III.

We now approach the most important aspect of the theory of social value, and that which makes the subject worth discussing. The concept of social value is chiefly instrumental in opening up a thoroughly optimistic view of society and its activities. It affects an important theory and great practical conclusions, and in these the chief interest of the subject centres. Vastly more than terminology is at .stake. As the reader knows, the theory is that even in a non-communistic society each factor of production ultimately gets what its services are worth to the community.

The practical importance of this theory is obvious. It tends to show that economic forces are not only of the same nature, at all times and everywhere, but also that they lead, under a régime of free competition, to the same results as in a communistic society. Competition and private ownership of productive agents are held to bring about a distributive process quite similar to one regulated by a benevolent and intelligent ruler. This theory attributes, indeed, to the law of social value the functions of such a ruler. Society itself is called upon to sanction what is actually happening, and it is assumed. that, apart from minor grievances, there is little to complain of.

It would be possible to trace this view to a period far back in the past. Some of the classical economists and their immediate followers inclined toward it. With McCulloch political economy was not always a dismal science; and others went much farther in this direction, — Bastiat and such later writers as M. Block, P. Leroy-Beaulieu, and G. de Molinari. But it is essential to distinguish this group of economists, whose importance, never very great, is now rapidly declining, from those modern writers with whom we are here concerned. While the former confine themselves to general philosophies about the excellence of free competition and laissez faire, the latter have developed a scientific theory, the originality and merits of which have rightly led to its present vogue. The former are individualists in every sense, the latter emphasize the social aspect of economic things. This new theory was first expounded by J. B. Clark and v. Wieser. (16) The work most typical in this respect is, as far as I know, Carver's Distribution of Wealth. (17)

For the system of economic science the main importance of this theory lies in the fact that, if distribution can be described by means of the social marginal utilities of the factors of production, it is not necessary, for that purpose, to enter into a theory of prices. The theory of distribution follows, in this case, directly from the law of social value. This theory, indeed, seems to be the starting-point of the concept of social value and the main theoretical reason for its introduction; and it helps to set forth all economic phenomena, and especially those of wages and interest, in a very simple manner, — one that is much more lucid and attractive than that derived from an intricate and cumbersome theory of prices. The first step is to describe things in a communistic society. Then it has to be shown or assumed that what happens in a non-communistic society is not essentially different, and that the same theorems apply in both cases. From this follows, on the one hand, the theory of social value as the guiding principle of economic activity, and, on the other hand, that brighter view of everything happening in competitive society.

This last step follows as a consequence of the two others. There is no doubt about the first step; for, certainly, the concept of social value is the only available instrument for explaining the economic life of a communistic society. It enables us to show satisfactorily how such a society carries on its daily existence, how the values of all its commodities will be adjusted, how its means of production will be employed, how they will be arranged on fixed scales of social utility, and how their marginal utilities will be determined. These marginal utilities, in their turn, are the barometer of the social importance of the means of production and fix the share of the value of the product which each productive agent may claim. There is no doubt that v. Wieser's work gives a thoroughly sound theory of a communistic and static society. But it is the second step — the extension of the domain of social value to competitive society — that requires discussion. If tenable, it would much simplify matters and constitute a great step in advance. The concept of social value would, in this case, acquire in economics an importance similar to that of the fiction of a "central sun" in astronomy.

This is what has been tried; and, surely, success has been attained to a certain extent. The fundamental theorems concerning value can be applied, whatever may be the organization of society. Therefore, some of the results obtained by the study of communistic society can serve usefully as a foundation of, and introduction to, the study of economic phenomena in general, — a role which formerly Crusoe was called upon to fulfil. But what we have to decide is whether this study can do more, and whether it gives a perfectly sufficient and correct view of all the features of competitive distribution. The writers referred to have used an interesting device to obtain this end. Whilst retaining the idea of values governed by society as such, they have introduced into their picture of a communistic economy some characteristics of a non-communistic one. They speak of land-owners and capitalists, and even of competition. The society they deal with is one which admits private ownership of factors of production, but retains a control of production and distributes the national product according to the principle of efficiency. Land-owners and capitalists have to submit to this social control, and really are land-owners and capitalists only in so far as they receive rent and interest. Every one, so to speak, keeps his factor of production, but gets his orders from society as to what to do with it; or, to put it differently, every one is regarded according to the social appreciation of what he produces. It is held, not that this is a description of an existing organization, but that, given a régime of free competition, everything happens in the way that it would if society were so organized. This, at least, would be the last consequence of the theory of social value.

We seem to be faced by this alternative: either we are to assume social utility curves, — in which case society must be the sole owner of capital and land, the society is communistic, and no rent or interest will be paid to individuals; or rent and interest are paid, in which case there are no social values, but only individual ones, and society as such does not control production. It may still be held that the final results are the same as they would be if society were in control; and this theory we shah further discuss.