The Ultimate Standard of Value [13]
the disutility exercises a determining or co-determining influence upon the amount of the supply, the height of the marginal utility, and the price of the product. This, too, is done in just the same way as in the frustration given in the last chapter, in which the ware was the product of common labor. At the same time, economists are agreed that such monopoly prices do not come under the classic law of cost. Here again, as I believe, we are brought to the conclusion, that the disutility which we are investigating is something different from the cost which is operative in the empirical law of cost, and, therefore, that those economists are on the wrong path who think that the occasional agreement of value and disutility may be explained as a manifestation of the great empirical law of cost, and vice versa. This erroneous confounding of two quite different phenomena has been, as it were, in the air of theoretic economics since the time of Adam Smith. The latter, according to the very apt and ingenious observation of Wieser,(22*) really give two parallel explanations of the phenomenon of value, viz.: a philosophical explanation, which is especially applicable to primitive conditions; and an empirical explanation, which is better sited to the more fully developed conditions of our present industrial life. Adam Smith also gives us two similarly related explanations of cost. According to the philosophical, he puts the personal pain associated with labor, "the toil and trouble," as the cost which really determine the price of the product. Later, in explaining his famous law of cost, which belongs to the empirical part of his theory of value, he holds that the "natural price" of the product gravitate toward the empirical cost. This, he declare to be wages of labor and interest.(23*) To the mind of Adam Smith, of course, there was no opposition between these two explanations, and accordingly it was impossible to escape the conclusion, that, at least so far as labor is concerned, they really have to do with the same thing. By eliminating the modern economic conditions, as modified by exchange, we get the real kernel of the matter. And this kernel, according to the empirical law of cost, is nothing else than "the toil and trouble" of labor. The well-known controversy that long monopolized the attention of the classical economists, whether the price of goods depends upon the quantity of labor expended, as Ricardo taught, or upon the amount of wage, as Mill correctingly suggested, afforded ample opportunity to correct this error. They failed, however, to do so. The old Smithian "toil and trouble" remained in a sort of scientific haziness, until, through Gossen, and especially through Jevons, it was brought to full and clear recognition. Then, for the first time under the name of the "disutility of labor," it was raised to the rank of an elementary economic power, while its counterpart, the utility of the good, was set over against it. The old confusion, however, attached itself to the new name. If I am not greatly mistaken, not only the followers of the old classical school, but also many of the adherents of the newer theory, developed by Jevons, still stand under this ban. In the case of Professor Macvane, the confusion is quite pronounced, as when he explains the cost of the classical law of cost as "pain of labor and fatigue of muscles."(24*) Professor Edgeworth take substantially the same position when he occasionally explains the "disutility" in terms of "cost and sacrifice."(25*) Or when he sets first utility and cost,(26*) and again, utility and disutility over against one another.(27*) Again, when he indulge in a polemic against the Austrian school of economists, and urge that they have neglected the great Ricardian law of cost and stripped it of its significance, and that they have not properly recognized the function of disutility in the determination of the economic equilibrium and the value of goods.(28*) Professor Marshall, as it seems to me, also become involved, to some degree, in this confusion. While