The Ultimate Standard of Value [3]
and determining condition is the amount of personal fatigue, pain or disutility which is imposed upon the laborer by the last and most fatiguing increment of his day's work.(4*) Somewhat nearer the middle of our series, though still not far from the cost end, we find those writers who, with certain modifications, uphold the old classical theory. It is here that we find the learned and contentious Dietzel,(5*) of Bonn, who so divide the field of value that the value of scarcity goods is determined by utility, while the value of freely reproducible goods is determined by the cost. His position differs from the classical theory, in that he divide the domain of value in use between utility and cost, in the same way that he divide the domain of value in exchange. The classical theory, on the other hand, puts the use value entirely under the dominion of utility. Quite close to Dietzel, we find the Italian economist, Achille Loria, and the able American defender of the classical school, Professor Macvane. The latter has recently attacked the position of the Austrian economists, in two polemical papers of great acuteness. His interpretation of the Austrian theory, however, is not always accurate, nor always free from polemic exaggeration. His chief objection is that their conception of cost as "a sum of producer's goods possessing value" is obsolete and untenable. He holds that the only genuine economic cost of production is labor and abstinence (more correctly, waiting), which, in the case of freely reproducible goods, are the final and entirely independent regulators of value.(6*) Where opinions vary so widely from one another, some one is usually found who will take a middle course, hoping to find a solution for the problem in the golden mean. This mission of conciliation has been undertaken in this case by no less eminent economists than Professor Marshall, of Cambridge,(7*) and Professor Edgeworth, of Oxford.(8*) Both of these writers incline toward the theory of marginal utility, but have perched themselves very nicely upon the middle round of the ladder, from which vantage-ground they send forth gentle blame and conciliating applause to both parties in the discussion. Jevons and the Austrian economists are censured for exaggerating the importance of marginal utility, while the adherents of the classical theory are taken to task for underrating its importance; the truth, they say, lies in the middle. Scarcity goods, without doubt, have their value determined entirely by utility. In the case of freely reproducible goods the demand is governed by utility, and the supply by cost; since the price is determined by the interaction of these two factors, one cannot say either that utility alone or that cost alone determines value; but rather that utility and cost cooperate with each other in the determination of price, like, to use Professor Marshall's figure, the two blades of a pair of shears.(9*) Criminal lawyers of long experience are wont to apply to obscure and complicated cases the motto: Cherchez la femme! For my own part, when, in our science, I find many clear and able thinkers at odds about a given point, I usually ask myself, where is the ambitious or elusive concept with which they are playing. In this case we need not search far afield; it is the concept of "cost."
II. THE VARIOUS MEANINGS OF THE WORD "COST."
The term "cost", like many of the other terms employed in political economy, is used, both in scientific discussions and in practical life, in several different senses. Even when in a general way we agree in saying that the "cost of production" of a good is the sum of the sacrifices involved in the creation of the good, this, by no means, guarantees that we all have the same thing in mind. In the estimation of these sacrifice, we may employ several different methods of measurement. Thee give us results which, under certain circumstances, will differ not merely with reference to the terms employed, but also with reference to the phenomena indicated by these terms. First of all,
II. THE VARIOUS MEANINGS OF THE WORD "COST."
The term "cost", like many of the other terms employed in political economy, is used, both in scientific discussions and in practical life, in several different senses. Even when in a general way we agree in saying that the "cost of production" of a good is the sum of the sacrifices involved in the creation of the good, this, by no means, guarantees that we all have the same thing in mind. In the estimation of these sacrifice, we may employ several different methods of measurement. Thee give us results which, under certain circumstances, will differ not merely with reference to the terms employed, but also with reference to the phenomena indicated by these terms. First of all,