Graham Wallas in To-day March 1889

An Economic Eirenicon

Source: To-day March 1889, pp. 80-6.
Transcribed: by Ted Crawford. A few minor typos have been corrected.

Four-and-a-half years ago (Oct. 1884) Mr. P.H. Wicksteed wrote in this magazine a criticism, from the Jevonian point of view, of the fundamental propositions contained in the earlier part of Marx’s Kapital. Three months afterwards (Jan. 1885) he was answered by G.B. Shaw, and published his final rejoinder in the April number of that year. The controversy had a very noticeable and unusual result. One of the controverters was actually convinced by the reasoning of the other and not long afterwards Mr. Shaw announced himself as a believer in the Jevonian value analysis.

Now Mr. Wicksteed has carried the argument a step further by himself publishing a book on Value with the somewhat misleading title of An Alphabet of Economic Science. At first sight the book, with its twenty-four sheets of diagrams and its unflinching use of mathematical terms, is likely to terrify a student whose knowledge of mathematics is “at the margin,” but Mr. Wicksteed is so painstaking and clear in his explanations that the most ignorant reader when he has finished the last page fancies for one delirious moment that he knows all about the Differential Calculus. In fact a competent critic is said to have told him that she did not think much of him as an economist, but would like to have him as her mathematical tutor. Marx, also, who preferred to employ the technical terms of Hegelian dialectic had to fill many pages with explanations of his method, pages which the adept finds unnecessary and the general reader “funks” but which like Mr. Wicksteed’s mathematics are very useful to the anxious but ill-trained enquirer. I have been asked, while reviewing Mr. Wicksteed’s book to state my own opinion on the points at issue in order that I may afterwards be dealt with by some other and more learned opponent. I will therefore describe the general impression left on my mind after some evenings spent in reading the Alphabet of Economic Science, and re-reading Marx and Jevons.

The existence of the problem of value is, I take it, due to the fact that men have a habit of exchanging various commodities with each other. If we examine the nature of those acts of exchange which make part of the trade of any civilised community we find, first, that similar commodities if exchanged for each other more than once at the same time in the same market are exchanged at the same ratio, and also that each party almost always gives up something which has cost him or someone else trouble to acquire, and does so in order either at once or eventually, to get something which may cause him pleasure. Therefore it is to be expected that anything which changes either the trouble necessary to acquire a commodity or the pleasure to be derived from it will alter the conditions under which any future act of exchange takes place, and therefore, the ratio of exchange. Marx fixed his attention on the causes which affect the trouble necessary to acquire any commodity, and in particular upon those causes which tend to increase or decrease the labour necessary on the average for the actual production of commodities. He pointed out[1] that if the labour generally necessary to produce any commodity is increased or decreased, then (other things being equal) a corresponding alteration takes place in the ratio of exchange between that commodity and others. Of course he was well aware that “other things” never are “equal,” that not only does the efficacy of labour in the production of each commodity vary with the circumstances of each mine,[2] factory, etc., i.e., that rent and interest must exist as economic categories; but also that the utility (in the Jevonian sense, i.e.., the power of satisfying human wants), of commodities varies with changes of fashion amount in the market, or already possessed, etc.[3]. I have heard Marx’s statement of value objected to on the ground, e.g., that the price of a fur coat in a pawnbroker’s shop varies with the daily readings of the thermometer, and that the labour involved in making another like it varies with the skill of the tailor who may sew it, and the excellence of the machine which he uses. Such an objection reminds the sharp boy who always when one is teaching Euclid, Bk. I, Prop. 4, minutely examines the figures on the board and says, “But, please sir, the triangles are not equal.”

At the same time I have difficulties of my own about Marx’s statement of his case. In the first place when he states that a change in the “labour-cost” of a commodity brings about a change in the ratio of exchange he does not indicate the process by which that change is brought about. In his tract Wage Labour and Capital, he describes in the most minute and graphic way the steps which he here omits, the constant competition of capitalists, the necessity which forces each to lower his price in order to secure a larger sale, and the final “settling,” after each fresh disturbance, of a price which represents the average (or to use Jevonian definiteness, the “final”) labour cost. The true reason why manufacturers cannot sell more goods without lowering their prices, namely, that they have to content themselves by satisfying relatively less “effective” wants seems to have escaped him. And he assumed that this effect of competition was so certain and invariable that in a scientific analysis of value any details as to its action would be out of place. But, since Marx’s time, manufacturers with or without the study of Jevons have discovered that their profits can be considerably increased if they agree to satisfy only the more urgent wants of their consumers, and with this object are giving up both in America and in Europe the kind competition which Marx assumes as universal, He quotes with approval in his preface a remark of some Russian reviewer, who describes him asserting that “any stage of development has its own law of population.” If he were writing now he would probably admit that his “labour-cost” law of value does not apply to the period of development characterised by rings, corners, syndicates, and all the other modern “interferences with the laws of supply and demand.” My next criticism is that Marx re-introduces in a somewhat clumsy way the notion of utility which he at first carefully excludes from his definition of value. For instance after saying (p. 5) “a use value, or useful article. therefore, has value only because human labour in the abstract has been embodied or materialised in it,” he afterwards says “Whether that labour is useful for others, and its product consequently capable of satisfying the wants of others, can be proved only by the act of exchange.” But while he admits that labour whose product fetches nothing in the market does not create “value,” he will not say that it creates more or less “value,” according as the product fetches more or less in the market. We have, therefore, the result that if labour has been wasted in producing a commodity its “value” as compared with its market price steadily rises, till at the exact instant when the price becomes nothing it vanishes.[4]

Again, though he recognises, as in the passage quoted, that the actual labour-cost does not always coincide with the “value in exchange,” yet he measures value sometimes, as here, by socially-necessary,” labour-cost and sometimes (p.22 et passim) by value in exchange. Finally if Marx measures the distinction between “simple average labour” and that “skilled labour” which counts as “simple labour multiplied” (cf. p.11) by anything but by comparing their products when sold in the market, what is his standard?

But in spite of possible inconsistencies Marx’s main position seems to me to be this, “If two commodities produced under equally advantageous circumstances by labour of equal efficiency be sold at the same time in the same market, the ratio at which they will exchange, will be the ratio of the labour (measured in units of time) spent in producing them provided that unrestricted competition prevail between all sellers in that market.” So stated I believe that it is true, but that the statement only possesses an historical interest, because competition is not now always unrestricted.

Mr. Wicksteed on the other hand believes that the whole subject of the trouble involved in making commodities belongs not to “Value,” but to “Production,” and accordingly omits everything but a casual reference to it. He fixes all his attention on the causes which affect men’s desire of commodities, and particularly on the well-known law that the more of any particular commodity a man has, the less anxious is he as a rule to get any more of it. The whole book is, in fact, an ingenious mathematical statement of this law and its corollaries. Now I have already tried to show that Marx knew this, though he certainly was not in the habit of figuring to himself, the decreasing satisfaction afforded by successive increment of any commodity as a “curve of quantity, and marginal effectiveness” and indeed seems to have had no clear conception of any kind, of the concomitant variation of utility and supply.

It seems to me, therefore, that Marx’s essential proposition is in no way inconsistent with that of Jevons and Mr. Wicksteed. Marx, I repeat, states that ratio of exchange between commodities varies with (or in Mr. Wicksteed’s language “is a function of”) the amount of labour necessary on the average to produce either of them. Wicksteed states that it is also a function of the amount of each commodity already possessed by the parties to the exchange. Each grants, I conceive, the truth of the other’s proposition, but attaches more importance to his own.

And not only may these two statements be both true, but any number of other Economists might be also right in declaring that the ratio of exchange is a function of any number of other variants which affect all commodities more or less, e.g., their weight, or the season of the year at which they are produced.

The question, however, still remains, “If Marx’s conception of value, and Jevons’, are not necessarily inconsistent, which is the more useful and important?” Now Marx gained certain obvious advantages by insisting on “socially necessary labour-time,” as the most important cause of variation in the ratio of exchange. He wrote in order that his teaching might in the end reach modern wage workers, men in most cases accustomed to compare all commodities by calculating the amount of time usually necessary to produce them, and to roughly eliminate not only all differences due to individual skill, advantage of sites, efficiency of superintendence, etc., but also all casual rises and falls in price due to the overstocking or understocking of the market. At the same time, the most salient industrial facts of the thirty or forty years during which Marx wrote on economics were changes in the methods of production which became practically universal almost as soon as they were introduced, and changes in the length and severity of the normal labour-day. In some instances it even seems as if his use of the word “value” helps him to put certain trains of reasoning more clearly, as in the vigorous pages in which he smashes Senior’s “last hour” notion.

The great disadvantage of that method is that Marx himself is tempted to forget, and his more ardent followers are emboldened to deny the existence or importance both of those causes of variation in the ratio of exchange, other than labour lost, which arc roughly summed up as “the laws of supply and demand,” and of those causes of variation in the efficacy of labour, which are the occasions of Rent and Interest. In fact, as has been well said, Marx explains the existence of surplus value by stating that the produce of all equally efficient labour is the same, whereas, in fact, surplus value is due to the constant variation of the product of equal labour.

In their choice of mathematics rather than Hegelian dialectics as a means of exposition, Jevons and Wicksteed have a decisive advantage over Marx. The science of Economics has to deal with effects produced by a multitude of causes acting simultaneously but varying independently, and mathematicians declare that the “fluxional calculus” is the best if not the only means by which such problems can even be clearly stated. The necessity, indeed, of some adequate mathematical statement of economic conceptions is becoming rapidly more evident. For the examination of causes is useless unless it leads to the prediction, and finally to the control of effects. So far the science, owing to the complexity of the causes with which it deals, has in this all important respect almost entirely failed. But every year provides economists with fuller and more exact statistics, and every year makes louder the popular insistence on an authoritative answer to certain economic questions. And at the same time the constantly growing body of state and municipal industry requires to be guided by some steadier light than that afforded by individual shrewdness and experience or by the most brilliant exposition of economic laws which, whether true or false, are not immediately applicable.

But while Jevons’ was certainly right in his belief that economics could only be treated exactly and fruitfully by the use of mathematical expressions, he probably paid too much attention to variations in the “utility” of commodities, i.e., in the conditions of demand. And too little to the difficulty of producing them, i.e., the conditions of supply. To explain the ratio of exchange by considering either demand alone or supply alone, is to explain the position of the tongue of a balance by referring only to the weight placed in one of the two scales. Jevons’ law runs, “The ratio of exchange of any two commodities will be inversely as the final degrees of utility of the quantities of commodity available for consumption after the exchange is effected.” If any single explanation of ratio of exchange is possible, this is incomparably better than Marx’s, since it is absolutely true without the use of qualifying words like “average,” “socially necessary,” etc. The expression “final utility” (i.e. utility of the last increment offered) neatly sums up all the conditions of production which cause that increment to be the last. But still, in Mr. Wicksteed’s case, the fact that he treats the whole question of ratio of exchange without reference to production, gives his book a certain “bourgeois” flavour when one comes to it fresh from Marx. This will be corrected by the next instalment of the work, but meanwhile he seems to take rather the point of view of a householder anxious to spend to the best advantage a fixed income, or of a shopkeeper anxious to extend the sale of some “special line,” than of a workman whose first pre-occupation is the severity of his work, and the conditions which make it necessary.

But this is by no means the effect of the Jevonian analysis when applied all round; and, indeed, for propaganda purposes nothing is more successful than the demonstration thus afforded of the fearful waste of the means of happiness produced by great inequalities of income. The Duke of Argyll put a common fallacy very neatly the other day, when he justified the social system which has created him on the ground that “price is the measure of demand.” No student of Jevons or Wicksteed, below the rank of a duke, could fail to discover that when a millionaire outbids a fisherman in hiring a few acres of mountain land, he is not necessarily more anxious to get them, or likely to derive from them more pleasure.

What then is “value"? Well, value, to quote Jevons, “is a thoroughly ambiguous and unscientific term.” It has two or three popular senses, and is used by economists to express so many different ideas, that not even the word “capital” is a source of greater confusion. The ratio of exchange between any two commodities has not the comparative permanence, e.g. of their ratio of weight, and therefore even if we use value to mean simply “ratio of exchange,” we must always state clearly whether we mean ratio at any particular act of exchange, or “normal” ratio; and in that case we must make it clear what is our definition of “normal.” And still greater difficulties are introduced if we use “value,” to mean any one of the causes which make things exchange at such and such a ratio, But there is no need whatever for us to use the word at all. Nobody, for instance, expects economists to find an exact sense for “niceness.” Plenty of terms already exist for the various meanings which have been attached to “value,” – such as “ratio of exchange,” “normal ratio of exchange,” “total utility,” “final utility,” or in Marx’s sense, “labour cost,” and “normal labour cost.”

Is it true then that the great “value” controversy can really be resolved into the fact that Marx and Jevons use the same word in different senses, and expound different but quite consistent laws?

I believe so, and in the presence of many of the stalwart partisans of Marx or Jevons, I feel like the child in Hans Andersen’s story, who could not see the coat which all men admired. If one of these will lift me on to his shoulders so that I may admire with the rest, I myself, and possibly some others in my position, will be genuinely thankful.


1. e.g.; Capital (Eng. Ed.), p.22, etc.

2. cf ., p.7. “The same labour extracts from rich mines more metal than from poor mines.

3. cf., p.79. If the community’s want of linen, and such a want has a limit like every other want, should already be saturated by the products of rival weavers, our friend’s product is superfluous, redundant, and consequently useless.

4. cf. p.7. “Jacob doubts whether gold has ever been paid for at its full value.” This applies still more to diamonds.