The Ultimate Standard of Value [4]
we may distinguish between what might be called the "synchronous" and the "historical" methods of estimating sacrifices. According to the former, we take a unit of the total sacrifices as the basis for our reckoning, a unit which contains an increment of all the forms of sacrifice, which, at any instant, must enter into the production of the commodity. In the production of cloth, for instance, we consume at the same time, yarn, looms (wear and tear), the labor of weavers, coal, etc., beside a great many subordinate aids to production. By this method we usually arrive at a very extensive list of production sacrifices. In order to obtain a single expression for this aggregate, or for the height of the cost, we must bring these various elements in production under a common denominator. This may be done by estimating them all according to their value or price. Hence, by this synchronous method of reckoning, the cost equals the aggregate of the means of production, that have been sacrificed in the creation of the commodities, estimated according to their value. This is undoubtedly the sense in which the term cost is understood in practical business life. It is in this way, that the manufacturer, the farmer and the merchant reckon their cost. This, too, is the sense in which Professor Marshall employs the term when he speaks of the "money cost of production,"(10*) and in my own writings about value and capital, I usually employ the term cost in the same way. Usually but not always, because for certain purposes another mode of estimating sacrifices, become important and may not be neglected. This is the historical method. It is quite manifest that many of the concrete forms of goods, which we today are compelled to sacrifice to purse of production, are themselves the product of past and more original sacrifices. For example, the wood and coal that we consume to-day in the production of cloth, and likewise the machine which we wear out, are themselves the product of previous sacrifices of labor. If we go behind these material commodities to the sacrifice which the human race has suffered in successive periods of time, in bringing them into existence, or if you like the sacrifices necessary to reproduce them, the list of the historical production sacrifices would be greatly simplified. It would include two, or at most three, elements. First of all come labor, which without doubt is the most important of these elements. Then come a second to which many economists have given the name, abstinence. Perhaps a third might be added, namely, valuable original natural power; though many might decline to regard this last as a sacrifice. For our present purse, the extension of the discussion to the last two elements, about which there may be some question, is not at all necessary. We may indeed leave them entirely out of the discussion, and take the most important of the above elements -- labor -- as the representative of the elementary production sacrifices. Of course we do not mean that we would either deny or overlook the co-operation of the other elements; but, in the question which here interests us, these elements play a part in no way different from that played by labor, so that the result obtained for the latter may in a general way be regarded as true of the other elementary production sacrifices. It is therefore hardly necessary to repeat the same argument for the other elements. As I have already remarked, the historical mode of viewing cost is regarded by Professor Macvane as the only correct method;(11*) whether or not he is right we have yet to inquire. It is employed by Professor Marshall in the statement of his conception, of "the real cost of production."(12*) In numerous instances I also have had occasion to make use of it, as when I endeavor to show that capital does not possess original productive power. Again, when in explaining the operation of the law of cost,(13*) say in the iron industry, I declare in a brief way, that the necessary means of production are mines, direct, and indirect labor.(14*) According