The Unsolved Riddle of Social Justice

by Stephen Leacock

The economists and the leading thinkers of the nineteenth century were in no doubt about this question. It was their firm conviction that the system under which we live was, in its broad outline, a system of even justice. They held it true that every man under free competition and individual liberty is awarded just what he is worth and is worth exactly what he gets: that the reason why a plain laborer is paid only two or three dollars a day is because he only "produces" two or three dollars a day: and that why a skilled engineer is paid ten times as much is because he "produces" ten times as much. His work is "worth" ten times that of the plain laborer. By the same reasoning the salary of a corporation president who receives fifty thousand dollars a year merely reflects the fact that the man produces—earns—brings in to the corporation that amount or even more. The big salary corresponds to the big efficiency.

And there is much in the common experience of life and the common conduct of business that seems to support this view. It is undoubtedly true if we look at any little portion of business activity taken as a fragment by itself. On the most purely selfish grounds I may find that it "pays" to hire an expert at a hundred dollars a day, and might find that it spelled ruin to attempt to raise the wages of my workingmen beyond four dollars a day. Everybody knows that in any particular business at any particular place and time with prices at any particular point, there is a wage that can be paid and a wage that can not. And everybody, or nearly everybody, bases on these obvious facts a series of entirely erroneous conclusions. Because we cannot change the part we are apt to think we cannot change the whole. Because one brick in the wall is immovable, we forget that the wall itself might be rebuilt.

The single employer rightly knows that there is a wage higher than he can pay and hours shorter than he can grant. But are the limits that frame him in, real and necessary limits, resulting from the very nature of things, or are they mere products of particular circumstances? This, as a piece of pure economics, does not interest the individual employer a particle. It belongs in the same category as the question of the immortality of the soul and other profundities that have nothing to do with business. But to society at large the question is of an infinite importance.

Now the older economists taught, and the educated world for about a century believed, that these limitations which hedged the particular employer about were fixed and assigned by natural economic law. They represented, as has been explained, the operation of the system of natural liberty by which every man got what he is worth. And it is quite true that the particular employer can no more break away from these limits than he can jump out of his own skin. He can only violate them at the expense of ceasing to be an economic being at all and degenerating into a philanthropist.

But consider for a moment the peculiar nature of the limitations themselves. Every man's limit of what he can pay and what he can take, of how much he can offer and how much he will receive, is based on the similar limitations of other people. They are reciprocal to one another. Why should one factory owner not pay ten dollars a day to his hands? Because the others don't. But suppose they all do? Then the output could not be sold at the present price. But why not sell the produce at a higher price? Because at a higher price the consumer can't afford to buy it. But suppose that the consumer, for the things which he himself makes and sells, or for the work which he performs, receives more? What then? The whole thing begins to have a jigsaw look, like a child's toy rack with wooden soldiers on it, expanding and contracting. One searches in vain for the basis on which the relationship rests. And at the end of the analysis one finds nothing but a mere anarchical play of forces, nothing but a give-and-take resting on relative bargaining strength. Every man gets what he can and gives what he has to.

Observe that this is not in the slightest the conclusion of the orthodox economists. Every man, they said, gets what he actually makes, or, by exchange, those things which exactly correspond to it as regards the cost of making them—which have, to use the key-word of the theory, the same value. Let us take a very simple example. If I go fishing with a net which I have myself constructed out of fibers and sticks, and if I catch a fish and if I then roast the fish over a fire which I have made without so much as the intervention of a lucifer match, then it is I and I alone who have "produced" the roast fish. That is plain enough. But what if I catch the fish by using a hired boat and a hired net, or by buying worms as bait from some one who has dug them? Or what if I do not fish at all, but get my roast fish by paying for it a part of the wages I receive for working in a saw mill? Here are a new set of relationships. How much of the fish is "produced" by each of the people concerned? And what part of my wages ought I to pay in return for the part of the fish that I buy?

Here opens up, very evidently, a perfect labyrinth of complexity. But it was the labyrinth for which the earlier economist held, so he thought, the thread. No matter how dark the passage, he still clung tight to it. And his thread was his "fundamental equation of value" whereby each thing and everything is sold (or tends to be sold) under free competition for exactly its cost of production. There it was; as simple as A. B. C.; making the cost of everything proportional to the cost of everything else, and in itself natural and just; explaining and justifying the variations of wages and salaries on what seems a stern basis of fact. Here is your selling price as a starting point. Given that, you can see at once the reason for the wages paid and the full measure of the payment. To pay more is impossible. To pay less is to invite a competition that will force the payment of more. Or take, if you like, the wages as the starting point: there you are again,—simplicity itself: the selling price will exactly and nicely correspond to cost. True, a part of the cost concerned will be represented not by wages, but by cost of materials; but these, on analysis, dissolve into past wages. Hence the whole process and its explanation revolves around this simple fundamental equation that selling value equals the cost of production.

This was the central part of the economic structure. It was the keystone of the arch. If it holds, all holds. Knock it out and the whole edifice falls into fragments.

A technical student of the schools would digress here, to the great confusion of the reader, into a discussion of the controversy in the economic cloister between the rival schools of economists as to whether cost governs value or value governs cost. The point needs no discussion here, but just such fleeting passing mention as may indicate that the writer is well and wearily conversant with it.

The fundamental equation of the economist, then, is that the value of everything is proportionate to its cost. It requires no little hardihood to say that this proposition is a fallacy. It lays one open at once, most illogically, to the charge of being a socialist. In sober truth it might as well lay one open to the charge of being an ornithologist. I will not, therefore, say that the proposition that the value of everything equals the cost of production is false. I will say that it is true; in fact, that is just as true as that two and two make four: exactly as true as that, but let it be noted most profoundly, only as true as that. In other words, it is a truism, mere equation in terms, telling nothing whatever. When I say that two and two make four I find, after deep thought, that I have really said nothing, or nothing that was not already said at the moment I defined two and defined four. The new statement that two and two make four adds nothing. So with the majestic equation of the cost of production. It means, as far as social application goes, as far as any moral significance or bearing on social reform and the social outlook goes, absolutely nothing. It is not in itself fallacious; how could it be? But all the social inferences drawn from it are absolute, complete and malicious fallacies.