I.

At the outset it is useful to emphasise the individualistic character of the methods of pure theory. Almost every modern writer starts with wants and their satisfaction, and takes utility more or less exclusively as the basis of his analysis. (4) Without expressing any opinion about this modus procedendi, I wish to point out that, as far as it is used, it unavoidably implies considering individuals as independent units or agencies. For only individuals can feel wants. Certain assumptions concerning those wants and the effects of satisfaction on their intensity give us our utility curves, (5) which, therefore, have a clear meaning only for individuals. These utility curves, on the one hand, and the quantities of procurable goods corresponding to them, on the other, determine marginal utilities for each good and each individual. These marginal utilities are the basis and the chief instruments of theoretical reasoning; and they seem, so far, to relate to individuals only. It is important to note that, for the purposes of a theory of utility and value, it is not sufficient to know merely the quantities of goods existing in our theoretical country taken as a whole. Not only must the sum of individual wealth be given, but also its distribution among individuals. Marginal utilities do not depend on what society as such has, but on what individual members have. Nobody values bread according to the quantity of it which is to be found in his country or in the world, but everybody measures the utility of it according to the amount that he has himself, and this in turn depends on his general means. The distribution of wealth is important for determining values and shaping production, and it can even be maintained that a country with one and the same amount of general wealth may be rich or poor according to the manner in which that wealth is distributed. For two reasons we have to start from the individual: first, because we must know individual wants; and, secondly, because we must know individual wealth.

Marginal utilities determine prices and the demand and the supply of each commodity; and prices, finally, tell us much else, and, above all, how the social process of distribution will turn out. (6) We gather from the theory of prices certain laws concerning the interaction of the several kinds of income and the general interdependence between the prices and the quantities of all commodities. This, in nuce, is the whole of pure theory in its narrowest sense; and it seems to be derived from individualistic assumptions by means of an individualistic reasoning. We could easily show that this holds true not only for modern theories, but also for the classical system. It is submitted that this treatment of economic problems is free from inherent faults, and, as far as it goes, fairly represents facts.

It now becomes clear that the same reasoning cannot be directly applied to society as a whole. Society as such, having no brain or nerves in a physical sense, cannot feel wants and has not, therefore, utility curves like those of individuals. Again, the stock of commodities existing in a country is at the disposal, not of society, but of individuals; and individuals do not meet to find out what the wants of the community are. They severally apply their means to the satisfaction of their own wants. Theory does not suggest that these wants are necessarily of an exclusively egotistical character. We want many things not for ourselves, but for others; and some of them, like battleships, we want for the interests of the community only. Even such altruistic or social wants, however, are felt and taken account of by individuals or their agents, and not by society as such. For theory it is irrelevant why people demand certain goods: the only important point is that all things are demanded, produced, and paid for because individuals want them. Every demand on the market is therefore an individualistic one, altho, from another point of view, it often is an altruistic or a social one.

The only wants which for the purpose of economic theory should be called strictly social are those which are consciously asserted by the whole community. The means of satisfying such wants are valued not by individuals who merely interact, but by all individuals acting as a community consciously and jointly.

This case is realized in a communistic society. There, indeed, want and utility are not as simple as they are in the case of individuals. Altho it would have to be determined somewhat artificially what the wants of such a society were, it is clear that we could speak of social utility curves. Furthermore, society would have direct control of all means of production, and could dispose of them much as could an isolated man. Production and distribution would, in fact, be ruled by social value and social marginal utilities; and in this part of economic theory such concepts have a place.

But outside of the domain of communism we see, so far, only individual wants, values, and demands and their interaction. It is true that in some connections, and, in particular, in applying pure theory to practical problems, it is desirable to combine all the individual demand and supply curves into general demand and supply curves. In similar connections we speak of general utility curves. But these are by no means the same as the utility curves of a communistic society. They resemble them and have about the same shape; but they refer to individual wants and to a given distribution of wealth. Being only combinations of individual curves, they cannot be understood without these, and they are not what they would be in a communistic society. In the two types of society different commodities would be produced, and the same commodities would have different values. They would be produced in different quantities and would be differently apportioned among the members. (7)