Social Value: A Study in Economic Theory, Critical and Constructive. Benjamin M. Anderson

of American youth to the study of economic and commercial subjects, and in encouraging the systematic investigation of the problems which vitally affect the business world of to-day. For this purpose they have delegated to the undersigned Committee the task of selecting topics, making all announcements, and awarding prizes annually for those who wish to compete.

      In the year ending June 1, 1910, the following topics were assigned:—

      1. The effect of labor unions on international trade.

      2. The best means of raising the wages of the unskilled.

      3. A comparison between the theory and the actual practice of protectionism in the United States.

      4. A scheme for an ideal monetary system for the United States.

      5. The true relation of the central government to trusts.

      6. How much of J. S. Mill's economic system survives?

      7. A central bank as a factor in a financial crisis.

      8. Any other topic which has received the approval of the Committee.

      A first prize of six hundred dollars, and a second prize of four hundred dollars, were offered for the best studies presented by class A, composed chiefly of graduates of American colleges.

      The present volume was awarded the second prize.

      Professor J. Laurence Laughlin,

       University of Chicago, Chairman. Professor J. B. Clark, Columbia University. Professor Henry C. Adams, University of Michigan. Horace White, Esq., New York City. Professor Edwin F. Gay, Harvard University.

      Footnote

       Table of Contents

      The following study is the outgrowth of investigations in the "Quantity Theory" of money, carried on in the seminar of Professor Jesse E. Pope, at the University of Missouri, during the term 1904-5. That a satisfactory general theory of value must underlie any adequate treatment of the problem of the value of money, and that there is little agreement among monetary theorists concerning the general theory of value, became very evident in the course of this investigation; and that the present writer's conception of value, as expressed in a paper written at that time on the "Quantity Theory," was not satisfactory, became painfully clear after Professor Pope's kindly but fundamental criticisms. The problem of value, laid aside for a time, forced itself upon me in the course of my teaching: my students seemed to understand the treatment of value in the text-books used quite clearly, but I could never convince myself that I understood it, and the conviction grew upon me that the value problem really remained unsolved. Hence the present book. It was begun in Dean Kinley's seminar, at the University of Illinois, in the term 1909-10. The first three parts, in substantially their present form, and an outline sketch of the germ idea of the fourth part, were submitted, in May of 1910, in the Hart, Schaffner & Marx Economic Prize Contest of that year. Part iv was elaborated in detail, and minor changes made in the first three parts, during the year 1910-11, at Columbia University. The book is submitted as a doctor's dissertation to the Faculty of Political Science of that institution.

      My obligations to others in connection with this book are numerous. I cannot refrain from thanking my old teacher Professor Pope, in this connection. I owe my interest in economic theory, and the greater part of my training in economic method, to the three years I spent in his seminar at Missouri. I am also indebted to him for substantial aid in the critical revision of the proofsheets. At the University of Illinois, Dean Kinley and Professors E. L. Bogart and E. C. Hayes were of special service to me, as was also Mr. F. C. Becker, now of the department of philosophy at the University of California. Dean Kinley, in particular, criticized several successive drafts, and made numerous valuable suggestions. My chief obligations at Columbia University are to Professors Seligman, Seager, John Dewey, and Giddings. My debt to Professors Seligman and Dewey is, in part, indicated in the course of the book, so far as points of doctrine are concerned. Both have been kind enough to read and criticize the provisional draft, and Professor Seligman has supervised the revision at every stage. My wife's services, in criticism, in bibliographical work, and in the mechanical labors which writing a book involves, have been indispensable.

      It is due Professor J. B. Clark, since I discuss his theories here at length, to mention the fact that, owing to his absence from Columbia University during the year 1910-11, I have been unable to talk over my criticisms with him, and so may have misinterpreted him at points. Of course, there is a similar danger with reference to every other writer mentioned in the book, but the reader will not be likely to think, in the case of others, that the interpretations have been passed on by the writers discussed, in advance of publication. I must also mention here Professor H. J. Davenport, whose name occurs frequently in the following pages. Chiefly he has evoked criticism in this discussion, but it goes without saying that his Value and Distribution is a most significant work in the history of economic theory, and my indebtedness to it will be manifest.

      The Author.

       Columbia University,

       May, 1911.

ANALYTICAL TABLE OF CONTENTS

       Table of Contents

      PART I. INTRODUCTION

      CHAPTER I

      PROBLEM AND PLAN OF PROCEDURE

      Social Value concept recently become important, chiefly in America, and primarily through the influence of Professor J. B. Clark—Value and "social marginal utility"—Relation of social-value theory to Austrian theory: Professor Clark's view; views of Böhm-Bawerk, Wieser, and Sax—Statement of the author's position: conceptions of social utility and social cost unsatisfactory, but social value concept a necessity for the validation of economic theory—Plan of procedure: study of logical requirements of valid value concept; failure of current theory to justify such a concept; cause of this failure in faulty psychology, epistemology, and sociology presupposed by current economic theory; reconstruction of these presuppositions; on the basis of the reconstruction, a positive theory of social value 3

      PART II. CRITIQUE OF CURRENT VALUE THEORY

      CHAPTER II

      FORMAL AND LOGICAL ASPECTS OF THE VALUE CONCEPT

      Value as ideal, and value as market fact—Value as absolute, and value as relative—Value as quantity—Relation between quantity and quality—Relative conception of value involves a vicious circle, if treated as ultimate—Every "relative value" implies two absolute values—Ratios must have quantitative terms—But physical quantities cannot serve as these terms—Value and evaluation: confusion of the two responsible, in part, for doctrine of relativity—Value in current economic usage: value and wealth; money as a "measure of values" 13

      CHAPTER III

      VALUE AND MARGINAL UTILITY

      Individualistic method of Jevons and the Austrians—Such a method, applied to value problem in concrete social life, yields, not quantities of value, but rather, particular ratios between such quantities—Value cannot be identified with marginal utility of a good to a marginal individual, even though we assume the commensurability and homogeneity of human emotions—Clark's Law 28

      CHAPTER IV

      JEVONS, PARETO AND BÖHM-BAWERK

      When individualistic methods and assumptions are