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CHAPTER II.

On Value.-Cost, and Value in Use.-Importance of Estimating Values in practical Economy.-Exchange Value.—Price.— Deductions from the above in reply to Lassalle's theory of reducing all value to labour only. - Conjunctures in Trade, and their influence on the Condition of the Working Classes. We have in the preceding chapter spoken of that incessant process of production and consumption which has for its object the increase and improvement of the personal life in the community. Now in order to the creation and formation of those commodities which can effect this, mental and bodily exertions are required, and certain values are attached to these efforts in proportion to their ultimate effects. Mental acquisitions, and moral results too, are judged according to their value. All scientific activity or technical experiments, all acts of statesmanship, are inaugurated first, and accompanied throughout, by a conviction of their respective values. We all estimate the amount of good any act of ours may produce; and herein, from our individual point, consists its value. Similarly, we deliberate on the comparative amount of pleasure and pain in the production of external commodities. Esthetical and other considerations influence our final estimates as to the value of any commodity we desire to create, or utilize. We inquire therefore :

(1) What is the amount of human life-vigour expended in the acquisition of any article in question? In other words, what is our valuation of the cost?

(2) And inversely: how much life-vigour will it produce, what amount of enjoyment will it afford? In other words, what is its value in the use?

VALUE OF COMMODITIES AND HUMAN LIFE. 21

(3) What is the mutual relationship between these two values-cost, and use? This last question is important; for what decides the producer or consumer in creating, or acquiring, any commodity is the estimate he forms as to its comparative value; he inquires whether the commodity utilized is equal to, less, or greater in value than, the expenditure which it entails.

By economic value of any commodity, then, we understand the importance attached to it by the economist, both with regard to the pain of life-expenditure exacted in its acquisition, and also the pleasure and sustenance of life afforded by its consumption. Both may not always, in fact do in few instances, cover exactly each other. We do not consider here what is value in exchange. We now only take the standpoint of Robinson Crusoe, who, in his elementary knowledge of political economy, values all articles only with regard to the cost of labour and the degree of their importance in the use. And he will only create such of them where, in his estimation, the value in use surpasses the value in the cost of labour. Value presupposes serviceableness of the commodity. But not all serviceable or even indispensable commodities are valuable in an economic sense, such as air for example. And, besides the external serviceableness, value expresses the importance attached to the commodity by the person who requires, but cannot obtain it except at the cost of labour or money. The value or worth of a thing then is nothing more or less than the estimate we form of it after carefully weighing, considering, appreciating, and calculating the amount of pleasure and pain represented by it from the point of view of those who enjoy and those who create it respectively. And the lessons of political economy tend to inculcate the production of such commodities only which are in demand, i.e. of value,

and which are most adapted for the furtherance of life, and this at the least cost possible.

Human life itself is such a commodity; and the destruction of human life in wars, and the improper utilization of it by keeping up large standing armies, is a violation of economical principles. There is a physical value and a mental value of human life; the former refers to the labour-power, the latter to the educational capacity, of man. A pharisaical contempt of the life of proletarians, as well as undue indulgence to the effeminate idlers in higher grades of society, are violations therefore of economical principles; those who encourage either are the abettors of despotism and barbarism. Socialism has the merit of having given the first impulse to a true estimation of man's value. Moreover, without human life there could be no value in things, since the source of their value is human labour, and their real value consists in the power of sustaining and reproducing human life-vigour.

It was important to point out the meaning of value, because after balancing the values in the cost of production, and of use in consumption, over against each other, the mind is determined to embark in or to give up any particular economic undertaking. If the value in use surpasses the value of the cost, it is an inducement to the manufacturer to produce such a commodity, for he profits by it. If, on the other hand, the value in use remains under the value of the cost incurred in producing a certain article, to avoid future loss the manufacturer will stop producing it. Or, again, if both values remain in a state of constant equilibrium, it becomes a matter of indifference to the manufacturer, who will only produce under the influence of a hope of gain.

But there is another value consideration which enters

VALUE IN EXCHANGE.

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largely into the calculations of practical economists, and complicates matters, namely, the value in exchange. If all commercial intercourse were simple barter, there would be little difficulty in this matter. But since all commodities are frequently exchanged, passing through many hands from the time of their production until they are finally consumed, they receive a certain exchange value which sometimes, but not invariably, is the price or equivalent given in the purchase. Now this value in exchange has been made the alpha and omega of political economy, and we must therefore carefully look into it. Moreover, it is the want of clear views on this subject that often has given a handle to socialistic writers in their attacks on private property. Now, actually exchange value is simply the estimate we form in our own mind of the relative values of the commodities to be exchanged, i.e. a comparison between the two values of cost and use. After this antecedent judgment of the mind, we are ready or unwilling to pay the price in so far as it seems to us a proper equivalent or cost for the use of the tendered commodity.

No doubt there is some complexity in the process of weighing the comparative values of expenditure and enjoyment, as indicated by the exchange value of any commodity. Here we have no longer the simple problem of Robinson Crusoe, but that of a whole community of economic human beings engaged in constant exchanges of the multifarious production and consumption of commodities in which all have a share. Here the producer must anticipate the value of his product to the consumer,what it will fetch in the market; he must be guided by the demand for his goods.] On the other hand the consumer has to consider, not merely the cost of production of the article he requires, but the lowest amount at

which it can be procured. And the function of valuation becomes more complex by the necessary interference of merchants, agents, and speculators, who become the medium of exchange between the producer and consumer. Take, for example, the following case. The manufacturer of raw iron buys iron ore, the merchant buys the raw iron and sells it again to the steel manufacturer. From him again another merchant buys the manufactured steel, and sells it to the cutler who, in his turn, produces the knife, which is finally bought by the consumer for a certain price in money. Here, instead of a simple comparison of the values of the cost and use, there are successive valuations through all the multifarious commercial transactions. The steel manufacturer inquires, what was the cost of steel to me? and he asks himself when and where will my manufactured article attain its highest market value? and so all the rest, in their calculations, aim at buying in the cheapest and selling in the dearest market. Exchange value, then, in each individual case, is the value put on any given article with a view to profit.

The price therefore of any commodity is not invariably the real value in exchange, but simply the result of the two estimates as to the cost and use of the commodity ultimately formed by the buyer and seller respectively. Now these considerations will assist us in dispelling hazy and deceptive views with regard to the non-agreement between the ever-varying value in exchange and the original cost and the real value in use of any commodity. It is quite true the actual price paid does not coincide always with the cost price, and each successive retail price rarely harmonizes with the former purchase value of the article. This is a natural result of a widely extended. system of human economy in commerce, having for its

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