The Ultimate Standard of Value [5]
to this historical method of reckoning cost, labor may be regarded as the chief representative of all production costs. But the sacrifice arising from the expenditure of labor may itself be measured by different standards or scale. We can measure it either according to the amount of the labor (i.e., the duration of the labor), according to the value of the labor, or, finally according to the amount of the pain or disutility, which is associated with the labor. Obviously, through the use of these different standards of measurements, one will arrive at very different formulas for expressing the amount of the costs. If, for instance, one were asked: What is the cost of production of a certain piece of cloth? he would answer according to the first scale or standard, twenty days' labor; according to the second (if a day's labor cost say eighty cents), labor to the value of sixteen dollars, and according to the third, a certain sum of pain or disutility, which the laborer must endure. But it is important that we should here see clearly, that this involve more than a mere difference in the terms employed. For according as we employ one or the other of these scales or standards, our estimate of the actual amount of the cost of any commodity will vary. They will not only be different, but may even positively contradict each other. Suppose, for instance, that a certain commodity A require for its production twenty days' labor, which is paid for at the rate of eighty cents per day; again let us assume that a certain other commodity, B, require thirty days' labor, which is paid for at the rate of forty cents per day. Now if we employed the first scale or standard, we would reach the conclusion that the cost of A was less than the cost of B, (twenty against thirty days' labor). By the application of the second, we reach the directly opposite conclusion, that the cost of A is greater than the cost of B (labor to the value of sixteen dollars against labor to the value of twelve dollars). It is also clear that even though we assume that the labor in these case is equal, either in amount or in value, this does not necessitate the conclusion that the amounts of pain or disutility are equal. The labor of a great artist, which perhaps is paid the highest of any form of labor, may not only not cause him any pain, but may even yield him, quite independent of all economical considerations, a large measure of pleasure. It might therefore very readily happen that by the application of the third standard, the cost of a commodity would seem very small, while its cost, according to the other two standards, would seem very large, and conversely. This short resume of the uses that have been made of the term "cost of production" makes it clear, that if we would avoid idle disputation, all further discussion of this subject must be preceded by the consideration of a preliminary question. A question which, for the most part, has been neglected by those who have taken part in the general discussion. The whole controversy, in its final issue, turns upon the famous "law of cost," which holds that the value of the majority of goods, namely, those which may be regarded as freely reproducible, adjusts itself in the long run according to the cost of production. As to the actual manifestation of such a law, there can be no question. Its existence is empirically proven, and so far as the actual fact is concerned is unanimously acknowledged by all parties to the discussion. The real question is as to the deeper meaning, the final theoretical conclusions, which may be deduced from this empirically established law of cost. But before we can enter upon any inquiry in regard to this deeper meaning, we must first know in what sense the term "cost" is to be employed. That it cannot at one and the same time, have all of the above enumerated meanings, the preceding example make very manifest. If the cost of a commodity A, taken in one sense is higher, and taken in another sense is lower, than the cost of a commodity B, it is manifest that the price cannot,