Social Value: A Study in Economic Theory, Critical and Constructive

by Benjamin M. Anderson

CHAPTER XVI

PROFESSOR SELIGMAN'S PSYCHOLOGICAL DOCTRINE OF THE RELATIVITY OF VALUES

Professor Seligman's discussion of value theory has been extremely fertile in suggestions for me, and I find the spirit of the positive theory outlined in this book much closer to the general point of view of his doctrines than to those of any other economic writer. His recognition of the generic character of value, of the fact that economic value is but a species within a genus,[183] his contention that, while ethical principles depend on economic considerations in primitive life, they still, in later and higher stages, attain a relative independence, and react on economic life,[184] his recognition of the essentially social nature of even the individual's wants,[185] his discussion of the legal and moral "level of competition,"[186] and, in general, his insistence upon a sociological point of view, especially in the treatment of all practical problems, have been of marked assistance to me in freeing my mind from the individualistic bias of the narrow price analyses, and in making clear the gap between existing theories of value and the function of the value concept in economic science. At certain stages, as already indicated in part, his theories differ pretty radically from that set forth in the preceding pages. For one thing, I find no place in my scheme for the notions of social utility and social cost[187] which are prominent in his discussions, as, indeed, in the discussion of most of the adherents of the social value school. There is one further point of difference, however, to which I wish especially to call attention, as criticism of Professor Seligman's view brings to light certain significant points in the theory I am defending. The following quotation is from his article, "Social Elements in the Theory of Value," from the Quarterly Journal of May, 1901:[188]—

Progress consists in reducing costs, so that we gradually approach gratuity. But, in reducing the value of certain things, we necessarily increase the value of other things. By diminishing the efforts required to satisfy one want, we liberate the efforts needed to satisfy a new want; it is only when we can satisfy this new want that the means of satisfaction acquires value. For the pioneer who with difficulty is able to clothe and feed himself a piano has no value. It is only as clothing and food take up less of his energy—that is, become of less value to him—that he will appreciate the new want, until finally in civilized society a piano is worth far more than a suit of clothes. Since value, as we know, is simply an expression for marginal utility, we cannot affirm that value in general ever increases or decreases. As pianos are worth more, clothing is worth less.

The relativity of value is here made to depend on a ground different from that which lies at the basis of the English School's doctrine of relativity. The ground of the latter is logical; the ground for Professor Seligman's view is psychological. Values considered as mutual relations between two goods cannot both fall—a fall in one means that it goes lower than the other, whence inevitably the other must rise, as a matter of logical definition. For Professor Seligman, on the other hand, value is a quantity of marginal utility. So far as the logic of the situation is concerned, an increase in the supply of good diminishes their marginal utility, and so their value.[189] But, as soon as that is done, a new want springs into existence, a new object receives value therefrom, and the total quantity of value remains as before. In the article from which the quotation is taken, the doctrine is merged to some extent with the English doctrine of logical relativity, as indicated by the discussion on page 343, and by the footnote on page 344. The English doctrine is also suggested by the treatment in the Principles of Economics (pp. 184-85), where it is stated that "prices may rise or fall with reference to this standard, but we cannot speak of a general rise or fall of values, because there is no fixed point." It is clear, however, that the argument for relativity in the passage first quoted, is wholly distinct from, and independent of, the logical relativity of definition. Professor Seligman, in conversation with the writer, has so distinguished it, and has indicated that, rejecting the logical doctrine of relativity, he now holds this psychological doctrine of relativity, as distinct, both from the absolute conception of Professor Clark, and the relative conception of the English School.

As preliminary to a criticism of Professor Seligman's doctrine, certain distinctions must be made. Values may be relative in Professor Seligman's sense without being relative in the sense in which the English School uses the term: the English School thought only of the relations among, say, a unit of wheat and a unit of corn, a unit of woolen goods, a unit of wine, etc.: Professor Seligman is thinking of the total stocks of these various commodities. Assume, for simplicity, that the stocks of all commodities were doubled, and that the demand curves for all the commodities have the same shape, and that form is the rectangular hyperbola,[190] so that the absolute value of each unit of each commodity would be exactly cut in half. The English School would say that there had been no change in the values of the units; Professor Seligman would say that there had been no change in the value of the stocks, but would concede at once that every unit has had its value cut in half.[191]

Another distinction must be made. There is, to be sure, at any given time, a pretty definitely limited[192] amount of social productive energy. This energy can be distributed among only a limited number of products. Hence, there can be only a limited number of objects to receive value from the mental energies of society. But does it follow from this that what we may call the social energy of value-giving is a limited thing? Or, granted that it is limited, does it necessarily follow that the limits are fixed and rigid? Cannot circumstances arise which will make it vary in amount? If a new want arises, does it necessarily follow that all the old wants become less intense in the exact degree that the new want is intense? Must a quantum of value be withdrawn from the old objects precisely equal to that which is attached to the new object? This doctrine is deliberately affirmed, so far, at least, as the individual is concerned, in the article on "Worth"[193] in Baldwin's Dictionary of Philosophy, etc.:—

The struggle for existence among dispositions, which are at once the objects of ethical valuation and the source of value reactions, springs out of the nervous conditions of these dispositions. While there dwells in each the tendency to utmost activity under the given conditions, yet, since the valuing subject is master of only a limited energy of valuation, i.e., nervous energy, the increase of value of any given disposition must necessarily cause others to decrease. In any case increase of values is always relative.

Now two lines of criticism suggest themselves. In the first place, the concluding sentence of the quotation is a non-sequitur. If there be a definite, absolute quantity of energy, then its distribution among objects can give absolute quantities of value. Reservoirs connected by pipes may among them contain a definite quantity of water, and increase in the volume of water in one may be at the expense of all the others. But still the amount of water in each is an absolute amount. This criticism, I may note, Professor Seligman concurs in. Conceding that a definite amount of value may exist in each object, he holds that there is, none the less, a relativity about value in the sense that increase in the value of one item can only come from a decrease in the value of another, and vice versa. The other line of criticism calls attention to the identification of "energy of valuation" with "nervous energy." That the two are identical would be maintained only by the crudest materialism. The one is a physical force; the other is a psychical force. While nervous energy and energy of valuation may be connected, the nature of the connection is surely not so well known as to justify the assumption that definite limitation in the one implies a precisely corresponding limitation in the other.[194] There is no justification—at least in the present state of psychological knowledge—for holding that the law of the "conservation of energy" applies to psychical energy.[195]

Some concrete illustrations will make clearer the difficulties of the doctrine, as applied to economic life. Assume a group of men on board a whaling vessel, who suddenly discover that they will be obliged to spend the winter in the ice-zone, instead of reaching home in the fall as they had planned. Will not the value of everything in their store of provisions be increased? Will not their whole stock of wealth have a greater value? But this, Professor Seligman objects, is because they are in a situation such that opportunity for reproduction is lacking, and he raises the question as to whether the same situation is possible in economic life on a large scale, where wealth is being constantly produced. Well, assume that a crop failure on a large scale occurs. Will not the value of the total existing supply of the articles in which there is a failure be raised? And will not other competing articles of food have their values increased also? But, Professor Seligman would retort, these increases would be at the expense of the values of the half-grown fields of grain, and at the expense of articles other than food. Granted: but what evidence is there of exact equivalence? And further, assume that half of every existing stock of commodities, of every sort, were suddenly wiped out. Would the sum total of values remain the same? Only on the assumption that the social value curve for this totality of commodities is a rectangular hyperbola.[196] That this particular shape of the curve holds for any particular commodity would be difficult to prove. That it does not hold at all for the necessities of life is one of the commonplaces of economic analysis. Initial items in a stock of necessities have a very great value, when there are no other items of the stock, and the curve often descends very abruptly. Gregory King has undertaken to show, in terms of money, the shape of this curve for wheat in the England of his day. Other commodities have curves which behave very differently. While the argument from the part to the whole is not a valid argument in the presence of specific reasons making the whole obey different laws from the parts, it still, in the absence of such special considerations, does raise a strong presumption. And I must confess that I see no reasons why the curve for the totality of commodities should take the particular form of a rectangular hyperbola, instead of some other form. A priori, the presumption would seem to be that its form would be irregular.