The Ultimate Standard of Value [18]
Their efforts, of course, will not receive much encouragement from those writers who do not recognize the existence of this discrepancy. This includes the great majority of those who hold, wittingly or unwittingly, that the explanation of the value of goods in accordance with the law of cost is firmly anchored upon the elementary factor, "disutility." That this is not the case, I have endeavored to show; and I will now attempt to bridge the gap in the explanation of value, which my investigation has revealed. On the one hand it is held, that in numerous cases the price of the product, according to the law of cost, oscillate about some normal rate of wages, which rate does not correspond either to the" disutility" of labor or the cost of maintaining the laborer. On the other hand, Professor Marshall, in common with many other English and American economists, admits that the normal rate of wages is adjusted according to the value of the product of the last employed laborer.
VI. What the Law of Cost Really Means. Final Result.
The existing productive powers, inclusive of the most original and important of all-labor-seek employment in the various opportunities for production that present themselves. Naturally, of course, they first engage in those branches of production that are most profitable. But as these are not sufficient to give employment to the whole productive power, some of this power must engage in successively less productive occupations, until finally A of it is employed. This gradual extension to less probable occupations may be seen in the production at one and the same time, of more valuable goods, and of others, which from the very beginning were less valuable, because the demand for them was less urgent. But the important case of this gradual extension to less profitable employments is found elsewhere. In any branch of production which hitherto has been very profitable, the amount produced tends to increase. Hence, according to well known principles, we are compelled to market the increased product at a diminished price. The demand arranges itself in strata that vary with the desire and purchasing power of the consumers. Let us assume that of a certain kind of commodity, thirty thousand pieces are produced by one hundred laborers with an outlay in labor of one day out of the three hundred working days in the year. Let us further assume that these are marketed at the price of eighty cents each. There will then be among the purchasers possibly one thousand to whom eight dollars per piece would not have been too dear, either because it satisfied some pressing want, or because their great wealth make the value of the monetary unit exceptionally low in their estimation. Then come perhaps, five thousand more purchasers who, in case it is necessary, are prepared to pay two dollars. Another six thousand, who, in an extreme case, would pay one dollar and sixty cents. Another six thousand who would pay only one dollar and twenty cents. Again, another six thousand who, at most, will pay only one dollar, and finally, the last six thousand who are prepared to pay only eighty cents. Below these come, perhaps, another group of six thousand who would be willing to pay sixty cents, but for whom the prevailing market price of eighty cents is too high, and who, therefore, must decline to purchase. Assuming the conditions of this example, a product of thirty thousand piece corresponds to a market price of eighty cents. But manifestly, if the productive power were less; if, for instance, the number of laborers was only eighty and the amount produced only twenty-four thousand piece, the market price at which the whole product would be sold might be one dollar. It is equally clear that with one hundred and twenty laborers and a product of thirty-six thousand piece, the market price might not exceed sixty cents. In other words, the value of the product of one laborer when eighty laborers are employed, would be one dollar; when one hundred are employed, eighty cents, and when one hundred and twenty are employed,
VI. What the Law of Cost Really Means. Final Result.
The existing productive powers, inclusive of the most original and important of all-labor-seek employment in the various opportunities for production that present themselves. Naturally, of course, they first engage in those branches of production that are most profitable. But as these are not sufficient to give employment to the whole productive power, some of this power must engage in successively less productive occupations, until finally A of it is employed. This gradual extension to less probable occupations may be seen in the production at one and the same time, of more valuable goods, and of others, which from the very beginning were less valuable, because the demand for them was less urgent. But the important case of this gradual extension to less profitable employments is found elsewhere. In any branch of production which hitherto has been very profitable, the amount produced tends to increase. Hence, according to well known principles, we are compelled to market the increased product at a diminished price. The demand arranges itself in strata that vary with the desire and purchasing power of the consumers. Let us assume that of a certain kind of commodity, thirty thousand pieces are produced by one hundred laborers with an outlay in labor of one day out of the three hundred working days in the year. Let us further assume that these are marketed at the price of eighty cents each. There will then be among the purchasers possibly one thousand to whom eight dollars per piece would not have been too dear, either because it satisfied some pressing want, or because their great wealth make the value of the monetary unit exceptionally low in their estimation. Then come perhaps, five thousand more purchasers who, in case it is necessary, are prepared to pay two dollars. Another six thousand, who, in an extreme case, would pay one dollar and sixty cents. Another six thousand who would pay only one dollar and twenty cents. Again, another six thousand who, at most, will pay only one dollar, and finally, the last six thousand who are prepared to pay only eighty cents. Below these come, perhaps, another group of six thousand who would be willing to pay sixty cents, but for whom the prevailing market price of eighty cents is too high, and who, therefore, must decline to purchase. Assuming the conditions of this example, a product of thirty thousand piece corresponds to a market price of eighty cents. But manifestly, if the productive power were less; if, for instance, the number of laborers was only eighty and the amount produced only twenty-four thousand piece, the market price at which the whole product would be sold might be one dollar. It is equally clear that with one hundred and twenty laborers and a product of thirty-six thousand piece, the market price might not exceed sixty cents. In other words, the value of the product of one laborer when eighty laborers are employed, would be one dollar; when one hundred are employed, eighty cents, and when one hundred and twenty are employed,