But this revision of "final productivity" has further consequences for the optimistic doctrines of hedonism. Evidently, by a somewhat similar line of argument the "consumer's surplus" will be made to disappear, even as this that may be called the "producer's surplus" has disappeared. Production being acquisition, and the consumer's cost being cost of acquisition, the argument above should apply to the consumer's case without abatement. On considering this matter in terms of the hedonistically responsive individual concerned, with a view to determining whether there is, in his calculus of utilities and costs, any margin of uncovered utilities left over after he has incurred all the disutilities that are worth while to him,—instead of proceeding on a comparison between the pleasure-giving capacity of a given article and the market price of the article, all such alleged differential advantages within the scope of a single sensory are seen to be nothing better than an illusory diffractive effect due to a faulty instrument.
But the trouble does not end here. The equality: pain-cost = pleasure-gain, is not a competent formula. It should be: pain-cost incurred = pleasure-gain anticipated. And between these two formulas lies the old adage, "there's many a slip 'twixt the cup and the lip." In an appreciable proportion of ventures, endeavors, and enterprises, men's expectations of pleasure-gain are in some degree disappointed,—through miscalculation, through disserviceable secondary effects of their productive efforts, by "the act of God," by "fire, flood, and pestilence." In the nature of things these discrepancies fall out on the side of loss more frequently than on that of gain. After all allowance has been made for what may be called serviceable errors, there remains a margin of disserviceable error, so that pain-cost > eventual pleasure-gain = anticipated pleasure-gain—n. Hence, in general, pain-cost > pleasure-gain. Hence it appears that, in the nature of things, men's pains of production are underpaid by that much; although it may, of course, be held that the nature of things at this point is not "natural" or "normal."
To this it may be objected that the risk is discounted. Insurance is a practical discounting of risk; but insurance is resorted to only to cover risk that is appreciated by the person exposed to it, and it is such risks as are not appreciated by those who incur them that are chiefly in question here. And it may be added that insurance has hitherto not availed to equalise and distribute the chances of success and failure. Business gains—entrepreneur's gains, the rewards of initiative and enterprise—come out of this uncovered margin of adventure, and the losses of initiative and enterprise are to be set down to the same account. In some measure this element of initiative and enterprise enters into all economic endeavor. And it is not unusual for economists to remark that the volume of unsuccessful or only partly successful enterprise is very large. There are some lines of enterprise that are, as one might say, extra hazardous, in which the average falls out habitually on the wrong side of the account. Typical of this class is the production of the precious metals, particularly as conducted under that régime of free competition for which Mr. Clark speaks. It has been the opinion, quite advisedly, of such economists of the classic age of competition as J. S. Mill and Cairnes, e.g., that the world's supply of the precious metals has been got at an average or total cost exceeding their value by several fold. The producers, under free competition at least, are over-sanguine of results.
But, in strict consistency, the hedonistic theory of human conduct does not allow men to be guided in their calculation of cost and gain, when they have to do with the precious metals, by different norms from those which rule their conduct in the general quest of gain. The visible difference in this respect between the production of the precious metals and production generally should be due to the larger proportions and greater notoriety of the risks in this field rather than to a difference in the manner of response to the stimulus of expected gain. The canons of hedonistic calculus permit none but a quantitative difference in the response. What happens in the production of the precious metals is typical of what happens in a measure and more obscurely throughout the field of productive effort.
Instead of a surplus of utility of product above the disutility of acquisition, therefore, there emerges an average or aggregate net hedonistic deficit. On a consistent marginal-utility theory, all production is a losing game. The fact that Nature keeps the bank, it appears, does not take the hedonistic game of production out of the general category known of old to that class of sanguine hedonistic calculators whose day-dreams are filled with safe and sane schemes for breaking the bank. "Hope springs eternal in the human breast." Men are congenitally over-sanguine, it appears; and the production of utilities is, mathematically speaking, a function of the pig-headed optimism of mankind. It turns out that the laws of (human) nature malevolently grind out vexation for men instead of benevolently furthering the greatest happiness of the greatest number. The sooner the whole traffic ceases, the better,—the smaller will be the net balance of pain. The great hedonistic Law of Nature turns out to be simply the curse of Adam, backed by the even more sinister curse of Eve.
The remark was made in an earlier paragraph that Mr. Clark's theories have substantially no relation to his practical proposals. This broad declaration requires an equally broad qualification. While the positions reached in his theoretical development count for nothing in making or fortifying the positions taken on "problems of modern industry and public policy," the two phases of the discussion—the theoretical and the pragmatic—are the outgrowth of the same range of preconceptions and run back to the same metaphysical ground. The present canvass of items in the doctrinal system has already far overpassed reasonable limits, and it is out of the question here to pursue the exfoliation of ideas through Mr. Clark's discussion of public questions, even in the fragmentary fashion in which scattered items of the theoretical portion of his treatise have been passed in review. But a broad and rudely drawn characterisation may yet be permissible. This latter portion of the volume has the general complexion of a Bill of Rights. This is said, of course, with no intention of imputing a fault. It implies that the scope and method of the discussion is governed by the preconception that there is one right and beautiful definitive scheme of economic life, "to which the whole creation tends." Whenever and in so far as current phenomena depart or diverge from this definitive "natural" scheme or from the straight and narrow path that leads to its consummation, there is a grievance to be remedied by putting the wheels back into the rut. The future, such as it ought to be,—the only normally possible, natural future scheme of life,—is known by the light of this preconception; and men have an indefeasible right to the installation and maintenance of those specific economic relations, expedients, institutions, which this "natural" scheme comprises, and to no others. The consummation is presumed to dominate the course of things which is presumed to lead up to the consummation. The measures of redress whereby the economic Order of Nature is to renew its youth are simple, direct, and short-sighted, as becomes the proposals of pre-Darwinian hedonism, which is not troubled about the exuberant uncertainties of cumulative change. No doubt presents itself but that the community's code of right and equity in economic matters will remain unchanged under changing conditions of economic life.
FOOTNOTES:
[1] Reprinted by permission from The Quarterly Journal of Economics, Vol. XXII, Feb., 1908.
[2] The Essentials of Economic Theory, as Applied to Modern Problems of Industry and Public Policy. By John Bates Clark. New York: The Macmillan Company. 1907.
[3] Cf., e.g. The Distribution of Wealth, p. 376, note.