In the foregoing a.n.a.lysis, the a.s.sumption of the h.o.m.ogeneity and communicability of human wants was made. Only on this a.s.sumption could value as a quant.i.ty of utility appear even in Wieser's "natural" community.

How hopeless the case becomes when individualistic methods and a.s.sumptions are pushed to the extreme, will appear from a consideration of Jevons and Pareto, both of whom insist on the entirely subjective and incommunicable nature of human wants. Thus, Jevons:[49]--

I see no means by which such a comparison [between the motives of one man and those of another] can be accomplished. The susceptibility of one mind may, for what we know, be a thousand times greater than that of another. But, provided that the susceptibility was different in a like ratio in all directions, we should never be able to discover the difference. Every mind is thus inscrutable to every other mind, and no common denominator of feelings seems to be possible.... But the motive in one mind is weighed only against other motives in the same mind, never against the motives in other minds. Each person is to other persons a portion of the outside world--the _non-ego_ as the metaphysicians call it. Thus the motives in the mind of A may give rise to phenomena which may be represented by motives in the mind of B; but between A and B there is a gulf. Hence the weighing of motives must always be confined to the bosom of the individual.

This question as to the h.o.m.ogeneity and communicability of emotional states in different men is one fundamental to any value theory which starts with individual feelings or desires as elements--and, indeed, from a somewhat different viewpoint, is fundamental to all value theory. Value, as a concrete quant.i.ty 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 h.o.m.ogeneous and can interact--even in Wieser's ideal society, where the complication of differences in wealth does not obtain. And value must have some very different meaning unless this a.s.sumption be held. In ill.u.s.tration of this, I wish to quote further from Jevons. Jevons finds for value[50] three distinct meanings, for each of which he employs both a "popular" and a "scientific" name: (1) value in use ("popular" name) = total utility ("scientific" name); (2) esteem, or urgency of desire ("popular" name) = final degree of utility ("scientific"

name); (3) purchasing power ("popular" name) = ratio of exchange ("scientific" name). Now the first two of these are purely subjective, individual facts, varying as to their quant.i.ties for each individual. The only one that can have social meaning is the third, and that, as Jevons explicitly states, is a numerical ratio, an abstract number.[51] This is brought out very clearly when he discusses the question of the concrete dimensions of these three quant.i.ties. Total utility has dimensions, and so has final utility, but ratio of exchange, which he considers the precise scientific equivalent for the popular term, purchasing power, has no dimension at all. Its dimension is zero. Finding these ambiguities in the word value, Jevons proposes to abandon it altogether, and to use instead either of the three expressions discussed, depending on which sense of the word value is intended.[52] He can find no definite meaning for value as an unqualified term. Now in this I believe he is correct. Economic value is not total utility to an individual, nor marginal utility to an individual, nor is it a mere ratio of exchange. If no other meaning of the term can be found--and no other meaning _can_ be found on Jevons's psychological a.s.sumptions--then the term should be abandoned altogether.

Pareto's position[53] is essentially similar. "Ophelimity" (which he uses in place of the more ambiguous "utility" to mean what Jevons means by the latter term) "is an entirely subjective quality." (4.) "On ne doit pas...o...b..ier que le vigneron etablit l'egalite des deux ophelimites pour lui, et que le laboureur fait de meme, mais qu'il n'y a aucun rapport entre l'ophelimite du vin pour le vigneron et pour le laboureur, ni entre l'ophelimite du ble pour le vigneron et pour le laboureur. Il faut toujours se rapeller ce caractere subjectif de l'ophelimite." (21.) Now no quant.i.ty of value, irrespective of the particular holder of the good, emerges for Pareto. Value is either a "_rapport de convenance_" between a man and a good, i.e., ophelimity, or is a "_taux d'echange_," a ratio between two goods. (30.) The older term, "_puissance d'achat_," power in exchange, which John Stuart Mill makes synonymous with value in exchange, is, at bottom, nothing but a vague conception of ophelimity. (30.) The two conceptions, ratio of exchange and ophelimity, are to be sharply distinguished, power in exchange is ruled out as a vague and confused conception, and value as an objective quant.i.ty does not appear at all.

Davenport, who recognizes clearly "the rich-man-poor-man complication,"[54]

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

The same may be said for Bohm-Bawerk, so far as his formal a.n.a.lysis goes.

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

Exchange Value is the capacity of a good to obtain in exchange a quant.i.ty of other goods. Price is that other quant.i.ty of goods. But the laws of these two coincide.

So far as the law of price explains that a good actually obtains such and such a price, and why it obtains it, it affords at the same time the explanation that the good is _capable_, and why it is capable, of obtaining a definite price. The law of Price, in fact, contains the law of Exchange Value.[59]

But (as will be elaborated more fully in chapter VI), Bohm-Bawerk's law of price does not explain the _why_ any more than do those of Jevons and Pareto, and the a.s.sumption 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 a.s.sumption that the problem of its nature and causes had been cleared up. The Austrian a.n.a.lysis, even with Professor Clark's correction, is simply an explanation of the _modus operandi_ of the determination of _particular_ ratios in the market. It tells us nothing of quant.i.tative values, and, in fact, a.s.sumes a whole system of values already predetermined, before the question of any particular price can be approached.[60]

FOOTNOTES:

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

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

[51] _Ibid._, p. 83.

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

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

[54] _Value and Distribution_, p. 444.

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

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

[57] It is not wholly clear whether or not Bohm-Bawerk means his "objective value in exchange" to be considered as an absolute or as a relative concept. His formal definition ("Grundzuge der Theorie des wirtschaft lichen Guterwerts," Conrad's _Jahrbucher, N. F._, XIII, 1886, p. 5) is as follows: "Hierunter ist zu verstehen die objective Geltung der Guter im Tausch, oder mit anderen Worten, die Moglichkeit fur sie im Austausch eine Quant.i.tat anderer wirtschaftlicher Guter zu erlangen, diese Moglichkeit als eine Kraft oder Eigenschaft der ersteren Guter gedacht." The concluding phrase would seem to point to an absolute conception, as would also his criticism of the expressions, "ratio of exchange," "_Austauschverhaltnis_,"

and "_Tauschfuss_" (_Ibid._, p. 478, n.): "Diese Ausdrucke haben namlich eine Nuance an sich, die es unmoglich macht, sie sprachlich den Gutern als Eigenschaft beizulegen, oder von einer grosseren oder geringeren Hohe derselben zu sprechen." But, on the other hand, his identification of the concept, "objective value in exchange," with the term "power in exchange"

of the English economists (in both the pa.s.sages referred to) would seem to make the relative implication in the concept unavoidable, and perhaps there is no point to raising the question. His criticism of Hermann in the _Capital and Interest_ (p. 203) is based on the relative conception of value. _Cf._ our discussion of the practical usage of the Austrians in chapters XI and XVIII.

[58] Whether price be defined as a quant.i.ty of goods given for a good, or as the ratio between the two quant.i.ties of goods exchanged, is for present purposes immaterial.

[59] _Positive Theory_, p. 132.

[60] See chapter VI, _infra_.

CHAPTER V

DEMAND CURVES AND UTILITY CURVES

Much of the foregoing would be needless were it not for the fact that there has been, and is, in the writings of the Austrians and those who have followed them, a confusion of two very different things: on the one hand, the curve of utility for a single individual of a given good, measured in terms of money, on the a.s.sumption that the marginal utility of money remains constant to him; and, on the other hand, the demand-price curve of that commodity for a whole community or a "trading body,"[61] made up of many individuals, differing in wealth and in tastes.[62] The former curve does express a diminishing scale of absolute feeling-magnitudes,[63]

concerned with the consumption of the good. The latter does not. The latter is not necessarily a diminishing utility curve at all, for the poor man whose price offer is lowest may easily desire the good more intensely than does the rich man whose demand price is highest. These confusions, in the writings of Bohm-Bawerk and Wieser, especially, have been adequately commented on by Professor Davenport,[64] who adheres pretty carefully throughout to the distinction drawn above, and to the strictly individualistic, subjectivistic conception of price determination, with its correlate of relativity. Jevons's confusion on this point has been noted by Marshall.[65] It is amazing, really, when one sets about to find them, how numerous are the occasions on which leading economists have been guilty of this confusion--a confusion that utterly vitiates very many of the conclusions based upon it. In truth, Professor Davenport is not far wrong when he a.s.serts that "the general understanding of Austrian theory has come to be that it explains market value by marginal utility, and resolves market value into marginal utility."[66]

To go through the roll of the economists in pointing out this confusion is a needless task here, but a few representative names must be called, in addition to those mentioned above. Thus, Pierson:[67]--

There is nothing to prevent our treating a group of persons as a unit, and examining the position which commodities occupy in relation to that unit. If we do this, we shall see that the above diagram [the regular diminishing utility diagram of Jevons], depicting the position which they occupy in many cases in relation to the individual, must depict the position which they occupy in a still larger number of cases in relation to the group. And the truth of this statement is greater in proportion to the size of the group.

Similar confusions appear in Professor Patten's _Theory of Prosperity_, in a number of places.[68] President Hadley's discussion of "Speculation"

falls into this confusion, also.[69] Professor Ely's confusion on this point is instanced in his _Outlines of Economics_, 1908 edition, pp.

358-59.[70] Schaeffle, in his _Quintessence of Socialism_,[71] treats utility as if it were demand. With Professor Flux it seems more a deliberate identification than an unconscious confusion, as he recognizes very clearly the complication which differences in wealth bring in, and yet none the less declares, "The measure of the exchange value is, then, the utility which is on the margin of not being realized, or the marginal utility," and "The series of marginal-demand-prices, corresponding to all the varied possible scales of supply, register, in fact, the utility of the marginal supply for each such scale."[72] It is somewhat disheartening, however, to find Professor Marshall, who has pointed out the confusion on the part of Jevons, allowing his marginal notes to speak of "utility and cost" when the body of the text, to which they refer, is discussing demand and supply.[73] And still more disheartening to find Professor Davenport, at the end of his cautiously written volume, marked throughout by the greatest clearness of thought, and by especially painstaking care in the criticism of this confusion in the writings of others, saying:--

Limitation upon the supply of goods relatively to the need gives value. Thus value in producible goods is ultimately explained by human desires over against a limitation of supply due either to the shortage of instrumental goods or to the irksomeness of effort, or to both.

With great esteem for good singing, and with the rarity of good singers, the high gains of prima donnas find sufficient explanation.

This, as a separate, unqualified proposition in the "Summary of Doctrine,"[74] is hardly to be counted anything but a _lapsus_, even though recognition is later accorded to the necessity of backing up "utility" with "purchasing power."

But it cannot be too strongly insisted, in the first place, that only particular ratios, market relations, can come out of the individualistic a.n.a.lysis of satisfactions of consumption and dissatisfactions of production, and that, in the second place, these ratios, and this relativity, are but surface explanations, that point to, and are based upon, something underlying and definite--without which they would be hanging in the air.[75]

FOOTNOTES:

[61] See Jevons, _Theory of Pol. Econ._, 3d ed., pp. 88-90; 95-96.

[62] See, especially, Pareto, _op. cit._, vol. I, pp. 36-37.

[63] Our question here is primarily a _logical_, and not a _psychological_, one, else I should choose a different term from "feeling-magnitude." For the present, I am accepting the Austrian psychology, and attacking the Austrian logic. _Cf._ the chapter in this work on the psychology of value.

[64] _Op. cit._, pp. 300, 312, 313 _et seq._, 320, 325, n., 327, 328 n., 329, and chap. XVII.

[65] _Principles_, 1898 ed., p. 176.

[66] _Op. cit._, p. 300.

[67] _Principles of Economics_, London, 1902, p. 57.

[68] Page 18, "The consumption of all the individuals in a community or nation can also be represented by this diagram if their feelings, sentiments, and habits are nearly enough alike to create a normal type."--A statement which is defensible only if "habits" be stretched to include incomes! See, also, pp. 28 (diagram) and 82.

[69] _Economics_, 1904 ed., pp. 101-104.

[70] See _supra_, p. 17, n.

[71] English edition, London, 1889, pp. 90-91