 176. 
Socrates, 61. 
Sophists, 60. 
Spencer, Herbert, 72, 83. 
Spinoza, Benedict de, 62, 63. 
Stuart, H. W., 68, n., 95, n., 168, n. 

Tarde, G., 4, 16,' 56, 95, 97, n., 103, 
118, n., chap, xii, 148, n., 172, 

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, xn, 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, 
31, n., 34, 35, 40, 46, 47, 49, n., 
120, n., 132, 133, 136, 137, 143, 
190, 194. 

Wundt, W., 85, n. 

U . S . A