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"Rate of exchange" is no more useful from this angle than "ratio of exchange.' "Rate of exchange" affords no homogeneous quality among the diversities of the concrete forms of wealth, present in each in definite quantitative degree, by virtue of which items of wealth may be compared with one another, added to make sums, treated as a distribuendum for the imputation analysis, etc. Nor can " rates of exchange " even be averaged. In illustration of the difficulties which lack of the absolute value concept involves, I have cited Professor Fisher's doctrine of the independence and priority of the price level with respect to the particular prices, a device for making good the lack of an absolute concept; and the partly unconscious use, by Professor Laughlin, of the absolute concept, with a shift, in the course of the argument, to the relative notion. It is in the theory of money that the absolute concept, explicitly held, is most necessary, an implicit assumption of a fixed value of money serving adequately for most other purposes of price theory. of price theory. I have contrasted the measurement of speed with the measurement of values, on the basis of Professor Clark's illustration, pointing out that a fallacy, "the mathematician's fallacy," is involved if either speed or value be identified with a rate or ratio. Finally, in answer to the question as to what practical difference is made whether the relative exchange concept, or the conception of value as absolute, prior to exchange, be held, the following points are

1 The averaging for purposes of index numbers is, not of rates, or ratios, but of one term of the rate or ratio, that, namely, which numbers the units of the single commodity which is being measured by the index number, usually money. The other term is really not representative of a true quantity at all; it is not apples plus wheat plus shoes, etc., but apples and wheat and shoes, etc., each in definitely stipulated quantity measured in terms of its own unit. If any one of these elements in the "composite commodity" varies, you have not a quantitative variation in a homogeneous sum, but a new composite, incomparable with the old-except that for purposes of practical measurement we may often safely abstract from this theoretical consideration. The relations between money and the goods cannot be averaged. The only thing to suggest this possibility is the mathematical convention treating ratios like fractions.

submitted. (1) Economic value is a wider concept than exchange, and would hold, e. g., in a socialist economy. Value is a wider concept than economic value. In the value concept is a useful unifying principle for all the social sciences. (2) Value and exchangeability are different notions, and do not vary together. Hence the distinction between two viewpoints, the timeless equilibrium assumed by abstract price theory, and the notion of a causal process in price determination, requiring time, becomes important. Normally, values are the causes of prices, and change first. (3) Many prices are controlled, in greater or less degree, by non-economic values, so that they express, not economic values alone, but a marginal equilibrium between economic and non-economic values. (4) On the basis of Schumpeter's theory of interest, it is suggested that the capitalization theory is bound up with the absolute notion of value, and is harder to defend on the relative notion.

In conclusion, I wish to record my appreciation of the honor Professor Clark does me in discussing my theories, and my admiration for the vigor and clearness with which he maintains a view in which I cannot concur. I have not anywhere read a stronger presentation of the case for the relative notion, nor have I anywhere read an argument from that standpoint which seems to me so sympathetic and catholic in its evaluation of the doctrines it opposes.



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1 In connection with the social value doctrine, I would especially refer to three very important articles by Professor C. H. Cooley: "Valuation as a Social Process," Psychological Bulletin, December, 1912; Pecuniary Valuation as an Institution," Am. Jour. of Sociology, January, 1913; "The Sphere of Pecuniary Valuation," Ibid., September, 1913.



I. Points of agreement, 709.-Need of economic standards independent of price, 710. - The place of inappropriables, 711. — Weighting of individuals in social value, 712.- Conflicts of values, 713. - Values of institutions should be imputed to institutions, not to single commodities, 715. Marginal method reversed, 715. Some of the requirements of a social theory of value, 716. — II. Dual nature of Professor Anderson's concept, 716. — Term "rate" avoids a confusion, 717. — III. Doctrine v. definition, 718. Doctrine criticized by Professor Anderson not implied in the mere definition of value, 719. — Examples, 720. IV. Use of the relative concept, 720. — “Assuming a fixed value of money," and other criticisms, 721.-V. Economic v. non-economic, 722. — Values of institutions not to be taken for granted as something supreme and apart from single exchanges, 723. — Conclusion, 723.

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ONE reason Professor Anderson and I are destined to clash joyously is that our views have so much in common. I feel overpaid in having drawn from him such a searching and stimulating discussion of the general topic of value in exchange for a fragment which aimed rather to promote tolerance in definitions than to establish an adequate theory of the causes governing values," and least of all to destroy any one's constructive work.1 At the outset, as his collaborator, let me emphasize one very welcome constructive point of agreement. We are agreed that economists must deal with quantities and qualities of which actual market prices are not the only measure, and, I would add, some of which com

1 Hence my surprise when Professor Anderson ascribes to me an assertion of the Austrian theories in opposition to his own. As this is quite foreign to the intent of my paper, it is no wonder that my problem, as he interprets it, needs more data for its solution than I have supplied.

mand no market price at all under present conditions; altho with changes in law and custom they might perhaps come to command one. We are agreed that measures of value which may be less exact than those of the market are also much more fundamental.

We are agreed that our most fundamental concepts should be independent of institutions of competitive exchange; they should be such as would hold even in a socialistic state. This is necessary if there is to be any economic meeting-ground for debate between socialists and conservatives. It is necessary if we are to have any standard of judgment on economic reforms which are continually overruling the valuations of the market. It is necessary even in the process of describing the workings of competition under different institutions of property, contract and social control, which we recognize as infinitely varied and ever changing. The competitive product of capital does not mean the same thing in two societies with different institutions of inheritance and bequest, and different laws and customs in the matter of unfair competition. Or, let us take the statement that the rental value of land tends to equal the excess of the (competitive valuation of the) goods and services produced upon it above the (competitive) expenses of production. This becomes quite indefinite the moment we realize that the net product in question may or may not include robbing the neighbors of their light and air, obstructing the streets, fouling streams, increasing or destroying the beauty of the landscape or the business character of the neighborhood, admitting tenants whose very presence destroys the value of other real estate in the same blocks, and so on.2 There are as many different kinds of competitive product of land as there are

1 Cf. J. B. Clark, Philosophy of Wealth, pp. 215 ff.

2 Cf. Ely, Property and Contract, passim.


regulations governing these matters, and merely to describe the differences, without passing any sort of judgment on them, we must use terms that go behind the competitive value of the exchangeable product.

The world is full of unpaid costs and unappropriated services. In proportion as we rise above bare material necessities we reach intangible utilities that are harder and harder to appropriate, such as knowledge, civic beauty, or personal privacy. The age of material power is the age when these higher and more elusive utilities come increasingly into the focus of social attention. The age of the railroad and the interlocking credit system is an age when business transactions have more far-reaching effects than ever before, and quite beyond what can ever be bought and sold directly. The age of researches in bacteriology and environmental determinism is an age when innumerable effects, always in existence, are being discovered and valued as never before. The age of democracy is an age when every one can exercise to the full the two great social impulses, the impulse to be like one's fellows, and the impulse to be different and distinguished. But these emulative and especially these invidious utilities are mostly of such a peculiar character that one man's gain is another's loss: they eat each other up, and the resultant is a social utility far different from the sum of its individually appropriable parts.

The legal doctrine of damnum absque injuria covers a multitude of such unpaid costs, and the unearned increment is a great catch-all of unappropriated services. Viewed as a study of individual utilities and not of organic social values, a theory of inappropriables is merely a tracing of such products and costs as law and custom do not yet recognize and a revealing of responsibilities which have not yet been brought home effectively in markets or in courts.

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