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The Common Sense of Political Economy; Wicksteed, Philip H.
8 paragraphs found.
Book I,Ch.2

Now since it is the marginal values that we are always considering, our minds are always engaged in appraising the least valued part of the commodity or service in question. One of the favourite examples of the distinction between "value in use" and "value in exchange" in the older books was the air we breathe, which obviously has an extremely high value in use, though under ordinary circumstances it has no value in exchange; the reason being that, since we all have as much of it as we want, its marginal significance has sunk to zero, though its total significance remains greater than can be measured in money. And accordingly, whenever the supply is for any reason curtailed, and can be increased or diminished by suitable appliances, air acquires a marginal significance, and may have an exchange value. If a mine-owner wished to improve his system of ventilation and asked for tenders or estimates, the engineer might put different systems before him, the more expensive ones providing for a larger volume of air to pass through the workings per minute, and the cheaper ones for less. In weighing them the owner would estimate, in each case, the additional advantages of the increased supply of air, and would consider whether they were worth the increased cost. He would therefore be considering with some precision the marginal value of air at several alternative margins. But no owner of deep mines would ever consider whether the mines ought to be ventilated at all or not. That is to say, he would never consider the most important part of the question, but would take it for granted. It would not be the total but the marginal value of the supply of air in the workings that would engage his thoughts.

Book I,Ch.3

We shall find that the difficulties of the subject yield readily enough as soon as we understand that it is payment for those things the "using" of which covers a long time and many successive occasions that is the branch of expenditure needing special study and explanation, and which must be brought into line with normal "consumption"—that is to say, the "using up" of things dissipated or transformed by a single application. It is this latter class of obviously "consumable" goods which, as a fact, has hitherto been the chief subject of our studies; and we can now go on to bring the other class under the same principles. To begin with, the whole distinction is only a matter of degree. We think of three great spending departments, food, furniture, and clothing, as representing respectively commodities that disappear after a single application to their purposes, commodities which survive an indefinite number of usings, and the intermediate class of commodities, which can be used many times, but which we should not speak of, even loosely, as permanent. But, strictly speaking, nothing is permanent; and perhaps nothing but an explosive is "consumed" or used up instantaneously, even in a popular sense. The process of eating a mouthful of food occupies a certain amount of time, and in the case of all infusions, such as tea, there may be repeated uses of the same thing, on a down scale of excellence, just as there is in the case of clothes. The careful housewife may make her sticks of cinnamon flavour a custard, and then enter into some other confection; and she will not consider that the virtues of a bag of root ginger have been exhausted after the one use of flavouring her rhubarb jam. Thus in the matter of durability and repeated use the classes of food and clothes overlap; for a calf's foot may be used several times in making successive batches of jelly, and a pair of white kid gloves can only be used a few times, and that on a downward scale of distinction; while a white tie can hardly be used twice. From the kid gloves we may mount by as small steps as we please, through muslin trimmings and what not, to a coat or frock which may be worn for six or twelve months, and the dress-coat or velvet gown that may serve a person of retiring or economical habits for twenty years or more. When we come to furniture, the single class of lighting appliances may offer us varieties running from the Japanese lanterns that will only survive a few uses, to a great lampstand that will never need to be renewed. So, too, the estimated life of a chair may run from a few months to fifty years or more. The distinction we are dealing with, therefore, is purely relative, and as soon as we begin to examine our actual budgets we shall find that even this relative distinction does not correspond at all closely with any actual distinction in our methods of administration. Coal is a perishable article, and when we use a lump we use it up (though its consumption extends over an appreciable period of time), whereas a suit of clothes survives many successive usings; yet it may very well be that if we have suitable premises we shall buy coal for six months in one order; and, on the supposition that a suit of clothes also lasts for six months, we may be buying clothes and coals at the rate of so much the half-year, just as we are buying milk at the rate of so much per day, although each portion of coal is used up by a single application, and each article of clothing stands repeated wear. This observation may put us in the way of clearing up the whole matter. Let us suppose that a man's six months' stock of coal is six tons and that it costs £1 a ton, and further that his suit of clothes costs £5:5s.; that milk is 4d. per quart, and that the average amount taken in the house is a quart and a half a day. Now it will be observed that although we buy our coal and our clothes only once in six months, we consume a portion of the coal and use the clothes every day. We may be said therefore to be consuming milk at the rate of 6d. a day, using up clothes at the rate (by a very close approximation) of 7d. a day, and coal at the rate of 8d. a day. And this is obviously the proper way in which to look at the matter from the point of view of the scientific analysis of administration of resources. Everything should be reduced to a question of rate of supply. In the case of milk most householders have no choice but to purchase day by day: fresh milk cannot be stored in any ordinary sense. Coals may be bought by the scuttleful, the cwt., the ton, or the truck-load, according to convenience; but you cannot get and use up your 7d. worth of clothes day by day as you want it. The forms of purchase, then, are dictated partly by the nature of the commodity, partly by the custom of the trade, and partly by the convenience of the purchaser. But in considering the budget for the year there is no difficulty of principle whatever in bringing into exact comparison and equilibrium the supply of commodities which perish with a single use and that of commodities which are relatively permanent. The apparent difficulty disappears still more completely when we remember that "buying" is not the same thing as "paying," and that the housewife who orders, and in that sense buys, her milk day by day, or even twice a day, probably pays for it weekly or monthly, and possibly at longer intervals than in the case of her coals or many articles of dress. In all cases alike the scientific basis is "rate of supply." All else is secondary.

Book I,Ch.7

And here, too, the law of diminishing marginal significance very obviously comes into operation. To begin with the simpler case of the tools handled by a craftsman. I have known a carpenter of exceptional skill and resourcefulness do a wonderful day's work of a miscellaneous description with no tools but a flat-tailed hammer and an old broken chisel. The difference between his efficiency with these implements and with none at all was certainly far greater than the whole extra difference which the command of his complete basket of tools would have made; for no number of men, absolutely without tools, could have done his day's work at all, whereas a full supply of tools would probably not have enabled him to increase the yield of the same time and the same effort by more than from ten to twenty per cent. The tasks in which he was engaged on that particular day were no doubt of a comparatively simple nature, and if he had been engaged in building a cart his hammer and chisel would have been cruelly inadequate. But he could shape the wheel-hub perfectly with an axe, and a very small equipment of tools would have enabled him to do all his ordinary tasks as carpenter and wheelwright with fair expedition and efficiency. More elaborate tools, had he cared to command them, would have had a rapidly declining significance. They would have made his labour more fertile, but not at anything like the same rate as the initial supplies of the most useful tools. The principle hardly needs to be elaborated, for it will not be disputed. Successive increments of tools and appliances, after a certain point, while they still increase the efficiency and economy of efforts and resources, will do so at a decreasing rate.


The case is exactly the same with the manufacturer. A man may see his way to making £10,000, spent in improved machinery and appliances, yield him £1000 in the increased efficiency of his staff and materials. Perhaps by spending yet another £10,000 he could still further increase their efficiency, but possibly the further addition would amount not to £1000 but only to £500 a year. So if he went into the open market to raise the money, and found that under all the conditions of the case he would have to pay 6 per cent premium or interest, he would think it worth while to raise the first £10,000 and not the second. The declining significance, however, would be gradual, and he would not be confined to increments of £10,000. The first portions of the second £10,000 might have the power of increasing the output at less than the rate of 10 but more than the rate of 6 per cent, and therefore some portion of the further sum would be borrowed. In short, whatever the rate of interest at which the manufacturer can command an advance (that is to say, the immediate use of concentrated or accumulated resources), a balance must be struck between the industrial efficiency of increased apparatus and the price that has to be paid for it in the market. The point will come at which the man would lay down a certain machine, if interest were only 5 per cent, because he expects it to fertilise the concern to the amount of 5 per cent on the money expended, with a sufficient margin to cover risks, replacement, etc.; but if interest is 6 per cent he will not lay the machine down.


And this brings us back to the administration of individual resources, from which we started. We now understand the exact nature and meaning of saving; and we understand that, as one man can make chairs for another, and get something from him that he wants more than anything he could have made for himself, so one man may save for another (that is, make something for him in advance) and get from him in the future something that he wants more than anything he could have made for himself in advance. This fact enters into the very penetralia of our ordinary affairs, and intimately affects the distribution of all our resources. If a man were confined to saving for himself; that is to say, if he could only embody his present resources in the things that he could himself make use of hereafter, he would be utterly unable to make provision for his future. For we have seen *30 that many of the things he will want this day ten years cannot possibly be kept so long if they exist already. Nor would he be able to embody indefinitely large resources in articles of lasting significance to himself, or in tools and appliances that would economise or fertilise his labour. No man, therefore, can adequately provide for his own future by the direct product of his own saving, nor can he indefinitely apply present resources to any kind of provision for his future. And, on the other hand, if no man could enjoy, or utilise, any accumulations, except in the shape of such specific articles as he himself had made or stored out of current revenue, or such as had been provided for him by persons obeying other than economic forces, the vast majority of us would never be able to begin living a civilised life at all. It is the exception for a man to possess a house, or to have "where to lay his head," on the strength of his own accumulations, or of possession that has come to him by gift. Most men, therefore, are dependent for civilised life upon the accumulations of others, and upon the market in which they can be commanded in exchange for currently accruing resources.


So, too, the man who refuses an offer of £2000 for an old family portrait by a great master, practically pays, say, £80 a year for the privilege of keeping it on his walls. Does it secure him a revenue of enjoyment equal to anything he could get for that annual sum? Perhaps he has never asked himself the question, and hardly realises that the economy or extravagance of keeping it depends on the rate of interest. In like manner a man may buy a house for £1000, and then, by a few judicious purchases of adjacent sites, and a few suitable clearances, altogether at the expense of £200 or £300, may double its value. But he does not always realise that he has now practically doubled the rent. He might now let or sell his house, and have twice as much to spend on other alternatives as he could have had before. Therefore he sacrifices twice the value in other things for his house that he did before; and he has, without reflection, determined to apply the whole of the proceeds of his successful strokes of business to one item in his own expenditure. Neither of these men realises exactly what he is doing, nor do we, as a rule, admire the man who obviously does realise such things. But why? Only because we suspect that it is a sordid habit of mind that has made him realise them. The man who does not value personal relations and associations, and who is in the habit of looking at all his possessions apart from their atmosphere of association, their individuality—one might almost say their personality—who regards them merely as "things" that can be exchanged for other "things," is probably a sordid person. He is thinking more of the value that things have for others than of the value that they have for himself, and it is only in comparatively gross forms that he is susceptible to the flavours of life. His consciousness that it costs him £80 a year to keep a picture on his walls, or £50 a year to be able to sit in his garden and enjoy a pleasant prospect on Sunday afternoons, appears to indicate that he is in the habit of considering these things under their most material and detached aspect, as separable possessions, rather than as ministrant to inalienable experiences. The habit of perpetually dwelling on the exchange value of things suggests an undue preoccupation with means and appliances and an undervaluing of ends and experiences, an overvaluing of things that are and an undervaluing of things that are not in the circle of exchange. But it need not be so. A man accustomed to generalised thought on such matters would necessarily realise the facts that have just been mentioned, and on due occasion would act upon them; but he would also realise the value of the finer experiences that these things can provoke in him but in no other, and will understand that it may be very wise to keep a thing, if its roots have struck down into his life and its memories and associations have made an atmosphere around it, on terms on which it would be very foolish to acquire it as a naked material object or opportunity, on the mere chance of its clothing itself with "living garments" at some time or other.

Book I,Ch.9

In agriculture it has long been recognised that though land, labour, instruments, and so forth, are all necessary to produce a crop, and no one of these can be substituted for any of the others in its totality, yet they can be substituted for each other at their margins. It will be possible to produce the same crop off the same piece of land, with slightly inferior implements or less effective manuring, if the requisite amount of extra labour is judiciously applied, or with less labour if better appliances are provided. Or the same crop may be produced on a smaller area of land, by the employment of more labour upon it; or the same amount of labour may produce a better result on a larger than on a smaller piece of ground. *37

Book II,Ch.5

Thus we have arrived at a more exact analysis of the phenomenon which we have already described as the microbe of the disease of civilisation, *46 the fact, namely, that every man is convinced (except in exceptional periods) that his own industry or profession is overstocked. However true it may be that an increase in the numbers engaged in every industry, accompanied by a suitable increase in tools and appliances, would secure a larger general command of resources, it remains true that in any industry, taken in isolation, the reverse must seem to be (and in a sense must really be) the truth. Hence it is to the interest of the existing members of every industry, taken severally, that every other industry should recruit its staff and increase its output, while they themselves retain the exclusive right of ministering to the increased demand for their own product thus created. They will then reap the full benefit of the raising of their own curve which the advance of other industries down their declining slopes secures, and will themselves escape the obligation of raising the curves of others by advancing on the down-slope of theirs. But it is obvious that if the advance were even in all industries the remuneration of each factor of productivity, measured in the sum of things in the circle of exchange of which it represented the command, would increase.