Value and Common Estimation

61. (b) Charles Marx¹ (1818-1883) succeeded him; he is regarded as the principal teacher of the school, and in the work Das Kapital reduced socialist principles to a true system. According to him, capital (i.e., whatever is reserved for the new production of goods) is nothing else than the fruit of labor unjustly taken away from workers. To demonstrate this, he distinguishes a double value of things: one of use (valeur en usage), which consists in the utility of the thing; the other exchange value (valeur en echange), which consists in the price which can be obtained for those things.² Now he asserts that the sole font of exchange value is the labor expended in producing the thing.

¹ K. Marx, Das Kapital, a work translated into various languages; Deville, Le Capital de K. Marx resume, 1883; V. Pareto, Karl Marx, extracts by P. Lafargue, and critique by Pareto; Rae, op. cit., p. 128-177.

² The value of use is that which is determined solely by the needs and desires of an individual at a given moment. Exchange value is the price which one can obtain by selling an object, what is called the current price, or the quotation.

62. This being posited, he argues thus: the capitalist, by hiring workers, buys their faculty of laboring for a determined price; but this price in fact is equivalent to the daily expenses which are required for the support of the workers, not however to the value of the things produced. For they produce more than that which is necessary for their own support, but part of the things produced is retained by the capitalists; thus capital is born and grows by theft. But by the natural law of evolution, capital and industries increase daily, and are converted into monopolies, destructive of all liberty. But the extreme evil carries its remedy with it; for when very few capitalists have appropriated to themselves all the instruments of labor and all riches, then the expropriation of those despoilers will become necessary, and all the means of production will be possessed collectively.

338. The importance and difficulty of the disputation. From the general disputation concerning contracts, the rationale of beneficent agreements has become sufficiently known that henceforth it is permissible to direct attention to onerous agreements alone. In these, the sum and chief point is to establish a correct doctrine concerning value and the just price. For from these is to be sought almost every rationale for judging the equity or iniquity of an onerous contract.

Moreover, modern economists experience and proclaim this question to be grave equally in utility and in difficulty.¹

¹ Bastiat, Harmonies économiques [Economic Harmonies], V, De la valeur [On Value], expressed the importance of the matter thus: “Every truth and every error introduced into minds by this word (value) is a social truth or a social error”; while Rev. Fr. Antoine, place cited, bears witness to the difficulty in these words: “Ask the scholars beyond the Rhine; they will answer you that the theory of value is the dragon which guards the entrance to economic science.” Cauwès, work cited, no. 190, affirmed that the question was at once great and arduous when he said: “The social question, at least in theory, would be settled if the notion of value could be the object of an indisputable analysis. This is what makes Proudhon say that value is the cornerstone of political economy. Unfortunately, there is no subject more thorny, nor one concerning which one can count more divergent opinions.”

Hence a marvelous variety of opinions is observed, and the number of studies which treat this argument every day can scarcely be reckoned.

Therefore, we judge it better first to set forth briefly the rationales which commend themselves to us, rather than to report confused modes of speaking which easily pour darkness over the very eyes of the mind.

339. The true rationale of value. 1. Value, in general, can be called a quality on account of which, in some order, a person or thing comes into estimation. In this manner we speak of intellectual value, moral value, and so forth. It is apparent, however, that the peculiar force of this word in the economic order—that is, in the order of goods which are the object of economic science—is not yet thereby indicated. In order that we may attain it:

2. It must be observed, with Aristotle, place cited, that there is a twofold use of things: one proper to each thing, by which, to adhere to his example, we fit a shoe, for example, to the foot; the other common with other things, by which we exchange the shoe for money or food. Each use, the Philosopher continues, belongs to things per se and not per accidens: in each we use the shoe insofar as it is a shoe.

a) There is therefore a certain prior rationale by which a thing becomes estimable: the thing’s own utility, or its aptitude for satisfying some necessity or desire of the person possessing it. For the goodness of the thing is esteemed. But those things which exist for the sake of another derive their goodness from their relation to that end. Therefore, things which exist for the sake of the human person will be good and worthy of estimation by reason of their relation to the good of the person. Knowledge of that goodness is nevertheless required as a condition, for there is no desire or estimation of the unknown. The value which is called value in use rests upon this known goodness.² This designation, however, which is employed by some economists and rejected by others, is better omitted as superfluous. For, as Liberatore observes after J. B. Say,³ it is convertible with the perceived utility of the generic or singular qualities of some thing.⁴

² Valeur en usage [value in use], Gebrauchswerth [value in use], value in use, valore di uso [value in use].

³ Work cited, pt. 1, no. 14.

⁴ Thus the function of water is rather generic; in a horse, singular endowments are considered chiefly.

b) The faculty of exchanging things is, however, most precious to man, since it is the way of obtaining all the things by which we provide for our various necessities. Therefore, things which furnish this faculty have, by this very rationale, a certain weight worthy of estimation, that is, value. And this value, which some call value in exchange,⁵ is value properly so called in the economic order.

⁵ Valeur en échange [value in exchange], Tauschwerth [value in exchange], value in exchange, valore di cambio [value in exchange].

3. But what things are endowed with this value? It appears without much difficulty that they are those which at the same time:

a) Contribute to temporal prosperity. For there is no estimation of a useless thing. And temporal utility alone is considered in the economic order. Yet you should observe that this goodness is not absent from many goods which are spiritual per se, nor from virtue itself.

b) Are useful insofar as they are possessed or owned, and of which, consequently, there is not an infinite abundance. For in every exchange some ownership is intended. Hence, per se, there is no value of water or air, although their use is very great. Therefore, things must be rare in some manner.

c) Are useful in that society where the exchange is to be made. For example, a book will have no value in a wholly barbarous region.

d) Whose utility is commonly known in that society. Otherwise, an occasion for exchanging the thing will be present only per accidens, and this will scarcely confer any estimation upon the thing. The thing will then be desired and possessed only for the sake of that use which we called proper (339, 2).

4. From this we are led to the following conclusions of the greatest importance, by which we embrace almost the entire matter:

a) Value properly so called is the proximate aptitude by which, in a certain society, goods can be exchanged for other goods. Thus it is considered in first act; but in second act, when the exchange itself takes place. The very degree of value is defined by the quantity of those things which are given for obtaining another thing; it is therefore defined by the comparison which is made of this thing with others.

b) It depends proximately upon the common estimation of a thing in some region. Yet this estimation does not arise from caprice. To one asking why a thing is esteemed so highly, rationales will be adduced, various circumstances of the thing: the uses which it has, the abundance in which it is available, and the mode of selling it.

c) This value is most closely connected with the commonly recognized advantages of possessing the thing, but not with those alone. For we have just said that there is weight in the very mode of selling. Thus, if there are many who immediately desire to exchange some thing, it is apparent that from their increasing number there comes to be for each a lesser faculty of exchanging; and conversely, if there are few. But if, in the rule handed down in this place, you put the acquisition of the thing in place of its possession, you will perhaps say in a manner accommodated to the truth: that the common estimation, and consequently the value of the thing, which depends proximately upon the common estimation, is accommodated to the utility of acquiring the thing, as this utility is commonly perceived. For in this manner, what efficacy the mode of selling also has is not neglected.

d) Among the uses to which a thing is applied, some correspond to the natural necessity of feeding and clothing oneself, and so forth; others are devised more by the will of men itself, as are many ornaments, and so forth. But—and this must be kept well in mind—by reason of the very custom introduced, things acquire a true utility in that society. For, as C. de Lugo, vol. 2, disp. 26, no. 48, says, “it is honorable to possess precious things, or things which are thought precious by everyone.”

e) Briefly, therefore, it is permissible to connect in the following manner the ordered series of causes which, in this matter, succeed one another:

Value — Common estimation — The utilities of acquiring a thing as one’s own which are commonly perceived —
Nature or human customs, as the sources of these utilities.

f) The rationale of value, therefore, is not something merely subjective, since common estimation itself rests proximately also upon the objective utility of procuring the thing for oneself; but it is something relative and exceedingly variable according to the circumstances of time and place.

Indeed—and this must be carefully noted—the thing with which another thing is compared and which is assumed as the measure is itself subject to similar vicissitudes, that is, variations. If, for example, today you exchange a chair for three measures of wheat, and after some time for only two and a half, the cause can equally be either that chairs have become of less account or that grain has become dearer.

Finally, the foundation of value can be intrinsic to the thing by its nature, as when a quality or power has been adapted by nature itself to our uses—for example, food for the body—or it can come to the thing from without, from human customs. But even an intrinsic quality of a thing will not produce value except through the mediation of common knowledge of the quality.

5. Nor should it displease us, on account of the importance of the matter, to direct attention to these two conclusions.

a) Common estimation is indeed the rule of value.⁶ Yet it will not be present unless men have freely judged concerning the thing as it can be known of itself. Therefore, a price which an artisan who alone practices a craft in some place, or another who has acquired a monopoly of things for himself, establishes at his own judgment from his prevailing position will not have proceeded from common estimation. Then common estimation is present only in appearance, as corrupted; but it remains to conjecture what the true estimation would have been without those artifices.

⁶ We shall soon consider below the kind of this rule.

b) He who possesses some thing possesses it according to its value, and it makes no difference that he cares little or nothing for the proper use of the thing. Thus, for most persons, the metal from which money is made has no use; nevertheless, whether it is possessed by a goldsmith or by a beggar, it remains of like value.

340. Concerning price. For the facility of transactions, a common sign of the value of all things was invented. That is, all things are compared with the same thing, which thus becomes the common measure of value. For this end, as Zech says (Rigor Moderatus [Moderated Rigor], diss. 3, § 20), “certain more noble metals were selected, not excessively abundant, suited to safekeeping and handling, which at the same time are of a very compact substance and admit of division into very many small particles.” This is money. You should observe, however, that although these metals were deliberately selected as more stable, they are endowed with one value in some common circumstances and with another in others. Therefore, money itself will vary.

The value of a thing measured according to that common measure and expressed in money is called the price. If it agrees with common estimation, it is just and true, whether the matter is then determined by the judgment of the people or of the prince, so that it is called the common price or the legitimate (legal) price.⁷ Indeed, neither will a price be judged unjust which, for the suitable governance of the commonwealth, the prince has determined as greater or less than the common estimation of things bears.

⁷ Concerning the question whether or not it is expedient that a legitimate price be established, it is useful even now to read the ancient controversies. Cf. C. de Lugo, disp. 26, no. 50.

Moreover, the common price is conceived more broadly, so that there is distinguished the highest, beyond which this estimation does not reach; the lowest, below which it does not fall; and the middle, which is almost equally distant from each. The rationale is that, on account of the many circumstances to be weighed, there are several probable opinions; while the prince, by fixing the price according to one of them, is able to define the matter more precisely.⁸ Cf. Lessius, chap. 21, no. 10.

⁸ There are nevertheless some, such as Molina, vol. 2, disp. 347, no. 3, and Rebellus, who judge that the common price extends more broadly because estimations and affections toward things are various.

Therefore, price formally is the signification of value by money.

341. Other opinions. 1. It is a common dictum of the Scholastics that the value of a thing depends proximately upon common estimation. Some, however, assign to this estimation a subjective cause more than others do. Molina, for example, judges the estimation of men to be partly arbitrary.⁹ Nevertheless—and this is the chief point—they affirm that, before the agreement of the parties, there is a natural just price, whose rule and measure is common estimation when the latter has arisen without frauds, monopolies, and so forth (Molina, disp. 348, no. 4). This doctrine also pleases modern theologians.

⁹ “From the fact that they willed to be so affected toward those things and that they willed to esteem them so highly.” Diss. 348, no. 4.

Among economists, some have retained this truth: that before the consent of the parties there is an objective rationale of value.

Yet not a few have indicated a false, or at least inadequate, measure of it: while some, such as Adam Smith, judged value to inhere in labor alone; others, such as J. B. Say, considered nothing but the utility of things, or, like Storch, the judgment concerning that utility; others ascribed value to rarity alone. Thus Senior. And these opinions are sufficiently obsolete.

Others, on the contrary, have denied that there is any norm by which value is defined, so that the consent of the contracting parties, bargaining according to the law of supply and demand (offre et demande), would not only manifest but would first effect value.

Among them, Bastiat¹⁰ attained the greatest celebrity. His thought is approximately this: Whatever nature furnishes or effects is and remains gratuitous, nor does it have weight worthy of any compensation; but formally only services (les services) which, on the occasion of things, persons confer upon one another are compared. Services alone, therefore, have value; and they acquire this value in the exchange or agreement itself from the subjective estimation of the parties. From subjective estimation, I say, since its causes are too various to allow any objective measure to be present. Hence he defines value as the relation of two services which are exchanged: “Value is the relation of two exchanged services.”

¹⁰ He proposed his doctrine in the book Harmonies économiques [Economic Harmonies], in which he attempted to show that things have been arranged so harmoniously by divine Providence that, while each one sought his own private utility, the greatest common good would be obtained almost spontaneously, provided that men enjoyed honorable liberty to labor, exchange, and so forth. Cf., as regards value, from the 1850 edition, pp. 173, 176, 177, 181, 212, 213, 228, 229.

Moreover, K. Marx assumed for himself a second principle, so that with Bastiat he maintained that the work of nature is furnished gratuitously, and with Adam Smith he derived all value from labor alone. Value, he says approximately, since it is something “relative,” posits a comparison of things among themselves.

But only similar things can be compared with one another.¹¹ Therefore, something common to all things must be discovered, so that in it the cause of value may be acknowledged. But the one thing which is found common to all things is this: a certain amount of human labor, for a definite time, had to be expended in preparing them. Labor, therefore, contained in the thing itself and measured by time, is the one source of value. If, therefore, a garment is exchanged for twenty loaves, it is a sign that, to make the garment, it was necessary to labor for the time in which twenty loaves would be prepared. (As regards the consequences for the present-day regime, cf. above, no. 176, δ.)

¹¹ The Philosopher, in Book V of the Ethics, place cited, already touched upon and resolved this difficulty. “He says,” St. Thomas states, lect. 9, “that things so different cannot be commensurated according to truth, that is, according to the properties of the things themselves; but by comparison with human need they can sufficiently be contained under one measure.”

Finally, not a few economists maintain that a norm underlies the law of supply and demand, that there is a natural value, and that, if there is room for competition, it is derived from what the thing ordinarily costs the one producing it, with a certain profit added.¹² Yet, as they themselves think, that norm, rather than being a norm of just value, indicates the value which it is expedient for the common good to prevail, or the value which those who exchange things pursue by their effort and generally obtain.

¹² Thus, for example, Cauwès, no. 194: “Natural value in exchanges with competition is proportioned to the cost of production, and the cost of production is the equivalent of the difficulty spared to the acquirer.”

The distinguished Professor Funk approaches most nearly the opinion by which an objective norm is denied, while he places value in the estimation, not the common estimation of some region, but the singular estimation of the contracting party, by which the latter judges concerning the utility and advantages which he thinks will be his if he procures the thing. Therefore, any price whatsoever is just, provided that it is paid with full knowledge of the thing and with liberty.¹³

¹³ “Value according to its essence is nothing other than the significance of a good in the economic consciousness of the economic subject.... The price is perfectly just ... insofar as it is paid with free will and full knowledge of the object.” Theologische Quartalschrift [Theological Quarterly], Tübingen, 1869, pp. 426, 427.

What, moreover, pleases us is exhibited by the conclusion now to be proposed:

514. The matter of purchase is the price for merchandise. Price is the value of a thing expressed in money, or the expression of saleable value through a sum of money, and therefore it is the measure of the quantity of the value of the merchandise itself. Therefore a just price is that which is adequate to the thing, or commensurate with its value; by it there is effected an objective equivalence between what is given and what is received. For a thing is worth neither more nor less than its just price.

Value is of one kind as useful value, of another as economic or saleable value. Saleable value supposes useful value, which is diverse in diverse things and does not have a univocal measure. Useful value, namely, is from the intrinsic dignity of the thing and the intensity of individual necessity; but saleable value is the aptitude which a thing has so that it may be exchanged in commerce with others (ruilwaarde), or the estimability of the utility and facility which a thing has for satisfying needs, that is, the appetite and common desires of pleasure, utility, necessity: aptitude for satisfying common necessities.¹

¹ Economists dispute about the causes of value. Some, as many liberals, hold value as merely subjective, namely from the utility and estimation of the contracting parties. Others derive it from the very intrinsic utility of the thing, either absolute or relative to the buyer, with simultaneous attention to the abundance or scarcity of merchandise and money, and to the proportion between things offered and things sought. Others, as many socialists, reckon the value of a thing from the labor alone which in itself is necessary in making, preserving, or also transferring it.

Value, and therefore price, does not depend on the subjective estimation of the seller (since he ought not to be judge in his own cause), nor on the subjective advantage of this or that buyer in particular, nor on the intrinsic perfection or natural dignity of the thing itself considered in itself; for wheat is sold more dearly than mice, gold than a dog, a gem than fleas, a house than a horse, or even than a slave. But it depends on the objective utility of the thing with respect to human uses, and indeed not absolutely, but according as men are able to estimate that use, and this utility is appraised and measured by common estimation: for a gem for ornament is worth more than a great quantity of wheat for consumption. - The foundation of the whole matter seems to be the reality of the social order. But the necessity of exchanging things, goods, and services according to certain and determined qualities is the objective reason of equality and economic value.

Value depends on the utility of the thing, that is, on its fitness for human uses of convenience, pleasure, necessity; and this is estimated more or less a) from the labor expended, costs, industry, and dangers, in themselves and commonly necessary for producing, preserving, and transforming things; b) from the abundance and scarcity of things, and the frequency or rarity of buyers or sellers; and c) from the intensity of common desire or the common will of acquiring and selling.

Whence price can vary and be increased or diminished from various causes:

a) on the part of merchandise, on account of abundance, which diminishes the value of merchandise, and scarcity, which increases it: for that is esteemed more which is sought by more persons and which is found with greater difficulty or in lesser supply, but that is esteemed less of which there is greater supply and which is less sought;

2. on the part of buyers: a) from their frequency. If there are many, merchandise is sold more dearly than if they are rare: for the more buyers there are, the more things are esteemed, since frequency of buyers induces scarcity of merchandise; b) from their capacity and the quantity of money of which they can dispose;

3. on the part of sellers, for those who sell by office sell more dearly than those who sell by accident. For it is estimable by price that some persons continually take care of seeking out, preserving, and distributing things, and are compelled to omit other ways of making gain. And likewise expenses, dangers, and damages which commonly occur increase the price: commonly, I say, for from the fact that one merchant suffers a singular loss in his merchandise, for example, by shipwreck or fire, the price is not thereby justly increased for him;

4. from the mode of selling. For things are sold more dearly, or on the contrary at a cheaper price, according as they are sold a) by office, or by accident; b) by retail, or together in a great quantity: for this frees merchants from many cares and makes them ready for acquiring new things; c) in one's own shop, or under the hammer, by public auction; d) in a shop sought out, or brought by free offer: for merchandise offered spontaneously becomes cheap, since this mode of selling indicates moderate utility and means on the part of buyers.

By all these the just price can be determined.

From these things it can be understood:

1. That the principle is false: a thing is worth as much as it can be sold for, or as much as can be had from buyers. This is true only within the latitude of the estimation of the just price, namely in such a way that one can seek up to the highest just price, but not beyond the highest.

2. "That those rules of merchants are false by which they are wont to justify the prices of their merchandise: that they bought for so much, that they made such expenses, that they underwent dangers, unless these are of the kind which commonly occur in the purchase of such merchandise. For some merchants are foolish and imprudent, and rash, who either easily suffer themselves to be deceived, or make useless expenditures, or rashly expose themselves to dangers. There is added that, even if the merchant proceeded rightly, nevertheless because of a supervening abundance of the same merchandise, it happens that the price is diminished, and therefore he cannot sell for as much as they cost him: just as also when scarcity supervenes unexpectedly, the price increases, and he can sell for more than he bought" (Sylvius, on q. 77, a. 1, q. 2).

c) That an individual merchant cannot, from the fact that he suffers a singular loss in merchandise through misfortune, theft, or fraud, exact even above the highest just price: for a thing is worth as much as it is commonly estimated, not as much as it cost a private person. But if the misfortune were common to many merchants, so that it induced a loss of merchandise, then the price would increase.

d) That the practice of merchants is of itself inequitable when, selling at the lowest price or below it, they do not hand over a full measure or hand over merchandise not whole but adulterated. Nor can this be called licit as an occult compensation against buyers, because they have not harmed the sellers, unless they have unjustly compelled them to sell at a cheaper or the lowest price.

e) That those are unjust who are wont to give gifts to servants, and afterward secretly compensate themselves by increasing the price beyond the highest just price, unless, however, the practice is known to the masters and they do not contradict it.

f) If certain things are very highly esteemed among uncivilized nations, it is not unjust to sell them there at a very high price: common estimation in some region renders the price just.

Finally, others, as many Catholics, judge that value depends on the intrinsic utility of the thing together with labor, and besides on the more or less vehement desire of buyers to procure the thing for themselves on account of its utility, pleasure, or necessity.

But the right arm of Socialism, as I have said, is Karl Marx’s Theory of Value. He presupposes the distinction between worth, or value in use, and value in exchange, or market-value. The worth of a thing is the esteem which its possessor has of its utility to him. Thus the convenience of being ferried across a river, thereby saving a seven miles’ walk when I am short of time, has a worth in my eyes equal perhaps to £1. The market-value of that same passage, the ferry being a public one, is 1d. Value in exchange is measured by the commercial price of any article, or of a service rendered. Karl Marx, then, reasoned thus. The exchange value of a commodity, he said, is the amount of human labour that has been put into it. Take, for instance, a regimental coat. There was, to start with, a sheep, a work of nature ; but the shepherd laboured to rear and feed it, and to shear it : there was the carriage of the wool, the dyeing it, the manufacture of it into cloth, the tailoring. There has been large use of machinery in these processes, but the machines were made by man. The value of the coat is all this labour added together, all the human labour that such a coat involves. Moreover, Marx goes on, labour is estimated by the time that it takes a man to do it. Thus the value of the coat is the amount of man’s time that has been spent in making it. It is obvious to object that at that rate the slower the workman, the more valuable the work. Marx replies that by time we must understand the time which an average workman would take over the task.

I waive for the present another objection with Marx’s reply to it, and proceed to show how this theory is pursued to the destruction of capital. Suppose we have before us a consignment of five thousand regimental coats, fresh from the premises of Messrs. X. Y. Z., military tailors and outfitters. The coats are of considerable value : that is, they represent not a little of man’s time spent in making them. Who created that value ? The man, it is answered, whose time and labour has been spent, and is contained as it were jellified in those coats. But who are those men ? X. Y. Z. ? Not a bit of it. Y. and Z. are away perhaps boating on Lake Lucerne; and X. has not been on the premises more than two hours a day, and has never laid a finger on the coats in any stage of their manufacture. The men who created that value are other workmen going before, and finally the workmen or “ hands ” of Messrs. X. Y. Z. But now who will pocket the price, the equivalent of that value? Messrs. X. Y. Z. will take it, and divide into three portions. With one they will pay for the raw material and machinery : one will be paid to their workmen as wages : the third portion, it is said, they will put into their own pockets, and on it live in luxury, doing no work, creating no value, but consuming the lives and devouring the labours of other men. Messrs. X. Y. Z. are capitalists. That third portion which they take to themselves, is termed “ surplus value.” Karl Marx proposes to abolish Messrs. X. Y. Z., and distribute that surplus value among the hands that created it, the workmen.

It is time to go back upon the objection that we waived just now. A carver in wood spends his time in turning out wooden imitations of cakes of Brown Windsor Soap. In ten days, working eight hours a day, he has turned out two hundred of these wooden tablets. No ordinary carver could have done the job in less. The man goes about to sell his products and can find none to buy them. In vain he relates how long he took to make them, and babbles of labour-jelly and Karl Marx : the public will not have them. They are no use. This brings Marx down to saying that by labour he means socially useful labour, or what society esteems such. Here is a vast alteration of the theory. Value, which had been all reduced to labour and time, is found to contain a totally different element, social utility. So the value of labour itself is not the mere labour and toil of it, not the mere time that it took, or would have taken an average man ; but the issue or outcome of the labour to society is an important factor in its value.

It further appears that there are various orders of labour, some more useful to society than others, and therefore more valuable, time for time. In other words, we must consider the quality of labour, not merely the quantity. The attempt to reduce labour of high quality, or the best skilled labour, to quantity by referring it to the time spent in education or apprenticeship, is futile and absurd. Lord Wellington drove the French out of the Peninsula in something like five years : how long would it have taken an ordinary soldier, with Arthur Wellesley’s education, to do the like? How long would the Duke of York, of Walcheren celebrity, have taken to do it ? As in war, so in medicine, literature, engineering, politics, business management, art, there are men whose labour is quite incommensurable with the labour of their fellows. There are born aristocrats, a nobility of nature’s own creation. And there is every grade of quality between one man’s labour and his neighbour’s, the difference arising partly from natural endowment, partly from advantages of position. Thus the little finger of Caesar or Crassus is thicker than the loins of Drom : half an hour of Caesar’s thought does what Dromo could not do in weeks, perhaps not in centuries. So blind, so misleading, so outrageously neglectful of the facts, is this conceit of reducing all value to labour, and all labour to time.

To return to Messrs. X. Y. Z., their “hands,” and the regimental coats. These coats are valuable, not merely as representing a certain amount of labour, but as being tolerably well adapted to meet a public need. But who thought of adapting them ? Who foresaw the need and was forward to meet it? Who set up the machinery, improved and perfected it, bought up the raw material, got together the workmen, inspected and controlled them? All this is the doing of capitalists, not of the hands. It is not hand-labour, but it is labour of the highest social utility. Unless this be done, all the labour of the workmen is of no use at all, and has no value. So I have seen four horses dragging a load of timber up the slope of a hill, straining and bending to the weight, and by their side at his ease walked a man urging the animals with low cries : the horses carted the timber, but the man carted it too, the former as physical causes, the latter in the way of mental and moral causation ; and as the man would have been helpless to move the timber without the horses, so the horses without the man could never have carried it to any good end. But it will be urged, the capitalist is a man and the workmen are men too : the workmen then may replace the capitalist. Not if they continue to be workmen, that is, hand-labourers. You cannot have every one working with his hands. There must, as Socialists allow, be directors, statisticians, managers, whose work is mental, not manual; there must be men set aside for mental labour, as others are made over exclusively, this to one, this to another narrow province of manual labour. The labour and use of capitalists, and the value they create, are proved by the vast bureaucracy which Socialists are compelled to think of instituting in order to replace them. It is no more fair to deny the capitalist his profit, and call it unjust gain, because one has imagined a contrivance to work in his stead, than it would be fair of a capitalist to defraud his labourers of their wages, in view of a dreamy vision of machinery to come whereby he shall no longer need them. The present actual creator of social utilities is to have his reward in the present ; the coming man may look for his at the justice of future generations.

It is only fair to X. Y. Z. to observe that they do not spend all the so-called surplus value in living riotously : that is what Socialists advise workmen to do with the said surplus, when it comes to be distributed amongst them. But X. Y. Z. capitalize great part of it, and provide for work and production to come. Their investments are not always judicious, it is true ; but it is generally better to invest than to squander. More production means of itself higher wages ; and less production, lower wages.

Pressed by arguments like these, Socialists sometimes change their key, and tell us that at any rate Messrs X. Y. Z. are wonderfully well paid for their personal contribution to the value of their goods. As one puts it, “ half the cake is a pretty dear price for overseeing its baking.” But how many capitalists get half the cake, or a net profit equal to the sum of wages and other working expenses put together? Perhaps there ought to be higher wages ; certainly the capitalist has other duties to his workmen besides paying them their wages ; but it is a law of nature, from which even the Socialist Commonwealth will not be exempt, that the superintendent be better paid than the journeyman baker.

Under the direction of intelligence, labour has vastly increased the wealth of the world, an increase which Socialists are never weary of enlarging upon, while they forget that it is due, not to common labour merely, but also to the intelligence of the capitalist setting common labour to work under advantageous conditions.

Capital, according to Karl Marx, comes to the world “dripping from every pore from head to foot with blood and dirt.”¹ It is, according to its very nature, nothing else than the unpaid-for, stolen labor of the workman; or, as Lassalle calls it, “the property of others” (Fremdtum). In order to substantiate this death-verdict on capital, Marx avails himself of his peculiar theory of value which we have discussed in detail in an earlier chapter (p. 46 sqq.).² He distinguishes two kinds of value—value in use and value in exchange. Value in use consists in the utility of an object to satisfy human wants; value in exchange consists in the ratio in which commodities are exchangeable for one another. Value in use, it is true, forms the basis of value in exchange, in so far as only useful things can have exchange-value. But in other respects value in exchange is entirely independent of value in use. The exchange-value is determined by the labor embodied in an object.

¹ Capital, vol. I. p. 726.

² There are some who wish to retain the materialistic conception of history without accepting Marx’s theory of value. But then they cease to be adherents of Marxian socialism. It is indeed inadmissible to represent the matter as if Marx had argued thus: Surplus-value is unjust, therefore capitalist society must be abolished. This is not Marx’s view of the matter. His real argumentation is rather as follows: Surplus-value is essentially based on exploitation, and by its very nature tends to an increase of exploitation by which society will finally be divided into a mere handful of billionaire capitalists and a countless herd of proletarians, and then the collapse will ensue. In this sense Marx undoubtedly considered his theory of surplus-value as a fundamental tenet of his system. His conception of capital, capitalism, accumulation of products, is based entirely on the doctrine of surplus-value, which in turn necessarily presupposes his theory of value. Also Engels, as we have seen above (p. 35), plainly tells us that by the materialistic conception of history and by the doctrine of surplus-value, socialism has received its scientific character.

Let Marx explain his idea himself.¹ He says: “Let us take two kinds of merchandise, e.g., wheat and iron. Whatever may be their ratio of exchange, it can always be expressed by an equation in which a certain quantity of wheat equals a certain quantity of iron, e.g., one bushel of wheat=x pounds of iron. What is the meaning of this equation? It means that an equal amount of something common to both is contained in two different things. Both are equal to some third quantity, which in itself is neither the one nor the other. But each of the two, in as far as it is value in exchange, must be resolvable into this third element.”

¹ Capital, vol. I. p. 3.

But what is this third element common to both? “This common element cannot be any geometrical, physical, chemical, or other natural quality of the merchandise. Its material qualities come into consideration only in so far as they contribute to its utility. On the other hand, precisely the abstraction from the value in use evidently characterizes the ratio of exchange of different commodities. Within the limits of this ratio one kind of use-value is worth as much as any other provided it is present in the right proportion.” What then is that remaining element? “If we abstract from the use-value of merchandise, it retains but one quality, the quality of being the product of labor. But also the labor product has been changed in our hands. If we abstract from its use-value, we abstract also from its material composition and form by which it is useful. It is no longer a table, or a house, or yarn, or any other useful object. All its external qualities are, as it were, blotted out. It is also no longer the product of the work of the joiner, or carpenter, or spinner, or of any definite productive labor.” “Nothing has remained but the same ghostlike actuality, a mere crystallization of human labor without distinction, i.e., of the expenditure of human labor capacity without regard to the manner of expending it. These objects now represent only the fact that in their production human labor has been expended, human labor has been stored up.”¹

¹ Capital, vol. I. p. 4.

“A value in use or an object has value only because human labor considered in the abstract is embodied or materialized in it. But how are we to measure the amount of its value? By the amount of ‘value-creating substance,’ i.e., labor, contained in it. The quantity of labor itself is determined by the time employed, and the labor-time again is measured by the unit of certain periods, as hours, days, etc.”

“Now it might seem that if the value of any commodity is determined by the amount of labor expended in producing it, this commodity would be the more valuable the lazier and clumsier its producer, because he would need more time to produce it. The labor, however, which forms the substance of value must be equal human labor, an expenditure of equal labor capacity. The sum total of labor capacity in the whole society . . . is taken here as one and the same human labor capacity, although it consists of countless individual labor capacities. Each one of these individual capacities is the same as any other in so far as it has the character of average labor capacity and as such produces an average amount of social labor and needs therefore in the production of any commodity only the average labor-time or the socially necessary labor-time. Socially necessary labor-time is the time required to produce a certain value with given normal social conditions of production, and with the average social degree of skill and intensity of labor.”²

² Ibid., p. 5.

How Marx has utilized the principle that exchange-value is something intrinsically independent of use-value and consists only in ‘crystallized labor-time” for the explanation of capitalistic “surplus-making,” we have already shown (p. 46 sqq.). The Marxian doctrine of surplus-value and of the process of accumulation is inseparably connected with his theory of value. If the latter is false, then all the consequences deduced from it are null and void. Therefore we must examine this theory more closely.

For his fundamental principle that the exchange-value of an object is not determined by its use-value, but exclusively by the labor expended upon it, Marx can appeal to the authority of the greatest political economists, Adam Smith, Ricardo, and others. Socialism in this as in many other regards, is only the lineal descendant of liberalism; it only draws the logical inferences from the principles of liberalism. Not until Marx, Lassalle, and other socialists had taken hold of this principle to use it as a deft weapon against private capital did any misgiving arise concerning it; then authors began to abandon it or at least to restrict it very materially.

In reality this principle is untenable. To understand this we need but inquire into the notion of value. It is one of those simple and primitive notions which are evident to every man and become obscured only when we attempt to analyze them. An object is said to be of value to us if it in any way appears desirable. Value therefore includes an objective and a subjective element. In order to be of value to us an object must be good in itself or at least it must appear to us as such, and moreover it must have some relation of adaptation to us, i.e., it must appear as in some way conducive to our preservation and perfection. In other words, value is the capacity of any thing to serve the needs and desires of man and therefore to be estimated as desirable.¹

¹ Cf. Devas, Political Economy, p. 4.

Also purely spiritual goods are of value. The kingdom of heaven is far more valuable than any earthly goods, and therefore the prudent man is like unto a merchant who sacrifices all his earthly possessions to acquire the pearl of great price spoken of in the Gospel. In a similar manner life and health are more valuable than money and estates.

Of economic value we speak in a more restricted sense. It is the business of economics to provide those material goods which are needed for the support, continuance, or enjoyment of man’s material and intellectual life on earth. Therefore the economic value of these goods is the capacity they are estimated to possess of satisfying the above-mentioned needs.¹ Our striving after well-being impels us to aim at increasing the values at our disposal and to prevent their decrease.

¹ Ibid., p. 5. Cf. also Philippovich, Grundriss der polit. Oekonomie

(1901), p. 6.

In economic goods a twofold value may be distinguished: value in use and value in exchange. Also Marx rightly makes use of this distinction which we find already adopted by Aristotle and his commentators. Aristotle² distinguishes a twofold use of earthly goods: the one is proper to an object according to its peculiar character (χρῆσις οἰκεία); the other is common to it with all other objects (χρῆσις οὐκ οἰκεία). The philosopher illustrates this distinction by the example of a shoe. A shoe has a twofold use: the first is peculiar to it in contradistinction to other objects, and consists in this, that it can be used for the protection of the foot; the second consists in this, that it may be exchanged for other goods. This second use is common to the shoe with all other objects of merchandise. It may therefore be called common use or secondary use.³ Value in use is therefore a far more comprehensive notion than value in exchange. Exchange-value is also a kind of use-value, but not every value in use constitutes an exchange-value. Air and light are of continual value in use, but they are of no value in exchange.

² Polit. I, 9. St. Thom. in I, Pol. l. 7. Silv. Maurus in I. Polit. c. 6, n. 2.

³ This distinction of use-value is much clearer, simpler, and more objective than those which we generally meet with in the works of modern political economists. Many call use-value the fitness of an object for the use of the possessor himself, and exchange-value the fitness of the object to be given in exchange. But exchange itself is a use of the object by the possessor. Consequently the first member of the definition contains also the second. Others call use-value immediate value, and exchange-value mediate value. Others again reject this distinction altogether, and divide value into subjective and objective. As often as we shall, according to the ruling custom, distinguish between use-value and exchange-value, we shall understand by use-value the fitness of an article for all kinds of use, the use of exchange alone excepted.

What constitutes value in exchange? or in other words, what is required to make any object of value in exchange? First of all it must be capable of becoming private property. Exchange or barter is a kind of contract whereby one man yields up to another some economic good and receives some equivalent in its stead. This contract presupposes private property in some form or other.

Moreover, in order to be of value in exchange an object cannot be at the disposal of everybody in any desired quantity. Thus water is of great value in use, but in ordinary circumstances it is of no value in exchange, because it is free to all and because it is therefore useless to appropriate it, since no one will barter anything for water. But within the restrictions here mentioned every object which is of value in use is also of value in exchange. But how is this exchange-value to be determined? This can be done by comparing different objects with regard to. the utility derived from them. The greater and more urgent the need which is relieved by some object in use, the smaller the quantity in which it is found, and the greater the trouble to be undergone in obtaining it, the greater also the value which we attribute to it. But in most cases this determination of value does not depend on the judgment of the individual, but on the general estimate formed by society. This estimate is not immutable, it changes according to time and place. African negroes attach great value to many things which Europeans look upon as trifles, whilst some things which are of the utmost value to civilized man are of no importance to savages.

If Marx had confined himself to the distinction of these two kinds of value, no serious objection could be raised against him; but he has completely rent them asunder. Value in use, according to him, is no factor in the determination of value in exchange. He asks, why can I exchange, e.g., a bushel of wheat for x boxes of shoe-blacking or y pounds of silk or z ounces of gold, or why can I consider these quantities of the substances indicated as being of equal value? And he answers: “In the ratio of exchange the exchange-value of different objects [appears] as something entirely independent of their values in use.”¹ Therefore, according to Marx, value in use has no determining influence on value in exchange. But this assertion of his is unproved and incorrect, and involves him in contradictions.

¹ Capital, vol. I. p. 4.

1. It is unproved. The chief argument which Marx adduces for his opinion is the following: Value in exchange must be something common to all merchandise; but this common element cannot be anything else than the human labor embodied in it, taken in the abstract. Therefore the labor contained in an object forms its exchange-value.

We grant that exchange-value is something common to all merchandise, because the various objects of merchandise may be compared with each other according to their value in exchange. But we deny that this common element consists only in the labor contained in them. Marx does not produce any arguments for this opinion, but only mere assertions.

“The common element in all kinds of commodities cannot be a geometrical, physical, chemical, or any other natural quality of the goods themselves. Their physical properties come into consideration only in as far as they go to constitute their utility, or use-value. On the other hand, the exchangeableness of commodities is evidently characterized by abstracting from their usefulness. In regard to exchange the use-value of one object is just as much as the use-value of another, provided it be forthcoming in due proportion. As to their use-value, goods, in the first instance, differ in quality; but as to their exchange-value they differ only in quantity, and contain not a particle of use-value.”¹

¹ Capital, vol. I. p. 12.

This passage contains only assertions in lieu of arguments; nay, false statements presented to us as “evident.” And yet upon these statements depend all the subsequent conclusions. We are surprised, in fact, that Marx so confidently affirms without proof that apart from labor there is no common element in different goods. Aristotle, to whom he repeatedly appeals, could have taught him better. This great philosopher teaches expressly that there is a common element in all commodities, according to which they can be compared with one another and estimated. This common measure or standard of exchangeable goods, according to the philosopher,² is usefulness, that is, their fitness for supplying the wants of mankind.

² Δεῖ ἄρα ἑνί τινι πάντα μετρεῖσθαι . . . τοῦτο δ’ ἐστὶ τῇ μὲν ἀληθείᾳ ἡ χρεία, ἣ πάντα συνέχει.—Ethic. v. 8.

The commodities to be exchanged may be ever so different in other respects, they all agree in this one point that they satisfy some human need, that in some way or other they are useful and desirable. This furnishes a point of comparison and a standard of measurement.¹

¹ Hohoff (Warenwert und Kapitalprofit, p. 5) writes as follows: “Commodities become commensurable only by abstracting from their use-value. Linen, iron, wheat, the Iliad, illuminating-gas, arsenic, Eau de Cologne, and Asafœtida, etc., cannot be compared to another and measured by one another regarding their utility or use-value.” And why not? In their specific use-value they differ indeed, yet they all agree in this, that they are useful to man, that they supply some human demand, in this respect they can be compared, estimated, and measured according to a fixed standard.

2. But the assertion of Marx that labor alone constitutes exchange-value is not only gratuitous: it is also untrue. Unwittingly Marx himself has penned his own refutation. He says: “ Within the same ratio of exchange-value, the use-value of one object is as great as that of another, if it is only forthcoming in the same proportion.” Why must the use-value be forthcoming in the same proportion? Evidently because in the determination of the exchange-value the usefulness of an object is by no means indifferent, but a decisive element. Moreover, how is it that, even according to the concessions of Marx himself, useful objects only can have exchange-value for society? Certainly because use-value or utility is an essential element in exchange-value. If one, for instance, with the greatest expenditure of labor manufactured boots from pasteboard, he yet could not find customers to buy them; they would have no exchange-value, because they would be useless; in other words, because they would have no use-value. Use-value is, therefore, an essential element of exchange-value.

But there are objects of use-value which have no exchange-value. Air and light, for instance, are useful though not exchangeable commodities. Very true; but what follows from this fact? Only this, that mere usefulness does not suffice to constitute exchange-value; that other conditions must be added; but it by no means follows that those things which have exchange-value do not owe this value at least in part to their usefulness. What would Marx say to the following argument? There are men who are not artists; therefore the notion of man does not belong to the notion of an artist. The conclusion drawn by Marx is not more logical. In order that a useful object may have exchange-value it must be fit to pass into the exclusive possession of an individual, and must not be forthcoming in such quantities that all can have of it whenever they please. But this supposed, the exchange-value of an object depends chiefly upon its use-value, or utility. In the primeval forests of South America wood has no exchange-value, either because there is no one to use it, or because every one can have it for nothing, like air and water. But suppose a merchant brings several shiploads of different kinds of wood to a European harbor, what will then be the standard of its value? Is it the amount of labor, the amount of expense and time, which the transportation has cost? Certainly not; otherwise all different species of wood conveyed from South America would sell at the same price, which is not the case. The better and more durable material will sell at a higher rate. Fine cedar or mahogany, abstracting altogether from the labor expended on it, has a much greater exchange-value than pine or birch.

By a thousand such instances we might show that the value or price of an article is determined in the first place by the general estimate of its usefulness. Good wine sells at a higher rate than bad wine, although the vintner may have expended the same amount of labor on the preparation of both. Why do our mine-owners sell coal from the same mine at different prices? Because the quality is different. In short, it is the quality, or the different degrees of objective goodness, that generally determines the exchange-value of objects independently of the amount of labor consumed upon them.

It would be carrying coal to Newcastle to attempt any further proofs of this truth. Nor can it be objected against the examples alleged that in all cases labor is necessary to give the object real value, for we do not deny that labor has a certain influence upon the exchange-value; but we do say that labor alone does not constitute exchange-value. For the rest, labor generally comes into account only in so far as it tends to give greater usefulness to a thing. Besides, there are in nature also objects which require no labor in order to be made useful, but which may be directly appropriated and exchanged for other commodities. Such are, for instance, coal-oil, wild fruits, etc.¹ Thus also in the products of human labor the exchange-value is determined in the first place not by the “socially necessary labor-time,” but by their artistic qualities or other intrinsic perfections. If two authors, after an equal amount of labor and preparation, publish their works, which of the two will have the larger sale? His, no doubt, which appears to the public more perfect in contents and expression. What determines the value and price, of paintings at an exposition? Surely not the “socially necessary labor-time,” but their intrinsic perfection, the fruit of genius rather than of labor. Why will a painting or even a pencil-sketch of Raphael or Dürer fetch such fabulous prices? Why are old manuscripts, rare prints, ancient medals and coins, and other things of that kind paid for so lavishly? Is it on account of the labor represented in them? Is it not rather their rarity, their perfection, their importance for the history of civilization, or something of that sort?

¹ Cf. Von Hammerstein, S. J., Stimmen aus Maria-Laach, vol. x. p. 426; Hitze, Kapital und Arbeit (1880), p. 9 sqq. According to St. Alphonsus Liguori (Theol. moral. l. 3, n. 801 sqq.) it is the common doctrine of Catholic theologians that the price or exchange-value of an object depends not only on the labor expended in its production, but also on many other circumstances, on the utility of the commodity, on supply and demand, etc. Thus St. Thomas (S. theol. 2. 2. q. 77, a. 2 ad 3) declares that the price of an article of merchandise is determined not by the degree of perfection of its nature, because sometimes a horse is dearer than a slave, but by the utility which man derives from the object in question.

3. Marx involves himself in contradictions. According to Marx’s theory of value the rate of profit, i.e., the relation of surplus-value to the total capital invested in any enterprise, must needs vary according to the “organic composition of the capitals.” The value of raw materials and machines, the amount of materials used, and the wear on the machines differ considerably in different undertakings.¹ It is therefore to be expected that at the same rate of surplus-value every branch of industry should show a different rate of profit. But what is the case in reality? Here we find it to be a general law that capitals of equal magnitude yield equal profits regardless of their composition. Marx himself concedes the fact and acknowledges that it appears to be in flagrant contradiction to his law of value. But now how does he set about harmonizing facts and theory? Spirited controversies were carried on for years, within and without socialist circles, as to how Marx would unravel this Gordian knot, a feat which he had reserved for the third volume of his “Capital.” The volume has finally been published by Engels, and lo! Marx simply abandons his law of value. He confesses quite candidly that the rate of profit is independent of the composition of capitals, and that mercantile commodities are sold not according to their value— i.e., the labor contained in them—but partly below, partly above their value.¹

¹ Capital, vol. III. part I. p. 132.

¹ Ibid.

Therefore Marx in the first instance bases his law of value upon experience, and acknowledges finally that his law is contradicted by experience. Of course, he endeavors to prop up his tottering law of value by the assertion that the sum total of prices paid corresponds to the sum total of values.² This contention is ably refuted by Boehm-Bawerk, who remarks that the purpose of the law of value can be no other than to formulate and explain the actual ratio of exchange of the various commodities. We wish to know why, e.g., a coat has as much value in exchange as twenty yards of linen, and according to what standard the exchange is effected. This is the purpose assigned to the law of value by Marx himself. But the ratio of exchange comes into question only in reference to single commodities.³ But if it is granted that the ratio of exchange of single commodities is not determined by their value (the labor contained in them), then also the law of value is abandoned, and it is an arbitrary and useless assertion to maintain that the law of value remains in force for the sum total of commodities exchanged.

² Ibid., p. 140.

³ Boehm-Bawerk, Zum Abschluss des Marxschen Systems, p. 116 sqq.

4. If, therefore, the exchange-value of commodities is not determined exclusively by labor, but, above all, by their utility and applicability in the satisfaction of human needs, then also the entire theory of surplus-value, of the nature of capital, of the accumulation of capital, etc., must needs collapse, for all these are but deductions from the theory of value. We agree with Marx when he says: “The wages of labor are not what they seem to be [to many], namely, the value or price of labor itself; they are but the value or price of labor capacity.” For, the contract between employer and laborer is ordinarily no more than a contract of hire. The laborer hires out his labor capacity, and in return receives the price of hire, in other words, the price for his hired-out labor capacity. But when Marx maintains that the exchange-value or the value of hire of human-labor capacity is determined by the cost of its production, he is but drawing a false conclusion from his theory of value. For, even supposing that two laborers need equally as much for their own support and for their families, still their labor capacities may differ widely as to their exchange-value, in so far as one man is more experienced, talented, skilful, and reliable than the other. A skilled worker will find employment sooner and receive better pay than the raw novice. As in all commodities, so also in labor capacity the value in exchange is determined in the first place by utility and practical applicability.

Just this very example, the difference in exchange-value of different labor capacities according to the utility of each, deals the death-blow to the Marxian theory of value. In accordance with this theory the exchange-value of labor capacity should be regulated by the cost of producing and sustaining it. This, however, is not the case. Why is a higher salary awarded to a capable, experienced, reliable manager, engineer, physician, or foreman than to an ordinary workman? Why do the perquisites of “star” actors, musicians, and singers often reach such enormous figures, whilst others in the same walk of life must be satisfied with a mere pittance despite their painstaking labor? Does the “star” actress, perhaps, need so much more for her sustenance than another? Or can talent, genius, beauty of voice and action, and similar qualities be reduced to the standard of “average labor-time,” so that their cost may be figured out?

The collapse of Marx’s theory of value necessarily implies also that of his other assertion, that the laborer needs but a part of his actual labor-time in order to produce an equivalent for the price of his labor capacity—the necessary labor-time—and that during the rest of the time he is doing “surplus work” for the benefit of the capitalist. The untenability of this assertion becomes still more evident, if we consider that according to Marx “the value of labor is determined not only by the labor-time necessary for the sustenance of the individual laborer, but also by that required for the sustenance of his family.”¹ Who on earth has told Marx that every wage-earner imparts to the manufactured commodities not only as much exchange-value as is required for his own support and that of his family, but also something over and above, which is freely appropriated by the capitalist as surplus-value?

¹ Capital, vol. I. p. 359.

In fine, the entire socialist theory of value is so absurd that we are forced to ask ourselves, how could a man of Marx’s talent and capacity hit upon such a theory and make it the foundation of his whole system? The only explanation to be found in this is that in a very one-sided manner he took into consideration only the condition of industrial wage-earners, generalized that which is applicable to them under certain circumstances, and by purely ideological processes developed it into a comprehensive theory, into a so-called “scientific” system.

To meet a possible objection we would here remark that even in the socialist state the exchange-value of goods would still remain, and could not, even in socialistic circumstances, be determined by the labor spent in its production; for not only in commerce with foreign nations, but also in the division of produce among individuals, the exchange-value of goods would have to be taken into account, and even in this case it would be determined chiefly by the standard of usefulness. If two laborers in the socialist state would perform the same amount of work, it would be unjust to give to one as a remuneration a case of Johannisberger or Riidesheimer, and to the other the same amount of bad Mosel wine, or cider, on the plea that both the productions cost the same amount of labor. So also in the socialist state more labor could be procured for a bushel of good wheat than for the same amount of bad wheat, although the expenditure of labor upon the bad wheat may be just the same as upon the good. The same may be said of all similar commodities.

The price of a thing is the expression in money of its value. But what is value? What is it that makes a pair of boots sell for sixteen shillings in a certain place on a fixed day? The question is one of primary importance in the science of Political Economy. Jevons¹ quotes with approval the following words of Mill: —

¹ Theory of Political Economy, p. 80.

Almost every speculation respecting the economical interests of a society thus constituted, implies some theory of value; the smallest error on that subject infects with corresponding error all our other conclusions; and anything vague or misty in our conception of it, creates confusion and uncertainty in everything else.

The theory of value is picturesquely said by a foreign writer to be the dragon which guards the entrance to economic science; while another declares that he who understands value, understands half of the difficulties of the science of Economics.² If the notion of value is fundamental in Economics, it is of great importance, to say the least, in Moral Theology, and particularly in questions concerning justice and contracts. It may be of interest to inquire what economists have to say on a subject which specially belongs to their province, and to compare it with the received doctrines of Moral Theology. According to a recent writer, economists have shown the teaching of theologians on the point to be chimerical and absurd: and as I propose to make the words of this writer the basis of my remarks, I will quote him at length : —

² C. Antoine, S.J., Economie Sociale, p. 258.

In modern times the form of economic doctrine has been affected by the fact that it has been so much discussed by men who were accustomed to deal with physical and mathematical problems, and who brought their habitual methods of reasoning to bear on the phenomena of supply and demand. In a similar fashion the economic doctrine of the thirteenth century in Christendom was affected, as far as its form was concerned, by the engrossing studies of the time; economic problems were discussed by men who were habituated to the methods of metaphysics. In accordance with current modes of thought, they tried to determine an ideal standard which should be realized in particular transactions, and sought for a definite conception of a ‘‘just price’’; the practical inquiries then resolved themselves into means for discovering the just price of each particular thing. From the modern point of view this whole quest was chimerical: prices are always fluctuating, and must, from their very nature, fluctuate. According to the ‘‘plenty or scarcity of the time’’ there will be great differences in the quantities available, and, therefore, in the relative values of wheat, cloth, coal, and commodities of every sort. We know, too, that the commodity used for money must vary in value from time to time, and that, therefore, there must be continual fluctuations not only in values but in prices as well. The attempt to determine an ideal price implies that there can and ought to be stability in relative values, and stability in the measure of values, which is absurd.

The medieval doctrine and its application rested upon another assumption, which we have outlined. Value is not a quality which inheres in an object, so that it shall have the same worth for everybody; it arises from the personal preferences and needs of different people, some of whom desire a given thing more and some less, some of whom want to use it in one way and some in another. Value is not objective—intrinsic in the object—but subjective, varying, with the desires and intentions of the possessors or would-be possessors; and because it is thus subjective, there cannot be a definite ideal value, which every article ought to possess, and still less a just price as the measure of that ideal value.³

³ Dr. Cunningham, Western Civilization in its Economic Aspects, 1900, p. 78.

According to Dr. Cunningham, therefore, the medieval theory of a just price for everything, and the medieval concept of value have been shown to be absurd and untenable by modern economic science. The schoolmen of the Middle Ages, habituated to the study of metaphysics, looked upon value as a quality intrinsic to the thing itself. To them it was something objective, definite, stable, and fixed; and so the measure of value, or price, was something stable and fixed also.

On the contrary, the doctrines of modern economic science have been formulated by men accustomed to deal with the physical and mathematical sciences. These men have brought their strictly scientific methods to bear on the economic problems of supply and demand. They have taught us that the medieval quest after a just price for commodities was as chimerical as the quest after the San Grail. Taught by them we now know that prices are not stable and fixed, but are always fluctuating, and must of their very nature fluctuate. The plenty or scarcity of the time will affect the quantities of the available commodities, and so will affect the relative values. We now know that. money itself, the measure of value, is subject to the same economic laws as other commodities, and that it fluctuates in value as they do. So that the attempt of the schoolmen to arrive at a just price for each particular thing involved the two absurdities of supposing that there can be stability in relative values, and stability in the value of money.

Let us see what the schoolmen really did teach about the just price of commodities. It is easy to state some absurd theory, ascribe it to the metaphysical scholastics of the Middle Ages, and then proceed to demonstrate its absurdity. It is a more scientific method of procedure first, as the scholastics were fond of doing, to make sure of the fact — Primo, queritur utrum sit.

Molina, one of the great doctors on justice, will tell us what the common teaching of the schoolmen concerning the just price of commodities really was. Almost any other of a score of scholastic theologians would serve our purpose equally well, and I shall refer to one or two others in the course of my remarks, but in the main I propose to follow Molina. The difference between the date at which he lived and the thirteenth century, which Dr. Cunningham has specially in view, need not trouble us, for there was no change of doctrine in the meantime; Molina’s teaching is merely that of St. Thomas somewhat amplified.

This scholastic doctor then is careful in the first place to say what the just price is not derived from. It is not, he says, to be measured by the excellence of things according to their own nature and intrinsic qualities, but according as they serve man’s use and benefit. A mouse considered in its own nature is a more excellent thing than corn, but mice are worthless, while corn, which serves man’s necessities, has its price.

However, he proceeds, the price of a thing does not depend merely upon its usefulness for supplying man’s necessities, but it depends a very great deal upon the estimation which men commonly choose to have of it with reference to its use. Thus the just price of a gem, which is for ornament only, is greater than that of a large quantity of corn, wine, meat, cloth, and horses. And among the Japanese a piece of rusty iron or cracked pottery is of immense value on account of its antiquity; while among us it is worth nothing at all. And mere ornaments of colored glass have a far higher price among the Ethiopians than gold, which they exchange for them. Now all this is brought about solely by the common estimation in which things are held in the place where they are exchanged, so that such trafficking is not to be condemned, though the want of culture and the manners of such peoples are sometimes laughable.

So that the just price of a thing depends a great deal upon the common estimation of men in any place; and when without fraud or any unfair dealing, a commodity is commonly sold at a certain price in any place, that may be considered the just price, as long as the circumstances which cause prices to vary remain unchanged. The Roman Civil Law⁴ and the common opinion of doctors agree on this point.

⁴ L. Pretia rerum, Dig. ad legem Falcidiam.

But it must be observed, adds Molina, that a great many circumstances alter the prices of commodities. Thus scarcity makes the just price rise, while plenty makes it fall; the greater number of competing buyers at one time than at another, or their eagerness to buy, makes prices rise, on the other hand the fewness of buyers makes them fall; the greater demand at one time than at another, while the supply remains constant, as of horses in time of war, makes prices rise. The scarcity of money in any place makes the price of other things fall, while abundance of money makes the price of other commodities rise. For the less the supply of money in any place the greater its value, and thus many more other goods are bought with the same sum. The manner of sale, too, alters the price, as we see in sale by auction, or when a man is anxious to find buyers and seeks them, or in sale by retail.⁵

⁵ Molina, De Justitia, tract. ii., disp. 348.

The just price which we have been considering was called by some theologians, following Aristotle, the natural price; not, as Molina is careful to explain, because it did not depend largely on men’s estimation, nor because it was not very inconstant and changeable, but to distinguish it from the legal price, which was settled for some commodities by law. Inasmuch as the natural, or vulgar price as it was also called, depended upon men’s estimation, wants, and desires, which are very various, it could not be a quantity exactly determinate and precisely defined, it necessarily admitted of a certain latitude; and so theologians distinguished the highest, the lowest, and the middle price, and taught that justice would be done if the seller kept within those limits.⁶

⁶ Ibid. disp. 347.

All this, even in the light of modern economic doctrines, seems eminently practical and thoroughly in keeping with common sense; I fail to detect in it anything that savors of the “ metaphysical,” if that term is intended by Dr. Cunningham to mean unreal and unpractical. The whole point of the teaching of the theologians lies in this, that there is such a thing as a fair and reasonable price for commodities, in which English law and English juries agree with them, and that it is matter of justice to keep to it in contracts. The scholastics certainly knew as well as the modern economist that prices are always fluctuating; they knew that the plenty or scarcity of the time has great influence on the relative values of commodities of every kind; they knew of what is now called the law of supply and demand; they even knew that money is exposed to constant variations in value, and that it would be absurd to look for stability either in relative values, or in the measure of values. In fact they knew all that Dr. Cunningham has taken for granted that they did not know.

From what has already been said, it is quite clear also, in spite of what Dr. Cunningham seems to imply, that the scholastics knew that “value is not a quality which inheres in an object, so that it shall have the same worth for everybody.” Molina expressly states that it arises from the preferences and needs of different people, with their different desires and wants. As we shall presently see they unanimously denied that the seller can charge for any special individual advantage which may accrue to the buyer from the bargain; thus clearly supposing that social and individual value were two very different things. However, a difference between the scholastic doctrine on value and modern theories is touched upon, when Dr. Cunningham proceeds to say : —

Value is not objective—intrinsic in the object—but subjective, varying with the desires and intentions of the possessors or would-be possessors; and because it is thus subjective, there cannot be a definite ideal value, which every article ought to possess, and still less a just price as the measure of that ideal value.

According to modern theories then, value — exchange value is meant — is merely subjective, varying with the desires and intentions of the possessors or would-be possessors of a commodity; and so there is no definite value which a thing possesses, and no just price, for a just price is merely the just measure, the proper equivalent of value. A man may sell a horse for what he can get, he may exact whatever interest the borrower will give him for a loan, he may pay his workmen as little as necessity forces them to take for a day’s wage. There is no just price for commodities, justice is not violated by however unconscionable a bargain. Certainly these are conclusions of great importance, and if they had been proved to be true, we should have to modify some of the rules of Moral Theology. Catholic theologians of the Middle Ages, as well as their successors of to-day, are unanimous in teaching that there is such a thing as a just price for commodities, that justice can be violated by charging too much for what is sold, and that individual wants and tastes do not finally settle the just price. “The estimation of one or two,” says Lugo,⁷ “does not suffice to raise the price, but the common estimation is required.” This doctrine is common to all theologians, and most are content to quote in proof of it the Roman Civil Law: “The prices of things are not settled by the tastes or utility of individuals, but by those of the generality of people.”⁸ The great authority of the Roman Law, that ever-living monument of written reason, was of itself considered sufficient to settle the question; but some went further in their inquiries as to the method of arriving at the just price. Scotus taught that to estimate the just price of his merchandise the merchant should reckon up all the expenses which he has incurred in buying, transporting, housing his goods, then add to them something for his labor and trouble, and something else to compensate for the risks he has run: what corresponds more or less to all these items, will be the just price, he says.⁹

⁷ De Justitia, xxvi., n. 42.

⁸ L. Pretia rerum,

⁹ Molina, disp. 348.

In modern phrase the costs of production were the measure of value, according to Scotus. This opinion was commonly rejected by other theologians, who pointed out that if this were so, the merchant who had lost a portion of his goods might raise the price of the rest to compensate himself; which could not be admitted, for the price of goods is not measured by the profit or loss of the seller, but by the common estimation concerning their value in the place where they are sold, consideration being given to all the circumstances; besides Res perit domino, and it was not fair that the public should bear the private losses of the merchant.

63 Dig. ad legem Falcidiam.

The common estimation then is the cause of value and the measure of value, according to the scholastics; and if the formula be understood as they understood it, there seems no objection why “the common estimation ” should not still be used as a correct term for the cause and the measure of what economists call market prices. For certainly the market price of an article, whatever it may ultimately depend upon, is settled proximately by the common estimation of the value of the article in the particular market, at the time in question. Some of the most recent writers on Economics state this doctrine in terms as precise as those used by the scholastics. Thus Mr. J. A. Hobson¹⁰ says: —

¹⁰ The Social Problem, 1901, p. 144.

Now, just in proportion as exchange or market-value enters and displaces use-value, so does social determination of value displace individual determination. While value in use is strictly personal, value in exchange is distinctively social. A market, however crudely formed, is a social institution ; the value of our farmer’s produce is partly determined by the personal labor he has put into them, but partly by the needs and capacities of others, and not even by the needs and capacities of any definite individual, but by a great variety of needs and capacities expressed socially through the instrument of a market price, which is a highly elaborate result of bargaining, and does not represent the needs or the capacity of any single purchaser.

It would seem, then, that the difference of view between theologians and economists appears prominently and practically only with regard to non-market prices. The theologian teaches that justice requires that there should be an equivalence of social value between the price and the thing bought; (I say “social value,” because, of course, each party to a contract hopes to gain in individual value in use, otherwise there would be no exchange;) that the just price is settled by the common estimation of the value of an article; that value is partly objective, inasmuch as it supposes usefulness, capacity to be esteemed and desired, in the object, partly subjective, not, indeed, with reference merely to the wants and desires of the buyer and seller, but with reference to the common estimate of people at the particular time and place. However, theologians commonly allow the seller to charge for any special private loss of any sort which he may suffer from parting with his property, the pretium affectionis as it is called; and so to this extent they concede that subjective and private wants and desires may be allowed to influence the terms of the contract. What they agree in rejecting is the view that the seller may exact a higher price on account of some private necessity of the buyer, for then he might sell dearer to the poor than to the rich, or on account of some special advantage accruing to the buyer from his purchase, for then he would sell what did not belong to him, and sin against justice.¹¹

¹¹ St. Thomas II. II. q. 77, a. 1.

On the other hand the economist considers that the value of an article and its price are settled by the consent of the parties to a bargain; no man would give 100 per cent. interest for money unless it were worth his while; the loan, therefore, is worth that price to him, and the lender does him no injustice in taking it.

This, of course, would be true if both parties to the contract were equally intelligent, free, and independent; a man, if he chooses, may give what he likes of his own for any commodity ; if he gives a sovereign for a cup of tea at a bazaar, held for a charitable purpose, nobody will have anything but praise for his generosity. But usually when an unconscionable bargain is struck the parties are not on equal terms.

If a man promises 100 per cent. for a loan, when the current rate of interest on money is 3 per cent., or if a laborer undertakes to work for sixpence a day, when the common rate of wages is sixpence an hour, hard necessity alone, or perhaps ignorance, will have been the cause of his consent to such unfair terms. In such cases theology teaches that he who exacts such hard terms commits a sin against justice, and is bound to restitution; but the theory of value, on which this theological doctrine rests, is, according to Dr. Cunningham, an “ assumption which we have outlived.”

The difference between theological and economic doctrines on this point may partially perhaps be explained by the difference of standpoint assumed by theologians and economists respectively. Theologians consider the question from an ethical point of view, they condemn whatever the Christian code of morals condemns; on the other hand many economists at least treat the phenomena of political economy as they treat the phenomena of the physical sciences. The law of supply and demand is, for the purposes of the science, studied and reasoned upon with the help of mathematics as if it were as necessary and determinate as a law of astronomy; most economists abstract from questions of morality. Thus Jevons wrote: —

I conceive that such a transaction must be settled upon other than economical grounds. The disposition and force of character of the parties, their comparative persistency, their adroitness and experience in business, or it may be a feeling of justice or of kindliness really influences the decision. These are motives altogether extraneous to a theory of economy.¹²

¹² The Theory of Political Economy, p. 124.

Perhaps Dr. Cunningham belongs to this class of economists, and perhaps he would not disagree with the theologians if he treated the matter from their point of view, for he writes: —

We feel that it is unfair for the economically strong to wring all he can out of the economically weak, or to trade on terms in which ‘‘common estimation’’ is notoriously set aside. We have given up as impracticable many of the old attempts to put down hard bargains with a high hand: but modern moral feeling does not sensibly differ from that of medieval times in the desire, if it were possible, to interfere with the action of any dealers who are able to enrich themselves through the necessities or the ignorance: of others, and to gain at their expense. If we tried to find a test by which to discriminate hard bargains we could scarcely do better than adopt the medieval phrase and say that hardship arises when a bargain is made without reference to ‘‘common estimation.’’¹³

¹³ Western Civilization, p. 80.

This is admirable, but we hardly see how it can be reconciled with other passages of the same author. In other passages he seems to condemn the theological doctrine not only as out of place in economics, but as false in itself. He thus seems to agree with many other writers, the earliest of whom is said to be Hobbes, who rejected the hitherto received doctrine on commutative justice, and substituted an invention of his own. “The value of all things contracted for,” he says, “is measured by the appetite of the contractors: and therefore the just value is that which they be contented to give.”¹⁴

¹⁴ Hobbes, Of Man, p. 187.

This assertion Hobbes did not attempt to prove, nor has it been proved by any of his followers. The argument drawn from marginal values is no proof that the subjective and individual theory of value is in accordance with truth and justice; it merely formulates the fact that as a rule people will exchange commodities as long as it is worth their while to do so.

Economists are by no means agreed as to the nature of value, although all confess that it is a question of the greatest difficulty; some hold that it is purely subjective, depending upon the desires of each individual; others, that it is the same thing as private utility; others, that it is social utility; others, that it is the relation between two services exchanged ; others, that the value of a commodity is the labor bestowed on it, and so forth. None of these theories is commonly accepted, and none of them is an improvement on the old doctrine that common estimation is the cause and measure of value.¹⁵ The merely subjective theory, which seems to be most in vogue, fails to furnish any reasonable ground for condemning transactions which all, economists included, admit to be wrong. It even furnishes some sort of justification for the iniquities of the swindler, the usurer, and the sweater. I cannot do better than conclude this article with the concise argument by which, in his Encyclical on the Condition of Labor, Leo XIII proves its falseness as applied to the price of labor.

¹⁵ Professor Smart in his little book on The Theory of Value

We now approach a subject [says the Holy Father] of very great importance, and one on which, if extremes are to be avoided, right ideas are absolutely necessary. Wages, we are told, are fixed by free consent, and, therefore, the employer, when he pays what was agreed upon, has done his part, and is not called upon for anything further. The only way, it is said, in which injustice could happen would be if the master refused to pay the whole of the

(1914) says: “The history of economic science is strewn with the wrecks of theories of value,” p. 1.

wages, or the workman would not complete the work undertaken. ...

This mode of reasoning is by no means convincing to a fair-minded man, for there are important considerations which it leaves out of view altogether. To labor is to exert oneself for the sake of procuring what is necessary for the purposes of life, and most of all for self-preservation. In the sweat of thy brow thou shalt eat bread. Therefore a man’s labor has two notes or characters. First of all, it is personal; for the exertion of individual power belongs to the individual who puts it forth, employing this power for that personal profit for which it was given. Secondly, man’s labor is necessary; for without the results of labor a man cannot live, and self-conservation is a law of Nature which it is wrong to disobey. Now, if we were to consider labor merely so far as it is personal, doubtless it would be within the workman’s right to accept any rate of wages whatever; for in the same way as he is free to work or not, so he is free to accept a small remuneration or even none at all. But this is a mere abstract supposition; the labor of the working man is not only his personal attribute, but it is necessary, and this makes all the difference. The preservation of life is the bounden duty of each and all, and to fail therein is a crime. It follows that each one has the right to procure what is required in order to live, and the poor can procure it in no other way than by work and wages.

Let it be granted, then, that, as a rule, workman and employer should make free agreements, and in particular should freely agree as to wages, nevertheless there is a dictate of Nature more imperious and more ancient than any bargain between man and man, that the remuneration must be enough to support the wage-earner in reasonable and frugal comfort. If through necessity, or fear of a worse evil, the workman accepts harder conditions because an employer or a contractor will give him no better, he is the victim of force and injustice.

In the Irish Theological Quarterly for October, 1914, Fr. Kelleher subjected the doctrine of the just price which I have been defending, to some adverse criticism. He writes:

The difficulty against this, which we may call the general desirability, convenience, or utility theory, is that it is only a variety of the fascinating game of sending the fool farther. In substance it means that we can get over the objection against a subjective, individualistic standard by applying it to 100 or 1000 cases instead of to one.