The Ultimate Standard of Value [17]
equilibrium will be attained when in the different branches of production the price has so adjusted itself that the productive power does not tend to change its occupation. This would be the case, when, in all kinds of employment, equal labor received equal pay and unequal labor received proportionately unequal pay. Then the differences in pay could be regarded as a just equivalent for the special laboriousness or disagreeableness, or for the special skill or fidelity, etc., incident to certain occupations. Equal capital would everywhere receive the same rate of interest. Any excess above this could be regarded as a just equivalent for the greater risk, etc., incurred in that particular investment. We may, for example, assume that this point of equilibrium is reached, when in all branches of production the wages of an unskilled laborer are eighty cents, and the rate of interest on capital is five per cent. Under this supposition the normal price, toward which according to the law of cost the market price gravitate, should be such as would correspond with an average wages of eighty cents, and a rate of interest of five per cent. The price of a commodity that costs three days of common labor would, according to the law of cost, gravitate toward two dollars and forty cents (interest being ignored). This would be true, whether or not this equalized rate of pay of eighty cents corresponded to the minimum of existence. It may be that when the minimum of existence is only forty cents, the rate of wages will not remain at eighty cents. A generation. later it may sink to sixty cents, or even to fifty cents. While this would show that there is no fixed and absolute normal price,(35)* it does not alter the fact that at the present time the price of the commodity, according to the law of cost, gravitates toward that price, which would give the laborer a wages of eighty cents. When we examine this gravitating motion more closely, it is manifest that we cannot say that "the price gravitates toward the rate of eighty cents"; because the laborer's cost of maintenance is forty cents. Instead we must say, that the price gravitate toward the rate of eighty cents, because the rate of wages which obtains throughout the whole field of employment is eighty cents. In other words, in explaining the oscillating motion of prices, according to the law of cost, we cannot avoid assuming as a basis, a certain average or normal rate of wages as the prevailing rate for the period under consideration. We will now repeat the question which was asked in the beginning of this chapter, a question which must be asked if our explanation is to maintain a logical and coherent form: Upon what does this average or normal rate of wage, prevailing at any given time, depend? We have already answered this question, or rather Professor Marshall has answered it, in the first of his explanations of the rate wages already quoted. In this he has declared, and we must perforce agree with him, that the price of a day's labor depends upon the value of the pure product of a day's labor. Or more correctly, upon the value of the product of the last employed laborer, in Professor Marshall's example the "marginal shepherds."(36*) This answer brings the whole doctrine of the law of cost to its final test. Upon the one side, this analysis of cost practically abandons the attempt to show that disutility is the essential element of cost. On the other side, the expression "value of the products of labor", make manifest that we have not yet obtained the ultimate element, and that the analysis must be continued still further. Finally, the explanation seems even more than before to continue in a circle. In the name of the law of cost we explain the value of the product by the value of the labor expended in its production, and then explain the value of this labor by the value of the product. There is manifestly a great discrepancy somewhere in this explanation. A discrepancy which the Austrian economists endeavor to avoid by a special interpretation of the law of cost.(37*)