II.

It follows from what we have said that no obvious or natural meaning attaches to the concept of social value in a non-communistic society. We shall proceed, therefore, to examine the uses made of it, in order to get a well-defined idea of the character and the importance of this instrument of economic thought.

Many writers call production, distribution, and exchange social processes, meaning thereby that nobody can perform them — at least the two last named — by himself. In this sense, prices are obviously social phenomena. (8) Others explain certain fundamental truths by means of a "representative firm"; that is to say, by considering society, for the moment, as one great establishment, (9) — a method which is very useful for certain purposes. It is very usual, finally, to speak of society as such consuming and producing, directing the agents of production, and so on. This is meant to emphasize the mutual interaction of individuals and the manifold social influences under which all of them live and work. Altho not quite precise, this way of expressing one's self is often a convenient . The concept of social value is frequently used in connection with such sayings, but here its role is not very important and its use does not involve any opposition to the individualistic methods and concepts of theory. It is a summary expression for certain phenomena, and its meaning is pretty clear. It expresses the fact of mutual interaction and interdependence between individuals and the results thereof.

So far we have not, I think, travelled over very controversial ground. But we now approach two more important applications of our concept, which fairly cover the whole range of applications of it within the field of pure theory. In the first of these it is said that "it is society — and not the individual — which sets a value on things"; (10) and in the second that "exchange-value is social value-in-use." (11)

That it is society as a whole which sets values on things can be true in different senses, which are admirably stated by Professor Seligman. This dictum may be nothing more than the short expression already referred to. It is evidently true, moreover, that, if value means "exchange-value," it is, of course, not fixed by any single individual, but only by the action of all. Even then, however, it would not simply be the aggregate of wants that fixes values, but only this aggregate acting according to the self-interest of individuals and to the distribution of wealth among them. But our question is whether social value can be considered as an independent agency, which can be substituted, partly at least, for the idea of individual values; and we need to examine this wider claim. There are two important facts to support it. First, it is only so long as an individual is isolated that the total as well as the marginal utilities of all commodities he may possess depend exclusively on him. All utilities are changed when he lives within society, because of the possibility of barter which then arises. This possibility alters at once the individual's appreciation of his goods. It has an effect on their values similar to the discovery of new ways of using them. Our individual will now put a new value on his goods because of what he can get for them in the market; and this new value depends on how much other people want them. This fact may be said to show a direct social influence on each individuals utility curves.

Secondly, there are other influences of a similar kind. Every one living in a community will more or less look for guidance (12) to what other people do. There will be a tendency to give to his utility curves shapes similar to those of other members of the community. Every one's valuations will be influenced by the fact "that he compares them consciously or unconsciously with those of his neighbors." The phenomenon of fashion affords us an obvious verification of this. Moreover, the same holds true of the "cost side" of economic phenomena. Every one's costs depend, in an easily perceptible way, on every one else's costs, so that the individual cost curves, — for each community, are interdependent and govern each other.

This is important. Social influences like these are the keys to a deeper understanding of the whole life of the functions of the body politic, and the analysis of them may lead to new and valuable results. To-day we know very little about our utility curves, and are forced to make assumptions (13) about their shape. (14)

We must look at individual demand curves and marginal utilities as the data of purely economic problems outside a communistic society. Social influences form them, but for us they are data, at once necessary and sufficient, from which to deduce our theorems. We cannot substitute for them "the community of wants" or the idea of society as such fixing values. That this is so we shall try presently to prove; but, if so, it would follow that this way of expressing things has, except for the case of a communistic society, no other than a metaphorical meaning; that it may not be wrong, but that it is superfluous and only synonymous with what the concept of "interaction of individuals" expressed; and that we had better avoid it, since it lends itself to doubts and to misinterpretation.

If it be really society that fixes values, then the exchange values of things could be called social values-in-use. This theory we may proceed to discuss now. Rodbertus held this view, and it amounts to saying that exchange-values, as represented by prices in a market, are identical with the values which the same commodities should have in a communistic society. Perhaps it is implied that, if society as such should value things, it would put the same values on them as are expressed by their prices under present circumstances, or that market prices express relative values of things which correspond to what they are worth from the standpoint of society as a whole. It may, in explicit terms, be held that what appears prima fade as the result of individual actions turns out, in the end, to be the very thing that would be brought about by the conscious action of society itself. This would, at any rate, be the proper and the most interesting meaning of the formula. This interpretation is confirmed by sayings like these: "The group finds, after comparing individual preferences, that the desire unsatisfied, for instance, by the lack of an apple is three times as great as that unsatisfied by the lack of a nut." "Value is the expression of social marginal utility.'' (15)

Is this true, and under what conditions? It is obviously true for a communistic society. But for a noncommunistic one it would be a fair representation of facts on these conditions only', —

(1) if its members were in the habit of meeting to express their wants and if equal account were taken of all of them, regardless of their wealth;

(2) if the same kinds and amounts of commodities were produced in both cases;

(3) if the principle of distribution were the same in both cases.

These conditions are not fulfilled. We have already touched upon the first. As to the second, it seems to be beyond doubt that production, under the influence of demand from individuals possessing different amounts of wealth, will take a different course from that which it would take in a communistic society, and that different kinds and amounts of commodities will be produced. This fact will alter the values of the products. The principle of distribution might, indeed, conceivably be the same in either case. But the principle now in operation is that of marginal efficiency; and it is probable that, in many cases, another principle — that of want, for example — would more commend itself to a socialistic community. Such a community might apportion goods among its members according to their several needs. But, disregarding this, we easily see that, even if the principle of efficiency were applied in both cases, it would mean, in the one case, distribution according to personal efficiency, in the other distribution according to the efficiency of the productive agency one may possess. Land and capital are factors in the second case, and this makes a decisive difference.

Hence it follows that to substitute for the many individual values the idea of a social value cannot lead to more than an analogy. This analogy is separated from reality by a great gulf, — by the fact that values, prices, and shares in the social product all depend on, and are dominated by, the original distribution of wealth. Rodbertus's saying, taken verbally, is altogether wrong. This we shall prove more fully by discussing its application to the problem of distribution.