I (6)

Karl Marx' system is so inconsistent that M. Werner Sombart, who has tried to explain it, declares that “the law of value is not an empirical fact, but a mental fact.” It is a “stimulus to our minds,” and consequently far removed from all reality. M. Werner Sombart says that he has tried to reconcile the obviously contradictory parts of Marx' theory of value, and adds, “at this time Engels can still certify that I was very nearly in the right, but that he is unable to subscribe without some qualification to everything that I have imported into Marx' doctrines. Other critics were of opinion that this was not Marx' theory of value at all.” And M. Werner Sombart adds modestly, “perhaps they are right.” Nevertheless, Engels recognises that “even if Marx' law of value cannot be considered incorrect, it was too vague and was capable of being set out with greater precision,” but he has not himself undertaken the task of doing so.

If the foundation of scientific socialism, with which the disciples of Marx claim to revolutionise the world, is merely a “subjective conception,” deprived of all reality, they lay themselves open to the same criticisms which they level at the French Utopians and socialists of 1848.

It is untrue that labour is the measure of value; value is measured by exchange and is based upon two objective elements, the net cost of the commodity, of which labour constitutes merely a variable element, and the purchasing power of him who desires to possess it, and upon one subjective element, the demand for such commodity. The market rate is fixed, not by the net cost, but by the purchase price.

Value is the ratio between the utility possessed by an individual or group of individuals and the demand as well as the purchasing power of one or of several other individuals. Price is the expression in money of this ratio. The vendor in offering a commodity for sale looks upon labour as an element representing 20, 30, 40, or 60 per cent. of the net cost, but he adds to this the cost of raw materials, interest, and the redemption of his capital, all of them objective elements which are no less indispensable than the element of labour. He fixes his price according to the strength of the demand for which he has to provide, and to the purchasing power exhibited by those who furnish that demand. If the price he asks be greater than this purchasing power, the contemplated purchasers abstain from buying, and if the vendor be obliged to sell, he first makes a reduction in that portion of the profit which he had proposed to reserve for himself, and subsequently draws upon his total net cost, in which case he sells at a loss. But this loss falls upon the other elements in the net cost of production as well as upon the element of labour, indeed labour is only affected in the last resort.