PROFESSOR SELIGMAN'S PSYCHOLOGICAL DOCTRINE OF THE RELATIVITY OF VALUES
Professor Seligman's discussion of value theory has been extremely fertile
in suggestions for me, and I find the spirit of the positive theory
outlined in this book much closer to the general point of view of his
doctrines than to those of any other economic writer. His recognition of
the generic character of value, of the fact that economic value is but a
species within a genus,[183] his contention that, while ethical principles
depend on economic considerations in primitive life, they still, in later
and higher stages, attain a relative independence, and react on economic
life,[184] his recognition of the essentially social nature of even the
individual's wants,[185] his discussion of the legal and moral "level of
competition,"[186] and, in general, his insistence upon a sociological
point of view, especially in the treatment of all practical problems, have
been of marked assistance to me in freeing my mind from the individualistic
bias of the narrow price analyses, and in making clear the gap between
existing theories of value and the function of the value concept in
economic science. At certain stages, as already indicated in part, his
theories differ pretty radically from that set forth in the preceding
pages. For one thing, I find no place in my scheme for the notions of
social utility and social cost[187] which are prominent in his discussions,
as, indeed, in the discussion of most of the adherents of the social value
school. There is one further point of difference, however, to which I wish
especially to call attention, as criticism of Professor Seligman's view
brings to light certain significant points in the theory I am defending.
The following quotation is from his article, "Social Elements in the Theory
of Value," from the _Quarterly Journal_ of May, 1901:[188]--
Progress consists in reducing costs, so that we
gradually approach gratuity. But, in reducing the value
of certain things, we necessarily increase the value of
other things. By diminishing the efforts required to
satisfy one want, we liberate the efforts needed to
satisfy a new want; it is only when we can satisfy this
new want that the means of satisfaction acquires
value. For the pioneer who with difficulty is able to
clothe and feed himself a piano has no value. It is
only as clothing and food take up less of his
energy--that is, become of less value to him--that he
will appreciate the new want, until finally in
civilized society a piano is worth far more than a suit
of clothes. Since value, as we know, is simply an
expression for marginal utility, we cannot affirm that
value in general ever increases or decreases. As pianos
are worth more, clothing is worth less.
The relativity of value is here made to depend on a ground different from
that which lies at the basis of the English School's doctrine of
relativity. The ground of the latter is _logical_; the ground for Professor
Seligman's view is _psychological_. Values considered as mutual relations
between two goods cannot both fall--a fall in one means that it goes lower
_than the other_, whence inevitably the other must rise, as a matter of
logical definition. For Professor Seligman, on the other hand, value is a
quantity of marginal utility. So far as the logic of the situation is
concerned, an increase in the supply of good diminishes _their_ marginal
utility, and so their value.[189] But, as soon as that is done, a new want
springs into existence, a new object receives value therefrom, and the
total quantity of value remains as before. In the article from which the
quotation is taken, the doctrine is merged to some extent with the English
doctrine of logical relativity, as indicated by the discussion on page
343, and by the footnote on page 344. The English doctrine is also
suggested by the treatment in the _Principles of Economics_ (pp. 184-85),
where it is stated that "prices may rise or fall with reference to this
standard, but we cannot speak of a general rise or fall of values, because
there is no fixed point." It is clear, however, that the argument for
relativity in the passage first quoted, is wholly distinct from, and
independent of, the logical relativity of definition. Professor Seligman,
in conversation with the writer, has so distinguished it, and has indicated
that, rejecting the logical doctrine of relativity, he now holds this
psychological doctrine of relativity, as distinct, both from the absolute
conception of Professor Clark, and the relative conception of the English
School.
As preliminary to a criticism of Professor Seligman's doctrine, certain
distinctions must be made. Values may be relative in Professor Seligman's
sense without being relative in the sense in which the English School uses
the term: the English School thought only of the relations among, say, a
_unit_ of wheat and a unit of corn, a unit of woolen goods, a unit of wine,
etc.: Professor Seligman is thinking of the _total stocks_ of these various
commodities. Assume, for simplicity, that the stocks of all commodities
were doubled, and that the demand curves for all the commodities have the
same shape, and that form is the rectangular hyperbola,[190] so that the
absolute value of each unit of each commodity would be exactly cut in half.
The English School would say that there had been no change in the values of
the units; Professor Seligman would say that there had been no change in
the value of the _stocks_, but would concede at once that every unit has
had its value cut in half.[191]
Another distinction must be made. There is, to be sure, at any given time,
a pretty definitely limited[192] amount of social _productive energy_. This
energy can be distributed among only a limited number of products. Hence,
there can be only a limited number of objects to receive value from the
mental energies of society. But does it follow from this that what we may
call the social energy of value-giving is a limited thing? Or, granted that
it is limited, does it necessarily follow that the limits are fixed and
rigid? Cannot circumstances arise which will make it vary in amount? If a
new want arises, does it necessarily follow that all the old wants become
less intense in the exact degree that the new want is intense? Must a
quantum of value be withdrawn from the old objects precisely equal to that
which is attached to the new object? This doctrine is deliberately
affirmed, so far, at least, as the individual is concerned, in the article
on "Worth"[193] in Baldwin's _Dictionary of Philosophy_, etc.:--
The struggle for existence among dispositions, which
are at once the objects of ethical valuation and the
source of value reactions, springs out of the nervous
conditions of these dispositions. While there dwells in
each the tendency to utmost activity under the given
conditions, yet, since the valuing subject is master of
only a limited energy of valuation, i.e., nervous
energy, the increase of value of any given disposition
must necessarily cause others to decrease. In any case
increase of values is always relative.
Now two lines of criticism suggest themselves. In the first place, the
concluding sentence of the quotation is a _non-sequitur_. If there be a
definite, absolute quantity of energy, then its distribution among objects
can give absolute quantities of value. Reservoirs connected by pipes may
among them contain a definite quantity of water, and increase in the volume
of water in one may be at the expense of all the others. But still the
amount of water in each is an absolute amount. This criticism, I may note,
Professor Seligman concurs in. Conceding that a definite amount of value
may exist in each object, he holds that there is, none the less, a
relativity about value in the sense that increase in the value of one item
can only come from a decrease in the value of another, and _vice versa_.
The other line of criticism calls attention to the identification of
"energy of valuation" with "nervous energy." That the two are identical
would be maintained only by the crudest materialism. The one is a physical
force; the other is a psychical force. While nervous energy and energy of
valuation may be connected, the nature of the connection is surely not so
well known as to justify the assumption that definite limitation in the one
implies a precisely corresponding limitation in the other.[194] There is no
justification--at least in the present state of psychological
knowledge--for holding that the law of the "conservation of energy" applies
to psychical energy.[195]
Some concrete illustrations will make clearer the difficulties of the
doctrine, as applied to economic life. Assume a group of men on board a
whaling vessel, who suddenly discover that they will be obliged to spend
the winter in the ice-zone, instead of reaching home in the fall as they
had planned. Will not the value of everything in their store of provisions
be increased? Will not their whole stock of wealth have a greater value?
But this, Professor Seligman objects, is because they are in a situation
such that opportunity for reproduction is lacking, and he raises the
question as to whether the same situation is possible in economic life on a
large scale, where wealth is being constantly produced. Well, assume that a
crop failure on a large scale occurs. Will not the value of the total
existing supply of the articles in which there is a failure be raised? And
will not other competing articles of food have their values increased also?
But, Professor Seligman would retort, these increases would be at the
expense of the values of the half-grown fields of grain, and at the expense
of articles other than food. Granted: but what evidence is there of exact
equivalence? And further, assume that half of every existing stock of
commodities, of every sort, were suddenly wiped out. Would the sum total of
values remain the same? Only on the assumption that the social value curve
for this totality of commodities is a rectangular hyperbola.[196] That this
particular shape of the curve holds for any particular commodity would be
difficult to prove. That it does not hold at all for the necessities of
life is one of the commonplaces of economic analysis. Initial items in a
stock of necessities have a very great value, when there are no other items
of the stock, and the curve often descends very abruptly. Gregory King has
undertaken to show, in terms of money, the shape of this curve for wheat in
the England of his day. Other commodities have curves which behave very
differently. While the argument from the part to the whole is not a valid
argument in the presence of specific reasons making the whole obey
different laws from the parts, it still, in the absence of such special
considerations, does raise a strong presumption. And I must confess that I
see no reasons why the curve for the totality of commodities should take
the particular form of a rectangular hyperbola, instead of some other form.
_A priori_, the presumption would seem to be that its form would be
irregular.
There is another point of view which seems to support Professor Seligman's
contention, and that is the money-price viewpoint. At a given moment, each
man has a definite quantity of money--or of bank-credit--which he can use
in purchasing commodities. If he spends it for some commodities, he cannot
spend it for others. As he joins one group, demanding one commodity, he
must--at least to the extent of that amount of money--withdraw from other
groups demanding other commodities. At a given instant, therefore, there is
a definite demand-situation with reference to every item of every stock,
and one can increase its money-price only by drawing upon the demand for
others. But let a panic now come. Let these bank credits become unstable:
let _social confidence_ be wiped out, and what happens to general prices
and values? Does the value that leaves the general range of commodities all
betake itself to the gold supply? That cannot be, for the supply of gold,
as compared with the supply of other commodities, is well-nigh
infinitesimal, and if the whole of the values that left the commodities
went into gold, then every unit of gold would be tremendously increased in
value, and prices in terms of gold would fall, not two-thirds, but a
thousandfold. What has become of the values? They have simply been wiped
out. A psychical change has taken place, a malady has afflicted the social
mind, its integrity is shattered, doubt has taken the place of confidence,
panic fear has replaced buoyant expectation, demoralization and
disorganization have lessened the social psychic energy--or dissipated it
in inchoate, unorganized individual activities. The sum total of values is
lessened. Of course, the reverse may happen. Let confidence be restored,
let the social psychic organization function normally once more and values
rise again. As we have indicated in our discussion of the psychology of
value, _belief_, as well as desire and feeling, may often be a very
significant phase in the value situation, and have a motivating power quite
as great as the other phases. _Credit_, while it exists, is a real addition
to the sum of values--has, that is to say, a real power in motivating
economic activity, calling forth new productive efforts, and directing
labor, capital, and enterprise to new channels. This is not, of course,
asserting the doctrine of John Law. Credit cannot be manufactured out of
whole cloth. Beliefs, at least to some extent, follow rational laws, and,
except in moments of hysteria, there must be something for people to
believe in before strong belief can emerge. Sometimes, of course, an
unstable but momentarily powerful belief, based on nothing rational, may
dominate a situation, and radically upset the existing scale of
values--with a sad reaction following shortly after. And, in the absence of
belief, the most rational justification for belief is impotent. Witness
the bankruptcies, in times of panic, of men whose assets turn out later
perfectly adequate, but who are unable to liquidate them at the time of the
panic. Note, too, in this connection, the tendency in times of panic to
turn to government for aid in sustaining values--to substitute for the
waning social force of belief the power of a new legal force.
A case parallel to the panic, as inducing a diminution of the total psychic
energy of control, is presented by widespread epidemics. Gabriel Tarde,
criticizing Mill's contention that all values cannot rise or fall,
instances the general fall in all values which an epidemic occasions, and
the recovery of values after the epidemic.[197] This criticism of Tarde's
will not, of course, hold as against Mill's doctrine (indefensible on other
grounds) which bases the relativity of values upon a logical definition,
but it will hold as against the psychological doctrine of relativity under
discussion.
A further point is to be noted. Even granting that the sum total of social
power of motivation is definitely limited, it still does not follow that
the sum total of economic value is so limited. For not all of this social
psychic energy goes into economic values. Religious, aesthetic, patriotic,
moral values, all call for their share of this energy, and the amount given
to each varies from time to time. This phase of the matter is discussed in
detail by Professor Ross, in the chapter on "The Social Forces" in his
_Foundations of Sociology_, and I shall not expand the discussion here.
The doctrine that there is a definite, unchanging sum of economic values,
therefore, cannot, in my judgment, be maintained. And yet, it must be
conceded, there is a substantial element of truth in Professor Seligman's
contention. At a given time, or through a considerable period, assuming
social conditions to change slowly, there are fairly definite amounts of
social energy, both of production and of control over production
(value-giving energy). The surface fact here is that men have definite
incomes. If this energy is disposed of in one way, it cannot be disposed of
in another. If men elect to have one good, they must dispense with
something else. And in using their control over social forces to increase
the value of one good, they must refrain from using it to increase the
value of another. In the long run, these quantities are subject to change.
At a given moment, a sudden disturbance may radically change them. But, as
a statement of tendency, Professor Seligman's doctrine must be admitted.
Professor Seligman's view differs from that of Professor Clark simply in
that it adds an element. On its logical side, it conceives value in the
same way. Value is a quality, with degrees, i.e., a quantity. This quantity
in a particular good is an absolute fraction of an absolute quantity. It is
not changed merely in consequence of being compared with some other
good--it remains the same, regardless of what price-ratio it is put into.
On its formal and logical side, therefore, Professor Seligman's concept is
to be classed with that of Professor Clark--with which, as indicated in
chapter II, I am in hearty accord, in so far as the issues raised in that
chapter are concerned.
FOOTNOTES:
[183] _Principles_, 1905, p. 174.
[184] _Economic Interpretation of History_, _passim_.
[185] _Principles_, p. 175.
[186] _Ibid._, pp. 147-48.
[187] It might be possible to put the argument into terms which would give
an analogical meaning to "social utility" and "social cost." The diagram
representing the intersection of the demand curve and the supply curve,
fixing price, may be taken equally well to represent the balance of social
forces which lies back of the market phenomena in the case of a given
commodity. The demand curve might then be called a "social utility" curve,
and the supply curve a "social cost" curve, if only it be remembered that
cost and utility here have only a vague, analogical meaning, and cover up a
host of factors which, while they fall conveniently into two opposing
groups, like the individual's "cost" and "utility," are yet much more than
the latter. But they are really so very much more than the latter, that it
seems to me misleading to continue the use of the terms, utility and cost,
when the associations of these terms in economic theory are remembered. The
tendency would be to make the student feel that value depends on two
abstract phases of social-mental life, instead of being an outcome of the
organic whole.
[188] Pp. 342-43.
[189] The reader will understand that I am using accustomed phraseology and
making customary assumptions, not because I approve of them, but because
the point at issue here is not affected by the question as to the relations
between value and utility, etc. The distinction between a utility curve and
a price curve does not affect the argument here.
[190] Analytically expressed _xy_ = _c_. This curve, by definition, leaves
the "value area" (_xy_) constant.
[191] A complication must be noticed here, due to my use of the term,
"demand curve." I am tacitly assuming that the absolute value of the money
unit remains the same in this process, and so must say that the English
School would concede that the value of the money unit has doubled even
though holding that all the other values remain unchanged, except with
reference to the money unit. For Professor Seligman, the value of money
(_i.e._, the total stock) has not changed.
[192] But the limitation is not absolute. New incentives may call out
substantial increases in productive activity.
[193] Written by Professor W. M. Urban, author of _Valuation_, to which
frequent reference has been made. _Vide Valuation_, p. 4, n. The article
was, of course, written several years before the book.
[194] In this view I am sustained by Professor John Dewey.
[195] _Cf._ Stuart, "Valuation as a Logical Process," in Dewey's _Studies
in Logical Theory_, pp. 328, n., and 330.
[196] See _supra_, p. 165, n.
[197] "La psychologie en economie politique," _Rev. Philosophique_, vol.
XII, p. 238.