Thus the net economic value of a given service may be considered to include not only the familiar marketable "utilities," but also (1) potentially exchangeable byproducts in the way of service or damage, valued at the price they would presumably command in exchange; (2) unmarketables measured by a standard derived from market price.

We may go farther than this, if we are studying such fundamental values as might prevail in a socialist state as well as in our own. Things may be valued by other standards than that of competitive exchange, especially if those other standards are effective in society or may reasonably be expected to become so. Thus the old "rich-man-poor-man complication" may emerge from the thought-tight compartment in which it has been more or less successfully interned, and demand a place in the sun, for there is ample proof that society does not wholly acquiesce in the idea that the desires of rich and poor should have economic weight in proportion to the respective purchasing powers of those classes. This fact is ever coming to the surface where men follow some common policy or when an emergency throws them back on elemental needs.

A ticket to the Yale-Harvard game is cheap enough to be sold for $2, and too valuable to be bought for $10, and the principle of this paradox applies to public land under the homestead act and land-rushes in Oklahoma, to bread in Germany, to train accommodations sold to war refugees by a relief committee, to the administration of justice (tho all too imperfectly), to public education. An allied principle governs poor-relief, minimum wage laws, and so on. Enough instances could be easily cited to show the all-pervading economic influence of standards of value contrary to those of the free market. Now unless economics can take and use such standards

in advance of their becoming effective in the market place, it misses by so much its chances to contribute scientifically to economic reform.

Economists do use these standards constantly in their practical thinking on matters of public policy, but somehow the theory of value and distribution seems insulated. If we can develop a concept of social value and valuation independent of market valuations and capable of scientific application to concrete cases, we shall have an intellectual instrument that will pierce the insulation and establish a working connection with the ideas that are making things happen.

It is a substantial gain to regard a price as the resultant of conflicts of many kinds of values, positive and negative, individual and social.1 But if economics merely accepts and records the outcome as representing the effective social importance of that particular commodity, there is still something lacking. Many a commodity commands a price merely because its negative social value is less than the costs involved in suppressing its use utterly. Whiskey has at once positive and negative social value and motivates prohibitionists to much expenditure of time, effort and money. Yet this negative" power in motivation" has no effect on the price until it actually prevails in a prohibition law. And then, -the price may go higher and not lower,2 and the outlawed trade may become more profitable financially than ever before.


The idea of a strong positive value to a minority, in marginal equilibrium with a weak negative value to a majority,' does not seem adequately to represent the case. Certainly the price does not express any such equilibrium, but only one side of it. Exchange value

1 Cf. Anderson, Social Value, ch. xiii.

Cf. Social Value, p. 151.

Certainly if quality is considered!

will remain positive till the negative social value accumulates such overwhelming momentum as to stamp out the trade entirely. What balances the majority's disapproval is not the desire of the minority, but the whole cost of making the majority will effective. There is no marginal equality of effort between policemen and the customers of the " blind tiger." Moreover other values than that of temperance itself may be affected in the attempt to stamp out illicit sales.

The positive value of freedom may deter us from prohibiting the sale of many quack remedies, or outlawing many questionable business practices, which predominant social judgment and sentiment oppose. In all this my view is quite like Professor Anderson's, and I gladly acknowledge indebtedness to his writings.1

But there is one decided difference, perhaps fundamental. I object strenuously to attributing to a commodity as that commodity's social value the whole resultant of these broader forces and values to which it may stand in the relationship of an insignificant or unwelcome by-product, or even in that of a cost of production. It is the freedom which has social value and not the nostrums or the products of sharp practices which may shelter under its wing. Freedom may be an end in itself like any other utility which affects economic values, and it may also take effect in increasing the output of goods in general. Neither fact can elevate its incidental abuses, recognized as such, to the rank of utilities or values. The net social value of the latter is negative, not positive, and I shall never be satisfied


1 It is hardly necessary to add that I join him in acknowledging our common debt to J. B. Clark's Philosophy of Wealth.

• Can this be the way to a more vital connection between economics and sociology?

This conception is ethically neutral, accepting the standards in force, and merely insists on distinguishing clearly (as the other concept does not do) to what it is that the accepted standards are attached.

with a theory bearing the name of social value which does not embody this principle so clearly that he who runs may read.

It is so simple! The marvel is that such an obvious statement of fact could be considered to constitute an economic heresy in any school of thought. The distinction may make little difference in static theory, which ignores institutional changes and considers abuses abnormal, but into the dynamic study of the actual world the static hypothesis must not be carried. Here abuses are normal and institutions are active forces campaigning against them, with constant changes of plan and shifts of fortune. Wasteful advertising is waste, not product, tho we may not know how to get rid of it without sacrificing more than we should gain. If static doctrine is to be adapted to deal with dynamic facts, it is at this point, in the concept of value itself, that the modification must begin.

I suspect Professor Davenport of holding exactly this view, with the minor qualification that he throws the whole subject of social value out of the science of economics. Thus it is not wholly facetious to call him the best of social value theorists, for there is no danger of his sanctioning any theory of this kind which is not the real thing. As Mr. Dooley says: "Showin' disrispict f'r th' candydate is wan way iv showin' rispict f'r th' office." Therefore this doctrine of institutionvalues is proposed, with due trepidation, as the germ of a synthesis, in which Professor Anderson represents thesis and Professor Davenport antithesis. It is also proposed as a necessary premise of dynamic theory.

One further result may be noted. If things may have exchange value when their social value is a minus quantity, can we say of things which have positive social value that the exchange value, actual or normal,

gives a correct measure of their relative social importance? The simplest exchange is not free from these relationships to values outside the market. Each one is a unit in a great social joint product. Thus the theory of social value is anti-marginal in the sense that the part takes its price from the value of the whole and not vice versa. In a somewhat similar way railway rates cannot be fixed by the marginal cost of separate services without running the whole road into bankruptcy.

These, then, are some of the elements which must count in a theory of social value. The theory of inappropriables, the conscious social weighing of men and their desires on scales different from that of free exchange, the insistence that institutional valuations and commodity valuations be distinguished and not both attributed to single commodities, and the readiness on occasion to reverse the marginal method of analysis: all have their place in the interpretation. Such studies can be vitally useful, even if they never attain the precision of a yard-stick. Therefore, I am delighted that Professor Anderson also holds that social value varies independently of exchange values, tho I carry the heresy farther than he does.


Indeed most of the cases he cites might be classed by an orthodox economist as normal exchange values, distinguished from actual prices, and his own statement of the reason why one of his examples does not fall within this category might itself pass as a definition of the difference between normal and actual price.1 More

1 P. 698, "I mean . . . that social forces which would have led to a much higher price had they had time to operate were forestalled in the snap judgment."

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