A long discourse is always boring, and a long discourse on value must be doubly so.
Therefore, naturally enough, every inexperienced writer, when confronted with a problem in economics, tries to solve it without involving himself in a definition of value.
But inevitably it does not take him long to discover how very inadequate such a procedure is. The theory of value is to political economy what a numerical system is to arithmetic. How hopelessly confusing Bezout*50 would have become if, to spare his students tedium, he had tried to teach them the four fundamental operations of arithmetic—addition, subtraction, multiplication, and division—and the theory of proportions without first explaining to them how the ten digits by their shape and position represent numerical values!
If only the reader could foresee the fascinating conclusions to be deduced from the theory of value, he would accept the tiresome explanation of the basic principles, just as he resigns himself to the dull chore of learning the elementary principles of geometry by keeping in mind the exciting prospect of things to come.
But in the field of political economy one does not intuitively anticipate anything of this sort. The more pains I shall take to make clear the distinctions between value and utility, and between value and labor, in order to explain how natural it was for early economic theory to have run aground on these treacherous shoals, the more surely the reader will find in my careful analysis mere sterile and idle subtleties, of no possible interest to anyone, except perhaps professionals in the field.
You are laboriously considering, he will say to me, whether wealth resides in the utility of things or in their value or in their scarcity. Is not this like the question asked by the Scholastics: Does form reside in the substance or in the accident? Are you not afraid of being parodied in a vaudeville skit by some would-be Molière?
And yet I must say: From the viewpoint of political economy society is exchange. The primary element of exchange is the notion of value, and consequently the connotations that we give to this word, whether true or erroneous, lead us to truth or error in all our social thinking.
I have undertaken in this work to show the harmony of the providential laws that govern human society. These laws are harmonious rather than discordant because all the elements, all the motive forces, all the springs of action, all the self-regarding impulses within man, work together toward attaining a great final result that he will never completely reach, because of his innate imperfection, but which he will constantly approach because of his indomitable capacity for improvement; and this result will be the progressive merging of all classes at a higher and higher level—in other words, the equalizing of all individuals in the general enjoyment of a higher standard of living.
But, to succeed in my effort, I must explain two things, namely:
1) Utility—that is, the service a thing renders tends to cost less and less, to become more generally available, as it gradually passes outside the domain of individual ownership.
2) Value, on the contrary, which alone can be claimed as a possession, which alone, in law and in fact, constitutes property, tends to decrease in proportion to the amount of utility it represents.
Consequently, if I base my demonstration both on private ownership, but exclusively on private ownership of value, and on public ownership, but exclusively on public ownership of utility, I should be able, provided my reasoning is valid, to satisfy and reconcile all schools, since I recognize that all have had a glimmering of the truth, but only of a part of the truth seen from different points of view.
Economists, you defend private ownership. In the social order no private ownership exists save the ownership of value, and it cannot be called into question.
Socialists, you dream of public ownership. You have it. The social order makes all utilities common to all, provided the exchange of privately owned values remains free.
You are like architects arguing over a building of which each one has seen only one side. They do not see poorly, but they do not see all. To reach an agreement, they need only to walk around the entire edifice.
But how can I reconstruct this social edifice and present it to the public in all its beautiful harmony if I reject its twin cornerstones—utility and value? How could I effect the much-to-be-desired reconciliation of all schools of thought on the common ground of truth if I should yield to my reluctance to analyze these two ideas, whose confused interpretations have unfortunately given rise to so much disagreement?
A preamble of this kind has been necessary to persuade the reader, if possible, to arm himself for a short while with the concentration and the patience to endure some degree of tiresomeness, and alas! of boredom. Unless I am much mistaken, the beauty of the conclusions will richly compensate for the dullness of the premises. If Newton had allowed himself, in the beginning, to be deterred from the study of mathematics by his distaste for its elementary principles, his heart would never have quickened with admiration at the vision of the harmonies of the celestial universe; and I insist that we have only to work our way manfully through a few elementary notions of political economy to realize that God has not been less lavish in bestowing touching goodness, admirable simplicity, and magnificent splendor upon the social universe.
In the first chapter we saw that man is both passive and active; that wants and satisfactions, being concerned exclusively with sensation, are, by their nature, personal, intimate, and nontransferable; that effort, on the contrary, the link between want and satisfaction, the mean between the extremes of motive cause and end result, stemming as it does from our activity, our impulse, our will, can be transmitted by mutual agreement from one individual to another. I know that this assertion could be challenged on metaphysical grounds, and that it could be maintained that effort also is personal and individual. I have no desire to become involved in any such ideological debate, and I hope that my thought will be accepted without controversy when expressed in this nontechnical form: We cannot feel another persons' wants; we cannot feel another person's satisfactions; but we can render services to one another.
This transmission of effort, this exchange of services, forms the subject matter of political economy; and since, on the other hand, political economy can be summed up in the word value, which is the thing it seeks to explain in all its detail, it follows that our notion of value will be an imperfect one, an erroneous one, if, neglecting the mean, we base it on the extremes, which are phenomena of our sensations—wants and satisfactions, which are intimate, nontransferable, not subject to measurement from one individual to another—instead of founding it on our activity, our effort, our exchange of reciprocal services, since these are capable of comparison, appraisal, evaluation, and can indeed be evaluated for the very reason that they are exchanged.
In the same chapter we arrived at these conclusions:
Utility (the ability of certain acts or things to serve us), is composite, one part of it being due to the action of Nature, the other part to the action of man. The more Nature has done to effect a given result, the less there is for human labor to do. Nature's contribution is essentially gratuitous; man's contribution, whether intellectual or physical, exchanged or not exchanged, collective or individual, is essentially onerous, as is implied by the very word "effort."
And since what is gratuitous cannot have value, the notion of value implying acquisition through effort, it follows that value too will be misunderstood if we extend its meaning to include, in whole or in part, those things that are received as gifts from Nature, instead of restricting its meaning to the human contribution only.
Thus, from two points of view, from two different approaches, we reach the conclusion that value must have reference to the efforts made by men in order to secure the satisfaction of their wants.
In chapter 3 we noted that man cannot live in the state of isolation. But if, in our thinking, we conjure up this imaginary case, this state contrary to nature, to which the eighteenth century paid homage under the name of the state of nature, we realize at once that, although it exhibits the active phenomenon that we have named effort, it still does not reveal the notion of value. The reason is simple: value implies comparison, a rating, an evaluation, a measure. For two things to be measured, they must be commensurate; and to be commensurate, they must be of the same kind. In the state of isolation, to what can effort be compared? To wants? To satisfactions? This can lead us only to grant to effort a greater or a lesser degree of timeliness, of appropriateness. In the social state we compare the effort of one man with the effort of another man (and from this comparison arises the idea of value), two phenomena of the same kind, and hence measurable.
Thus, the definition of the word "value," to be accurate, must have reference not only to human efforts, but also to efforts that are exchanged or exchangeable. Exchange does more than take note of values or measure them; it creates them. I do not mean that it creates the acts or the things that are exchanged, but it imparts the idea of value to them.
So, when two men exchange their present effort, or the fruits of their past effort, they are serving each other; they are rendering each other mutual service.
I therefore say: Value is the relationship existing between two services that have been exchanged.
The idea of value first entered the world when a man said to his brother, "Do this for me, and I will do that for you," and the brother agreed; for then, for the first time, men were able to say, "Two services that are exchanged are equal to each other."
It is curious to note that the true theory of value, which is to be sought in vain in many a thick volume, is found in the delightful little fable of Florian, the Blind Man and the Paralytic:
This is value identified and defined with rigorous economic accuracy, except for the touching reference to friendship, which takes us into another realm. We can well understand how two handicapped persons can render each other mutual service without undue concern as to which one performs the more useful function. The special circumstances invented by the fabler produce a strong sense of sympathy that prevents the two men from trying to assess the relative importance of the services they exchange, although this assessment is indispensable in order to bring completely into focus the notion of value in this transaction. This idea would become fully apparent if all men, or most men, were stricken with paralysis or blindness; for then the inexorable law of supply and demand would take over, and, eliminating the element of voluntary sacrifice on the part of the one performing the more useful function, would re-establish the transaction on the solid ground of justice.
We are all halt or blind in some respect; and we readily understand that by mutual aid the burden of our ills will be the lighter. Hence exchange. We work to provide food, clothing, lodging, light, health, defense, education for one another. Hence reciprocity of services. These services we compare, we discuss, we evaluate. Hence value.
A host of circumstances can increase the relative importance of a service. We find it greater or less in proportion to its usefulness to us; to the number of persons ready to perform it for us; to the amount of labor, pains, skill, time, preparation it requires, to the degree to which it relieves us of the necessity of providing these same things for ourselves. Value depends not only on these circumstances but also on the estimate we make of them; for it can happen, and often does, that we rate a given service very highly, because we judge it to be very useful, whereas in reality it is detrimental. For this reason, vanity, ignorance, error play their part in influencing this essentially elastic and fluctuating relationship that we call "value"; and one could say that the evaluation of services tends to come closer to absolute truth and justice as men progress in knowledge and morality.
Up to now the principle of value has been sought in those circumstances that increase or lessen it, in material quality, wear, usefulness, scarcity, labor, inaccessibility, subjective judgment, etc.—things that from the very beginning have given the science of political economy a wrong direction, for the accident that modifies the phenomenon is not the phenomenon itself. Moreover, every writer has set himself up as the godfather, so to speak, of the particular one of these circumstances that he considered the most significant—the inevitable outcome of the tendency to generalize; for the whole universe is in everything, and there is nothing that a word cannot be made to include if only its meaning is sufficiently broadened. Thus, the principle of value for Adam Smith is in material quality and wear (durability); for Say, in utility; for Ricardo, in labor; for Senior, in scarcity; for Storch, in subjective judgment; etc.*52
What happened, inevitably, was that these writers in all innocence weakened the authority and dignity of the science of political economy by giving the impression of contradicting one another, whereas in reality each one was correct from his own point of view. Furthermore, they enmeshed the primary notion of political economy in a maze of inextricable difficulties, since the same words did not connote for all of them the same meaning; and, although one set of circumstances might be declared fundamental, they also noted other factors at work that were too important to be neglected, and thus their definitions became more and more involved.
This book is not designed to add to the controversy, but to be an exposition of principles. I point out what I see, not what others have seen. I cannot, however, refrain from calling the reader's attention to the circumstances on which the idea of value has been based. But before proceeding with this topic, I shall turn to a series of concrete illustrations of the nature of value, for it is through different applications of it that we grasp the meaning of a theory.
I shall show how every transaction can be reduced to a bartering of services. But the reader must keep in mind what was said about barter in the previous chapter. It is rarely a simple transaction; sometimes it is accomplished through products or commodities circulated among several contracting parties; more often it is accomplished by means of money, in which case it can be broken down into two factors, sale and purchase; but, since this complicating feature does not in any way alter the nature of the transaction, let me assume, for the sake of simplicity, an immediate and direct barter between two parties. In this way we may avoid any misconception as to the nature of value.
We are all born with one overwhelming physical want, which must be satisfied on pain of death: the need to breathe. On the other hand, we are all placed in an environment that provides for this want, generally speaking, without requiring any effort from us. Air, then, has utility, but no value. It has no value, because, since it occasions no effort, it calls for no service. Rendering a service implies sparing someone pains; and when no pains are required to achieve a satisfaction, there are none to be spared.
But if a man goes down to the bottom of a river in a diving bell, a foreign body is introduced between the air and his lungs; to re-establish connections, the pump must be set in motion; then there is effort to be exerted, pains to be taken; and certainly the man will be ready to co-operate, for his life is at stake, and no service to him could be greater.
Instead of making this effort himself, he requests me to make it; and, in order to induce me to do so, he promises in his turn to take pains that will procure me satisfaction. We discuss the matter, and we come to an agreement. What do we have here? Two wants, two satisfactions, that are not mutually exclusive; two efforts that are the subject of a voluntary transaction; two services that are exchanged—and value makes its appearance.
Now, it is said that utility is the basis of value; and as utility is inherent in air, we are to assume that this is likewise true of value. There is obvious confusion here. Air, by its composition, has physical properties that are adapted to one of our bodily organs, the lungs. What I take out of the atmosphere to fill the diving bell is not changed in any way; it is still oxygen and nitrogen. There is no combining to form a new physical quality; no reagent brings forth a new element called value. The fact is that value comes only from the service that has been rendered.
When someone states the axiom that utility is the basis of value, I have no quarrel with him if he means that service has value because it is useful to the one who receives it and pays for it. This is a truism that adds nothing new to the idea of the word "service."
But we must not confuse utility of the type provided by the air with the utility of a service. These two are distinct, of different orders and natures, and do not necessarily have any common denominator or relationship. Under certain conditions, I can do someone a service that is trifling, as far as the effort it costs me or saves him is concerned, and yet, by so doing, I can place at his disposal something of very great intrinsic utility.
Let us see how the two contracting parties would go about evaluating the service that the one renders the other in sending air down to him. There must be a common ground for comparison, and it can only be in the service that the diver has promised to give in return. What they demand will depend on their respective situations, the urgency of their wants, the relative ease with which one can get along without the other, and many other circumstances that demonstrate that value is in the service, since both increase in the same ratio.
If the reader so desires, he can easily think up for himself other examples of this kind that will convince him that value is not necessarily commensurate with the amount of effort expended. This is a remark that I throw out here in anticipation of later discussion, for I expect to prove that value no more resides in labor than it does in utility.
Nature has seen fit to make me in such a way that I should die if I did not quench my thirst from time to time; and the spring to which I must go for water is two miles from my village. Therefore, every morning I must take the trouble of going after my little supply of water, for I find in water those useful qualities that have the power to assuage that type of suffering known as thirst. Want, effort, satisfaction—they are all there. I am familiar with the utility I derive from this act; I do not yet know its value.
However, suppose my neighbor also goes to the spring, and I say to him, "Spare me the trouble of making this trip; do me the service of bringing me some water. While you are so engaged, I will do something for you; I will teach your child to spell." It happens that this suits both of us. This is the exchange of two services, and we can say that the one is equal to the other. Note that what is compared here are the two efforts, not the two wants or the two satisfactions; for on what basis can we compare the relative merits of having a drink of water and learning how to spell?
Soon I say to my neighbor, "Teaching your child is becoming a bore; I prefer to do something else for you. You will continue to bring me water, and I will give you five sous." If the offer is accepted, the economist may say without fear of error: The service is worth five sous.
After a while my neighbor no longer waits for me to ask him. He knows, by experience, that I need to drink every day. He anticipates my want. And while he is at it, he provides water for other villagers. In a word, he becomes a water-seller. Then we begin to put it this way: Water is worth five sous.
But has the water really changed? Has the value, which so recently was in the service, now become a material thing, a new chemical element added to the water? Has a slight change that my neighbor and I made in our arrangements been powerful enough to upset the principle of value and alter its nature? I am not so pedantic as to object to saying that water is worth five sous, any more than to saying that the sun sets. But we must realize that both are examples of metonymy; that metaphors do not alter facts; that scientifically, since, after all, we are dealing with a science, it is no more true that value is contained in water than that the sun sets in the sea.
Let us therefore assign to things the qualities that are proper to them: to water, to air, utility; to services, value. Let us say: Water has utility because it has the property of quenching thirst; the service is the thing that has value, because it is the subject of the agreement. This truth is apparent when we reflect that whatever may be our distance from the spring, the utility of the water remains constant, but its value varies. Why? Because the service becomes greater or smaller. Value, then, is in the service, since value changes as the service does and in the same degree.
The diamond plays an important role in the books written by economists. They use it to elucidate the laws of value or to indicate the so-called disturbances of these laws. It is a shining weapon that all schools use in their combat. The English school says: "Value consists in labor." The French school produces a diamond and says: "Here is a product that requires no labor and is yet of immense value." Then, if the French school affirms that value resides in utility, the English school cites the diamond, along with air, light, and water, as proof to the contrary. "Air is very useful and has no value; the diamond's utility is highly questionable, and yet it is worth more than the whole atmosphere." And the reader can only say with Henry IV, "On my word, they're both right."*53 Eventually they reach common agreement in the following error, which is worse than the other two: We must admit that the handiwork of God has value, and that value, then, is material.
These anomalies disappear, it seems to me, on the basis of my definition, which is corroborated rather than invalidated by the example in question.
I take a stroll along the seashore. A stroke of good luck puts a superb diamond into my hand. I have come into possession of a considerable amount of value. Why? Am I going to contribute something great to humanity? Have I toiled long and arduously? Neither the one nor the other. Why, then, does the diamond have such value? Because the person to whom I give it believes that I am rendering him a great service, all the greater because many rich people would like to have it, and I alone can render it. Their judgment is open to question, granted. It is based on vanity and love of display, granted again. But the judgment exists in the mind of a man ready to act in accordance with it, and that is enough.
We could say that this judgment is far from being based on a reasonable evaluation of the diamond's utility; indeed, it is quite the contrary. But making great sacrifices for the useless is the very nature and purpose of ostentation.
Value, far from having any necessary relation to the labor performed by the person rendering the service, is more likely to be proportionate, we may say, to the amount of labor spared the person receiving the service; and this is the law of values. It is a general law and universally accepted in practice, although, as far as I know, not taken into account by the theorists. We shall describe later the admirable mechanism that tends to keep value and labor in balance when the latter is free; but it is nonetheless true that value is determined less by the effort expended by the person serving than by the effort spared the person served.
The transaction relating to the diamond may be supposed to give rise to a dialogue of this nature:
"Let me have your diamond, please."
"I am quite willing; give me your whole year's labor in exchange."
"But, my dear sir, getting it didn't cost you a minute's time."
"Well, then, the way is open to you to find that kind of minute."
"But, in all justice, we ought to exchange on terms of equal labor."
"No, in all justice, you set a price on your services, and I set one on mine. I am not forcing you; why should you force me? Give me a whole year's labor, or go find your own diamond."
"But that would entail ten years of painful search, and probable disappointment at the end. I find it wiser and more profitable to spend ten years in some other way."
"And that is just why I feel that I am still doing you a service when I ask only for one year. I am saving you nine years, and for that reason I consider this service of great value. If I appear demanding to you, it is because you consider only the labor I have performed; but consider also the labor that I save you, and you will find that I am almost too easy."
"Nevertheless, you are making a profit from what is a work of Nature."
"And if I let you have my lucky find for nothing or next to nothing, you would be the one to make the profit. Besides, if this diamond has great value, it is not because Nature has been toiling away on it since the beginning of time; Nature does as much for a dewdrop."
"Yes, but if diamonds were as plentiful as dewdrops, you would not be laying down the law to me."
"Certainly, because in that case you would not be appealing to me, or you would not be disposed to pay me a high price for a service that you could easily perform for yourself."
We see from this dialogue that value resides no more in the diamond than it does in water or in air; it resides entirely in the services performed and received in connection with these things and is determined after free discussion by the contracting parties.
Go through what the economists have to say; read, compare their definitions. If any one of them can account for air and the diamond, two cases apparently so opposite, then throw this book of mine into the fire. But if my definition, simple as it is, resolves the difficulty, or rather, eliminates it, then, reader, in all good conscience, you are bound to read me through to the end; for so good an introduction to the science we are studying cannot fail to hold promise for the rest.
I ask indulgence to cite other examples, in order both to clarify my thought and to familiarize the reader with a new definition. Besides, this attention to the principle of value, showing it in all its aspects, will pave the way for my conclusions, which will prove to be, I venture to predict, no less important than unexpected.
Among the wants to which we are subject because of our physical nature is the need for food; and one of the best commodities for satisfying it is bread.
Naturally, since it is I who experience the need to eat, it is I who should perform all the operations that will produce the amount of bread I require. I cannot ask my fellow men to perform this service for me gratis, since they too are subject to the same want and are obliged to make the same effort.
If I were to make my own bread, I should have to perform a series of tasks much like those involved in getting water from the well, but much more complicated. The elements of which bread is composed exist, of course, everywhere in Nature. As Jean-Baptiste Say so wisely observed, man has neither the need nor the ability to create anything. Gases, minerals, electricity, plant life all exist about me; I need only bring them together, help them along, combine and transport them, with the aid of that great laboratory which we call the earth, so full of mysterious things that science has barely begun to discover. Even though the sum total of all the operations I must go through in pursuit of my objective is quite complicated, each individual operation is as simple as drawing water from the spring where Nature has placed it. Each one of my efforts, therefore, is merely a service that I perform for myself; and if, through an agreement freely arrived at, other persons spare me some or all of these efforts, I have received that amount of services. The sum of these services, in comparison with those that I perform in return, constitutes and determines the value of my bread.
A convenient intermediate agent is introduced to facilitate this exchange of services and to measure their relative importance, viz., money. But the fundamental nature of things remains the same, even as in mechanics power is transmitted in accordance with the same laws, whether it be passed through one or several sets of gears.
We can see the truth of all this in the following illustration. If a good accountant were to analyze the elements entering into the value of my loaf of bread costing, say, four sous, he would eventually identify, in the course of searching through many complicated transactions, all the individuals whose services had contributed to determining this value, all who had saved trouble for the person who, in the last analysis, pays for the bread because he is the consumer. First, there would be the baker, who keeps a twentieth part, and out of his twentieth pays the mason who built his oven, the woodcutter who prepared his firewood, etc.; then, there would be the miller, who would receive not only enough to pay for his own labor but also something for the quarryman who made his millstone, the workman who built the banks for his millrace, etc. Other parts of the total value would go to the thresher, the harvester, the cultivator, the planter, until the account was complete to the last centime. But no part of it, none whatsoever, would go to pay God or Nature. Such an assumption is absurd, on the face of it, and yet logically it is implicit in the theories of those economists who attribute to matter or the forces of Nature any part of the value of a product. No, once again, what has value here is not the loaf of bread, but the series of services that made the bread available to me.
It is quite true that, among the constituent parts of the loaf's value, our bookkeeper will find one part that he will have trouble itemizing as a service, at least as a service requiring effort. He will find that out of his twenty centimes, which make up his total of four sous, one or two go to the owner of the land, to the possessor of the field of operations. This small part of the bread's value constitutes what is called the land rent; and, confused by the expression, by the metonymy that we again encounter here, our accountant will perhaps be tempted to list this as the share due the forces of Nature, due, that is, to the land itself.
I maintain, however, that if he is a good accountant, he will realize that even this item is actually the cost of true services like all the others. This fact will be conclusively demonstrated when we study real property. For the moment, I shall simply remind the reader that here I am dealing, not with property, but with value. I am not inquiring whether all services are valid and legitimate, or whether some men have succeeded in receiving payment for services they did not render. After all, the world is full of injustices of this sort, but rent should not be included among them.
All that I am seeking to demonstrate here is that the so-called value of things is, in fact, only the value of the services, real or fancied, that are transmitted through the medium of things; that value does not reside in the things themselves, and is no more to be found in bread than in diamonds, in water, or in air; that Nature receives no payment for value; that the entire amount, paid by the ultimate consumer, is distributed among men; and that the consumer is willing to make them this payment only because they have rendered him services, cases of fraud and violence excepted.
Two men think that ice is a good thing in summer, and that coal is a better thing in winter. The one cools us, and the other warms us, both thus answering to two of our wants. I cannot insist too much that the utility of these objects consists in certain physical properties that are adapted to our physical organs. Let us note that neither value nor anything like it is included among these properties, which physics or chemistry could isolate. How, then, could anyone have reached the conclusion that value resides in matter and is itself material?
If these two men wish to satisfy their wants independently, each one will have to labor at storing up his own supply of both ice and coal. If they come to an understanding, one will go to the mines to get enough coal for both of them, the other to the mountains for enough ice for both. But in that case an agreement has to be reached. The two services exchanged must be carefully evaluated and compared. All the circumstances must be taken into account: the difficulties to be overcome, the dangers to be faced, the time to be lost, the pains to be taken, the skill required, the risks to be run, the possibility of satisfying the want in some other way, etc., etc. When the two men reach agreement, the economist will say that the two services that are exchanged are equivalent; but the common way of putting it, by metonymy, will be: So much coal is worth so much ice, as though value has passed physically into these objects. Though it is easy to realize that the common expression indicates the result well enough, only the scientific statement gives a true idea of the cause.
Instead of two services and two persons, the agreement may include a great number of services and persons, substituting indirect or roundabout exchange for direct barter. In that case money will be introduced to facilitate the act of exchange. Need I say that the principle of value will not be displaced or altered in the process?
But I do need to add a comment about the coal. It might well be that there is only one mine in the region, and that one man has got possession of it. In that case, this man will make his own terms, that is to say, he will set a high price on his services or his so-called services.
We have not yet come to the question of law and justice, of distinguishing between real services and fraudulent services. For the moment, what concerns us is to elucidate the true theory of value and rid it of the error from which the science of economics has suffered. When we say, "What Nature has done, or given, it has done, or given, gratis; consequently these things have no value," people answer by giving us a cost analysis of coal or any other natural product. They admit readily enough that the price, in most cases, includes human services. One man has dug the earth; another has drained off the water; this man has brought the coal up from the mine; another one has delivered it; and the sum total of all these actions constitutes, they say, almost all the value of the coal. Yet there still remains a part of the value that does not correspond to any labor, to any service. That is the price of the coal lying underground, still untouched, as they say, by human labor. This is the owner's share; and since this part of the value is not created by man, it must indeed be created by Nature.
I reject this conclusion, and I warn the reader that if he accepts it in any guise whatsoever, he will make no further progress in the science of political economy. No, value is no more created by an act of Nature than matter is created by the action of man. One of two things must be true: either the owner has contributed to the final result and has performed real services, in which case the part of the value that he has set on the coal falls rightly within my definition; or else he has entered the transaction as a parasite and, in that case, has been sharp enough to receive payment for services that he did not perform; the price of the coal is improperly raised. This situation proves that injustice has crept in; but it cannot upset the theory to the point of warranting the assertion that that portion of value is material, that it has combined, like a physical element, with the gratuitous gifts of Providence. And here is the proof: Put an end to the injustice, if there is injustice, and the corresponding amount of value will disappear. Such would not be the case, certainly, if value were inherent in matter and created by Nature.
Let us now pass to the second of our most elemental wants: security.
A certain number of men land on an inhospitable shore. They set to work. But not one of them ever knows at what moment he will have to stop his work to defend himself against savage beasts or men more savage still. Beyond the time and effort spent directly in defending themselves, more is required to provide arms and munitions. They finally realize that the total loss in effort would be infinitely less if some of them gave up their other work and devoted themselves entirely to this service. They would assign to it those with the most skill, courage, and strength. These latter would perfect themselves in an art that would be their constant occupation; and while they watched over the safety of the community, the others would bring in from their labors more satisfactions for everybody than would have been possible if ten of their number had not been removed from the general working force. Consequently, the arrangement is carried out. What can we see in this except more progress in the direction of the division of labor, introducing and requiring an exchange of services?
Are the services of these troops, soldiers, militiamen, guards—call them what you will—productive? Undoubtedly, since the arrangement is made solely in order to increase the ratio of total satisfactions to the general effort.
Do these services have value? They do indeed, since they are appraised, assigned a price, evaluated, and, after all, paid for by other services against which they are compared.
The form under which the remuneration is stipulated, the manner of assessment, the procedure whereby the terms of the arrangement are discussed and agreed upon, all this in no wise alters the principle. Do some save the others effort? Do some procure satisfactions for the others? If so, then there is exchange, comparison, evaluation of services, and there is value.
Services of this type, in a complex society, often lead to terrible consequences. Since the very nature of the services demanded from this class of workers requires that force be placed in their hands, and enough force to overcome all resistance, those to whom it has been entrusted may abuse it and turn it against the community itself. It can also happen, since they receive from the community services that are proportionate to the community's need for security, that they foment a sense of insecurity and, through overcunning diplomacy, involve their fellow citizens in continual warfare.
All this has been known to happen and still happens. It results, I admit, in upsetting frightfully the just balance of reciprocal services. But it does not result in altering in any way the fundamental principle or the scientific theory of value.
One or two more examples. I beg the reader to believe that I am just as aware as he is of the wearisomeness and dullness of this series of hypothetical cases, all presenting the same proofs, all reaching the same conclusions, all couched in the same terms. I am sure that it will be realized that this procedure, if not the most entertaining in the world, is the surest way to establish the true theory of value and thus open the road that we must travel.
We are in Paris. This vast metropolis seethes with countless desires; it also abounds with the means of satisfying them. A host of men, wealthy or well-off, turn their energies to industry, the arts, politics; and, when evening comes, they are eager for an hour's diversion and relaxation. First among the pleasures so avidly sought after is that of hearing Mme. Malibran*54 sing Rossini's beautiful music or Rachel interpret Racine's admirable poetry.*55 Only two women in all the world can provide such noble and exquisite pleasure; and, unless recourse could be had to violence or torture, which probably would not succeed, they will perform only on their own terms. Thus, the services requested from Malibran and Rachel will have great value. This explanation is prosaic enough, but nonetheless true.
Let a wealthy banker decide that, to gratify his vanity, he will have one of these great artists appear at his home, and he will discover, through personal experience, that my theory is correct in all respects. He seeks a great satisfaction; he desires it keenly; a single person in the world can provide it. The only means of inducing the person to accept is by offering a very considerable remuneration.
What are the extreme limits within which the transaction will be conducted? The banker will go to the point of preferring to do without the satisfaction rather than pay the price demanded for it; the diva, to the point of preferring the price offered to not being paid at all. The point of balance between these two extremes will determine the value of this special service, as it does all others. In many cases it happens that usage may have fixed this delicate point. People in high society have too much good taste to haggle over certain services. It may even happen that the remuneration will be gallantly disguised to mitigate the crassness of economic law. Yet economic law presides over this transaction just as surely as it does over the most commonplace transactions, and the nature of value is not changed because the experience or urbanity of the contracting parties enables them to dispense with certain details of the bargaining.
Thus are explained the vast fortunes earned by great artists of exceptional talent. Another circumstance favors them. The nature of their services is such that they can be rendered, for the same effort, before a great multitude of persons. However large may be the auditorium, provided Rachel's voice can fill it, every spectator there receives the full impact of her inimitable rendition. This, we can see, forms the basis of a new arrangement. Three or four thousand persons sharing the same desire can settle upon a certain amount to be contributed by each one; and the sum total of their combined services represented by this contribution, which is offered as a tribute to the great tragic actress, exactly balances the unique services that she renders simultaneously to all her listeners. This is value.
Just as a great number of auditors may reach an agreement to listen, so a group of actors may reach an agreement to sing in an opera or present a play. Agents may be called in to spare the contracting parties countless petty details of production. Value is multiplied, is made more complex, is ramified, is distributed more widely; but its nature does not change.
Let us end with what are called exceptional cases. They are the acid test of good theories. When a rule is correct, the exception does not weaken it, but confirms it.
Here is an old priest walking along, pensive, a staff in his hand, a breviary under his arm. How serene his features! How expressive his countenance! How rapt his look! Where is he going? Do you not see the church spire on the horizon? The young village vicar does not yet trust his own prowess; he has called the old missionary to his aid. But, before he could do so, a number of arrangements had to be made. The elderly preacher will indeed find bread and board at the rectory. But between one Lent and another, one has to live; it is the common law. Therefore the young vicar has taken up a collection, modest, but sufficient, from the rich of the village; for the old pastor was not demanding, and in response to the letter he had been written he replied: "My daily bread, that is my necessary expense; a sou to give as alms to the poor, that is my luxury."
Thus, the economic prerequisites are duly satisfied; for political economy insists on slipping in everywhere and is involved in everything, and I really believe that to it should be attributed the quotation: Nil humani a me alienum puto.*56
Let us pursue this illustration a little further, from the economic point of view, naturally.
This is a true exchange of services. On the one hand, an old man agrees to devote his time, his energies, his talents, his health, to bring some degree of enlightenment to the minds of a small number of villagers, to raise their moral level. On the other hand, bread for a few days, a superb bombazine cassock, and a new broad-brimmed hat are guaranteed the man who preaches the word of God.
But there is something else here. There is a veritable bombardment of sacrifices. The old priest refuses everything that is not absolutely indispensable to him. Of this poor pittance half is taken care of by the vicar; and the other half is raised by the Croesuses of the village, relieving the other villagers of the cost of providing their share, who nevertheless will be edified by the sermons.
Do these sacrifices invalidate our definition of value? Not in the least. Every man is free to render his services on his own terms. If the terms are extremely easy, or indeed gratis, what is the result? The service retains its utility, but loses its value. The old priest is convinced that his efforts will receive their reward in another world. He does not expect it here below. He knows, doubtless, that he renders his auditors a service by speaking to them; but he also thinks that they render him a service by listening to him. It follows that the transaction is made on a basis advantageous to one of the contracting parties, and with the consent of the other. That is all. In general, exchanges of services are motivated and evaluated by considerations of self-interest, but sometimes, thank Heaven, by the promptings of altruism. In such cases either we surrender to others satisfactions that we had the right to keep for ourselves, or we exert for them efforts that we could have devoted to ourselves. Generosity, loyalty, self-sacrifice are impulses of our nature that, like many other factors, influence the current value of a service contracted for, but do not change the general law of value.
In contrast to this reassuring example, I could introduce another of a quite different character. For a service to have value in the economic sense of the word, that is, actual value, it is not obligatory that the service be real, conscientiously rendered, or useful; all that is necessary is that it be accepted and paid for by a service in return. The world is full of people who foist upon the public and receive from it payment for services of highly questionable worth. Everything depends on the judgment passed on the services, and for that reason morality will always be the best auxiliary of political economy.
Some rogues succeed in spreading a false belief. They are, they say, the special emissaries of Heaven. They can open as they choose the gates of Paradise or of Hell. When this belief has taken root, they say, "Here are some little images to which we have given such power that they can make those who wear them happy through all eternity. Giving you one of these images is rendering you an immense service; give us, therefore, services in return."
This is a created value. It is based on an erroneous appraisal, you will say; that is true. The same can be said of many material things whose value is indisputable, for they would find purchasers if they were put up for auction. The science of economics would be impossible if it recognized as values only those values that are judiciously appraised. At every step it would be necessary to repeat a course in physics or the moral sciences. In the state of isolation, a man may, by reason of depraved desires or poor judgment, pursue with great effort an unreal satisfaction, a delusion. Similarly, in society, it happens, as a philosopher said, that sometimes we purchase our regrets at a very high price. If it is in the nature of human intelligence to be more disposed to truth than to error, all these frauds are destined to disappear, these false services to be refused, to lose their value. Civilization in the long run will put all things and all men in their proper place.
I must, however, terminate this overlengthy analysis. The wants of breathing, drinking, eating; the wants of vanity, of the mind, of the heart, of public opinion, of well-founded or groundless hopes—we have sought value in all of them, and we have discovered it wherever services are exchanged. We have found it to be everywhere of identical nature, based on a clear, simple, absolute principle, although affected by a multitude of varying circumstances. If we had passed all our other wants in review—if we had summoned the cabinetmaker, the mason, the manufacturer, the tailor, the doctor, the doorman, the lawyer, the businessman, the painter, the judge, the President of the Republic—we should have discovered nothing more: sometimes material things, sometimes forces furnished gratis by Nature, but always human services exchanged for other human services, being measured, estimated, appraised, evaluated by comparison with one another, and alone evidencing the result of this evaluation, that is, value.
There is, nevertheless, one of our wants of a very special nature, which binds our society together, which is both the cause and the effect of all our transactions and the perennial problem of political economy. I wish to say a few words about it. I mean the want of exchanging.
In the preceding chapter we described the marvelous effects of exchange. They are such that men are naturally disposed to facilitate exchange even at the price of great sacrifice. For that reason there are highways, canals, railroads, wagons, ships, businessmen, merchants, bankers; and it is impossible to believe that humanity, in order to facilitate exchange, would have subjected itself to such a tremendous levy on its energies if it had not found a large measure of compensation in the act of exchange.
We have also seen that simple barter could make possible nothing more than very inconvenient and limited transactions.
For this reason men thought of the idea of breaking up barter into two factors, buying and selling, through the medium of an intermediate commodity, easily divisible and, above all, possessing value, so that it would in its own right commend itself to the public's confidence. This commodity is money.
What I wish to note here is that what we call, by ellipsis or metonymy, the value of gold and silver, rests on the same principle as the value of air, water, the diamond, the sermons of our old missionary, or the trills of Mme. Malibran; that is, on services rendered or received.
Gold, which is widely distributed along the favored banks of the Sacramento, does indeed derive from Nature many of its desirable qualities: malleability, weight, beauty, brilliance, even utility, if you wish. But one thing Nature did not give gold, because Nature is not concerned with it, and that is value. A man knows that gold corresponds to a much felt want, that it is greatly desired. He goes to California to look for gold, just as my neighbor a little while ago went to the well to get water. He exerts strenuous efforts, he digs, he shovels, he washes away gravel, he melts the ore, and then comes to me and says, "I will do you the service of turning this gold over to you; what service will you render me in return?"
We discuss the matter; each one ponders over the factors that enter into the decision; at last we come to an agreement; and there we have value made manifest and definite. Deceived by the abbreviated expression, "Gold has value," we might well believe that gold contains value just as it does weight or malleability, and that Nature took the pains to place it there. I trust that the reader is now convinced that this is a misapprehension. He will become convinced later that it is a deplorable misapprehension.
There is also another error involving gold, or rather money. Since it is customarily the intermediate agent in all transactions, the mean term between the two extremes in roundabout or indirect barter, since its value is always the standard of comparison when two services are to be exchanged, it has become the measure of value. Practically, it cannot be otherwise. But our science should never lose sight of the fact that money, as far as value is concerned, is subject to the same fluctuations as any other product or service. Science does lose sight of this fact frequently, and it is not surprising. Everything seems to conspire to cause money to be considered the measure of value in the same sense that the litre is a measure of capacity. It plays an analogous role in transactions. We are not conscious of its fluctuations because the franc, along with its larger and smaller components, always retains the same denomination. And even arithmetical tables conspire to encourage the confusion by listing the franc, like a measure, alongside the metre, the litre, the are, the stere, the gramme, etc.
I have defined value, at least as I conceive it. I have subjected my definition to the test of various and sundry cases; no one of them, it seems to me, has disproved it. Finally, the scientific sense that I have given the word is in accord with common usage, a fact that constitutes no negligible advantage or trifling guarantee; for what is science except experience viewed in the light of reason? What is theory except the methodical presentation of universal practice?
The reader must permit me now to glance rapidly at the systems that have been accepted up to the present time. It is not in a spirit of controversy, and even less of criticism, that I undertake this survey, and I should gladly abandon it if I were not convinced that it can cast new light on the central thought of this book.
We have seen that writers on the subject have sought to locate the principle of value in one or more of the accidental phenomena that influence it greatly—physical composition (materiality), durability, utility, scarcity, labor, etc.—as a physiologist might seek to locate the principle of life in one or more of the external phenomena that encourage its development: air, water, sunlight, electricity, etc.
Physical Composition (Materiality) of Value
"Man," says M. de Bonald, "is an intellect served by bodily organs." If the economists of the materialistic school had merely tried to say that men can render one another services only through a physical medium, in order to conclude that there is always a material element in these services, and consequently in value, I should carry the matter no further, since I have always had a horror of those quibblings and subtleties in which our minds are only too prone to delight.
But this is not what they meant. They believed that value was communicated to matter, either by men's labor or by the action of Nature. In a word, deceived by the elliptical expressions, "Gold is worth so much," "wheat is worth so much," etc., they were led to see in matter a quality called value, as the physicist finds in it density and weight—and even these attributes have been questioned.
However that may be, I most positively question the attribution of value to it.
At the outset we must admit that matter and value are rarely separated. When we say to a man, "Deliver this letter," "Fetch me some water," "Teach me this science or that technique," "Give me advice on my illness or my lawsuit," "Guard my safety while I work or sleep," what we ask for is a service, and in this service we recognize, before the whole world, that there is value, since we willingly pay for it with an equivalent service. It would be strange if we should refuse to admit in theory what universal assent admits in practice.
It is true that our transactions often involve material objects; but what does this prove? It proves that men, by exercising foresight, often get ready to render services that they know will be asked of them. Whether I buy a suit ready-made or bring in a tailor to work at my house by the day, in what respect does this change the principle of value, particularly to the extent of making it reside at one time in the suit and at another time in the service?
Here we could ask a subtle question: Must we see the principle of value in the material object, and therefore, by analogy, attribute it to the service? I maintain that it is just the contrary; we must recognize that it is in the services, and then attribute it, if you will, by metonymy, to the material object.
Besides, the numerous examples that I have presented to the reader relieve me of the necessity of carrying this discussion further. But I cannot refrain from trying to justify myself for having brought it up, by showing to what dangerous conclusions we can be led by an error, or, if you prefer, by a half-truth, that we encounter at the beginning of our scientific study.
The least of the drawbacks to the definition that I am assailing is that it has mutilated and stunted political economy. If value is attributed to matter, then, where there is no matter there is no value. Thus, the physiocrats used the term "sterile" classes to designate three-fourths of the population, while Adam Smith softened it to "unproductive" classes.
And yet, since in the last analysis facts are stronger than definitions, these classes simply had to be brought back, by some route or other, into the orbit of economic study. The materialists did it by way of analogy; but their scientific language, created for other data, was already so materialistic in tone that the analogies they used resulted in a shocking extension of the meaning of their terms. What do such phrases as these mean: To consume an immaterial product? Man is accumulated capital? Security is a commodity?
They not only made their language a materialistic jargon, but they were also reduced to overloading it with subtle distinctions in their attempt to reconcile ideas that they had erroneously separated. They invented value in use in contrast to value in exchange.
Finally, and this is a serious error indeed, the concepts of the two great social phenomena, private property and the communal domain, were so confused that the former could not be justified, and the latter could not be discerned.
In point of fact, if value resides in matter, then it is mixed with those other physical qualities of an object that constitute its usefulness to man. Now, these qualities are often placed in the object by Nature. Therefore, Nature helps to create value, and hence we must attribute value to those things that in essence are free of charge and common to all. Where, then, is the basis of property to be found? When the payment that I make to acquire a material product, wheat, for example, is distributed to all the workers who, in its production, have rendered me services, who should receive the share corresponding to the amount of value that is due to Nature and that man had nothing to do with? Should it be paid to God? Nobody supports this idea, and God has never been known to claim His wages. Should it be paid to a man? On what grounds, since, according to the hypothesis that value resides in matter, he has done nothing to earn it?
Let no one think that I am exaggerating, that in the interest of my own definition I am trying to force the economists' definition to its rigorously logical conclusions. On the contrary: they themselves very explicitly have drawn these conclusions under the pressure of logic.
Thus, Senior has gone so far as to say: "Those who have appropriated the resources of Nature receive compensation in the form of rent without having made any sacrifices. Their role consists merely of holding out their hands for contributions from the rest of the community." Scrope asserts:*57 "Ownership of land is an artificial restriction placed on the enjoyment of the gifts that God had intended to be used for the satisfaction of the wants of all men." Say affirms: "It would seem that arable land should be counted as natural wealth, since it is not of human creation but is given gratis to man by Nature. But as this wealth is not fugitive like air or water, since a field is a fixed and circumscribed area that certain men have managed to appropriate to themselves, excluding all other men who have given assent to the appropriation, land, which was a gratuitous asset of Nature, has become social wealth, which must be paid for if used."
Certainly, if this is true, Proudhon*58 was right in asking this terrible question, to which he gives an answer more terrible yet:
"To whom should the rent of the land be paid? To the one who produced the land, of course. Who made the land? God. In that case, landowner, withdraw."
Yes, through a faulty definition, political economy has put logic on the side of the socialists. It is a terrible weapon, but I shall break it in their hands, or rather, they shall gladly surrender it to me. Nothing will remain of their conclusions after I have destroyed their original principle. And I propose to prove that, while Nature combines with man's acts to produce wealth, yet what Nature does remains free of charge and common to all by its very essence, and only what man does represents services, value; it alone requires payment; it alone is the foundation, the explanation, and the justification of private property. In a word, I maintain that, in their relation to one another, men are owners only of the value of things; and that, as they pass products from hand to hand, what they bargain for is only value, that is, reciprocal services, adding as a gratuitous gift, into the bargain, all the qualities, properties, and utilities imparted to these products by Nature.
If political economists, by misunderstanding this fundamental consideration, have weakened the theoretical basis of the defense of the right to private property, representing it as an unnatural institution, necessary, but unjust, they have at the same time neglected and left completely unnoticed another admirable phenomenon, the most moving evidence of God's bountiful Providence toward His creature, man, namely, the phenomenon of the progressive trend toward more and more gratuitous and common utility.
Wealth (taking this word in its generally accepted sense) stems from the combination of two kinds of operations, those of Nature and those of man. The former are free of charge and common to all, by divine gift, and never cease to be so. The latter alone possess value, and consequently they alone can be claimed as private property. But in the course of the development of human intelligence and the progress of civilization, the action of Nature plays a larger and larger role in the creation of any given utility, and the action of man, a proportionately smaller one. Hence, it follows that the area of gratuitous and common utility constantly increases among men at the expense of the area of value and private property—a fruitful and reassuring observation that is entirely lost sight of as long as political economists attribute any value to the action of Nature.
In all religions God is thanked for His bounty. The father blesses the bread that he breaks and gives to his children—a moving tradition that would not be justified if the blessings of Providence were not given gratis.
Durability of Value
Durability, that so-called sine qua non of value, is connected with what I have just discussed. For value to exist, Adam Smith believed, it must be fixed in some object that can be exchanged, accumulated, preserved—consequently in something material.
"There is one kind of labor," he says, "that increases**12 the value of the object on which it is expended. There is another kind that does not have this effect."
"The labor that goes into manufactured goods," Smith adds, "is fixed and takes concrete form in some salable article of merchandise, which lasts at least for some time after the work is completed. The work of servants, on the contrary [and the author lists soldiers, magistrates, musicians, teachers, etc., under this heading] is not fixed in any salable merchandise. The services disappear as rapidly as they are performed and leave no trace of value behind them."
We see that it is implied here that value refers to the modification of things rather than to men's satisfactions. This is a colossal error; for if it is good that the form of things be modified, it is solely in order to attain the satisfaction that is the goal, the end, the consummation of all effort. If, then, we achieve the satisfaction by immediate and direct effort, the result is the same; if, moreover, the effort can be transferred, exchanged, evaluated, it contains the principle of value.
As for the time interval between the effort and the satisfaction, Smith gives it too much importance when he says that the existence or nonexistence of value depends on it. "The value of an article of salable merchandise," he says, "lasts at least for some time."
Yes, indubitably, it lasts until the article has fulfilled its function, i.e., to satisfy a want, which is exactly the case with a service. As long as this dish of strawberries stays on the side table, it will retain its value. But why? Because it is the result of a service I decided to render myself or that others rendered me in consideration of payment, and a service of which I have not yet availed myself. As soon as I avail myself of it, by eating the strawberries, the value will disappear. The service will have vanished, leaving no trace of value behind it. Exactly the same thing holds true of a personal service. The consumer causes the value to vanish, because it was created for this end. It makes little difference to the notion of value whether the pains taken today satisfy a want immediately or tomorrow or next year.
Suppose I am afflicted with a cataract. I call an oculist. The instrument he uses has value, because it is durable, but not the operation, although I pay for it, argue about the fee, and even compare it with the fees of other oculists! But such an assumption is contrary to the most ordinary facts, the most widely accepted notions; and what kind of theory is it that, when it cannot explain universal practice, dismisses it as of no account?
I beg the reader to believe that I am not allowing myself to be carried away by undue love of controversy. If I dwell on certain elementary ideas, I do so in order to prepare the way for most important conclusions that will be evident later. I do not know whether or not I am violating the laws of method by anticipating these conclusions, but in any case I permit myself this minor infraction for fear of trying the reader's patience. For this reason at an earlier point in my book I referred in an anticipatory way to private property and common utility. For the same reason I shall now say a word about capital.
Adam Smith, who made wealth an attribute of matter, could conceive of capital only as an accumulation of material objects. How, then, can value be assigned to services that cannot be accumulated or turned into capital?
Among those things called capital goods we place tools, machines, industrial equipment, at the head of the list. They serve to apply the forces of Nature to the work of production, and since the power of creating value was attributed to these forces, economists were led to believe that these tools of production, in themselves, possessed the same faculty, independently of any human service. Thus, the spade, the plow, the steam engine, were supposed to work together simultaneously with natural resources and human forces in creating not only utility, but value as well. But all value is paid for in exchange. Who, then, was to be paid for that part of value which is independent of human service?
It is for this reason that Proudhon's school, after questioning the legitimacy of land rent, is led to question interest on capital as well—a broader concept, since it embraces the first. I maintain that the Proudhon fallacy, from the scientific point of view, has its origins in Smith's. I shall show that capital, like natural resources, taken by itself and in reference to its own action, creates utility, but never value. Value, in its essence, is the product of a legitimate service. I shall show also that, in the social order, capital is not an accumulation of material objects, dependent on the durability of matter, but an accumulation of values, that is, of services. Hence, this recent attack on the idea of the productivity of capital will be repulsed—virtually at least, by destroying its foundation—and, moreover, in a way that should fully satisfy the very people who instigated it; for if I prove that the phenomenon of exchange is nothing but a system of mutual services, M. Proudhon must own himself beaten by the very triumph of his own principle.
Adam Smith and his disciples have ascribed value to labor under the condition of materiality. This is contradictory to their other theory that the forces of Nature have some share in the production of value. I have no need here to refute the contradictions that are evident in all their unfortunate conclusions when these authors speak of land rent or of interest on capital.
However this may be, in finding the principle of value in labor, they would be coming quite close to the truth if they did not make reference to manual labor. I said, in fact, at the beginning of this chapter that value must be related to effort, an expression that I preferred to "labor," since it is more general and includes the whole area of human activity. But I hastened to add that it could have its source only in efforts that were exchanged, or reciprocal services, because it is not something existing by itself, but solely as an expression of a relationship.
There are, then, strictly speaking, two flaws in Smith's definition. The first is that it does not take exchange into account, without which value can neither be created nor conceived of; the second, that it uses a word, "labor," which is too narrow in its meaning, unless that meaning is extended beyond its normal limits to include not only the degree of intensity and the length of time expended, but also the skill and sagacity of the worker, and even the good or bad fortune he happens to encounter.
Note that the word "service," which I substitute in the definition, eliminates these two flaws. It necessarily implies the idea of transmission, since a service cannot be rendered unless it is received; and it also implies the idea of an effort without assuming a corresponding amount of value.
Here is where the English economists' definition fails most seriously. To say that value resides in labor is to suggest that the two are in a reciprocal relation, that there is a direct proportion between them. In this respect, the definition is contrary to the facts, and a definition contrary to the facts is a faulty one.
Very frequently a piece of work that is considered insignificant in itself is accepted by the world as having tremendous value (examples: the diamond, a prima donna's singing, a few strokes of a banker's pen, a shipper's lucky speculation, the lines of a Raphael's brush, a papal bull of indulgence, the easy duties of a queen of England, etc.); even more frequently a slow, exhausting task ends in disappointment, in a nonvalue. If such is the case, how can we establish a correlation, a fixed ratio, between value and labor?
My definition eliminates the difficulty. It is obvious that there are circumstances under which one may render a great service that does not require great pains; others under which, after taking great pains, one finds that no service has been rendered to anyone, and therefore it is more exact, from this point of view also, to say that value resides in service rather than in labor, since it exists in direct proportion to the former and not to the latter.
I go further. I maintain that value is appraised at least as much in consideration of the labor it can spare the user as of the labor it has cost the producer. I ask the reader to be good enough to recall the dialogue between the two contracting parties in the negotiations over the diamond. It was not prompted by exceptional circumstances, and I venture to say that in substance it is at the heart of all transactions. It must not be forgotten that we are assuming that the two contracting parties have complete freedom to exercise their will and judgment. Each of them is induced to agree to the exchange for various reasons, first among them, certainly, being the difficulty that the recipient of the diamond would experience in obtaining directly the satisfaction that the other offers him. This difficulty is taken into account by both parties, making the one more or less conciliatory and the other more or less exacting. The pains that the one offering the diamond went to also influence the negotiation; it is one of the elements, but not the only one. Therefore, it is not exactly correct to say that value is determined by labor. Value is determined by a great many considerations, all included in the word "service."
It is very true that, under the influence of competition, values tend to be related efforts, or the rewards to the deserts. This is one of the beautiful harmonies of the social order. But, as far as value is concerned, this leveling tendency exerted by competition is entirely extraneous; and sound logic does not permit us to confuse the influence exerted on a phenomenon by an extraneous element with the phenomenon itself.**13
Jean-Baptiste Say, unless I am mistaken, was the first writer to shake off the yoke of the concept of the materiality of value. Very explicitly he made value a moral quality—an expression that perhaps overshoots the mark, for value is neither physical nor moral; it is simply a relationship.
But the great French economist had himself said, "It is not granted to any man to arrive at the outermost limits of knowledge. Scholars climb upon one another's shoulders to explore a horizon that keeps on extending farther and farther." Perhaps Say's glory (as far as the present question is concerned, for in other respects his claims to fame are as numerous as they are imperishable) is to have passed on to his successors a fruitful insight into the subject.
Say's axiom was this: The basis of value is utility.
If it were a question here of utility as related to human services, I should have no argument with him. At the very most I could say that the axiom is so self-evident as to be superfluous. It is quite clear that no one consents to pay for a service unless, rightly or wrongly, he considers it useful. The word service is so completely included in the idea of utility that it is simply the translation, and even the literal carrying over, of the Latin word uti, to serve.
But, unfortunately, this is not the way Say meant it. He found the principle of value not only in human services rendered through the medium of things, but also in the useful qualities that Nature imparts to things. By so doing, he again placed upon his neck the yoke of materiality, and, we must add, he did nothing to tear away the harmful veil that the English economists had thrown over the question of private property.
Before discussing Say's axiom on its own merits, I must indicate what its logical implications are, so as to avoid the reproach that I involved myself and the reader in a tedious dissertation.
There can be no doubt that the utility Say speaks of is the utility that resides in material things. If wheat, wood, coal, cloth have value, it is because these products have qualities that fit them for our use, to satisfy our need to be fed, warmed, clothed.
This being the case, since Nature creates utility, it also creates value—a most harmful confusion of ideas that the enemies of private property have forged into a terrible weapon.
Suppose I buy a product—wheat, for example—at the market for sixteen francs. A large part of the sixteen francs is distributed, through countless ramifications, through an inestimable maze of advances and repayments, among all the men, far and near, who have helped to put the wheat at my disposal. There is something for the man who plowed the field, the man who sowed the seed, who reaped the crop, who threshed the grain, who carted it away, as well as for the smith and the wagoner who made the equipment. Up to this point there is no disagreement, whether one is an economist or a communist.
But I perceive that four of my sixteen francs go to the owner of the land, and I have every right to ask whether this man, like all the others, has rendered me a service assuring him, like all the others, an unquestioned right to compensation.
According to the doctrine that it is the purpose of this book to establish, the answer is categorical. It is a very emphatic yes. Yes, the owner has rendered me a service. What is it? It consists in the fact that he or his ancestor has cleared the land and fenced it off; he has cleared out the weeds and drained off the stagnant water; he has fertilized the vegetable garden; he has built a house, barns, and stables. All this represents long hours of labor that he has performed himself or, what amounts to the same thing, paid others to perform for him. These are certainly services for which, by virtue of the just law of reciprocity, he should be reimbursed. Now, this owner has never been remunerated, at least to the full extent. Nor could he be, since he could not charge the whole amount to the first man who came along and bought a bushel of wheat. What, then, is the arrangement that has been worked out? Truly, the most ingenious, the most legitimate, and the most equitable in the world. It is this: Whoever wishes to buy a sack of wheat will pay not only for the services of the workers we have just enumerated but also for a small part of the services rendered by the owner; in other words, the value of the owner's services will be distributed over all the sacks of wheat that come from this field.
Now, we may ask whether this remuneration, set here at four francs, is too much or too little. I reply: This question does not concern the science of political economy, which notes that the value of the services of the owner of real property is governed by exactly the same laws as all other services; and that is sufficient.
Some may object that this system of piecemeal reimbursement would eventually result in the complete amortization of the owner's outlay, and consequently should lead to the cancelation of his property rights. Those who make this objection are not aware that it is the nature of capital to produce perpetual income, as we shall learn later.
For the moment, however, I must not stray longer from the subject, and I shall observe (for this is the gist of the matter) that out of my sixteen francs there is not a centime that is not used to pay for human services, that there is not one that corresponds to the so-called value that Nature is supposed to have imparted to the wheat by giving it utility.
But, if, basing your argument on the axiom of Say and the English economists, you assert, "Out of the sixteen francs, twelve go to the plowmen, sowers, reapers, wagon-drivers, etc.; two to pay for the owner's personal services; then two others represent a value that has as its basis the utility created by God, by natural resources, without any human co-operation"; do you not see that you will at once be asked, "Who is to profit from this part of value? Who has a right to this remuneration? God does not come forward to claim it. Who will dare stand in His place?"
The more Say tries to explain private property according to this hypothesis, the more vulnerable his position becomes. First, quite properly, he compares the land to a laboratory where chemical experiments are conducted with results useful to mankind. "The land," he adds, "is therefore the producer of a utility, and when it [the land] exacts payment in the form of a profit or a rent for the owner, it has indeed given something to the consumer in return for what the consumer gives it. It has given him a utility that it has produced, and because it has produced this utility, the land is just as productive as labor is."
Thus, the assertion is clear-cut. Here are two claimants who come forward to divide the payment the consumer owes for the wheat, namely, land and labor. They have identical rights, for the land, says Say, is just as productive as labor is. Labor demands payment for a service, the land for a utility; yet the land does not request the payment for itself (under what form could it be made?), but for its owner.
Whereupon Proudhon summons the owner, who calls himself the land's authorized agent, to produce his credentials.*59
You tell me to pay you, in other words, to render you a service, says Proudhon, for receiving utility produced by natural resources, without assistance from man, who has already been paid separately.
But I insist on asking: Who will profit from my payment, that is, my services?
Will it be the producer of the utility, that is, the land? That is absurd, and I can bide my time quite easily until the land sends the bailiff after me.
Will it be a man? On what grounds? If it is for having rendered me a service, well and good. But in that case you share my point of view. Human service is the thing that has value, not Nature's; that is the conclusion to which I wished to lead you.
However, that is contrary to your own hypothesis. You say that the human services are paid fourteen francs, and that the two francs that complete the payment for the wheat correspond to the value created by Nature. In that case, I repeat my question: By what right can any man lay claim to them? And is it not unfortunately only too clear that, if you apply specifically the name of landowner to the man who claims the two francs, you are justifying that too-famous maxim: Property is theft?
And let no one think that this confusion between utility and value is limited to undermining the foundations of real property. After questioning the legitimacy of the idea of land rent, it leads also to questioning interest on capital.
Machines, tools of production, are, in fact, like the land, producers of utility. If this utility has value, it must be paid for; for the word "value" implies a right to payment. But to whom is it paid? To the owner of the machine, of course. Is it for a personal service? Then simply say that the value is in the service. But if you say that there must be first a payment for the service, and then a second for the utility produced by the machine, independently of any human action already paid for, we ask you to whom does this second payment go, and how can the man who has already been paid for all his services have the right to demand something more?
The truth is that the utility produced by Nature is free of charge, and therefore common to all, just like the utility produced by the tools of production. It is free of charge and common to all on one condition: that we take the pains, that we perform the service, of helping ourselves to it; or, if we ask someone else to take the pains or perform the service for us, that we render him an equivalent service in return. The value resides in these comparative services, and not at all in the natural utility. The pains can be great or small, a fact that changes the value, but not the utility. When we are near a gushing spring, the water is free to all, provided we are willing to stoop down to get it. If we commission a neighbor to go to this trouble for us, then I see an agreement, a bargain, a value, but the water remains free of charge, nevertheless. If we are an hour's distance from the spring, the terms of the bargain will be different in degree, but not in principle. Value will not on that account have passed into the water or into its utility. The water will continue to be free of charge on condition that we go and get it or pay those who, after free bargaining, consent to spare us this trouble by assuming it themselves.
The same holds true for everything. Utilities are everywhere about us, but we have to stoop to pick them up. This effort, sometimes very simple, is often very complicated. Nothing is easier, in most cases, than helping ourselves to water, whose utility has been prepared by Nature. It is not so easy to gather in wheat, whose utility has also been prepared by Nature. That is why the value of these two efforts differs in degree, but not in principle. The service is more or less exacting; consequently, it is worth more or less. The utility is and always remains free of charge.
Suppose a tool of production is introduced, what then is the result? The utility is more easily made available. Therefore, the service has less value. We certainly pay less for books since the invention of printing. An admirable and misunderstood phenomenon! You say that tools of production produce value. You are wrong. You should rather say that it is utility, and gratuitous utility, that they produce; as for value, far from producing any, they progressively destroy it.
It is true that the maker of the machine has rendered a service. He receives a remuneration that increases the value of the product. It is for this reason that we are inclined to think that we pay for the utility produced by the machine, but this is a delusion. We pay for the services contributed by all those who had a part in making it or operating it. So little value resides in the utility that has been produced that, even after we have paid for the new services, we obtain the utility on better terms than before.
Let us, then, learn to distinguish between utility and value. An understanding of the science of economics comes only at this price. I maintain, without fear of indulging in paradox, that the ideas of utility and value, far from being identical or even reconcilable, are opposites. Want, effort, satisfaction—this, we have said, is man from the economic point of view. Utility is related to want and satisfaction. Value is related to effort. Utility is the good that terminates want with satisfaction. Value is the evil, for it is born of the obstacle that intervenes between want and satisfaction. If it were not for obstacles, there would be no efforts to be made or exchanged; utility would be infinite, unconditionally free of charge and common to all, and the notion of value would never have been brought into the world. Because of the presence of obstacles, utility is free of charge only on condition that there be an exchange of efforts, which, when compared with one another, constitute value. The more obstacles are reduced by the bounty of Nature or the progress of science, the nearer utility comes to being absolutely free of charge and common to all; for the cost in terms of effort and, consequently, the value decrease along with the obstacles. I should consider myself fortunate indeed if, through all these dissertations, which may well appear unnecessarily subtle, which fill me with misgivings because of their length and at the same time because of their conciseness, I should succeed in gaining acceptance for this reassuring truth: Private ownership of value is legitimate; and this other comforting truth: Utility tends constantly to become the gratuitous and common possession of all.
Still another observation: Everything that serves us is useful (uti, "to serve"). Accordingly, it is highly doubtful whether anything exists in the universe, whether force or matter, that is not useful to man.
In any case, we can affirm, without fear of being mistaken, that countless things are useful to us without our being aware of the fact. If the moon were placed higher or lower in the heavens, it is quite possible that the mineral kingdom, consequently the vegetable kingdom, and consequently also the animal kingdom, would be profoundly modified. If it were not for this star shining so brightly in the sky as I write, perhaps the human race could not exist. Nature has surrounded us with utilities. We recognize this quality of being useful in many substances and phenomena; science and experience reveal it to us in others every day; in still others it exists, though completely and perhaps for all time unknown to us.
When these substances and these phenomena exert their useful action upon us, but without our agency, we have no interest in comparing the degree of utility they have for us; and, what is more to the point, we hardly have the means of doing so. We know that oxygen and nitrogen are useful to us, but we do not try, and should probably try in vain, to determine in what proportion. They do not furnish us with the elements necessary for evaluation, for value. I could say the same thing for the salts, the gases, the forces that abound throughout Nature. When all these agents move and combine so as to produce utility for us, but without our contributing to it, we enjoy this utility without evaluating it. When our co-operation is introduced and, above all, is exchanged, then and only then appraisal and value make their appearance, but they are applied to our co-operation, not to the utility of substances or phenomena of which we are frequently ignorant.
That is why I say: Value is the appraisal of services exchanged. These services may be very complex. They may have required vast amounts and various types of labor in times remote or recent. They may be transmitted from one hemisphere or generation to another hemisphere or generation, involving numerous contracting parties, necessitating credits, the advancing of funds, varied arrangements, before the general balance is arrived at. Yet the principle of value always resides in them, and not in the utility of which they are the vehicle, a utility which is essentially free of charge, which passes from hand to hand into the bargain, if I may be permitted the expression.
After all, if anyone persists in attributing the basis of value to utility, I have no quarrel with him; but let it be well understood that we do not mean that utility which is in things and phenomena by the gift of Providence or the power of science, but the utility of human services compared and exchanged.
According to Senior, of all the circumstances that influence value, scarcity is the most decisive. I have no objection to make to this remark, unless it is that by its form it assumes that value is inherent in things—an hypothesis that I will challenge if it is even hinted at. Fundamentally, the word "scarcity," as used in connection with the subject with which we are dealing, expresses in abridged form this idea: Other things being equal, a service has greater value according to the difficulty we should experience in performing it for ourselves, and consequently, according to the more exacting terms we encounter when we ask someone else to do it for us. Scarcity is one of these difficulties. It is one more obstacle to surmount. The greater it is, the more we pay those who surmount it for us. Scarcity often occasions very high remunerations; and that is why I refused to agree a little earlier in this work with the English economists' position that value is in direct proportion to labor. We must take into account Nature's miserliness toward us in certain respects. The word "service" embraces all these meanings and shades of meaning.
Storch attributes value to the judgment that enables us to discern it. Of course, every time we are confronted with a question of the relation between two things, we must compare and judge. Nevertheless, the relation is one thing, and the judgment we pass on it is another. When we compare the height of two trees, their heights and the difference between their heights are distinct from our evaluation of them.
But in determining value, what is the relation that we are to judge? It is the relation between two services that are exchanged. It is a question of knowing, when services are rendered and received, what is the value of the one in respect to the other. It is a question of knowing, when services, involving the transfer of acts or the exchange of things, are rendered and received, what the one is worth in respect to the other, keeping in mind all the circumstances, rather than concerning ourselves with the amount of intrinsic utility these acts or these things may contain; for this utility may fall partially outside the realm of human activity and therefore outside the realm of value.
Storch is not aware of the fundamental error that I am attacking, when he says:
"Our judgment enables us to discern the relation that exists between our wants and the utility of things. The verdict that our judgment pronounces on the utility of things constitutes their value."
And, further on:
"In order to create value, three circumstances must coincide: (1) Man experiences, or conceives, a want. (2) Something exists that is capable of satisfying the want. (3) His judgment pronounces a favorable verdict on the utility of the thing. Hence, the value of things is their relative utility."
During the daylight hours I experience the want of seeing clearly. Something exists that is capable of satisfying the want, sunlight. My judgment pronounces a favorable verdict on this thing's utility, and .... it has no value. Why? Because I enjoy it without having to ask a service from anyone.
At night I experience the same want. Something exists that is capable of satisfying it very imperfectly, a candle. My judgment pronounces a verdict on the utility, but on the relatively slight utility of this thing, and it has value. Why? Because the person who took the pains to make the candle is unwilling to render me the service of letting me have it unless I render him an equivalent service.
What we must compare and judge, to determine value, is not, therefore, the relative utility of the things, but the relation between the two services.
Expressed in these terms, I do not reject Storch's definition.
Let us summarize briefly to show that my definition includes all that is true in my predecessors' definitions and corrects all that is erroneous through their inclusion of too much or too little.
The principle of value, as I have said, resides in a human service. It is derived from the appraisal and comparison of two services. Value must be connected to effort. Service implies an effort of some sort. It supposes a comparison of efforts that are exchanged, or at least exchangeable. Service implies the term giving and receiving.
In fact, however, it is not proportional to intensity of effort. Service does not necessarily imply such a proportion.
Many outside circumstances influence value without becoming value themselves. The word "service" takes all these circumstances into account in their proper measure.
When the service consists of the transfer of a material object, there is no reason for not saying, by metonymy, that the object has value. But we must not lose sight of the fact that this is a mere trope, or figure of speech, by which we attribute to the object the value arising from the services connected with it.
Whether having materiality or not, value lasts until the want is satisfied, and no longer. Its nature is not changed by any time gap, great or small, arising between the exerting of the effort and the satisfying of the want, nor by the kind of service, whether personal or including material commodities.
What can be accumulated by saving, in the social order, is not things, but value, or services.**14
I agree with Say that utility is the basis of value, provided that we mean the relative utility of services, not the utility that resides in things.
I agree with Ricardo that labor is the basis of value, provided first that we take the word "labor" in its most general sense, and, second, that we do not give it a ratio to value out of keeping with all the facts; in other words, provided we substitute the word "service" for the word "labor."
I agree with Senior that scarcity influences value. But why? Because it makes service all the more valuable.
I agree with Storch that value results from an act of judgment, provided that we mean the judgment that we pass on the utility of services, not on the utility of things.
Thus, economists of all persuasions should own themselves satisfied. I say that all are right, because all have glimpsed one side of the truth. Error, to be sure, lay on the other side. The reader must decide whether my definition takes into account the whole truth and rejects all the errors.
I must not conclude without saying a word about that economic equivalent of the squaring of a circle: the measure of value; and here I shall repeat, even more emphatically, the observation that ends the preceding chapters.
I said that our wants, our desires, our tastes, have no limits or exact measure.
I said that our means of satisfying them, the gifts of Nature, our faculties, our activity, foresight, discernment, have no exact measure. Each one of these elements is itself a variable quantity; it differs from man to man, and within each individual it differs from minute to minute, thus forming in its entirety what is the very essence of variability.
If, now, we consider what the circumstances are that influence value, such as utility, labor, scarcity, judgment, and if we realize that there is not one of these that does not vary infinitely, how can we stubbornly persist in seeking a fixed measure of value?
It would be strange indeed if we should find fixity in a mean term composed of variable elements, in a mean term that is merely a relation between two extremes more variable still!
Economists who seek an absolute measure of value are therefore pursuing a will-o'-the-wisp, and, not only that, something entirely useless. By universal practice gold and silver have been adopted as this measure, even though their variability has not gone unrecognized. But of what importance is the variability of the measure, if, since it affects in like manner the two objects that are exchanged, it does not alter the fairness of the exchange? It is a mean proportional, which can rise or fall, without on that account failing in its purpose, which is to register exactly the relation that exists between the two extremes.
The science of political economy does not, like exchange, have as its goal the establishment of the current ratio between two services, for in that case money would suffice. What it does seek to establish is the ratio of effort to satisfaction; and, in this respect, a measure of value, even if it existed, would tell us nothing; for effort, in attaining its satisfaction, always employs a variable amount of gratuitous utility that has no value. It is because this element of social well-being has been lost sight of that writers have deplored the absence of a measure of value. They have failed to realize that the measure would in no wise answer the question propounded: What is the relative wealth, or prosperity, of two classes, two nations, two generations?
To solve this question, political economy needs a measure capable of showing, not the relation between two services, which can serve as the vehicle for transmitting greatly varying amounts of gratuitous utility, but the relation between effort and satisfaction; and this measure could only be effort, or labor, itself.
But how can labor serve as a measure? Is it not itself one of the most variable of elements? Is it not characterized by varying degrees of skill, physical exertion, uncertainty, danger, distastefulness? Does it not have to be complemented by certain intellectual faculties and moral virtues? Does it not, by reason of all these circumstances, lead to infinitely varied amounts of remuneration?
There is one kind of labor that in all times, in all places, is identical with itself, and this is the one that must serve as the norm. It is the simplest, the crudest, the most primitive, the most muscular, the one most lacking in help from Nature's resources, the one every man can perform, which renders those services that each can render to himself, which requires neither exceptional strength nor skill nor apprenticeship—work of the kind performed by the first members of the human race, that, in a word, of the simple day laborer. This kind of work is always the most plentiful, the least specialized, the most uniform, and the least well paid. All wages are scaled and graded with this as a base; when circumstances are favorable to day labor, the rate of other wages increases also.
If, then, we wish to compare two societies, we must not turn to a measure of value, for two most logical reasons: first, because none exists; second, because if one did exist, it would give us only a wrong answer to our question, an answer that would ignore an important factor contributing to progress in human well-being: gratuitous utility.
What we must do, on the contrary, is to forget value completely, especially money, and ask: In a given country, at a given time, how much special utility of every category is there, and how does the sum total of all these utilities relate to a given amount of unskilled labor? In other words: How much comfort and well-being can the ordinary day laborer obtain in exchange for his services?
We may say that the natural social order is perfectible and harmonious if, on the one hand, the number of men engaged in unskilled labor and receiving the lowest possible wages is continually decreasing, and if, on the other, these wages, measured, not in value or in money, but in material satisfactions, are continually increasing.**15
The ancients well described all the possible combinations of exchange: Do ut des (product exchanged for product), do ut facias (product for service), facio ut des (service for product), facio ut facias (service for service).*60
Since products and services are interchanged, they must necessarily have something in common, something against which they can be compared and appraised, namely, value.
But value is always identical with itself. Whether in a product or in a service, it has the same origin, the same cause.
This being the case, does value exist originally, essentially, in the product, and is the notion that it exists also in the service an extension, by analogy, of its meaning?
Or rather, on the contrary, does value reside in the service, and is it incorporated in the product solely and precisely because the service itself is incorporated in the product?
Some persons seem to think that this question is merely a quibble. We shall see about that presently. For the time being I shall say only that it would be strange if in political economy a good or a bad definition of value were a matter of indifference.
It appears indubitable that originally political economists believed that value resided in the product, and, more than that, in the material of the product. The physiocrats attributed value exclusively to the land and called all classes sterile that added nothing to matter; so closely in their eyes were matter and value linked together.
It would seem that Adam Smith should have refuted this notion, since he derived value from labor. Do not nonmaterial services require labor, and therefore do they not imply value? Though so near the truth, Smith did not grasp it; for, in addition to saying emphatically that, for labor to have value, it must be applied to matter, something physically tangible and capable of accumulation, we all know that, like the physiocrats, he puts on the unproductive list all those classes of society whose activity is limited to services.
Smith does, in fact, devote a great deal of attention to these classes in his treatise on wealth (The Wealth of Nations). But does this not merely prove that, after formulating his definition, he found it cramping, and, that consequently, his definition was wrong? Smith would not have won his great and just renown if he had not written his magnificent chapters on education, the clergy, public services, and if, in writing on wealth, he had confined himself within the limits of his definition. Happily he escaped, by being inconsistent, from the yoke of his own premises. This is the way it always happens. A man of genius, when he starts from a false premise, never escapes the charge of inconsistency; without it, his views would become increasingly absurd, and, far from being a man of genius, he would not even be a man of ordinary intelligence.
Just as Smith went a step beyond the physiocrats, so Say went a step farther than Smith. Little by little, Say came to recognize that value resides in services, but only by analogy, by extension. He attributed value in its true essence to products, and nothing proves this better than the bizarre heading under which he listed services: "nonmaterial products," two words that clash stridently when put together. Say started from Smith's premises, as is proved by the fact that the full theory of the master is found related in the first ten lines of the works of the disciple.**16 But he thought deeply, and his thinking progressed during the next thirty years. Thus, he came nearer the truth, but he never reached it.
Moreover, we could well believe that he fulfilled his mission as an economist, enlarging, as he did, the notion of value so as to include services as well as products, and tracing its transmission through services to products, if the socialists' propaganda, which was founded on his own deductions, had not come to reveal the shortcomings and dangers of his fundamental hypothesis.
Suppose, then, that I were asked this question: Since certain products have value, since certain services also have value, and since value, being always identical wherever found, can have only one origin, one cause, one identical explanation; is this origin, this explanation, to be found in products or in services?
I declare confidently, the answer is not for an instant doubtful, and for this irrefutable reason: for a product to have value, a service is implied; whereas a service does not necessarily imply a product.
This answer seems to me conclusive, as certain as a demonstration in mathematics.
Whether or not a service has material form, it has value, since it is a service.
If a material object renders a service for someone, it has value; if it renders no service, it has no value.
Hence, value is not transmitted from the material object to the service, but from the service to the material object.
Nor is this all. Nothing is more easily explained than this preeminence, this priority, where value is concerned, of services over products. We shall see that it is due to a circumstance which it was easy to observe, but which was not observed, for the very reason that it was so obvious. The circumstance is none other than man's natural foresight, which disposes him not to stop at performing the services that are asked of him, but to ready himself in advance to perform the services that he anticipates will be asked of him. Thus, while the facio ut facias type of exchange remains the key factor, the dominant factor, in any transaction, it tends to be transformed into the do ut des type.
John says to Peter, "I want a mug. I should make it; but if you are willing to make it for me, you will be doing me a service, and I will do you an equivalent service in return."
Peter accepts. He goes in search of the proper kinds of clay, he mixes them, he kneads them; in a word, he does what John would have had to do.
It is quite evident here that it is the service that determines the value. The key word in the transaction is facio. And if later value is incorporated in the product, it is only because it is the outcome of the service, which is the combination of the labor performed by Peter and of the labor that John has been spared.
Now, it can happen that John often makes the same proposal to Peter, and other persons may make it also, so that Peter may foresee that he is certain to be asked to perform services of this kind and may get ready to perform them. He can say to himself: I have acquired a certain skill in making mugs. Experience tells me that the mugs correspond to a want that craves satisfaction. I can therefore manufacture them in advance.
Henceforth John will have to say to Peter, not facio ut facias, but facio ut des. If he, likewise, has foreseen Peter's wants and has worked at providing them in advance, he will say, do ut des.
But, I ask, in what respect does this progress, which stems from man's foresight, change the origin and nature of value? Does not service still remain its cause and its measure? What difference does it make, as far as the true idea of value is concerned, whether Peter waits to be asked before he makes a mug, or whether he makes it ahead of time, anticipating that he will be asked?
Please bear this in mind: In the history of mankind, inexperience and improvidence precede experience and foresight. Only in the course of time have men come to anticipate their mutual wants fully enough to prepare for them. Logically, the facio ut facias pattern had to precede the do ut des. The latter is both the result and the outward sign of some growth of knowledge, of a certain amount of experience, of political security, of faith in the future—in a word, of some degree of civilization. This foresight on the part of society, this faith in the demand that induces men to prepare the supply, this kind of intuitive statistical sense, to be found in all men, which establishes such a surprising balance between wants and the means of satisfying them, is one of the most powerful stimulants to human progress. Thanks to it, we have the division of labor, or at least as far as trades and professions are concerned. Thanks to it, we have one of the blessings men most ardently desire: fixed rewards for services, in the form of wages for labor and interest on capital. Thanks to it, we have credit, long-range financing, projects involving shared risks, etc. It is surprising that foresight, that noble attribute of man, has been so much neglected by the economists. It is due, as Rousseau said, to the difficulty we have in observing the environment in which we are immersed and which forms our natural habitat. Only unusual phenomena strike us, and we allow to pass unnoticed those that, constantly at work around us, upon us, and within us, modify us and our society so profoundly.
To return to our subject: It may be that man's foresight, in its infinite ramifications, tends more and more to substitute the do ut des for the facio ut facias; but let us, nevertheless, remember that it is in the primitive and necessary form of exchange that the notion of value is first found, that this form is that of reciprocal service, and that, after all, from the point of view of exchange, a product is only a service that has been anticipated.
Having once established that value is not inherent in matter and cannot be classified among its attributes, I am far from denying that value passes from the service into the product, or commodity, in such a way as to become incorporated, so to speak, in it. I beg those who disagree with me to realize that I am not such a pedant that I would exclude from our language such familiar expressions as: "Gold has value," "Wheat has value," and "Land has value." I believe only that I am within my rights in asking for a scientific explanation; and if the answer is "Because gold, wheat, land, have an intrinsic value," then I believe I have the right to say: "You are wrong, and your error is dangerous. You are wrong, because there is gold, and there is land, that is valueless—the gold and the land that has not yet been the occasion of any human service. Your error is dangerous because it leads to classifying as a usurpation of God's gratuitous gifts to men what is actually man's simple right to exchange his services with other men."
I am therefore ready to admit that products have value, provided others will admit with me that value has no necessary connection with products, that, on the contrary, it is related to and derived from services.
From this truth there follows a very important (in political economy a fundamentally important) conclusion, which heretofore has not been and could not be drawn, namely: When value has passed from the service to the product, it still remains subject to all the vicissitudes that can affect the value of any service. It is not fixed in the product, as would be the case if it were one of the product's intrinsic elements; no, it is essentially variable. It can keep rising indefinitely, or it can fall to zero, according to the type of service from which it originated.
The man who makes a mug now to be sold a year from now imparts value to it undoubtedly; and this value is determined by the value of the service—not by the present value of the service, but by the value it will have in a year. If, at the moment of sale, this kind of service is more in demand, the mug will be worth more; it will depreciate if the contrary is true.
That is why man is constantly stimulated to exercise foresight, to put it to good advantage. He always expects, through the appreciation or depreciation of his service, to be rewarded for what he has correctly anticipated and to be punished for his miscalculations. And note that his successes or his failures will coincide with the general prosperity. If he has calculated properly, he is prepared in advance to offer society services more sought after, more highly thought of, more efficient, which satisfy more keenly felt wants; he has contributed to reducing scarcity, to increasing the supply of services of this type, to placing them within the reach of a larger number of persons with less economic hardship. If, on the contrary, he is mistaken in his estimate of the future, he depresses still further the value of services for which the demand is already weak; he makes, at some cost to himself, a merely negative contribution, that of warning the public that services of a certain type do not at the present time require a great amount of its activity, that effort directed into this channel will yield poor returns.
This significant fact—that value incorporated in a product, if I may so describe it, continues to be identical with the value of the service to which it gives rise—is of the greatest importance, not only because it confirms the theory that the principle of value resides in the service, but also because it readily explains phenomena that other systems classify as abnormal.
Is there a general human tendency to lower rather than to raise the value of a product once it is placed on the world market? This is another way of asking whether the type of services that has created the particular value tends to receive better or poorer remuneration. Both are equally possible, and the fact that this is so offers limitless opportunities to men's foresight.
We may note, however, that for beings endowed with a capacity for experimenting, learning, and improving, progress is the general law. The probability is, therefore, that at a given moment in history a given expenditure of time and effort will obtain better results than at a previous moment in history; hence, we may conclude that the prevailing trend is toward a decrease in the value incorporated in a product. For example, if the mug that I just used as a symbol for products was made several years ago, it most probably has undergone depreciation. The fact is that today, for the production of an identical mug, we have more skill, more resources, better tools, more readily available capital, and more highly specialized labor. Therefore, the prospective purchaser of the mug does not say to the seller, "Tell me what the labor on this mug cost you in quantity and quality, and I will pay accordingly." No. He says, "Today, thanks to the progress of this art, I can make for myself or procure through exchange a similar mug for a certain amount of labor of a certain quality, and that is the limit that I will agree to pay you."
The end result of this is that all value attached to a commodity, that is to say, all accumulated labor, all capital, tends to depreciate as it encounters services that are naturally perfectible and increasingly productive; and that, in an exchange between current labor and previous labor, the advantage is generally on the side of current labor, as it should be, since it renders the greater services.
And this shows how empty are the tirades we constantly hear against the value of real property. This value is no different from any other in its origin or in its nature or in its obedience to the general law of slow depreciation. It represents services performed a long time ago: drainage, clearing, stonework, grading, fencing, additions to vegetable gardens, building, etc.; and its function is to collect payment for them. But the amount to be collected is not determined out of consideration for the work that went into them. The real-estate owner does not say, "Give me in exchange for this land as much labor as went into its development." (This is how he would have expressed himself if value came from labor, as Adam Smith theorized, and were proportional to it.) Even less does he say, as Ricardo and a number of other economists suppose, "Give me first as much labor as went into this ground, then a certain additional amount as the equivalent of all its natural resources." No, the owner of the property, speaking for all the previous owners, as far back as the one who originally cleared it, is reduced to this humble statement:
"We have prepared services, and we ask to exchange them for equivalent services. In times past we worked hard; for in our day your powerful modern devices were unknown: there were no highways; we were compelled to do everything with the strength of our own arms. Beneath these furrows lie buried the toil performed by the sweat of many brows, the effort of many human lives. But we do not demand toil for toil; we should have no means of obtaining such terms. We know that labor on the land as it is performed today, whether in France or elsewhere, is much more efficient and more productive. What we ask and what obviously cannot be denied us, is for our past labor to be exchanged for present labor on a basis proportional, not to their duration or their intensity, but to their results, so that we may receive the same remuneration for the same service. By this arrangement we are the losers from the point of view of our labor, since, to perform the same service, it takes two or perhaps three times as much of our labor as of yours. But it is an arrangement that perforce we must accept; for we no more have the means of imposing other terms than you do of refusing these."
And, in point of fact, this is the way things are done. If we could make an exact accounting of the amount of incessant effort, drudgery, toil, and sweat that were required to bring every acre of the soil of France to its present level of productivity, we should be thoroughly convinced that the purchaser does not pay at the rate of equivalent amounts of labor—at least in ninety-nine cases out of a hundred.
I add this reservation, for we must not lose sight of the fact that a service incorporated in a commodity can acquire value as well as lose it. And although the general trend is toward depreciation, yet the contrary phenomenon does occur occasionally, in exceptional circumstances, involving land as well as other things, without, however, doing violence to the laws of justice or warranting any hue and cry against monopoly.
In fact, services are always at hand to reveal the presence of value. It can generally be assumed that past labor renders less service than present labor; but this is not an absolute law. If past labor renders less service, which is almost always the case, than present labor, it takes more of the former than of the latter to establish a balance, since, I repeat, equivalence is determined by services. But, on the other hand, when it happens that it is the past labor that renders the greater service, then a greater amount of the present service will be required in payment.
Notes for this chapter
[Étienne Bezout (1730-1783), French naval inspector and mathematician.—Translator.]
[Jean-Pierre Claris de Florian (1755-1794), great-nephew of Voltaire, and author of plays and tales of some merit, but better known for his fables, which are generally recognized in France as second only to those of the great La Fontaine.
Let us aid each other ....
[Nassau William Senior (1790-1864), English economist. First professor of political economy at Oxford.
Heinrich Friedrich von Storch (1766-1835), German economist, instructor to the imperial children.—Translator.]
[A remark concerning Protestants and Catholics attributed to Henry when he became King of France in 1589. Himself a Protestant, he became a Catholic in order to win the crown. His Edict of Nantes, providing religious tolerance for the entire nation, put an end to France's bloody Wars of Religion.—Translator.]
[Maria-Felicia Garcia Malibran (1808-1836), a most celebrated soprano-contralto of her day, best known, as Bastiat indicates, for her interpretations of Rossini's operas.—Translator.]
[Elisa Felix Rachel (1820-1858), whose tremendous popularity at the Paris Théâtre Français in leading roles of Racine's tragedies was responsible for a revival of these seventeenth-century classics.—Translator.]
["(I am a man); I consider none of the incidents that befall my fellow creatures to be a matter of unconcern to me." Terence, The Self-Tormentor, I, 1, 23.—Translator.]
[George Poulett Scrope (1797-1876), English economist and geologist, prolific writer of pamphlets, particularly in refutation of the Malthusian theory.—Translator.]
[Pierre-Joseph Proudhon (1809-1865), French social theorist and experimenter, a prolific writer on political and economic questions, for the most part radical or anarchistic in viewpoint. Bastiat and he had a fiery controversy over his proposal of loans without interest.—Translator.]
Increases! The object, then, had value in itself before any human labor was performed upon it. It could have received it only from Nature. Therefore, the action of Nature is not gratuitous. Who, then, has the audacity to demand payment for the extrahuman part of value?
Because, under a regime of liberty, individual services enter into competition with one another, their remuneration tends to become approximately proportionate to the intensity of the labor involved. But, I repeat, this balance, this proportionality, is not inherent in the notion of value. Proof of this can be found in the fact that where there is no competition, there is no proportionality either. In this case no relationship is to be observed between the nature of the labor and the amount of its remuneration.
The absence of competition can arise from the nature of things or from the perversity of mankind.
If it arises from the nature of things, we may see a relatively modest expenditure of effort producing great value without anyone's having just cause for complaint. This is the case of the person finding a diamond; this is also the case of Rubini,* of Malibran, of Taglioni,† of the fashionable tailor of the moment, of the proprietor of the Clos-Vougeot,‡ etc., etc. Circumstances have given them extraordinary means of rendering service; they have no rivals, and their prices are high. The very fact of the extreme scarcity of the service is proof that it is not essential to the well-being and progress of mankind. It is, therefore, a luxury item, an object of ostentation available to the wealthy. Is it not natural that every man, before indulging in satisfactions of this nature, should wait until he is able to provide for his more basic and reasonable wants?
If competition is absent because some human agency has done violence to the natural balance, the same effects are produced, but with this tremendous difference, that they are produced in places and at times where and when they should not be produced. Then we see a relatively minor piece of work creating great value; but how? By stifling violently the competition whose function it is to relate remuneration to service. Then, even as Rubini can say to a music-lover, "I want a very high honorarium, or I will not sing for your guests"—acting on the principle that the service here is one that only he can render—so can a baker, a butcher, a landlord, a banker say, "I want exorbitant payment, or else you will not receive my wheat, my bread, my meat, my gold; and I have taken precautions: I have lined up rows of bayonets so that you cannot procure these things elsewhere, so that no one else may render you services analogous to mine."
People who class together artificial monopoly and what they call natural monopoly, because both have in common the power of increasing the value of labor, are either quite blind or quite superficial.
Artificial monopoly is downright plunder. It produces evils that otherwise would not exist. It inflicts hardship on a considerable part of society, because it often includes the most vital articles. In addition it gives rise to resentments, hatred, reprisals, all the fruits of injustice.
The favors bestowed by Nature do no harm to society. At the very most we could say that they bring to light an evil that already existed and can in no way be imputed to them. It is too bad, perhaps, that tokay wine is not as plentiful, and therefore not as cheap, as ordinary red wine. But this is not a social evil; it was imposed on us by Nature. There is, then, between the favors bestowed by Nature and artificial monopoly this profound difference: the former are the result of pre-existent and inevitable scarcity; the latter is the cause of artificial and unnatural scarcity.
In the first case it is not the absence of competition that creates the scarcity; it is the scarcity that explains the absence of competition. Mankind would be childish indeed if it became upset, or if it rebelled, because there is only one Jenny Lind, one Clos-Vougeot, or one Regent.
In the second case quite the contrary is true. It is not because of a providentially created scarcity that competition is impossible, but because force has stifled competition, because a scarcity has been created that should never have been. [Note taken from the author's manuscripts.—Editor.]
[Cf. chap. 9, p. 252.—Translator.]
See chap. 15. Accumulation is a circumstance of no consequence in political economy. Whether satisfaction is immediate or delayed, whether it can be postponed or separated from the effort that produces it, in no way changes the nature of things.
I am disposed to make a sacrifice for the pleasure of hearing a beautiful voice. I go to the theater and I pay; the satisfaction is immediate. If I had used my money to buy a dish of strawberries, I should have been able to postpone my satisfaction until the next day; that is all.
It can be said, of course, that the strawberries represent wealth, because I can still exchange them. That is true. Once the effort has been exerted, as long as the satisfaction remains unfulfilled, the wealth still exists. It is the satisfaction that destroys the wealth. When the dish of strawberries is eaten, this satisfaction will go the way of the other that brought me Alboni's* voice.
Service received, service rendered; such is political economy. [Note taken from the author's manuscript.—Editor.]
[What follows was intended by the author to be included in the present chapter.—Editor.]
[These Latin phrases mean: "I give to you that you may give to me." "I give to you that you may do for me." "I do for you that you may give to me." "I do for you that you may do for me.—Translator.]
Treatise on Political Economy, p. 1.
NOTES TO CHAPTER 6
End of Notes
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