Without recourse to some such common denominator as value the outcome of the argument would, as Mr. Clark indicates, be something resembling the Ricardian law of differential rent instead of a law drawn in homogeneous terms of "final productivity"; and the law of "natural" distribution would then, at the best, fall short of a general formula. But the recourse to terms of value does not, as Mr. Clark recognises, dispose of the question without more ado. It smooths the way for the argument, but, unaided, it leaves it nugatory. According to Hudibras, "The value of a thing Is just as much as it will bring," and the later refinements on the theory of value have not set aside this dictum of the ancient authority. It answers no pertinent question of equity to say that the wages paid for labor are as much as it will bring. And Mr. Clark's chapter (xxiv.) on "The Unit for Measuring Industrial Agents and their Products" is designed to show how this tautological statement in terms of market value converts itself, under competitive conditions, into a competent formula of distributive justice. It does not conduce to intelligibility to say that the wages of labor are just and fair because they are all that is paid to labor as wages. What further value Mr. Clark's extended discussion of this matter may have will lie in his exposition of how competition converts the proposition that "the value of a thing is just as much as it will bring" into the proposition that "the market rate of wages (or interest) gives to labor (or capital) the full product of labor (or capital)."
In following up the theory at this critical point, it is necessary to resort to the fuller statement of the Distribution of Wealth,[15] the point being not so adequately covered in the Essentials. Consistently hedonistic, Mr. Clark recognises that his law of natural justice must be reduced to elementary hedonistic terms, if it is to make good its claim to stand as a fundamental principle of theory. In hedonistic theory, production of course means the production of utilities, and utility is of course utility to the consumer.[16] A product is such by virtue of and to the amount of the utility which it has for a consumer. This utility of the goods is measured, as value, by the sacrifice (disutility) which the consumer is willing to undergo in order to get the utility which the consumption of the goods yields him. The unit and measure of productive labor is in the last analysis also a unit of disutility; but it is disutility to the productive laborer, not to the consumer. The balance which establishes itself under competitive conditions is a compound balance, being a balance between the utility of the goods to the consumer and the disutility (cost) which he is willing to undergo for it, on the one hand, and, on the other hand, a balance between the disutility of the unit of labor and the utility for which the laborer is willing to undergo this disutility. It is evident, and admitted, that there can be no balance, and no commensurability, between the laborer's disutility (pain) in producing the goods and the consumer's utility (pleasure) in consuming them, inasmuch as these two hedonistic phenomena lie each within the consciousness of a distinct person. There is, in fact, no continuity of nervous tissue over the interval between consumer and producer, and a direct comparison, equilibrium, equality, or discrepancy in respect of pleasure and pain can, of course, not be sought except within each self-balanced individual complex of nervous tissue.[17] The wages of labor (i.e., the utility of the goods received by the laborer) is not equal to the disutility undergone by him, except in the sense that he is competitively willing to accept it; nor are these wages equal to the utility got by the consumer of the goods, except in the sense that he is competitively willing to pay them. This point is covered by the current diagrammatic arguments of marginal-utility theory as to the determination of competitive prices.
But, while the wages are not equal to or directly comparable with the disutility of the productive labor engaged, they are, in Mr. Clark's view, equal to the "productive efficiency" of that labor.[18] "Efficiency in a worker is, in reality, power to draw out labor on the part of society. It is capacity to offer that for which society will work in return." By the mediation of market price, under competitive conditions, it is held, the laborer gets, in his wages, a valid claim on the labor of other men (society) as large as they are competitively willing to allow him for the services for which he is paid his wages. The equitable balance between work and pay contemplated by the "natural" law is a balance between wages and "efficiency," as above defined; that is to say, between the wages of labor and the capacity of labor to get wages. So far, the whole matter might evidently have been left as Bastiat left it. It amounts to saying that the laborer gets what he is willing to accept and the consumers give what they are willing to pay. And this is true, of course, whether competition prevails or not.
What makes this arrangement just and right under competitive conditions, in Mr. Clark's view, lies in his further doctrine that under such conditions of unobstructed competition the prices of goods, and therefore the wages of labor, are determined, within the scope of the given market, by a quasi-consensus of all the parties in interest. There is of course no formal consensus, but what there is of the kind is implied in the fact that bargains are made, and this is taken as an appraisement by "society" at large. The (quasi-) consensus of buyers is held to embody the righteous (quasi-) appraisement of society in the premises, and the resulting rate of wages is therefore a (quasi-) just return to the laborer.[19] "Each man accordingly is paid an amount that equals the total product that he personally creates."[20] If competitive conditions are in any degree disturbed, the equitable balance of prices and wages is disturbed by that much. All this holds true for the interest of capital, with a change of terms.
The equity and binding force of this finding is evidently bound up with that common-sense presumption on which it rests; namely, that it is right and good that all men should get what they can without force or fraud and without disturbing existing property relations. It springs from this presumption, and, whether in point of equity or of expediency, it rises no higher than its source. It does not touch questions of equity beyond this, nor does it touch questions of the expediency or probable advent of any contemplated change in the existing conventions as to rights of ownership and initiative. It affords a basis for those who believe in the old order—without which belief this whole structure of opinions collapses—to argue questions of wages and profits in a manner convincing to themselves, and to confirm in the faith those who already believe in the old order. But it is not easy to see that some hundreds of pages of apparatus should be required to find one's way back to these time-worn commonplaces of Manchester.
In effect, this law of "natural" distribution says that whatever men acquire without force or fraud under competitive conditions is their equitable due, no more and no less, assuming that the competitive system, with its underlying institution of ownership, is equitable and "natural." In point of economic theory the law appears on examination to be of slight consequence, but it merits further attention for the gravity of its purport. It is offered as a definitive law of equitable distribution comprised in a system of hedonistic economics which is in the main a theory of distributive acquisition only. It is worth while to compare the law with its setting, with a view to seeing how its broad declarations of economic justice shows up in contrast with the elements out of which it is constructed and among which it lies.
Among the notable chapters of the Essentials is one (vi.) on Value and its Relation to Different Incomes, which is not only a very substantial section of Mr. Clark's economic theory, but at the same time a type of the achievements of the latter-day hedonistic school. Certain features of this chapter alone can be taken up here. The rest may be equally worthy the student's attention, but it is the intention here not to go into the general substance of the theory of marginal utility and value, to which the chapter is devoted, but to confine attention to such elements of it as bear somewhat directly on the question of equitable distribution already spoken of. Among these latter is the doctrine of the "consumer's surplus,"—virtually the same as what is spoken of by other writers as "consumer's rent."[21] "Consumer's surplus" is the surplus of utility (pleasure) derived by the consumer of goods above the (pain) cost of the goods to him. This is held to be a very generally prevalent phenomenon. Indeed, it is held to be all but universally present in the field of consumption. It might, in fact, be effectively argued that even Mr. Clark's admitted exception[22] is very doubtfully to be allowed, on his own showing. Correlated with this element of utility on the consumer's side is a similar volume of disutility on the producer's side, which may be called "producer's abatement," or "producer's rent": it is the amount of disutility by which the disutility-cost of a given article to any given producer (laborer) falls short of (or conceivably exceeds) the disutility incurred by the marginal producer. Marginal buyers or consumers and marginal sellers or producers are relatively few: the great body on both sides come in for something in the way of a "surplus" of utility or disutility.
All this bears on the law of "natural" wages and interest as follows, taking that law of just remuneration at Mr. Clark's rating of it. The law works out through the mediation of price. Price is determined, competitively, by marginal producers or sellers and marginal consumers or purchasers: the latter alone on the one side get the precise price-equivalent of the disutility incurred by them, and the latter alone on the other side pay the full price-equivalent of the utilities derived by them from the goods purchased.[23] Hence the competitive price—covering competitive wages and interest—does not reflect the consensus of all parties concerned as to the "effective utility" of the goods, on the one hand, or as to their effective (disutility) cost, on the other hand. It reflects instead, if anything of this kind, the valuations which the marginal unfortunates on each side concede under stress of competition; and it leaves on each side of the bargain relation an uncovered "surplus," which marks the (variable) interval by which price fails to cover "effective utility." The excess utility—and the conceivable excess cost—does not appear in the market transactions that mediate between consumer and producer.[24] In the balance, therefore, which establishes itself in terms of value between the social utility of the product and the remuneration of the producer's "efficiency," the margin of utility represented by the aggregate "consumer's surplus" and like elements is not accounted for. It follows, when the argument is in this way reduced to its hedonistic elements, that no man "is paid an amount that equals the amount of the total product that he personally creates."
Supposing the marginal-utility (final-utility) theories of objective value to be true, there is no consensus, actual or constructive, as to the "effective utility" of the goods produced: there is no "social" decision in the case beyond what may be implied in the readiness of buyers to profit as much as may be by the necessities of the marginal buyer and seller. It appears that there is warrant, within these premises, for the formula: Remuneration ≷ than Product. Only by an infinitesimal chance would it hold true in any given case that, hedonistically, Remuneration = Product; and, if it should ever happen to be true, there would be no finding it out.
The (hedonistic) discrepancy which so appears between remuneration and product affects both wages and interest in the same manner, but there is some (hedonistic) ground in Mr. Clark's doctrines for holding that the discrepancy does not strike both in the same degree. There is indeed no warrant for holding that there is anything like an equable distribution of this discrepancy among the several industries or the several industrial concerns; but there appears to be some warrant, on Mr. Clark's argument, for thinking that the discrepancy is perhaps slighter in those branches of industry which produce the prime necessaries of life.[25] This point of doctrine throws also a faint (metaphysical) light on a, possibly generic, discrepancy between the remuneration of capitalists and that of laborers: the latter are, relatively, more addicted to consuming the necessaries of life, and it may be that they thereby gain less in the way of a consumer's surplus.