[208] Cf. p. 50, n. It is sufficiently clear, I trust, that this argument is concerned with the relativity of knowledge, and not with the relativity of value. We can know things only in terms of our "apperceptive mass," but that does not mean that things exist only by virtue of our apperceptive mass. And even knowledge is relative only when it is "Knowledge-about." Cf. James, Principles of Psychology, vol. i, p. 221, and The Meaning of Truth, p. 4, n.
[209] Marshall accords a limited recognition to our doctrine. See Principles, 1907 ed., p. 35, where he indicates that certain parts of the theory of value assume the prevailing ethical standards of our Western civilization, and that prices of various stock exchange securities are "normally" affected by the patriotic feelings of purchasers, and even brokers, etc.
CHAPTER XVIII
THE THEORY OF VALUE AND THE THEORY OF PRICES (concluded)
My strictures upon the Austrian, or "utility" theory of value in what has gone before seem to call for further qualification here. As a theory of value, as a theory to explain the nature and origin of value, I am convinced that the Austrian theory is utterly and hopelessly inadequate. And yet, for the work of the Austrian economists, taken by and large, I have the highest admiration. Their treatment of margins, their conception of the motivating function of value, and their new stress on the demand side of the price-problem, constitute a marked advance over the point of view of the earlier English School, even though perhaps too extreme a reaction. And their detailed work in the price analysis, despite the utterly inadequate basis which the utility theory of value affords for it, has been marvelously accurate, sound, and useful. Having no logical warrant for an objectively valid quantitative value concept, they have none the less assumed and used one—and used it marvelously well. Sometimes that objective value is called by the name, "objective value." Sometimes they call it "marginal utility," and yet it is clearly anything but the feeling of an individual, for it is broken up into different parts, and reflected back and back through different productive goods of remoter and remoter rank till it has got very far from the individual who may be supposed to feel it. Production is the production, not of material things, but of "utilities"—and yet these utilities, as treated in the analysis, are anything but individual feeling-magnitudes, and the actual reasoning on the basis of them would not be different if they were called quantities of value outright. By logical leaps, by confusing "utility" with demand, or by confusing "marginal utility" with objective value,[210] the Austrians have got what the practical exigencies of price theory demand. A detailed estimate of the work of the Austrian School is, of course, out of place here, but I do not wish to be understood as failing to recognize the immense value of the work of men who have given so great an impetus to economic thought as has been the case with the Austrian masters.
There is a further topic in connection with the relation between value theory and price theory that calls for more explicit attention here, though frequent reference has been made to it already. What is the relation of the distributive problem to value theory and to price theory? Is distribution a price problem or a value problem?
It may be looked at from either angle, and treated in either way. A complete theory of distribution involves many of the most fundamental social values. Indeed, it is through the machinery of distribution that the non-economic values most vitally affect economic values. Wages, interest, competitive profits, are surely legal categories, and are possible only in a society where there is free labor and private control of industry. We may agree with Wieser[211] that, as categories of economic causation, interest, rent, and wages will remain even in a communistic society (and, doubtless, also profit and loss), but that is far from saying (as Wieser of course recognizes) that they would remain as distributive shares. Each social system has its own distributive scheme.
But, in a system like that of Western civilization to-day, where human services and the uses of land and instrumental goods are offered in the market like other commodities, we may treat them in terms of the price analysis with as much propriety as the other commodities. The prices paid for them measure a complex of social forces, but we cannot always disentangle these social forces and measure them separately. It is hard to tell precisely how much influence on the price of labor has been exerted by a speech from Mr. Gompers, or a Federal injunction, or a law for the exclusion of certain classes of immigrants. If we wish to handle distribution quantitatively, we must do it superficially, studying in the market the effects which the underlying social forces manifest there with reference to the rewards of the different factors of production. This has been increasingly the case with later theories of distribution. If, on the other hand, we take the discussion which J. S. Mill gives in book ii of his Principles, we shall find that the price analysis plays relatively little part, and that he considers chiefly the influence of the more fundamental social values.[212]