I: THE THEORY OF SERVICE-VALUE
First of all we have the law of value, “which is to political economy what numbers are to arithmetic.”[706]
Ricardo taught that value was determined by the quantity of labour necessary for production. This theory is entirely at one with Bastiat’s, and he would have felt no compunction about inserting it in the Harmonies, for a theory of value which showed that every form of property is really based upon labour seemed to accord with the requirements of justice. But although Bastiat’s method was almost exclusively deductive, and as little realistic as possible, he could never content himself with an explanation which was all too clearly in conflict with the facts. Such a theory could never explain why the value of a pearl accidentally discovered should equal the value of another laboriously brought from the depths of the sea. Accordingly he sought another explanation, juster, and more in accordance with facts, than Ricardo’s.
Carey effected just the needed correction of the Ricardian theory, by propounding another ingenious explanation, namely, that value is determined, not by the quantity of labour actually employed in production, but by the quantity of labour saved. This would account for those facts that refused to fit in with the Ricardian theory, and the chance pearl was no longer a stumbling-block. Bastiat was evidently attracted by this theory.[707] But his satisfaction was by no means complete, for it is not quite clear how a value which is proportional to the amount of labour saved—that is, to labour which never has been and never will be undertaken—can be considered as an economic harmony. But a ray of light illumines the darkness. The labour saved is a kind of service rendered to the person who acquires the commodity. The long-sought explanation is found at last! “Value is the ratio between two exchanged services.”[708] And, seeing that individual property and private fortunes represent sums of values, we might say that a person’s property is merely the sum of the services rendered by him. Herein lies the harmony. Nothing better could be wished for, and Bastiat exults in his discovery. Everything becomes quite clear, every contradiction is removed, every difficulty solved, if we take for our starting-point the crux of economic theory—namely, why diamonds are considered more valuable than water. The diamond is more valuable simply because the person who gives it to me is rendering me a greater service than he who merely gives me a glass of water. This was not the case on the Medusan raft, but even in that instance, seeing that the service rendered was incalculable, the value must have been immense.
Every solution propounded by economists—utility, scarcity, difficulty of acquisition, cost of production, labour—is included within this conception of service, and “economists of all shades of opinion ought to feel satisfied.” “My decision is favourable to every one of them, for they have all seen some aspect of the truth; error being on the other side of the shield.”[709] Moreover, the word “service” has the advantage of including, besides value properly so called (that is, the price of goods), the price of all productive services such as appear under the heads of loans, rent, discount, and interest—in short, “everything that can be said to render a service.”[710]
One cannot help smiling at Bastiat’s naïve exultation, for he never realises that his formula is so comprehensive and includes everything within itself simply because it is an empty form—a mere passe-partout. It really amounts to saying that value depends upon desirability, and we are not so much farther on after all.[711] On closer view, it even lacks that apologetic tone which evidently attracted Bastiat to it. It legitimises neither value nor property, and even if it did it would simply be by the help of a hypocritical formula, for the word “service” gives rise to the belief that all value implies a benefit for those who receive it and a virtue in those who give it. But very frequently it is nothing of the kind. The owner of a house or of a piece of land in the city of London which is let or sold at a fabulous price, the capitalist who lends money to a needy borrower at a usurious rate, or the politician even who in return for an enormous bribe secures some financial concession, cannot be said to be rendering any real service, for all these have either been solicited or demanded, or perhaps even extorted under pressure. Such abnormal rates of discount, interest, or rent can find no place in Bastiat’s formula. From a moral and ethical point of view it is equally futile. It is a mere mask which affords protection as well to the worst exploiter as to the honest tradesman: all are thrown promiscuously into the “universal harmony.”[712]
Despite the justness of these criticisms, and although Bastiat’s attempt to explain value by employing the term “service” must be regarded as futile, the word has not remained a mere ingenious epithet. On the contrary, it has won for itself a permanent place in economic terminology. We shall again meet with it in the vocabulary of that school which prides itself upon the exactness of its method, namely, the Hedonistic and Mathematical school. These later writers constantly make use of the term “productive services,” and would find it hard to discover another word having a sufficiently wide connotation.[713] It is true that the word “service” with all the noble associations of unselfish interest and professional honour which cling to it (compare the phrase “his Majesty’s service”), may lead us astray as to the economic arrangements of society, and that a recollection of the less distinguished uses of the term may cause us to doubt the wisdom of Bastiat’s choice. Still, it is the best that we can imagine when speaking of the society of the future. It is employed in the same sense as Auguste Comte used the term “social function,” or as the equivalent of Marshall’s “economic chivalry.”[714] In attempting to present to ourselves the society of the future, or at least the society of our dreams, we must hope that the present incentive to economic activity, which is merely the desire for profit, will gradually give place to the idea of social service. When that day dawns a statue ought to be erected to the memory of Bastiat.