Social Value
Chapter 2: Formal and Logical Aspects of the Value Concept
Benjamin McAlester Anderson Jr.
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The study of wealth is meaningless, unless there be a unit for measuring it. The questions to be answered are quantitative. . . . Reciprocal comparisons give no sums. . . . Ratios of exchange alone afford us no answer to the economist's chief inquiries.[1]
THIS quotation from Professor Clark raises an issue which we must examine in detail. Professor Clark proceeds, pointing out the need for a homogeneous element, among the diversities of the physical forms of goods, capable of absolute measurement, if goods are ever to be added together, or a sum of wealth obtained. Money, on the surface of things, affords this common standard, but" the thought of men runs forward to the power that resides in the coins." This power is effective social utility, the quantitative measure of which is value. Elsewhere in his writings,[2] Professor Clark insists on the conception of value as a quantity, an absolute magnitude, and he consistently makes use of this conception. All of the exponents of the social value concept named, except Professor Seligman, follow him in this, and it may be considered an essential feature of the theory. Marginal utility
(14) is a definite quantity, social marginal I 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 marginal utility, or the social value, of the money unit.
It is important to contrast value as thus conceived, 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 necessary 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 conceptions which treat value as an ethical ideal, often different from the market fact, and those which accept the value which is expressed in prices in the market as the "real or true" value for economic science. The mediaeval conception of the justum pretium belongs to the first class,
(15) as does also the conception of President Hadley: "The price of an article or service, in the ordinary 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."[3] And the value theory of Karl Marx, though differing from either of these in points, is yet like them in this one respect: value and price do not necessarily agree for Marx. The value of a thing for him depends on the "socially necessary" labor embodied in it, while some things, as land, command a price in the market, even though embodying no labor.[4] Opposed to this group of theories are, doubtless, the greater part of present-day writers, who, while differing among themselves at many points, would insist th at value is a fact, and not an ideal.
The second line of division is between the conceptions of value as a quantity and value as a ratio, or, to put the thing more generally and more accurately, between the value of a thing as a definite magnitude, independent of exchange relations, and that value as a relative thing, not only measured by the process of exchanging, but
(16) 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.[5] Karl Marx and Henry George agree with them upon this latter point. Value is a quantity, and not a mere relation, for both.[6] Wieser would concur here.[7] Professor Carver, in a recent article in the Quarterly Journal of Economics, [8] insists on the conception of value as a quantity. Gabriel Tarde states the matter illuminatingly in a passage in his Psychologie Economique: [9]
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Value is a quality which we attribute to things, like color, but which, like color, exists only in ourselves. . . . This quality is of that peculiar species of qualities which present numerical degrees, and mount or descend a scale without essentially changing their nature, and hence merit the name of quantities.
On the other hand, the doctrine of relativity has characterized the teachings of the English School, of the Austrians (except Wieser), and of many of the more eclectic followers of each in this country. It will appear later that this relative conception follows naturally from their individualistic method of approaching the subject. The essence of the relative conception of value, whether defined as "power in exchange," or 66 ratio of exchange," or, with Professor Fisher,[10] and others, as a quantity of goods to be got in exchange, comes out in the statement, so common
(18) in the text-books, that, while there can be a general 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 disturbing 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 relations, or is value determined causally by them? To the writer, the former conception seems a logical necessity. Value as merely relative is a -thing hanging in the air. There is a vicious circle in reasoning if, when I ask you what the value of wheat is, you refer me to corn, and then when I ask you the value of corn, you refer me again to wheat. And if you put in intermediate links, -even as many links as there are different commodities 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:[11]
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Theorists who have confined themselves to the examination of exchange value, or, what comes to the same thing, of price, may have succeeded in discovering certain empirical 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 examination 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. . . . Absolutely and by itself, value was not to be understood. It is significant of this conception to state that one thing cannot 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 economics " -though Professor Seligman, with strict consistency, insists that even there value arises from a comparison in Crusoe's mind of apples with nuts [12] - by those who would object
(20) to its application to value in society. Value there, it would be insisted, is determined through exchange, and does not have any meaning except as a ratio between physical commodities.[13] But
(21) even here, it seems to me, the same reasoning must hold. We really do not find a ratio between physical commodities at all. Four gallons of milk exchange for one dollar, or 23.9.2 grains of gold. The exchange ratio is four to one. But milk is in units of liquid measure; gold in incommensurable units of Troy weight. The ratio, 4:1, is not on the basis of any physical commensurability. 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 quantities, 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,[14] "Value is a ratio of exchange between two goods, quantitatively specified." [Italics mine.] For the quantitative specification depends on the extent 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 exchange ratio will vary with the extent to which the common quality is present in each of the
(22) goods. We can have no quantitative ratios between unlike things. And yet, we must have terms for our ratios. The situation here is not unlike the situation that arises when we compare two weights. We have 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 physical standard of weight. Nor does value ever appear as an isolated quality. And we have no unit of abstract value which we can apply abstractly in a measurement. Instead, we choose some valuable 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 "economic quantities" as terms.[15]
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The difficulty with the doctrine we are maintaining 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. It rather grows out of the relation between our emotional-volitional life and the
object, and the definition of this relation, and the determination of the quality, have
been so difficult, that some writers, as Professor Davenport, [16] have
explicitly given it up as a hopeless task, and have determined to content themselves with
the surface facts of relativity. But there is no logical resting place in those surface
facts. Relativity implies things related, ratios must have quantitative terms,
additions require homogeneous quantities to make up a sum.
Some further distinctions are necessary. When we say "absolute magnitude," we do not mean a magnitude which stands out of all relations to other facts -in the universe. There is no intention of setting up a metaphysical absolute here. The terms "Positive" and "relative" (suggested by Professor Taylor) [17] might serve our purpose better, except for the fact that we wish to reserve the term "positive value" to contrast with "negative value" at a later stage of our discussion. Our objection to the relative conception of value really gives our value more, rather than less
(24) 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 numerous set of relations indeed, as we shall later see! -are of another sort. The contention is that value is absolute only in this sense: its amount is not determined by the particular exchange ratio in which it happens to be put, and is not changed eo ipso every time a new comparison is made.
Further, it is in the process of exchange, and by the method of comparison, that the value of goods becomes quantitatively known, as a rule. That is to say, we find out precisely how much value a good has by comparing it in exchange with some other good. In this respect, value is again like other qualities. We measure lengths, weights, cubic contents of objects, all by comparison, direct or indirect, with other objects. But the amount of water in a vessel is not changed when we put it into a measure, and determine how many gallons of it there are. Nor is the amount of value in a good causally determined by the process of exchange.[18] We must distinguish between two confused meanings of the word "determine." It may mean "to cause," and it may mean "to find out" or "to measure." We must
(25) distinguish, in Kantian phrase, between the "ratio essendi," and the "ratio cognoscendi." Value and evaluation are two distinct things. Value, to anticipate a later part of the study, is primary, and grows out of the action of the volitional-emotional side of human-social life; evaluation is secondary, and is the intellectual process devoted, not to giving value, but to finding out how much value there is in a good. This distinction between the existence of a quantity, and our precise knowledge of its amount, is brought out by several writers, among them, General F. A. Walker,[19] and the keen mathematical economists, Pareto [20] and Edgeworth.[21]
There are two further arguments for the propriety 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, [22] 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.[23] It is clear that a mere abstract ratio, which Jevons two pages later declares value to be, cannot serve such a purpose. Abstract ratios are subject-matter for mathematics, not for economics. "Wealth and
(26) value differ as substance and attribute." (Senior,, quoted with approval by F. A. Walker.[24]) With this view, Marx [25] would concur. "Wealth is that which has value," Professor Laughlin states.[26] 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." [27] And if we take a definition like that of Professor Seligman, who defines wealth in terms which entirely ignore the ideas of comparison and exchange as consisting of those things which are (1) capable of satisfying desire, (2) external to man, and (3) limited in supply,[28] we find no basis for insisting 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:
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I apprehend that this notion of money serving as a common 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. [29]
Only on the basis of a definition of value as a quantity is it proper to speak of a " measure of values." [30]
I conclude that the value of a thing is a quantity, and not a ratio. It is a definite magnitude, and not a mere relation. What sort of a quantity remains to be seen.
