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

precise relation of social value to social marginal utility is variously stated by the writers named: for Professor Clark, value is the measure of effective, or marginal, utility;[5] for Professor Seligman, social value is the expression of social marginal utility;[6] for Professors Ross, Merriam, and Kinley, value is that social marginal utility itself.[7] These statements are more different in words than in ideas, though some significance is to be attached to Professor Seligman's formulation, as will later appear.

This conception is a bold one. It has, moreover, never been adequately developed or criticized. Its friends have found it a convenient and useful working hypothesis, and Professor Clark, especially, has built a great system upon it, but, with the exception of an article in the Yale Review of 1892,[8] has made no serious efforts, either to make clear its full meaning, or to vindicate it—except that, of course, his whole system may be considered such a vindication. Professor Seligman, in an article in the Quarterly Journal of Economics, vol. xv, and also in his Principles of Economics, has espoused the conception, and has shown how, assuming its truth, a great many antagonistic theories may be harmonized; but he, also, has failed to treat it with that detail which full demonstration requires. In particular, he has omitted a treatment of the problem of the relation between the value of a good for the individual and for society, and the relation between individual and social marginal utility.[9] The most searching investigation of the theory has come from unfriendly critics, among whom may be especially named Professor H. J. Davenport, and Professor J. Schumpeter of Vienna.[10]

      For the purposes of this discussion, Professor Clark will be considered as the representative of the Social Value School, for the most part, though attention will be given to some of the other writers named as well. It is worth while, consequently, to make clear at this point the relation between Professor Clark and the Austrian School, with which he is sometimes associated by economic writers. His extensive use of the marginal principle, his use of the term, "utility," and his deduction of value from utility, seem to place him at one with them. Professor Clark has pointed out, however, in the preface to the second edition of his Philosophy of Wealth, that his theory is to be distinguished from that of Jevons by "the analysis of the part played by society as an organic whole in the valuing processes of the market." And the Austrians, for their part, have rejected the conception that value and social marginal utility coincide, or that society, as an organic whole, puts a value on goods. Thus, Böhm-Bawerk:—

Man pflegt den objektiven Tauschwert im Gegensatz zu dem auf individuellen Schätzungen beruhenden subjektiven Wert häufig auch als den volkswirtschaftlichen Wert der Güter zu bezeichnen. Ich halte diesen Gebrauch für nicht empfehlenswert. Zwar wenn man durch ihn nichts anders hervorheben wollte, als dass diese Gestalt des Wertes nur in der Gesellschaft und durch die Gesellschaft hervortreten könne, dass er also das volks- und sozialwirtschaftliche Wertphänomen per eminentiam sei, so wäre dagegen nichts zu erinnern. Gewöhnlich mischt sich aber mit jener Benennung auch die Vorstellung, dass der Tauschwert der Wert sei, den ein Gut für die Volkswirtschaft habe. Man deutet ihn als ein über den subjektiven Urteilen der einzelnen stehendes Urteil der Gesellschaft, welche Bedeutung ein Gut für sie im ganzen habe; gewissermassen als Werturteil einer objektiven höheren Instanz. Dies ist irreführend.[11]

      Equally emphatic is Wieser:—

The ordinary conception, which makes price the social estimate put upon goods, has to the superficial judgment the attraction of simplicity. A good A whose market price is £100 is not only ten times as dear as B whose market price is £10, but it is also absolutely and for every one ten times as valuable. In our conception the matter is much more complicated.... Price alone forms no basis whatever for an estimate of the economic importance of the goods. We must go further and find out their relation to wants. But this relation to wants can only be realised and measured individually.... And the question how it is possible to unite those divergent individual valuations into one social valuation, is one that cannot be answered quite so easily as those imagine who are rash enough to conclude that price represents the social estimate of value.[12]

      Sax, likewise, expresses his dissent:—

Da für die exacte Forschung die Psyche einer fabelhaften Collectiv-Personlichkeit nicht existirt, so kann der Ausgangspunkt unserer Untersuchung auch wieder nur der Individualwerth sein.[13]

Whatever the worth of the conception of social value, it is not the same as the Austrian theory. It is proper to remark here that these strictures of the Austrian writers are probably directed, not against Professor Clark, but rather against the social use-value concept as it had appeared in Germany, in the writings, say, of Rodbertus, and of Adolph Wagner, who accepts Rodbertus' notion.[14]

      It may be well, at the outset, for the writer to define his own position briefly. We shall find the notion of social marginal utility, and the companion notion of social marginal cost (considering the latter as a "real cost," or pain-abstinence cost, concept), unsatisfactory and unilluminating. Social marginal utility, as a determinant of value, cannot be the marginal utility of a good to some particular individual who stands out as the marginal individual in society, nor can it be an average of individual marginal utilities, nor a sum of individual marginal utilities, nor any other possible arithmetical combination of individual marginal utilities, if our conclusions are true. For the term, social marginal utility, we can find only a vague, analogical meaning, if any at all, unless we identify it outright with social value, in which case it is a superfluous term, which itself not only explains nothing, but rather presents complications which call for explanation. We shall find no use for the social utility concept in our analysis. On the other hand, we shall find the conception of social value a necessity for the validation of economic analysis, and a conception which present-day psychological and sociological theory abundantly warrant us in accepting.

      I do not desire, at the outset of a comparatively short book, to anticipate my arguments in detail, but a statement of the plan of procedure may aid the exposition somewhat. I shall first, through an examination of the logical necessities of economic theory, and of the function of the value concept in economics, set up certain logical and formal qualifications for an adequate value concept. Then I shall examine the efforts made by current theories of value to attain such a value concept, by means of the elements of individual utilities, individual costs, or combinations of the two, and show that such procedure gets into invincible logical difficulties. We shall find the source of these difficulties in the faulty epistemology, psychology, and sociology which constitute the avowed or implicit presuppositions of the economic theory of to-day. Criticizing these faulty presuppositions, we shall endeavor to reconstruct them in the light of later epistemological, psychological, and sociological doctrine, and then, on the basis of the new presuppositions, we shall endeavor to develop a truly organic doctrine of social value, and to link it with what seems valuable—that is to say, the greater part—in the economic theory of to-day.

      Footnote

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      [1] The value concept of Marx is not, strictly speaking, a social value concept. Cf. Pareto, V., Cours d'Économie Politique, vol. I, p. 32. Rodbertus, however, has a doctrine of social use value, based on the organic conception of society.