The different kinds of services range from direct to most indirect goods. The commonest labor may serve welfare at the moment or may be embodied in a form to be used years later. In that light, wages seems a more complex problem than either rent or capitalization. But the moment the service embodies itself in a material good with future uses the general theory of capitalization applies to it.
§ II. RELATION OF VALUE THEORIES TO SOCIAL REFORMS
"Orthodox" political economy
1. The earlier theories of political economy implied a dismal view of the future of the masses. The theory of value one holds is sure to affect his view of economic progress and of social reform. The theories from the middle of the eighteenth to the middle of the nineteenth centuries, however varied they were in other respects, nearly all gave a gloomy view of the condition of the laboring-men. The physiocratic school in France, the so-called "orthodox" economists in England (that is, the writers from about 1800 to 1850 that were in sympathy with the landholding or commercial classes), and the socialistic or laboring-class theorists, all inclined to this view. It was while this view prevailed that Carlyle characterized political economy by the term still sometimes heard—"the dismal science." The thinkers of that time started their study of value at wages, and assumed that population would always increase so fast as to force labor to a bare subsistence. The other shares (or the other classes of society) were supposed then to absorb all the surplus income. Economics to-day is not especially lugubrious, and its more cheerful note is due as well to its changed theory of value as to the evidence of advancing welfare among the masses.
The gloomy socialistic theory
2. The socialistic theory of value, akin to the other, holds that capitalists absorb all the benefits of progress. The socialists (of the radical school) claim that their theory is merely the logical conclusion to be drawn from the old "orthodox" theory, stated in its extremest form. Usually, however, the orthodox theorists softened and modified greatly the statement of their harsher views. The socialists have not been willing to recognize any ameliorating conditions. They say: economic theory shows that under a competitive condition of society the laboring-man must be forever ground down in helpless misery; therefore the only hope of the laboring masses is to do away with competitive society and to substitute for it central, governmental control of all industry. They did not and do not attempt to distinguish carefully the part of production, due to brains and effort, from the part due to ownership of capital. The socialist theory is a plan for political agitation rather than a scientific theory of value. It was originated or elaborated by men such as Karl Marx, Frederick Engels, and Ferdinand Lasalle, as labor leaders and political agitators, who found a ready weapon in the bungling economic analysis of the time. The claim of a scientific basis for socialism has continued to be proudly made by their followers, but it has a tottering support in their defective theory of value.
George's single-tax theory
3. The single-tax theory of value is that ground-rent automatically absorbs all benefits of progress. This is the most notable example of a plan of social reform growing out of an abstract theory of value. While the socialists first had their plan of social reform (or revolution), in whose support Marx's fanciful theory of value was invented, Henry George appears first to have got hold of a theory of value that suggested his plan of social reform. Studying the political economy of Ricardo and Mill, he accepted their ideas regarding the hopeless outlook of the laboring classes, and their conception of the theory of ground-rent with its false implication that landowners get all the surplus in society. George thus came to believe that, with private ownership in land, competition steadily robbed all but landlords, even the non-landholding capitalist, of any share in the benefits of progress. This theory of value is thought to explain all the poverty in the world. It calls, in the single-taxer's opinion, for a radical measure of reform, namely, the taking of all rent of land for public purposes as a common instead of an individual income. If the theory of value on which it is based were sound, the doctrine would have irresistible reasons in its favor; if it is false, most of the argument falls to the ground, though there may still be substantial reasons of a different nature for the exceptional treatment of ground-rents for purposes of taxation.
Recent hopeful theories of wages; Walker's