Basis of Valuation.—The whole basis for value and prices has also been changed. The old basis, employed for the most part through the Middle Ages in fixing the value of labor or goods, was the amount of labor and material which had been expended. The modern basis is that of supply and demand. This proceeds on the theory that it is human wants which after all give value to any product. I may have expended time and labor upon a book or carving, or in the cultivation of a new vegetable, or in the manufacture of an article for apparel, but if no one cares to read the book or look at the carving, if the vegetable is one that no one can eat, or the garment is one that no one will wear, it has no value. Starting then from this, we can see how the two elements in valuation—namely, demand and supply—are affected by social factors. The demand for an article depends upon the market: i.e., upon how many buyers there are, and what wants they have. Modern methods of communication and transportation have made the market for goods as large as the civilized world. Education is constantly awakening new wants. The facilities for communication, for travel, and for education are constantly leading one part of the world to imitate the standards or fashions set by other parts. We have, therefore, a social standard for valuation which is constantly extending in area and in intensity.
The other factor in valuation, namely, the supply, is likewise being affected in an increasing degree by social forces. With many, if not with most, of the commodities which are of greatest importance, it has been found that there is less profit in an unrestricted supply than in a supply regulated in the interest of the producers. The great coal mines, the iron industries, the manufacturers of clothing, find it more profitable to combine and produce a limited amount. The great corporations and trusts have usually signalized their acquisition of a monopoly or an approximate control of any great field of production by shutting down part of the factories formerly engaged. The supply of labor is likewise limited by the policies of labor unions in limiting the number of apprentices allowed, or by other means of keeping the union small. Tariffs, whether in the interest of capital or of labor, are a social control of the supply. Franchises, whether of steam railroads, street transportation, gas, electric lighting, or other public utilities so-called, are all of them in the nature of monopolies granted to a certain group of individuals. Their value is dependent upon the general need of these utilities, coupled with the public limitation of supply. In many cases the services are so indispensable to the community that the servant does not need to give special care or thought to the rendering of especially efficient service. The increase in population makes the franchises enormously profitable without any corresponding increase of risk or effort on the part of the utility company.
But the most striking illustration of the creation of values by society is seen in the case of land. That an acre of land in one part of the country is worth fifty dollars, and in another part two hundred thousand dollars,[230] is not due to any difference in the soil, nor for the most part to any labor or skill or other quality of the owner. It is due to the fact that in the one case there is no social demand, whereas, in the other, the land is in the heart of a city. In certain cases, no doubt, the owner of city real estate may help by his enterprise to build up the city, but even if so this is incidental. The absentee owner profits as much by the growth of the city as the foremost contributor to that growth. The owner need not even improve the property by a building. This enormous increase in land values has been called the "unearned increment." In America it is due very largely to features of natural location and transportation. It has seemed to some writers, such as Henry George, not only a conspicuous injustice, but the root of all economic evil. It is, no doubt, in many cases, a conspicuous form of "easy money," but the principle is not different from that which is involved in nearly all departments of modern industry. The wealth of modern society is really a gigantic pool. No individual knows how much he creates; it is a social product. To estimate what any one should receive by an attempted estimate of what he has individually contributed is absolutely impossible.
§ 5. THE FACTORS WHICH AID ETHICAL RECONSTRUCTION
The two distinctive features of the modern economic situation, its collective character and its impersonal character, are themselves capable of supplying valuable aid toward understanding the ethical problems and in making the reconstruction required. For the very magnitude of modern operations and properties serves to bring out more clearly the principles involved. The impersonal character allows economic forces pure and simple to be seen in their moral bearings. Publicity becomes a necessity. Just as the factories are compelled to have better light, air, and sanitation than the sweat shops, so public attention is aroused and the conscience stimulated by practices of great corporations, although these practices may be in principle precisely the same as those of private persons which escape moral reprobation. In some cases, no doubt, the very magnitude of the operation does actually change the principle. A "lift" on the road from an oldtime stage-driver, or a "special bargain" at a country store was not likely to disturb the balance of competition as a system of free passes or secret rebates may in modern business. But in other cases what the modern organizations have done is simply to exhibit the workings of competition or other economic forces on a larger scale. An illustration of this is seen in the familiar fact that a law passed to correct some corporate practice is often found to apply to many practices not contemplated by the makers of the law.
The effect of getting a principle out into the open and at work on a large scale is to make public judgment clear and reprobation of bad practices more effective. The impersonal factor likewise contributes powerfully to make condemnation easy. Criticism is unhampered by the considerations which complicate the situation when the conduct of an individual is in question. The individual may be a good neighbor, or a good fellow, or have had bad luck. But no one hesitates to express his opinion of a corporation, and the average jury is not biased in its favor, whatever may be true of the bench. Even the plea that the corporation includes widows and orphans among its shareholders, which is occasionally put forth to avert interference with corporate practices, usually falls on unsympathetic ears. A higher standard will be demanded for business conduct, a more rigid regard for public service will be exacted, a more moderate return for invested capital in public service, and a more liberal treatment of employees will be insisted upon from corporations than from private individuals. Nor does the organization of labor escape the same law. When an agent of a union has been detected in calling a strike for private gain, public sentiment has been as severe in condemnation as in the case of corporate officials who have profited at the expense of stockholders.
Summary.—We may summarize some of the chief points brought out by our analysis. Modern technique has increased enormously the productivity of labor, but has increased its dangers to health and life, and to some extent diminished its educating and moralizing values. The impersonal agencies give vast power, but make responsibility difficult to locate. The collective agencies and the social contributions make the economic process a great social pool. Men put in manual labor, skill, capital. Some of it they have inherited from their kin; some they have inherited from the inventors and scientists who have devised tools and processes; some they have wrought themselves. This pooling of effort is possible because of good government and institutions which were created by statesmen, patriots, and reformers, and are maintained by similar agencies. The pool is immensely productive. But no one can say just how much his contribution earns. Shall every one keep what he can get? Shall all share alike? Or shall there be other rules for division—either made and enforced by society or made by the individual and enforced by his own conscience? Are our present rules adequate to such a situation as that of the present? These are some of the difficult questions that modern conditions are pressing upon the man who thinks.
LITERATURE
Besides the classic treatises of Adam Smith, J. S. Mill, and Karl Marx, which are important for the relation of the economic to the whole social order during the past century, the following recent works in the general field give especial prominence to the ethical problems involved: Marshall, Principles of Economics, 1898; Hadley, Economics, 1896; Clark, Essentials of Economic Theory as Applied to Modern Problems of Industry and Public Policy, 1907; George, Progress and Poverty, 1879; Schmoller, Grundriss der allgemeinen Staatswirtschaftslehre, 1900-04; Bonar, Philosophy and Political Economy, 1893; Hobson, The Social Problem, 1901; Brooks, The Social Unrest, 1903.
On Modern Business and Industry: Veblen, The Theory of Business Enterprise, 1904; Taylor, The Modern Factory System, 1891; Hobson, Evolution of Modern Capitalism, 1894; Toynbee, The Industrial Revolution, 1890; Adams and Sumner, Labor Problems, 1905; S. and B. Webb, History of Trade Unionism, 1894, Problems of Modern Industry, 1898, and Industrial Democracy, 1902; Mitchell, Organized Labor, 1903; Ely, The Labor Movement in America, 1886; Hollander and Barnett, Studies in American Trades Unionism, 1907; Henderson, Social Elements, 1898, chs. vii.-x.