THEORY OF VALUE AND THE THEORY OF PRICES (concluded)

Great work of Austrians really done in field of price theory—They have, without logical right, but with excellent results, assumed and used a quantitative, objective value concept—Distribution in relation to theory of value and theory of prices—Mill's treatment primarily from standpoint of fundamental value theory; later theories, as a rule, chiefly concerned with more superficial, but also more exact, price analysis of distributive problems—Theory of value not a substitute for detailed price analysis, but, rather, a presupposition of it—Prices have meanings, which only theory of value can explain 188

CHAPTER XIX

THE THEORY OF VALUE AND THE SOCIAL OUTLOOK—SUMMARY

Belief that social optimism and social pessimism are connected with theory of value—Views of Fetter, Schumpeter, Wieser, and Davenport—No such implications, either optimistic or pessimistic, in theory here maintained—Theory of value does not contain justification of existing social order—Summary of main argument of book 194

INDEX OF NAMES 201

PART I

INTRODUCTION

SOCIAL VALUE

CHAPTER I

PROBLEM AND PLAN OF PROCEDURE

Recent economic literature has had much to say about "social value." The conception, while not entirely new,[1] has become important only of late years, chiefly through the influence of Professor J. B. Clark, who first set it forth in his article in The New Englander in 1881 (since reproduced as the chapter on the theory of value in his Philosophy of Wealth). The conception has been found attractive by many other American writers, however, and has become familiar in many text-books, and in periodical literature. Among those who have used the conception may be named: Professors Seligman, Bullock, Kinley, Merriam, Ross, and C. A. Tuttle.[2] Gabriel Tarde, the brilliant French sociologist, has independently developed a social value doctrine, different in many respects from that of the Americans named, which we shall later have occasion to consider.[3]

In its most definite form, the theory asserts that the value of an economic good is determined by, and precisely accords with, the marginal utility of the good to society, considered as a unitary organism. Professor Clark, as is well known, makes use of the analysis of diminishing utility in an individual's consumption of goods in much the same fashion that Jevons does, but while Jevons makes this simply a step in the analysis of market ratios of exchanges, Professor Clark treats it as analogical, representing in parvo what society does, as an organic whole, on a bigger scale.[4]

The precise relation of social value to social marginal utility is variously stated by the writers named: for Professor Clark, value is the measure of effective, or marginal, utility;[5] for Professor Seligman, social value is the expression of social marginal utility;[6] for Professors Ross, Merriam, and Kinley, value is that social marginal utility itself.[7] These statements are more different in words than in ideas, though some significance is to be attached to Professor Seligman's formulation, as will later appear.

This conception is a bold one. It has, moreover, never been adequately developed or criticized. Its friends have found it a convenient and useful working hypothesis, and Professor Clark, especially, has built a great system upon it, but, with the exception of an article in the Yale Review of 1892,[8] has made no serious efforts, either to make clear its full meaning, or to vindicate it—except that, of course, his whole system may be considered such a vindication. Professor Seligman, in an article in the Quarterly Journal of Economics, vol. xv, and also in his Principles of Economics, has espoused the conception, and has shown how, assuming its truth, a great many antagonistic theories may be harmonized; but he, also, has failed to treat it with that detail which full demonstration requires. In particular, he has omitted a treatment of the problem of the relation between the value of a good for the individual and for society, and the relation between individual and social marginal utility.[9] The most searching investigation of the theory has come from unfriendly critics, among whom may be especially named Professor H. J. Davenport, and Professor J. Schumpeter of Vienna.[10]

For the purposes of this discussion, Professor Clark will be considered as the representative of the Social Value School, for the most part, though attention will be given to some of the other writers named as well. It is worth while, consequently, to make clear at this point the relation between Professor Clark and the Austrian School, with which he is sometimes associated by economic writers. His extensive use of the marginal principle, his use of the term, "utility," and his deduction of value from utility, seem to place him at one with them. Professor Clark has pointed out, however, in the preface to the second edition of his Philosophy