The Ultimate Standard of Value [15]
remarked, that in obtaining the value of labor out of the value of the product of labor, one is in entire harmony with the conceptions of the Austrian school. What effect this has upon the law of cost will appear later on in the discussion. In another place(31*) Professor Marshall give us quite a different standard for determining the value of labor. He holds, that in the case of every agent of production: "there is a constant tendency toward a position of normal equilibrium, in which the supply of each of these agents shall stand in such a relation to the demand for its services, as to give to those who have provided the supply a sufficient reward for their efforts and sacrifices. If the economic condition of the country remain stationary sufficiently long this tendency would realize itself in such an adjustment of supply to demand, that both machines and human beings would earn generally an amount that corresponds fairly with their cost of production." I am not quite sure how wide an application Professor Marshall would give to this statement. This much, however, is clear, he would apply the distinction of the classical school, between the rapidly fluctuating "market price" and the "normal value" which is based upon cost, to the commodity-labor. In the passage just cited he manifestly wishes to indicate the standard according to which the normal or long period position of wages is finally determined. But as it appears to me, he is not quite clear whether he would make the efforts and sacrifice of the laborer the ultimate standard (as his expression, "sufficient... for their efforts and sacrifices," would seem to indicate), or whether he would take the cost of rearing and maintaining human beings as the standard (as the expression "amount that corresponds fairly with the cost of production of human beings") would imply. Doubt may also arise whether it is his opinion that the absolute height of wages tends to an equilibrium with the "efforts" or "cost of production of human beings", or that the differences in wages to which these give rise are but variations from an average level, the absolute height of wages being determined by other considerations. If this last is Professor Marshall's opinion, then I am in entire agreement with him in his conception of the value of labor. That differences in the pain of labor tend to bring about corresponding difference in wages, I have already admitted.(32*) The same influence, and for quite analogous reasons, may be exercised by differences in the cost of producing human beings. If, however, the expression is to be interpreted in the wider sense, that the absolute height of wages is finally determined by the pain of labor, or by the cost of producing human beings, then, as it seems to me, Professor Marshall has taken a position which cannot be maintained. This, so far as the pain of labor is concerned, I have endeavored to show in a previous chapter. In regard to the cost of producing human beings, a twofold objection suggests itself. First, this statement is hardly verified by experience, for modern economists are quite generally agreed that the "iron law of wages" cannot be interpreted as meaning that the necessary cost of maintenance is a fixed, definite amount, toward which the wages of labor must in the long run tend. On the contrary, they are agreed that the wages of labor may permanently exceed that amount, which hitherto has been regarded as the amount of the necessary cost of maintenance. And when this excess of the wages of labor above the cost of maintenance does disappear, it is really due to the fact, that the better conditioned laboring population have so accustomed themselves to the higher standard of life, that much that before was a luxury is now a necessity. In an agreement between cost of maintenance and wages of labor obtained in this way it can hardly be said that the cost of maintenance is the determining, and the wages of labor the determined element. Second, this last explanation is not satisfactory because it simply leads us around in a circle.