The Ultimate Standard of Value [9]
it equals its cost, then the wages which the entrepreneur has paid out either directly or indirectly, must equal the value of the product, (we here ignore all payments for abstinence). How high will the value of both product and labor go? We would again answer, to the point at which marginal utility and marginal disutility coincide. Here, however, a new element enters into the problem. We have to consider, not only the marginal utility which the wages have for the laborer, but also the marginal utility which the product of labor has for the general public or for the consumer. Every consumer continue to buy so long as the marginal utility of the ware exceeds the price sacrifice. Since the marginal utility decreases as the supply increase, an increase in the amount produced cannot find a market except at a lower price. When, for instance, thirty million piece of a product, each of which cost one-quarter hour's labor, will find purchasers at a price of seven and one-half cents; thirty-five million pieces will perhaps bring only six cents each; thirty-eight million only five cents; forty-two million only four cents, while fifty million might only find buyers at two or at one and one-half cents. On the other hand, the amount that will be produced will depend, ceteris paribus, upon the length of the working day. But this again, as we have seen, depends in part upon the rate of wages, or upon the amount which the laborer will receive for an additional quarter hour of work. With a wages of two and one-half cents per quarter hour, every worker, according to the figures of a previous example, would be willing to work thirty quarter hours per day: with a wages of five cents per quarter hour, they would work thirty-eight quarter hours; with a wages of seven and one-half cents per quarter hour, they would work forty-two quarter hours. If the number of workers be taken as a million, then with a wages of two and one-half cents per quarter hour, they will produce thirty million piece; with a wages of five cents, thirty-eight million, and with a wages of seven and one-half cents, they will produce forty-two million pieces of a product of which each piece costs one-quarter hour of labor. It is manifest that under these conditions supply and demand will be in equilibrium when we have a product of thirty-eight million pieces with a value of product, and a wages of labor equal to five cents. This would be the price of the commodity and the level of wages at which demand and supply would come into equilibrium. All those who desire to purchase at that price would be satisfied, and, at the same time, the price would afford sufficient indemnification for the pain endured by just the right number of workmen. It must not, however, be forgotten that in the fixing of this level the utility of the ware is just as important a factor as the disutility of the labor, or that in the determination of this level they work together like the two blade of a pair of shears. Here, however, my English and American colleagues and myself must part company. They seem to regard this rule as capable of quite general application.(18*) They even seem disposed to hold that it is the great law itself. I hold, on the other hand, that this rule has no wider application than is justified by the assumption upon which it is based; namely, that the laborer is entirely free to determine how long he will continue his daily labor. When, however, we turn to the actual facts of our present industrial life, we find first that this assumption does not obtain, save as an exception, and that it does not correspond at all with the other assumptions upon which our empirical law of cost is based.
IV. The Relation of the "Law of Cost" to Disutility Continued
To demonstrate the first of the two propositions with which I closed the preceding chapter, I need only advert to well-known facts. It is, for instance, a fact of common experience, that in most branches of production the laborer is not free to determine the length of his working day. The hours of labor are fixed more
IV. The Relation of the "Law of Cost" to Disutility Continued
To demonstrate the first of the two propositions with which I closed the preceding chapter, I need only advert to well-known facts. It is, for instance, a fact of common experience, that in most branches of production the laborer is not free to determine the length of his working day. The hours of labor are fixed more