Sec. 14. It is evident that the issue finally at stake in any economic
problem of constructive comparison, is an ethical issue. Two immediate
alternatives are before one--to expend a sum of money in some new and
interesting way, or to keep it devoted to the uses of one's established
plan. Upon the choice, one recognizes, hinge consequences of larger and
more comprehensive importance than the mere present enjoyment or
non-enjoyment of the new commodity.[55] And these "more important"
consequences _are_ important because there appears to lie in them the
possibility of a type of personal character divergent from the present
type and from any present point of view incommensurable with it.[56] The
ethical urgency of such a problem will impress one in the measure in
which one can see that such an issue really does depend upon his present
action and irretrievably depends. And we are able now to see what that
economic quality is that attaches to ethical problems at a certain stage
of their development and calls for a supplementary type of treatment.
Let us first consider certain types of juncture in conduct that will be
recognized at once as ethical and in which any economic aspect is
relatively inconspicuous. Temperance or intemperance, truth or
falsehood, idleness or industry, honesty or fraud, social justice or
class-interest--these will serve. What makes such problems as these
ethical is their demand for creative intelligence. In each, alternative
types of character or manners of life stand initially opposed. If the
concrete issue is really problematical, if there is no rule that one can
follow in the case with full assurance, constructive comparison, whether
covertly or openly, must come into play. How long, then, will a problem
of temperance or intemperance, idleness or industry, preserve its
obviously ethical character without admixture? Just so long, apparently,
as the modes of conduct that come into view as possible solutions are
considered and valued with regard to their _directly physiological and
psychological_ consequences alone. Any given sort of conduct, that is
to say, makes inevitably for the formation of certain habits of mind or
muscle, weakening, or precluding the formation of, certain others.
Attention is engrossed that is thereby not available elsewhere, time and
strength are expended, discriminations are dulled and sharpened,
sympathies and sensitivities are narrowed and broadened, every trait and
bent of character is directly or indirectly affected in some way by
every resolve concluded and every action embarked upon. If one moves a
certain way along a certain line he can never return to the
starting-point and set out unchanged along any other. If one does one
thing one cannot do another. And when the sufficient reasons for this
mutual exclusion lie in the structure and organization of the human mind
and body our deliberation as between the two alternatives, our
constructive comparison of them remains upon the ethical plane.
If one does one thing one cannot do another. If we substitute the
well-worn saying "one cannot eat his cake and have it" we indicate the
economic plane of constructive comparison with all needful clearness.
This is in fact the situation that has been already under discussion at
such length above and the economic quality of which we are just now in
quest arises from neither more nor less than the fact of our dependence
in the working out of our personal problems upon limited external
resources. The eventual solution sought under these circumstances
remains ethical as before. But to reach it, it is necessary to bring
into consideration not only such other interests and ends as the
psycho-physical structure of human nature and the laws of
character-development show to be involved, but a still wider range of
interests less intimately or "internally" related to the focal interest
of the occasion but imperatively requiring to be heard. If my
acquisition of a phonograph turns upon the direct psychological bearing
of the new interest upon my other interests, its probable effects
whether good or bad upon my musical tastes and the diplomatic
complications with my neighbors in which the possession of the
instrument may involve me, the problem of its purchase remains clearly
in the ethical phase. But when I count the cost in terms of sacrifices
which the purchase price makes necessary, from literature down to food
and fuel, and must draw this whole range of fact also into the
adjustment if I can, the economic phase is reached. In principle two
entire and very concrete schemes of life now stand opposed. Just _what_
concrete sacrifices I shall make I do not know--this, in fact, is one
way of stating my problem. Nor, conversely, do I know just what I shall
be able to make the phonograph worth to me. It is my task to come to a
conclusion in the case that shall be explicit and clear enough to enable
me to judge in _the event_ whether my expectation has been realized and
I have acted wisely or unwisely. Thus a problem is economic when the
fact of the limitation of my external resources must be eventually and
frankly faced. The characteristic quality of a problem grown economic is
a certain vexatiousness and seeming irrationality in the ill-assorted
array of nevertheless indisputable interests, prosaic and ideal, that
have to be reduced to order.
It is perhaps this characteristic emotional quality of economic problems
that has insensibly inclined economists to favor a simpler and more
clear-cut analysis. As for ethical problems--they have been left to
"conscience" or to the jurisdiction of a "greatest happiness" principle
in which the ordinary individual or legislator has somehow come to take
an interest. That they arise and become urgent in us of course does
human nature unimpeachable credit and economics must by all means wait
respectfully upon their settlement. So much is conceded. But economics
is economics, when all is said and done. What we mean by the economic
interest is an interest in the direct and several satisfactions that a
man can get from the several things he shrewdly finds it worth his while
to pay for. And shrewdness means nicety of calculation, accuracy of
measurement in the determination of tangible loss and gain. Here, then,
is no field for ethics but a field of fact. Thus ethics on her side must
also wait until the case is fully ready for her praise or blame. Such is
the _modus vivendi_. But its simplicity is oversimple and unreal. It
pictures the "economic man" as bound in the chains of a perfunctory
deference that he would throw off if he could. For the theory of
constructive comparison or creative intelligence, on the other hand,
instead of a seeker and recipient of "psychic income" and a calculator
of gain and loss, he is a personal agent maintaining continuity of
action in a life of discontinuously changing levels of interest and
experience. His measure of attainment lies not in an accelerating rate
of "psychic income," but in an increasing sense of personal
effectiveness and an increasing readiness and confidence before new
junctures.
The possession and use of commodities are, then, not in themselves and
directly economic facts at all. As material things commodities serve
certain purposes and effect certain results. They are means to ends and
their serving so is a matter of technology. But do I seriously want
their services? This is a matter of my ethical point of view. Do I want
them at the price demanded or at what price and how many? This is the
economic question and it obviously is a question wholly ethical in
import--more broadly and inclusively ethical, in fact, than the ethical
question in its earlier and more humanly inviting form. And what we have
now to see is the fact that no consideration that has a bearing upon the
problem in its ethical phase can lose its importance and relevance in
the subsequent phase.
There can be no restriction of the economic interest, for example, to
egoism. If on general principles I would really rather use goods
produced in safe and cleanly factories or produced by "union labor,"
there is no possible reason why this should not incline me to pay the
higher prices that such goods may cost and make the needful readjustment
in my budget. Is there reason why my valuation of these goods should
_not_ thus be the decisive act that takes me out of one relation to
industrial workers and sets me in another--can anything else, indeed,
quite so distinctly do this? For economic valuation is only the fixation
of a purchase price, or an exchange relation in terms of price and
quantity, upon which two schemes of life, two differing perspectives of
social contact and relationship converge--the scheme of life from which
I am departing and the one upon which I have resolved to make my hazard.
It is this election, this transition, that the purchase price
expresses--drawing all the strands of interest and action into a knot so
that a single grasp may seize them. The only essential egoism in the
case lies in the "subjectivism" of the fact that inevitably the
emergency and the act are mine and not another's. This is the
"egocentric predicament" in its ethical aspect. And the egocentric
predicament proves Hobbes and La Rochefoucauld as little as it proves
Berkeley or Karl Pearson. No social interest, no objective interest of
any sort, is shown ungenuine by my remembering in season that if I
cannot fill my coal-bin I shall freeze.[57]
Sec. 15. This logical and psychological continuity of the ethical and
economic problems suggests certain general considerations of some
practical interest. In the first place as to "egoism." I am, let us say,
an employer. If I am interested in procuring just "labor," in the sense
of foot-pounds of energy, then undoubtedly labor performed under safe
and healthful conditions is worth no more to me than other labor
(provided it does not prove more efficient). But is this attitude of
interest in just foot-pounds of energy the attitude _par excellence_ or
solely entitled to be called economic? And just this may be asserted for
the reason that an exclusive interest in just _labor_ is the only
interest in the case that men of business, or at least many of them, can
entertain without going speedily to the wall. If, then, I do _in fact_
pay more than I must in wages or if I expend more than a bare minimum
for conveniences and safety-guards this is not because of the valuation
I put upon _labor_, but only because I take pleasure in the contentment
and well-being of others. And this is not "business" but "uplift"--or
else a subtle form of emotional self-indulgence. Suppose, however, that
by legislation similar working conditions have been made mandatory for
the entire industry and suppose that the community approves the law,
even to the extent of cheerfully paying so much of the additional cost
thereby imposed as may be shifted upon them.
Shall we say that this is an ethical intrusion into the sphere of
economics or shall we say that the former economic demand for labor "as
such" has given place to an economic demand for labor better
circumstanced or better paid? The community at all events is paying the
increase of price or a part of the increase. It seems arbitrary to
insist that the old price is still the _economic_ price of the commodity
and the increase only the price of a quiet conscience. The notion of a
strictly economic demand for labor pure and simple seems in fact a
concept of accounting. To meet the community's demand for the commodity
a number of producers were required. The least capable of these could
make both ends meet at the prevailing price only by ignoring all but the
severely impersonal aspects of the process. Taking these costs as a
base, other more capable or more fortunate producers may have been able
to make additional expenditures of the sort in question, charging these
perhaps to "welfare" account. The law then intervenes, making labor in
effect more expensive for all by requiring the superior conveniences or
by compelling employers' insurance against accidents to workmen or by
enforcing outright a higher minimum wage. The old basic labor cost
becomes thus obsolete. And without prejudging as to the expediency of
such legislation in particular industrial or business situations may we
not protest against _a priori_ and wholesale condemnation of such
legislation as merely irresponsibly "ethical" and "unscientific"? Is it
not, rather, economically experimental and constructive, amounting in
substance to a simple insistence that henceforth the hiring and paying
of labor shall express a wider range of social interests--shall
signalize a more clearly self-validating level of comprehension, on the
part of employers and consumers, of the social significance of industry
than the old? And may we not protest also, as a matter of sheer logic,
against carrying over a _producer's_ distinction of accounting between
"labor" cost and "welfare" cost into the _consumer's_ valuation of the
article? How and to what end shall a distinction be drawn between _his_
"esteem" for the trimmed and isolated article and _his_ esteem for the
men who made it--which, taken together, dispose him to pay a certain
undivided price for it?
For the egoism of men is no fixed and unalterable fact. Taking it as a
postulate, a mathematical theory of market phenomena may be erected upon
it, but such a postulate is purely formal, taking no note of the reasons
which at any given time lie behind the individuals' "demand" or "supply
schedules." It amounts simply to an assumption that these schedules will
not change during the lapse of time contemplated in the problem in hand.
And it therefore cannot serve as the basis for a social science. As an
actual social phenomenon egoism is merely a disclosure of a certain
present narrowness and inertness in the nature of the individual which
may or may not be definitive for him. It is precisely on a par with
anemia, dyspepsia or fatigue, or any other like unhappy fact of personal
biography.
Sec. 16. There is another suggestion of ethical and economic continuity
that may be briefly indicated. If our view of this relation is correct,
a problem, by becoming economic, may lose something in dramatic interest
and grandiosity but gains in precision and complexity. In the economic
phase an issue becomes sensibly crucial. It is in this phase that are
chiefly developed those qualities of clear-headedness, temperateness of
thought and action, and well-founded self-reliance that are the
foundation of all genuine personal morality and social effectiveness.
And one may question therefore the ethical consequences of such measures
as old age, sickness, and industrial accident insurance or insurance
against unemployment. In proportion as these measures are effective they
amount to a constant virtual addition to the individual's income from
year to year without corresponding effort and forethought on his part.
They may accordingly be condemned as systematic pauperization--the
"endowment of the unfit." There is evidently a fundamental problem here
at issue, apart from all administrative difficulties. Clearly this type
of criticism assumes a permanent incapacity in "human nature" or in most
actual beings therewith endowed, to recognize as seriously important
other interests than those upon which hinge physical life and death. The
ordinary man, it is believed, is held back from moral Quixotism as from
material extravagance by the fear of starvation alone; and it is assumed
that there are no other interests in the "normal" man that can or ever
will be so wholesomely effective to these ends. And two remarks in
answer appear not without a measure of pertinence. First, if what is
alleged be true (and there is evidence in Malthus' _Essay_ and elsewhere
to support it) it seems less a proof of original sin and
"inperfectibility" than a reproach to a social order whose collective
tenor and institutions leave the mass untouched and unawakened above the
level of animal reproduction and whose inequalities of opportunity
prevent awakened life from growing strong. And second, the democratic
society of the future, if it exempts the individual in part or wholly
from the dread of premature physical extinction must leave him on higher
levels of interest similarly dependent for success or failure upon his
ultimate personal discretion. And is it inconceivable that on higher
levels there should ever genuinely be such a persisting type of issue
for the multitude of men?[58]
Sec. 17. We have held constructive comparison in its economic phase to be a
reciprocal evaluating of the "salient members" of two budgets. The
respective budgets in such a case express in the outcome (1) the plane
of life to which one is to move and (2) the plane one is forsaking. It
was the salient member of the former that presented the problem at the
outset. In the course of the process its associates were _gathered
about_ it in their due proportions and perspective. The salient member
of the latter (i.e., whatever the purchase is to oblige one to do
without), it was the business of constructive comparison to _single out_
from among its associates and designate for sacrifice. In any case at
all departing from the type of substitution pure and simple, the
commodities sacrificed will come to have a certain "value in exchange"
that clearly is a new fact, a new judgment, in experience. This value in
exchange, this "subjective" or "personal" exchange value, may fittingly
be termed a "value for transition." The transition once made, the
exchange once concluded, I shall deem the motor-car, for example, that I
have _not_ bought to replace one used-up, to be worth less than the
piano I _have_ bought instead. This indeed (in no disparaging sense) is
a tautology. But does this lesser relative value equal or exceed or fall
short of the value the car would have had if no question of a piano had
been raised at all and I had bought it in replacement of the old one as
a matter of course? How can one say? The question seems unmeaning, for
the levels of value referred to are different and discontinuous and the
magnitudes belong to different orders. In a word, because a "value for
transition" marks a resolve and succinctly describes an act, it cannot
be broken in two and expressed as an equating of two magnitudes
independently definable apart from the relation. The motor-car _had_ its
value as a member of the old system--the piano _has_ its value as a
member of the new. "The piano is worth more than the car"; "the car is
worth less than the piano"--these are the prospective and retrospective
views across a gulf that separates two "specious presents," not
judgments of static inequality in terms of a common measure.
Is value, then, absolute or relative? Is value or price the prior
notion? Was the classical English economics superficial in its
predilection for the relative conception of value? Or is the reigning
Austrian economics profound in its reliance upon marginal utility? By
way of answer let us ask--What in our world can be more absolute a fact
than a man's transition from one level of experience and action to
another? Can the flight of time be stayed or turned backward? And if not
can the acts by whose intrinsic uniqueness and successiveness time
becomes filled for me and by which I feel time's sensible passage as
swift or slow, lose their individuality? But it is not by a mere empiric
temporalism alone that the sufficient absoluteness of the present act is
attested. My transition from phase to phase of "finitude" is a thing so
absolute that Idealism itself has deemed an Absolute indispensable to
assure its safe and sane achievement. And with all Idealism's distrust
of immediate experience for every evidential use, the Idealist does not
scruple to cite the "higher obviousness" of personal effort, attainment,
and fruition as the best of evidence for his most momentous truth of
all.[59] And accordingly (in sharp descent) we need not hesitate to
regard value in exchange as a primary fact in its own right, standing in
no need of resolution into marginal pseudo-absolutes. A price agreed to
and paid marks a real transition to another level. There are both
marginal valuation and _Werthaltung_ on this level, but they are
subordinate incidents to this level's mapping and the conservation of
its resources. On this level every marginal utility is relative, as we
have seen, to every other through their common relation to the complex
plan of organization as a whole.[60]
Sec. 18. In conclusion one more question closely related to the foregoing
may be briefly touched upon. We have held that the individual's attitude
toward a commodity is in the first instance one of putting a
price-estimate upon it and only secondarily that of holding it in a
provisionally settled marginal esteem. If this principle of the
priority of price-estimation or exchange value is true, it seems evident
that there can be no line of demarcation drawn (except for doubtfully
expedient pedagogical purposes) between (1) "Subjective valuations" with
which individuals are conceived to come to a market and (2) a mechanical
equilibration of demand and supply which it is the distinctive and sole
function of market concourse to effect. In such a view the market
process in strict logic must be timeless as it is spaceless; a
superposition of the two curves is effected and they are seen to cross
in a common point which their shapes geometrically predetermine.
Discussion, in any proper sense, can be no inherent part of a market
process thus conceived. Once in the market, buyers and sellers can only
declare their "subjective exchange valuations" of the commodity and
await the outcome with a dispassionate certainty that whoever may gain
by exchanging at the price to be determined, those who cannot exchange
will at all events not lose. But considered as a typical likeness of men
who have seen a thing they want and are seeking to possess it, this
picture of mingled hope and resignation is not convincing. Most actual
offering of goods for sale that one observes suggests less the
dispassionate manner of the physiologist or psychologist taking the
measure of his subject's reactions, sensibilities, and preferences than
the more masterful procedure of the physician or the hypnotist who seeks
to uproot or modify or reconstruct them. This is the process known in
economic writing since Adam Smith as "the higgling and bargaining of the
market."
In fact, the individual's ante-market valuation, when there temporarily
is one, is an exchange valuation of the constructive or experimental and
therefore (in any significant sense of the word) perfectly objective
type, and the market process into which this enters is only a perfectly
homogeneous temporal continuation of it that carries the individual
forward to decisive action. There is no more reason for a separation
here than for sundering the ante-experimental sketching out of an
hypothesis in any branch of research from the work of putting the
hypothesis to experimental test. The results of experiment may serve in
a marked way in both sorts of process to elucidate or reconstruct the
hypothesis.
The "higgling and bargaining of the market" has been accorded but scant
attention by economists. It has apparently been regarded as a kind of
irrelevance--a comedy part, at best, in the serious drama of industry
and trade, never for a moment hindering the significant movement and
outcome of the major action. As if to excuse the incompetence of this
treatment (or as another phase of it) theory has tended to lay stress
upon, and mildly to deplore, certain of the less amiable and engaging
aspects of the process. The very term indeed as used by Adam Smith,
imported a certain aesthetic disesteem, albeit tempered with indulgent
approbation on other grounds. In Boehm-Bawerk's more modern account this
approbation has given place to a neutral tolerance. A certain buyer, he
says (in his discussion of simple "isolated" exchange), will give as
much as thirty pounds for a horse; the horse's owner will take as
little as ten pounds--these are predetermined and fixed valuations
brought to the exchange negotiations and nothing that happens in the
game of wits is conceived to modify them. The price will then be fixed
somewhere between these limits. But how? "Here ..." we read, "is room
for any amount of 'higgling.' According as in the conduct of the
transaction the buyer or the seller shows the greater dexterity,
cunning, obstinacy, power-of-persuasion, or such like, will the price be
forced either to its lower or to its upper limit."[61] But the higgling
cannot touch the underlying attitudes. Even "power of persuasion" is
only one part of "skill in bargaining," with all the rest and like all
the rest; if it were more than this there would be for Boehm-Bawerk no
theoretically grounded price limits to define the range of accidental
settlement and the whole explanation, as a theory of price, would reduce
to nullity.[62]
With this, then, appears to fall away all ground for a one-sided, or
even a sharply two-sided, conception of the process of fixation of
market-values. A "marginal utility" theory and a "cost of production"
theory of market price alike assume that the factor chosen as the
ultimate determinant is a fixed fact defined by conditions which the
actual spatial and temporal meeting-together of buyers and sellers in
the market cannot affect. In this logical sense, the chosen determinant
is in each case an ante-market or extra-market fact and the same is true
of the blades of Marshall's famous pair of scissors.
The price of a certain article let us say is $5. According to the
current type of analysis this is the price because, intending buyers'
and sellers' valuations of the article being just what they are, it is
at this figure that the largest number of exchanges can occur. Were the
price higher there would be more persons willing to sell than to buy;
were it lower there would be more persons willing to buy than to sell.
At $5 no buyer or seller who means what he says about his valuation when
he enters the market goes away disappointed or dissatisfied. With this
price established all sellers whose costs of production prevent their
conforming to it must drop out of the market; so must all buyers whose
desire for the article does not warrant their paying so much. More
fundamentally then, Why is $5 the price? Is it because intending buyers
and the marginal buyer in particular do not desire the article more
strongly? Or is it because conditions of production, all things
considered, do not permit a lower marginal unit cost? The argument might
seem hopeless. But the advantage is claimed for the principle of demand.
Without demand arising out of desires expressive of wants there would
simply _be_ no value, no production, and no price. Demand evokes
production and sanctions cost. But cost expended can give no value to a
product that no one wants.
Does it follow, however, that the cost of a commodity in which on its
general merits I have come to take a hypothetical interest can in no
wise affect my actual price-offer for it? Can it contribute nothing to
the preciser definition of my interest which is eventually to be
expressed in a price offer? If the answer is "No, for how can this
external fact affect the strength of your desire for the object?"--then
the reason given begs the question at issue. _Is_ my interest in the
object an interest in the object alone? And _is_ the cost of the object
a fact for me external and indifferent? It is, at all events, not
uncommon to be assured that an article "cannot be produced for less,"
that one or another of its elements of cost is higher than would be
natural to suppose. Not always scientifically accurate, such assurances
express an evident confidence that they will not be without effect upon
a hesitant but fair-minded purchaser. And in other ways as well, the
position of sellers in the market is not so defenseless as a strict
utility theory of price conceives--apart from the standpoint of an
abstract "normality" that can never contrive to get itself realized in
empirical fact.[63] It is true that, in general, one tends to purchase
an article of a given familiar kind where its price, all things
considered, is lowest. In consequence the less "capable" producers or
sellers must go to the wall. But the fact seems mainly "regulative" and
of subordinate importance. Is it equally certain that as between
branches of expenditure, such as clothing, food, and shelter, children,
books, and "social" intercourse, the shares of income we expend upon
them or the marginal prices we are content to pay express the original
strength of separate and unmodified extra-market interests? On the
contrary we have paid in the past what we have had to pay, what we have
deemed just and reasonable, what we have been willing experimentally to
hazard upon the possibility of the outlay's proving to have been worth
while. In these twilight-zones of indetermination, cost as well as
other factors of supply have had their opportunity. Shall we
nevertheless insist that our "demands" are _ideally_ fixed, even though
in fallible human fact they are more or less indistinct, yielding and
modifiable? On the contrary they are "in principle and for the most
part" indeterminate and expectant of suggested experimental shaping from
the supply side of the market. It is less in theory than in fact that
they have a salutary tendency (none too dependable) toward rigidity.