agency of the factor. And this in spite of the fact that the total value product is the fund from which, in the long run, payment is made for the services of the factors.

The quid pro quo aspect of the wage valuation must not then lead us to identify valuable service with specific productivity. The distinction between the two is quite consistent with the doctrine of the psychological value theorists that value is ascribed because of the want-gratifying capacity of things and services.1 And their insistence upon the direction of the valuation process, that it is from human wants back to the things or services which are capable of gratifying those wants, should make them immediately sceptical of the alleged equation of a wage valuation with a productivity which proceeds in a diametrically opposite direction. The writer hopes therefore for their acceptance of his view. Members of the other school, whose tendencies are naturally antagonistic to the contention of this paper, will, it is hoped, be induced to subject to a careful re-examination the reasoning on which the specific productivity thesis has been allowed to rest.

If, as the writer believes, that reasoning, through the unconscious use of a term in two different senses, rests upon a truism, from which no valid inference may be drawn, not only the productivity thesis itself, but its important social implications must be given up. These implications were originally stated by Professor Clark in the following words:

This thesis we have still to prove; and more hinges on the truth of it than any introductory words can state. The right of society to exist in its present form, and the probability that it will continue

1 The writer is not to be understood as taking any ground as to the influence of supply on price. This point needs more complete formulation than has yet been given it if the value theorists, while showing that supply itself is largely influenced by subjective valuations, are yet to be generally credited with recognizing the truth which lies in the supply side of the stereotyped formula of "demand and supply."

so to exist, are at stake. These facts lend to this problem its measureless importance. The welfare of the laboring classes depends on whether they get much or little; but their attitude toward other classes, and, therefore, the stability of the social state - depends chiefly on the question whether the amount that they get, be it large or small, is what they produce. If they create a small amount of wealth and get the whole of it, they may not seek to revolutionize society; but if it were to appear that they produce an ample amount and get only a part of it, many of them would become revolutionists, and all would have the right to do so. The indictment that hangs over society is that of "exploiting labor." "Workmen," it is said, ." are regularly robbed of what they produce. This is done within the forms of law, and by the natural working of competition." If this charge were proved, every right-minded man should become a socialist; and his zeal in transforming the industrial system would then measure and express his sense of justice.1

We do, if we are successful, settle the great personal issues that range men in hostile classes. By discovering the law that fixes the rates of wages, of interest and of pure profits, we decide whether the man, A, has a grievance against B. We have not, indeed, thus ascertained why one of them has only $500 a year, while the other has $50,000; but we have ascertained something about the two incomes that decides whether each of them rightfully belongs to the man who gets it.2

Such comprehensive claims, however, would not now be made. Tho many economists today accept the productivity thesis, few, if any, draw from it such sweeping conclusions.

3

It was promptly pointed out that justice is between man and man, — not between the factors in production. If the justice of our social order is to be established by any comparison of productivity and reward, it is not enough to show that payment is in proportion to the productivities of the respective factors, - the animate and the inanimate, the man and the machine. Since it is a question of justice with which we are concerned, the inanimate factors must be ignored. We need to

By Professor Carver. Quarterly Journal of Economics, vol. xv (Aug., 1901), p. 578.

be shown that the rewards of industry are distributed among men in proportion to their productive contributions. And when this necessity is realized, the social significance of the productivity thesis is very profoundly modified. It proves (if true) the injustice rather than the justice of society. If the factors in production, animate and inanimate, - are paid in proportion to what they produce, such an arrangement will constitute a just division only in that inconceivable sort of a world in which there is a distribution of ownership in exact correspondence with the productive services of men.

The surrender of the social significance of the theory has been explicitly admitted in a recent defense of the productivity idea by Professor J. Maurice Clark. "All that the hypothesis will justify is the claim that income would measure deserving under ideal competition, granted at all times perfectly just distribution of property, education and opportunity." 1 This stops very far short indeed of the original contentions. And, as we have seen, not even this much is true. If then to Davenport's and Hobson's vigorous and varied criticisms be added the fact, that the thesis of specific productivity is demonstrated only by the employment of a vitiating truism, we must naturally ask ourselves what the residual element in the Clarkian system amounts to. It should be clear at once that what we have left is a theory of value as distinguished from a theory of distribution. The ethical idea of reward in proportion to product has gone by the board; there remains a strictly economic process of evaluation.

The question may still be urged, however, whether the rewards which go to the various factors in production are not an approximate or rough measure of pro

1 Political Science Quarterly, June, 1914, p. 319.

ductive contribution. To the writer the importance of the inquiry lies in the fact that the productivity theory, with its parade of scientific accuracy, is after all but a precise formulation of a widespread and deepseated belief that, to a reasonable degree of approximation, a man gets out of his productive activities what he deserves. We deplore certain failures where a man seems to meet with disaster which could not have been anticipated or avoided. But in the main, business success is regarded as not only an index of ability but also a measure of social service and hence of social deserving. The truth and error in this view need to be very carefully disentangled.

The idea has already, within recent years, been subjected to scrutiny and correction. And this has come from critics of different sorts, ranging from the economist to the political agitator.

In the first place it has been repeatedly emphasized of late that personal income is made up of two elements, - that which is secured in return for labor, and that which comes from the ownership of capital. The social validity of the latter, as we have already seen, cannot spring from any product personally created by its owner. It must be sought in the circumstances which are taken to justify the ownership.

Secondly it has been shown that many incomes are the result of force or fraud, or inure to a man because he has catered to wants which are harmful to society. They are acquisitive rather than productive in the best sense of the word. Professor Davenport has been perhaps the most forceful theoretical exponent of this idea.1 But in connection with particular economic evils it has come to be widely understood and even taken for

1 Cf. his article, "Cost and its Significance," American Economic Review, December, 1911, p. 724.

granted. Food and drug laws would be unnecessary were all incomes the result of providing for the beneficial wants of society. Tenement house laws, mine and factory inspection, and a wide range of restrictive laws which are a commonplace to the present generation, all testify plainly to the fact that men can secure incomes through processes injurious to society. In a broad view, however, such cases seem to the writer exceptional. In the main, the man who manufactures and sells a product more cheaply than any one else has conferred a real benefit upon those who use it, and the income which accrues to him in so doing is an income which, tho disproportionate perhaps, is yet secured by virtue of a social service.

Now when all these corrections and exceptions are made and allowed for, where do we stand in general distributive theory if we deny the specific productivity thesis? Is it not true that functional incomes are a rough measure of service, and that (since it is through the saving of income that capital is accumulated) a rough proportionality exists between the earnings of capital and the productive services of its owners? The latter question is quickly disposed of. It would be true only if men were immortal and if they started originally on an equal footing. But men die and pass on their wealth to their heirs. The great question of inheritance introduces complicating elements into the problem, to say nothing of the equally large question of the validity of original titles. But if we deliberately shut our eyes to the incomes which flow from the ownership of wealth, is it not true that the services of men are paid for roughly in proportion to the values which they produce? Are we completely in the wrong when we take a man's success in acquisition as in some sort a measure of his service to society?