(September 1925)

NEO-CLASSICAL economics in Britain is most conveniently dated from the work of Stanley Jevons. For it was he who first tilted the balance in value theory from cost to utility, applied mathematics to the supply and demand curves, and conceived the project of building with elaborate statistical material an exact science. This science he denned as “the mechanics of human interest.” There are not a few passages, especially in the opening chapters in his Theory, which show how near his mind came to a broader and more balanced statement of the utilitarian calculus than that which he actually took.

“Political Economy must be founded upon a full and accurate investigation of the conditions of utility; and as we understand this element, we must necessarily examine the character of the wants and desires of men.” Now “utility” taken broadly in any utilitarian system should include disutility, or cost, since this clearly conies into the wants and desires of man. The elementary psychology by which Jevons explains the utility of consumption with its grades of variety and intensity is equally applicable to production. In this very book, indeed, Jevons made an elementary excursion into the intensity of labor, relating it to hours of labor etc., and in his Preface he definitely states, “In this Work I have attempted to treat Economy as a calculus of Pleasures and Pains.” Yet nowhere did he link up into a single calculus the pleasures and pains of the processes of production and consumption. No, “The whole theory of Economy” as he saw it “depends upon a correct theory of consumption” (p.47). In the last chapter of his Theory he says, ‘The great problem of Economy, may, as it seems to me, be stated thus’. Given, a certain population, with various needs and powers of production, in possession of certain lands and other sources of materials; required, the mode of employing their labour so as to maximize the utility of the produce.” (p.255) It seems curious that he should have failed to add the words “and so as to minimize the disutility of producing it.” Here was a real turning point in economic theory. Had Jevons worked out his prefatory promise the study might have been put upon a sound basis of utility conceived as human welfare; the utilities as well as the disutilities of production might have been put into the account, together with the disutilities which attend certain forms and portions of consumption.

How far the definitely hedonistic turn of the utilitarianism which Jevons had taken on from the Mills and Bentham, would have served him for a satisfactory art of human welfare, may be open to discussion. But such an application of the utilitarian method would have been a great advance along the road to a science for the interpretation of economic processes in terms of human well-being.

It might, however, have been expected that followers of the Jevonian method would have repaired the defects of their master. Had they done so, the Jevonian theory of value, resolving wealth into the various degrees of utility or enjoyment it furnishes to consumers, might have been the harbinger of a human political economy in Britain. Disinterested Science had only to take two tolerably obvious steps in order to construct a valid basis of a Science or Art of Economic Welfare. The first was to apply to the production or supply side of the equation of value the same subjective analysis as was applied to the consumption or demand side. If you are to evaluate a given quantity of concrete wealth, you must ask two related questions, how much utility it furnishes in its consumption, and how much disutility it involves in its production. For only by this double analysis can you realize what this wealth is really worth in human terms of net satisfaction or enjoyment. For, if each consumer, in purchasing a quantity of any article for consumption, gets for the last shilling of his expenditure a utility or satisfaction that is “just worth while”, it follows that for every prior shilling of that expenditure he gets a positive gain increasing in magnitude as it approaches the first shilling, the utility of which may, if the article in question be a necessary of life, be infinite. This concept of a surplus or fund of positive gain for consumers is, of course, equally applicable to the cost or supply side of the problem of purchase. If it is just worth while for the producer to put forth the last and costliest unit of productive effort incorporated in a supply which fetches a price of one shilling per unit, then on every earlier unit of productive effort he gets, in the shilling he receives, something more than an equivalent for that effort, i.e., a producer’s surplus, measuring the diminishing subjective cost of the earlier units. In theory, at any rate, the first unit of this output of productive energy may be considered to have a vital cost that is immeasurably small.

Such might seem to be an obvious first step towards a scientific hedonist calculus. The second step would have been an orderly correlation of the results of this double analysis, a setting of the human costs of production represented by a stock of concrete goods against the human utilities of their consumption—a profit and loss account. In the process of both analyses it would have become evident that, though costs predominated in production, and utilities in consumption, some elements of costs found a place in consumption, some elements of utility, or satisfaction, in production. Wider inequalities of distribution would signify that some goods passed the barrier which separated utility from satiety, while certain kinds and amounts of productive energy are pleasurable in their output. In the analysis of any given stock of goods, therefore, it would be the net utility of consumption that would be set against the net disutility of production.

This analysis would inevitably have led to a new reorientation of the problem of distribution. For it would have become evident that the total amount of satisfaction, enjoyment, welfare, attaching to any given quantity of wealth, would vary with the ways in which the efforts of making it and the enjoyments of consuming it were apportioned among the members of the community. Such an apportionment, or distribution, of productive efforts as would involve the smallest aggregate of disutility in making it, and such apportionment, or distribution, of consumptive opportunities as would yield the largest aggregate of enjoyment, would evidently maximize the “welfare” which attaches to any given quantity of goods.

Here a third step in the new subjective science might have been expected, involving a literally vital change in the method of the hedonist calculus. It might have been recognized that the costs and utilities, attaching to the production or consumption of any set or class of goods, cannot be discovered by a separate analysis of the processes of producing and consuming these goods. For these particular costs and utilities are associated with others derived from other sets of goods in a standard of production and a standard of consumption. The latter, standard is self-evident in its bearing on the hedonist calculus. The utility of any single article of consumption depends on, and in some measure varies with, the utility of other articles incorporated in the personal standard of consumption. The division of labor has, however, gone so far in modern industry as to obscure what should be the equal significance of a human standard of production; a varied day’s work should by its organic composition reduce the total disutility and incorporate elements of positive utility. To some extent this variety of work can be made to subserve efficiency and total productivity within the factory system: in other cases it requires a sufficient quantity of leisure to enable workers, earning their main livelihood in some single craft or routine process, to choose subsidiary occupations that provide relief elements and give play to otherwise thwarted instincts of workmanship in body or mind. This conception of an interrelation between standards of work and of consumption, based upon a comprehension of the harmonious needs and satisfactions of man as an organism, might have been evolved from the crude beginning of the Jevonian theory of value.

An advance along these lines might have been expected to produce a subjective Science and Art of Economic Welfare which would have realised Ruskin’s assertion “All Wealth is Life”, and pointed the way to a general social economic movement of reform.

This did not happen. It was not for want of intellectual leads. As early as 1854 Giessen published a book containing an outline of this utilitarian calculus of utility and disutility. But nowhere in Britain did the method receive much attention. This was partly due to the concentration of most economists upon the conflict between “cost” and “utility” theories of value as the central problem of Economics. Not until Marshall had achieved a peace treaty between these combatants by showing how the “final cost” principle and the “final utility” principle are undoubtedly component parts of the one all-ruling law of supply and demand, each compared to “ one blade of a pair of scissors”, did English orthodox economics attain the equilibrium needed for resolving wealth into the sum of its utilities and disutilities.

But even then this subjective or human interpretation of wealth was sedulously avoided. Though Marshall opened his Principles of Economics with the comprehensive statement, “Political Economy or Economics is a study of mankind in the ordinary business of life; it examines that part of individual and social action which is most closely connected with the attainment and with the use of the material requisites of well-being”, he nowhere proceeds to correlate the two processes of “attainment” and “use” from the standpoint of well-being. The elaborate studies of supply and demand curves in the determination of prices and the measurement of values in the various acts of purchase which constitute economic book-keeping, so thoroughly absorbed most of those who accepted the “scissors” metaphor as to keep them upon a mechanical plane of inquiry precluding any close psychological analysis into the human values affecting the constitution of these curves.

Though Marshall recognized more clearly than any of his academic predecessors the delicacy and intricacy of the choices and adjustments that went into the operations of the economic system through acts of production and consumption, he made no serious and continuous attempt to go behind these choices in order to convert them into terms of the human satisfaction which underlay them. Nowhere do we find in his work any attempt to express economic income in human welfare. Doubtless the sense that human well-being is the end of economic activities may be said to pervade his work. But it is never formulated.

It seemed as if this reconcilement of Economic Science with humanity was the definite task to be undertaken by Marshall’s pupil and successor, Professor Pigou. The title of his work, The Economics of Welfare, suggests that a full and formal examination of the contribution of economic art to human well-being will be made. In his opening chapter this purpose from time to time flickers before our eyes. Mr. Pigou clearly recognizes that the subject matter of Economics (whether as a Science or an Art) is a part of welfare. Wealth, in other words, he regards not as a mere aggregate of concrete products, but as a body of satisfactions. He carries his subjectivity so far as to insist that “ welfare includes states of consciousness only and not material things” (p.10).

There are passages which might suggest that “ the states of consciousness” are to be submitted to some objective test of “the desirable”, in the sense of a contribution to “the real good “ of a man, or a society, and not in the sense that they are actually desired. But these are evidently unintended departures from his explicit declaration that his Economic Science is “ a positive science of what is and tends to be, not a normative science of what ought to be.” In a word, we are to deal with current satisfactions.

The subject matter of Economics being thus a part of welfare, we ask what part, and are told “ that part of social welfare that can be brought directly or indirectly into relation with the measuring rod of money” (p.11)—an ominous suggestion of a return to the position that money is the measure, not merely of value, taken in its market meaning, but of that part of human values contained in welfare. With Professor Cannan, who also shows coy hankerings after the humanization of economics, he recognizes that no sharp demarcation is possible between economic and non-economic satisfactions. “Nevertheless, though no precise boundary exists, yet the test of accessibility to a money measure serves well enough to set up a rough distinction. Economic welfare, as loosely defined by this test, is the subject matter of economic science.” “Rough distinctions” and “loose” definitions are perhaps no very strong foundation for a scientific study which in its detailed superstructure aims at nicety of measurements. But it is undoubtedly true that the only possible demarcation for economic phenomena is to confine them to things that are bought and sold, and we may presume that it is the welfare related to such marketable things that Mr. Pigou proposes to investigate.

But, though we may seem to be able at any given time and place thus to distinguish concrete economic goods from non-economic goods, when we turn to examine them, as they meet and even join in the consciousness of which they are “ states of mind “, new difficulties crop up. If we are to correlate the part, economic welfare, with the whole, human welfare, we must at any rate keep the same meaning for the term “welfare”. We had supposed that, as the “ought”, or normative law, was to be excluded from economic welfare, it must also be excluded from human welfare, reduced pro hac vice to the currently desired.

But hardly is this established than we come (p.12) to a discussion of the objection that “an economic cause may affect non-economic welfare in ways that conceal its effect on economic welfare”, illustrated by the damaging reactions which excessive industrialism may exercise upon the appreciation and cultivation of “the beautiful in nature or in art” forming “an important element in the ethical value of the world.” Surely any such assessment of ethical value would seem to involve an introduction of the normative element just expressly excluded from the province of economic science.

In further discussion of the relations between economic and non-economic welfare, Mr. Pigou adduces two considerations, which, had he followed out their implications, would have led him far upon the road to a complete utilitarian calculus. That calculus requires, as we see, first, the recognition of satisfactions and dissatisfactions of production in their bearing upon economic and non-economic welfare; secondly, the interaction between this set of satisfactions and dissatisfactions and the set on the consumption side of the equation. Economists had hitherto failed in two ways, first, by looking exclusively to the yield of satisfactions from the consumption (or further application to production) of the real income of the community, secondly, by omitting to take account of the satisfactions of production (when they made their tentative analysis of human costs) or of the dissatisfactions of certain sorts and quantities of consumption.

Now Mr. Pigou seems in his opening analysis to recognize that the ways in which income is earned and spent have important reactions upon “non-economic welfare”. On the production side “the surroundings of work react upon the quality of life. Ethical quality is affected by the occupations—menial service, agricultural labour, artistic creation, independent as against subordinate economic positions, monotonous repetition of the same operation, and so on—into which the desires of consumers impel the people who work to satisfy them.” (p.15)

“In the Indian village collaboration of the family members not only economizes expenses but sweetens labour. Culture and refinement come early to the artizan through his work amidst his kith and kin.”

Now while these indirect results of conditions of labor may be classed as “non-economic”, why should those conditions be so regarded which directly raise or lower the dissatisfaction, or human cost of production?

Then again, Mr. Pigou affirms that “non-economic welfare is liable to be modified by the manner in which income is spent. Of different acts of consumption that yield equal satisfactions, one may exercise a debasing, and another an elevating influence” (p.17). Here once more he brings to bear upon non-economic welfare a normative standard, which really puts his whole calculus out of gear. Either one must accept provisionally current standards of “the desired”, alike for economic and non-economic welfare, or frankly apply to both fields some normative science of human values. Mr. Pigou recognizes formally a part of his difficulty though he does not appreciate its magnitude. For he argues (p.18), “These very real elements in welfare [i. e., “ethically superior” interests in literature and art etc.] will, indeed, enter into relation with the measuring rod of money and so be counted in economic welfare, in so far as one group of people devote income to purchasing things for other people. When they do this, they are likely to take account of the total effect, and not merely of the effect on the satisfactions of those people—especially if the said people are their own children.” In other words, here the ideally desirable is substituted for the actually desired. The importance of this distinction, fatal to Mr. Pigou’s economic calculus, is seen when we remember that quite twenty-five per cent of the current income of the country is spent by public authorities in this way. The state’s attitude both to production and consumption it is impossible to correlate with the estimate of economic welfare on the basis of “a positive science of what is and tends to be, not a normative science of what ought to be.” The parent in spending money on his children, the philanthropist in doing good to others, and the state in its public expenditures, are manifestly concerned with “what ought to be.”

It seems impossible to deal with a national income by excluding a normative science and sticking to the current standard of the desired. The cleavage between economic welfare estimated on the latter standard, and non-economic, or total, welfare estimated on the former, is wholly inadmissible. Either we must take actual current satisfactions and dissatisfactions for our standard, apply them to both sides of the economic question, and extend the same standard to non-economic welfare, or we must apply to the entire area of consideration some normative method based on ethics or biology. The attempt to reconcile these two standards must land us in intellectual chaos.

Mr. Pigou seems to have some inkling of his difficulty for he admits that “any rigid inference from effects on economic welfare to effects on total welfare is out of the question.” He falls back, however, upon a presumption, “an unverified probability “ that total welfare will probably vary with economic welfare in direction, though not in magnitude. This means that more wealth per head is presumed to carry more total satisfaction, irrespective of the methods of production or the distribution of its toil, upon the one hand, the nature of the wealth, its distribution and the uses or abuses of its consumption on the other hand. The presumption is, I think, open to grave doubt, at any rate until it is shown that with growing wealth there is some normal tendency towards lightening the day’s work for the average worker, and towards more, not less equalization, in the distribution of incomes.

I have laid stress upon the failure of English economists to interpret economic welfare with equal regard to the production and consumption processes. This oversight is formally corrected by Mr. Pigou in his Chapter IV stating “The relation of economic welfare to the National Dividend.” There he lays down the doctrine that: “The quantity of economic welfare associated with any volume of the dividend depends, not only on the satisfaction yielded by consumption, but also on the dissatisfaction involved in production” (p.43). One may complain of the assumption that no positive form of satisfaction involved in production is recognized, but the passage does appear to furnish a consistent standard for measuring economic welfare as he defines it. You would assess in economic welfare any stock of goods according to the total satisfaction it afforded in its consumption over the net dissatisfaction attending its production.

But having given this formal recognition to the part which disutility plays in economic welfare, Mr. Pigou proceeds to deal with the national dividend, as a concrete annual product, exclusively with regard to the effects of its distribution, in the shape of income, upon economic welfare. The differences in amount of economic welfare, attendant on various shifts in distribution of income, and the special problems of state or business machinery by which changes in distribution may be brought about, occupy almost the whole of his long treatise.

Nowhere is there any further recognition of the truth that the economic welfare of a man, or a class, or a nation, is dependent on, consists in and varies with, the conditions of the production of the national dividend, as much as upon its consumption.

Economic welfare is thus in fact confined to utilities or satisfactions of consumption. And these utilities are to be assessed in terms of current desirability. Mr. Pigou does not seek to go behind existing standards. For purposes of economic welfare a dollar’s worth of dope equals a dollar’s worth of food or other necessary of life, for “of different acts of consumption that yield equal satisfactions, one may exercise a debasing, and another an elevating influence.” Such bad consumption reacts apparently upon the quantity of welfare but not of economic welfare! This is made abundantly clear on page 28: “the first asserts that additions to work-people’s wages do not really lead to economic welfare, but are merely dissipated in worthless forms of exciting pleasure. This objection is, indeed, obviously irrelevant, when economic welfare is defined as we have defined it.”

The strongest and most serviceable part in Mr. Pigou’s analysis consists in showing with precision how economic welfare, connected with the consumption of any given body of resources, increases the more evenly this body of resources is distributed between them. It would seem to be an obvious corollary, that economic welfare, connected with these same resources, increased the more evenly the human costs of producing them were distributed between the producers. But though, several times in elaborating his argument, Mr. Pigou introduces parenthetically some consideration bearing upon economic welfare from the production side , some tough barrier in his thinking prevents him from giving it its proper place as a factor in economic welfare. What this barrier is remains a mystery. Perhaps, however, light is thrown upon it by the curious treatment of “costs” which has crept into the Cambridge doctrine, formerly confined to the theory of foreign trade. The most naive statement of this doctrine is thus presented by one of the ablest of the young Cambridge economists, Mr. W.D. Henderson.

The real costs which the prices of a commodity measure are not absolute but comparative. Marginal money costs reduce themselves in the last analysis to the payments which must be made to secure the use of the requisite agents of production. These payments tend to equal the payments which the same agents could have commanded in alternative employments. The payments which they could have commanded in alternative employments tend in their turn to equal the derived marginal utilities of their services in those employments. It is thus the loss of utility, which arises from the fact that these agents of production are not available for alternative employments, that is measured by the money costs of a commodity at the margin of production.

Ignoring the difficulty of understanding in what possible sense “payments” can tend to “equal” utilities, one wonders why it should seem even plausible that it is easier to compare respective “losses of utility” in other goods than costs or disutilities involved in producing the actual goods that are the objects of exchange. The doctrine that the real cost of anything is the forgone utility of other things perversely rules out all human considerations related to the supply side of exchange, by substituting an indirect and strictly irrelevant test for a direct and relevant one. It reminds one of the famous definition of sugar as “the stuff which makes tea nasty when you don’t put any in.”

This change-over in post-Jevonian theory from the producer point of view of the older classical political economy (where consumption had no valid place and no utility save as it was “productive”, i. e. contributory to the end of promoting more production) to this modern stress upon the utility of consumption, as not only the practical end of the economic costs, but the first principle of economic theory, is often claimed as a great advance in humanism, Utility, as issuing from wealth, real income, is now in the saddle. Economists concern themselves more and more with the problems of increasing the output of concrete goods, and of enlarging their utility by better distribution. But the twist of mind which leads so many of them to hold that it is easier and more relevant to welfare to evaluate goods for purposes of exchange, or for inherent satisfactions, by confining attention to the utilities of consumption they embody, is the more amazing since their professed master, Dr. Marshall, performed his greatest single service to economic theory in his balanced interrelation of supply and demand prices and the equality of their importance in the determination of value.

Nor is this disparagement of the human interpretation of costs, and the disposition to transmute them into utilities, confined to British economists. Here is Professor Taussig declaring that, “In the last analysis, the income of an individual, or of a community, consists of a sum of utilities steadily accruing from its store of economic goods. It consists, that is, of the total utility of all its goods.” So Professor Taussig, like Professor Pigou, appears to envisage economic welfare entirely in terms of concrete goods shedding utility in processes of consumption.

It is particularly strange that this one-sided theory should have attained such vogue, at a time when practical reformers in every industrial country devote so much attention to problems of lessening the human costs of production: by shortening hours of labor; restricting the employment of younger and weaker workers and imposing intervals of rest, or of alternative work; lightening the muscular and nervous strains; improving factory hygiene; and otherwise trying to reduce the net human costs of production by what is significantly called “welfare work”.

The failure of the post-Jevonian, or neo-classical economists of Britain and of the United States to humanize economic theory, in the sense of finding methods of expressing concrete economic goods and processes in terms of human welfare, is contained in four chief defects:

First, their failure to interpret the human welfare attaching to a concrete body of wealth, (a real dividend) so as to include equally the utilities and disutilities of producing them and of consuming them, with due regard to the actual conditions of the producing and consuming processes.

Secondly, their failure to realize adequately the difficulties attending the processes of applying “the measuring rod of money” to: (a) the varying satisfactions or dissatisfactions of different persons at the same time and the same persons at different times; (b) the separate measurement of different kinds of satisfactions or dissatisfactions in a standard working day or a standard of consumption.

Thirdly, their failure to keep consistently to the professed assessment of economic welfare and the total welfare into which it enters, in terms of present desiredness.

Fourthly, their hesitant attitude in assessing, as elements of the National Dividend, Personal Incomes and Economic Welfare, the products of public services, such as health, education, insurance, art, recreation.

Some of these defects I have here sought briefly to expose. Others are best reserved for discussion in a more formal criticism of Marginalism.

Our immediate problem is to try to understand how it came about that the neo-classical school of British economists failed to develop the subjective treatment introduced by Jevons, so as to produce a consistently human theory of wealth. It was doubtless partly due to the force and vividness with which the objective structure and processes of the industrial system imposed themselves upon observers. This objective system of the business world with its productive processes and its markets absorbed so much attention that little was left for considering the consumptive processes, though the utility associated with them figured as the formal goal of economic activities. Consumption only figured indirectly through demand curves. More and more the neo-classical economics concerned itself with the determination and movement of prices within the limits of the business world. How strong the influence of this school has been is well illustrated in the recent work of the Swedish economist, Gustav Cassel, whose Social Economy resolves all economic problems into questions of price based on scarcity.

This concentration upon price movements and their causes and effects in terms of the business system has been due partly to the discovery of a fascinating field for abstract reasoning. It is not without significance that so many of the younger school of economists in England and America received their academic training in mathematics. For, as will presently appear, the notion that all qualitative differences can be resolved into quantitative may be regarded as the modern substitute for that economic man moving in the “simple system of natural liberty” by which vested interests defended themselves against dangerous assaults in the earlier era of modern capitalism. The mathematical mind, set to work upon supply and demand curves and the conditions which regulated them, rapidly constructed an abstract economic system operated by the movement of identical and infinitesimal units whose accurate adjustment produced a new “economic harmony”. It was not necessary to assume a society composed of “economic men” with completely informed selfishness as their single motive. A series of minute adjustments at the margin of each supply and demand will do all that is required. This is provided chiefly by the intelligent application of new units of capital, labor, and other factors at the several points of vantage in the system, and by the gradual letting down of productive power at points where less is wanted. This unceasing movement of insensible increments on the producing and consuming sides tends both to put the technically right amount of the factors of production in each employment for the maximization of the product, and to distribute that product in accordance with the separate productivity or economic worth of each factor of production. It is not contended that there are no obstacles to the accurate operation of this “tendency”. But Science, which can only deal with tendencies, may legitimately ignore such friction as is itself immeasurable!

The acceptance of this new method and instrument for economic service is due, however, not merely to the craving of scientific men for exactitude. Its immanent conservatism recommends it, not only to timid academic minds, but to the general body of the possessing classes who, though they may be quite incapable of following its subtleties of reasoning, have sufficient intelligence to value its general conclusions as popularized by the press.

Disconcerted by social and political “attacks on property” and by socialist propaganda, sometimes also by social compunctions relating to the unfair apportionment of this world’s goods, they not unnaturally look with ,favor upon the line of defences which this new political economy provides.

Now for their purpose the main use of this new doctrine is that it serves to dispose of the charge against capitalists of exploiting labor. In England the best example of this treatment is given by Mr. Wicksteed, in a work which is at once the most complete and the most naive exposition of Marginalism.

If the final unit of capital, labor, or any other factor in a business or an industry, gets just as much in value as it produces (and it cannot get more or less, for otherwise a larger or a smaller number of units would be employed), then there is no surplus over and above these necessary marginal payments. For since the marginal units are neither more nor less productive than other units, but only marginal in the sense that they represent the limit to the total number employed, all units are equally productive and equally remunerative. As Mr. Wicksteed puts it:

We now see once for all that the marginal distribution in our sense (that is to say, the distribution of the product amongst the claimants in proportion to the significance of the addition or withdrawal of a small increment at the margin determined by the present supply) exhausts the whole product.

Again:

It is not open to anyone who understands the facts to argue that when, by a marginal distribution, every factor, reduced to the common term, has been satisfied, there remains any residue or surplus to be divided or appropriated. The vague and fervid visions of this unappropriated reserve, ruling upward as we recede from this marginal distribution, must be banished forever to the limbo of ghostly fancies.

Not only is there no unearned surplus to fight over among the owners of several factors of production, but substantial justice is done to every separate producer by paying him “what he is worth”—that is his market value on a fair and equal computation under existing economic conditions.

If it is a fact that the most miserable earners of starvation wages are getting all their work is worth, the lamentable fact of the existence of a vast population worth so little must, when once recognized, force us to face the question how we can make them worth more.

There are two main ways of “making people worth more.”

One is breeding, rearing, training and educating them from the beginning, so that they shall possess the vision, the habits and the particular skill which are likely to make them worth most ... The other is to shift them to places and conditions in which they will be worth more than where they are.

In a word, the only way of enabling the workers, collectively or individually, to get more is by increased productivity. Dr. J.B. Clark expounds in America the same simple doctrine of natural equity, showing how, along the lines of this marginal analysis, “the market rate of wages (or interest) gives to labor (or capital) the full product of labor (or capital).” And not only to collective labor, but to the individual worker, for— “Each man accordingly is paid an amount which equals the total product that he personally creates.” In what sense a man’s product can equal his pay, and how a man’s product can be measured, are questions rightly relegated to a closer study of the curious logic of Marginalism. Here we are mainly concerned to show how the emergence of this doctrine in economic science is accommodated to the requirements of the influential glasses for the defence of their economic interests.

It supplies a complete substitute for the wage-fund-cum-Malthusianism of the older Classical Economics. For, if everybody gets for his labor, or any other factor of production, just what it is worth, and can only get more by making it more productive, since the payment to each of “what he is worth” exhausts the entire product, leaving no surplus over which to quarrel—why, we are living in the best of all possible economic worlds, and anyone who, by agitation and wilful misrepresentation, tries to incite envy or stir up discontent, is as wicked as he is foolish. The charge of profiteering is meaningless, and combination can get nothing solid for the workers.

Leaving aside for the moment the question of the truth or falsity of this doctrine, consider how beautifully it fills the requirements of conservatism! What a rebuke alike to the envy and class hatred of the workers, and what an exposure of the folly and futility of ca’ canny! What a sedative to the foolish compunction astir in the minds of many men of great possessions when they survey the condition of the poorer classes! And all this got out of a refined application of Butler’s famous tautology that—

“... the value of a thing Is just as much as it will bring.”

equity being imported into the convincing proposition: “Every man gets what he can get.”

The earlier uses of margins, as we see, made for the disclosure of rents and quasi-rents, not only in the case of land, but in other factors of production, yielding a large composite body of surplus, unearned, unnecessary payments, capable of being diverted by appropriate action either into higher wages or fuller revenue, while the Jevonian calculus of subjective utilities visibly led towards a still more dangerous revelation of the inequality of apportionment of satisfaction in the processes of production and distribution. The effect of the later Marginalism has been to sidetrack both these inconvenient applications of theory, and to substitute one admirably adapted for the re-establishment of confidence in the natural equity and efficiency of the economic system as it stands.

This statement I propose to support by a closer account of the logic of the use of margins.