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THE CONCEPT OF VALUE
Need of enlarged concepts, 663.- The "ratio" argument nonessential, 664.—The word "rate" might avoid unnecessary verbal implications, 668. — Relation and quality two phases of one fact, 672.
THE Concept of value is the core of economic thinking, and modern economics is older than American independence, yet the builders of the science are still disputing what value is, or how it shall be conceived. This is altogether necessary and proper, for the concept is by no means in final shape. Indeed, one may hazard the prediction that progress in economic philosophy in the next half century will hinge on the adoption of new and enlarged meanings for its fundamental terms. Only so can we do for the twentieth century as much as our classical forefathers did for their time. It is a question how long nineteenth century formulations will stand the strain of twentieth century development. Our growing mass of economic regulations and social reforms, our general institutional iconoclasm, are a challenge to the values based on free exchange, and the final answer has not yet been given. Theories of conservation and compulsory insurance may be grafted upon the stem of marginal utility, but they will not grow there spon
taneously. They represent clashes of values for which the economist has furnished no adequate common denominator. It is fruitless to claim that these are not economic values but values of some other sort; ethical or what you will. The same is true of the aesthetic value of a picture or the dietetic value of a roast of beef. The test is that the economist must deal with them.
The socialists have a sufficiently clean-cut philosophy covering these vexed questions of reform, and writers like Patten, Veblen, Hobson, and Davenport deal with the fundamental problem, each in his own way. Economists in general cannot afford to become as those who would put new wine in old bottles. There are questions of social interpretation at issue which are real and important. But just for this reason it is peculiarly unfortunate if the discussion runs off upon non-essential matters and is thus side-tracked. Time is worse than wasted which is spent on merely verbal argument, or in disputing the claims of rival concepts which involve a "distinction without a difference," and the excuse for the present excursion into this field is the hope that thereby some of this intellectual waste motion may be saved and real problems be attacked more directly.
It seems to the writer that certain non-essentials have intruded themselves and should be eliminated. One of these is verbal. In the long-standing debate whether value is a quantitative thing or a mere relation, some part of the battle has seemed to hinge on the mere use of the phrase "ratio of exchange." Of those who hold that value is a relation some have called that relation a ratio. And out of this innocent-looking term has grown one of those misunderstandings, those strange failures of mind to connect with mind, which stultify so much good argument.
The discussion in question runs thus: "Our honored opponents claim that value is not a quantitative thing but is a mere ratio. Granted, and granted willingly, for wherever there is a ratio there must be two commensurable quantities, or else no ratio can be struck between them. These quantities are value. Our opponents
What shall we
have disproved their own contention." say of this reasoning? We may pass it as flawless on one condition: namely, that the man who calls value a ratio is talking about the kind of ratio which has to have as its terms two quantities of something homogeneous, other than mere abstract numbers. Is this condition satisfied, or may we find that one side has used a word in one sense and the other side has read into the same word an essentially different meaning? Let us investigate.
It is not at all necessary, for those who choose to consider value a mere relation, that they call that relation a "ratio." John Stuart Mill was for the most part careful enough to avoid this term; he avoided it even in the passage in which he argued the impossibility of a general rise or fall in values because value was held to be a mere relation of things to each other. Taussig follows Mill's usage, but with a significant addition. "The value of a commodity means in economics its power of commanding other commodities in exchange. It means the rate at which the commodity exchanges for others." 1 Evidently Taussig considers that these expressions are either synonymous or else complementary, indicating but two aspects of the same thing. Indeed, the terms "rate" and "ratio and "ratio" are sometimes used interchangeably. Usage is tolerant. Jevons, on the other hand, tho "not a courageous terminologist,' 11 2 not only defined value as a ratio but stoutly maintained
1 Principles of Economics, p. 115.
F. A. Fetter, "The Definition of Price," American Economic Review, vol. ii,
that this was "unquestionably the correct scientific term, and the only term which is strictly and entirely correct." Certain other writers have followed Jevons' example - and by so doing have furnished ammunition to their terminological enemies, of which the enemy has not neglected to make use.
General F. A. Walker, for example, slips momentarily into this terminology: "But a measure, a relation, a ratio, cannot be measured! You do not measure the relation of a mile to a furlong: you express it as 8:1." This argument lays itself open to the reply, which Professor Carver makes, that measuring implies a common quality in the measure and the thing measured and that a ratio between concrete things implies some common attribute of a quantitative sort. "Obviously no such comparison can be made unless the thing used as a unit of measurement also possesses that property of the thing to be measured which is selected as the basis of comparison." In this Professor Carver is technically correct, for his opponent had introduced the idea of a ratio between two similar quantities: two distances. But Professor Wicker is also within his rights in opposing Professor Carver's general conclusion, holding that valuing a horse is a different process from measuring a barn, and avoiding the fatal phrase with which Walker had so weakened his position.
Similarly Professor B. M. Anderson clearly shows the weakness of this terminology." "Four gallons of milk exchange for one dollar, or 23.22 grains of gold. The exchange ratio is four to one. . . Now a quantitative ratio is between commensurable quantities. Gold and
1 Theory of Political Economy, 2d ed., p. 89.
2 "The Concept of an Economic Quantity," Quarterly Journal of Economics, vol. xxi, p. 427.
Quarterly Journal of Economics, vol. xxii, p. 645.
Social Value, p. 21.