Chapter X: Part 10

Sec. 11. The economic demands which make up the budget of a particular person at a particular time are clearly interdependent. A man's income or the greater part of it is usually distributed among various channels of expenditure in a certain fairly constant way. In proportion to the definiteness of this distribution and the resoluteness with which it is maintained does the impression gain strength that the man is carrying out a consistent plan of some sort. Such a regular plan of expenditure may be drawn out into a schedule, setting forth the amounts required at a certain price for the unit of each kind. And such a schedule is an expression in detail, in terms of ways and means, of the type of life one has elected to lead. For virtually any income above the level of bare physical subsistence, there will be an indefinite number of alternative budgets possible. A little less may be spent for household conveniences and adornments and a little more for food. Some recreations may be sacrificed for an occasional book or magazine. One may build a house or purchase a motor-car instead of going abroad. And whichever choice is made, related expenditures must be made in consequence for which, on the assumption of a definite amount of income, compensation must be made by curtailment of outlay at other points. What seems clear in general is that one's total budget is relative to the general plan and manner of life one deems for him the best possible and that this plan, more or less definitely formulated, more or less steadily operative, is what really determines how far expenditure shall go in this direction and in that. The budget as a whole will define for the individual an equilibrium among his various recognized wants; if the work of calculating it has been carefully done there will be for the time being no tendency to change in any item.

If, then, we choose to say in such a case that the individual carries his expenditure along each line to the precise point at which the last or marginal utility enjoyed is precisely equal to the marginal utility on every other line, it seems not difficult to grasp what such a statement means. Quite harmlessly, all that it can mean is that the individual has planned precisely what he has planned and is not sorry for it, and for the time being does not think he can improve upon it. As there is one earth drawing toward its center each billiard ball of the dozen in equilibrium in a bowl, so there is behind the budget of the individual one complex personal conception of a way of life that fixes more or less certainly and clearly the kinds and intensities of his wants and assigns to each its share of purchasing power. That the units or elements in equilibrium hold their positions with reference to each other for reasons capable of separate statement for each unit seems a supposition no less impossible in the one case than in the other. To think of each kind of want in the individual's nature as holding separately in fee simple and clamoring for full and separate "satisfaction" in its separate kind, is the characteristic illusion of a purely formal type of analysis. The permanence of a budget and its carrying out no doubt require the due and precise realization of each plotted marginal utility--to go further than this along any one line would inevitably mean getting not so far along certain others, and thus a distorted and disappointing total attainment in the end. But to say that one actually plans and controls his expenditures along various lines by the ultimate aim of attaining equivalent terminal utilities on each is quite another story. It is much like saying that the square inches of canvas assigned in a picture to sky and sea and crannied wall are arranged upon the principle of identical and equal effects for artist or beholder from the last inches painted of each kind. The formula of the equality of marginal effects is no constructive principle; it is only a concise if indeed somewhat grotesque way of phrasing the essential fact that no change of the qualitative whole is going to be made, because no imperfection in it as a whole is felt.[52]

Sec. 12. We come, then, to the problem of the individual's encounter with a new commodity. In general, a purchase in such a case must amount to more or less of a departure from the scheme of life in force and a transition over to a different one. And a new commodity (in the sense in which the term has been used above) is apt to be initially more tempting than an addition along some line of expenditure already represented in the budget. The latter, supposing there has been no change of price and no increase of income, is usually a mere irregularity, an insurgent departure from some one specification of a total plan without preliminary compensating adjustment or appropriate change at other points. The erratic outlay, if considerable, will result in sheer disorder and extravagance--indefensible and self-condemned on the principles of the individual's own economy. But with a new commodity the case stands differently. It is more interesting to consider a really new proposal than to reopen a case once closed when no evidence distinctly new is offered. A sheer "temptation" or an isolated impulse toward new outlay along a line already measured in one's scheme has the force of habit and a presumption of un-wisdom to overcome. If the case is one not of temptation but of "being urged" one is apt to answer, "No, I can make no use of any more of _that_." But a new commodity has the charm of its novelty, a charm consisting in the promise, in positive fashion, of new qualitative values about which a new entire schedule will have to be organized. Partly its strength of appeal lies in its radicalism; it gains ready attention not only by its promise but by its boldness. "Preparedness" gains a more ready acclaim than better schools or the extirpation of disease. The automobile and the "moving picture" probably have a vogue today far surpassing any use of earlier "equivalents" that a mere general augmentation of incomes could have brought about. Indeed, the economic danger of the middle classes in present-day society lies not in mere occasional excess at certain points but in heedless commitment to a showy and thinned-out scheme of life in which the elements are ill-chosen and ill-proportioned and from which, as a whole, abiding satisfaction cannot be drawn. It is where real and thoroughgoing change in the manner of life is hopeless that irregular intemperance of various sorts appears to bulk relatively largest as an economic evil.

Shall we not say, however, that the superior attraction of the new in competition with established lines of expenditure only indicates the greater "satiation" of the wants the latter represent and the comparative freshness of the wants the novelty will satisfy? On the contrary the latter wants are in the full sense not yet existent, the new satisfactions are untried and unmeasured; the older wants have the advantage of position, and if satiated today, will reassert themselves with a predictable strength tomorrow. The new wants, it is true, if they are acquired, will be part of a new system, but the present fact remains that their full meaning cannot be known in advance of trial and the further outlines of the new scheme of uses and values cannot be drawn up until this meaning has been learned. If, then, the new commodity is taken, it is not because the promised satisfaction and the sum of known utilities to be sacrificed are found equal, nor again because the new commodity will fit neatly into a place in the existing schedule that can be vacated for it. This latter is the case of substitution. Such an interpretation of the facts is retrospective only; it is a formal declaration that the exchange has been deemed on the whole worth while, but the reasons for this outcome such a formula is powerless to suggest.

In general the new commodity and the habits it engenders could not remain without effect upon a system into which they might be mechanically introduced. Certain items in the schedule, associated in use with those dispensed with for the new, must be rendered obsolete by the change. The new interests called into play will draw to themselves and to their further development attention which may be in large measure diverted from the interests of older standing. And in the new system all interests remaining over from the old will accordingly stand in a new light and their objects will be valued, will be held important, for reasons that will need fresh statement.[53]

In similar fashion it might be argued that the commodities or uses which one sacrifices for the sake of a new venture are inevitably more than a simple deduction that curtails one's schedule in a certain kind and amount. Such a deduction or excision must leave the remaining lines of the original complex hanging at loose ends. The catching-up of these and their cooerdination with the new interest must in any event amount, as has been contended, to a thoroughgoing reorganization. What must really happen then, in the event of action, is in principle nothing less than the disappearance of the whole from which the sacrificed uses are dissevered. These latter, therefore, stand in the process of decision as a symbol for the existing personal economy as a whole. The old order and the new confront each other as an accepted view of fact and a plausible hypothesis everywhere confront each other and the issue for the individual is the practical issue of making the transition to a new working level. To declare that the salient elements of the confronting complexes are quantitatively equivalent is only to announce in symbolic terms that the transition has been effected, the die cast.[54]

Sec. 13. The statement thus given has been purposely made, for many transactions of the sort referred to, something of an over-statement. If I contemplate purchasing a typewriter or a book on an unfamiliar but inviting subject it may well seem somewhat extravagant to describe the situation as an opposition between two schemes of life. Is the issue so momentous; is the act so revolutionary? But the purpose of our over-statement was simply to make clear the type of situation without regard to the magnitudes involved. No novelty that carries one in any respect beyond the range of existing habits can be wholly without its collateral effects nor can its proximate and proper significance be measured in advance. This is in principle as true of a relatively slight innovation as of a considerable one. And our present conscious exaggeration departs less widely from the truth than the alternative usual preoccupation of economic theory with the logic of routine desire and demand. For the phenomena of routine and habit are thereby made a standard by which all others, if indeed recognized as real at all, must be judged "exceptional." And, as we shall see, to do this introduces difficulty into certain parts of substantive economic theory.

Again, objection may attach to the view that equivalence of the "salient members" of the opposing systems is only another name for the comprehensive fact of the novelty's acceptance. For if we hesitate in such a case, is this not because we judge the price too high? What can this signify but that the service or satisfaction we expect from the novelty falls short of sufficing to convince us? And unless we are dealing with measured quantities, how can we come to this conclusion? Moreover, if the novel commodity is divided into units we may take a smaller quantity when the price demanded is "high" than if the price were lower. And does this not suggest predetermined value-magnitudes as data? But if one takes thus a smaller amount, as the argument contends, it is because there is a presumption of being able to make some important total use of it and there is no general reason apparent for supposing that this will be merely a fractional part of a larger but like significance that might be hoped for from a larger quantity. And on the other hand, the prospect simply may not tempt at all; the smaller quantity may be deemed an improbable support for a really promising total program and the present program will hold its ground, not seriously shaken. The total demand of a market for a given commodity is no doubt in some sort a mathematical function of the price. The lower the price the greater in some ratio will be the number of persons who will buy and in general the greater the number of units taken by those who are already buyers. But that such a proposition admits of statistical proof from the observation of a series of price changes in a market affords no presumption concerning the nature of the reasons that move any individual person to his action. The theoretical temptation is strong, here as elsewhere, in passing from the study of markets to the personal economy of the individual forthwith to find this also a trafficking in unit-quantities and marginal satisfactions to which the concepts and notation of market analysis will readily apply.

It remains to consider certain implications of this view of economic desire and demand.

II

Sec. 14. It is evident that the issue finally at stake in any economic problem of constructive comparison, is an ethical issue. Two immediate alternatives are before one--to expend a sum of money in some new and interesting way, or to keep it devoted to the uses of one's established plan. Upon the choice, one recognizes, hinge consequences of larger and more comprehensive importance than the mere present enjoyment or non-enjoyment of the new commodity.[55] And these "more important" consequences _are_ important because there appears to lie in them the possibility of a type of personal character divergent from the present type and from any present point of view incommensurable with it.[56] The ethical urgency of such a problem will impress one in the measure in which one can see that such an issue really does depend upon his present action and irretrievably depends. And we are able now to see what that economic quality is that attaches to ethical problems at a certain stage of their development and calls for a supplementary type of treatment.

Let us first consider certain types of juncture in conduct that will be recognized at once as ethical and in which any economic aspect is relatively inconspicuous. Temperance or intemperance, truth or falsehood, idleness or industry, honesty or fraud, social justice or class-interest--these will serve. What makes such problems as these ethical is their demand for creative intelligence. In each, alternative types of character or manners of life stand initially opposed. If the concrete issue is really problematical, if there is no rule that one can follow in the case with full assurance, constructive comparison, whether covertly or openly, must come into play. How long, then, will a problem of temperance or intemperance, idleness or industry, preserve its obviously ethical character without admixture? Just so long, apparently, as the modes of conduct that come into view as possible solutions are considered and valued with regard to their _directly physiological and psychological_ consequences alone. Any given sort of conduct, that is to say, makes inevitably for the formation of certain habits of mind or muscle, weakening, or precluding the formation of, certain others. Attention is engrossed that is thereby not available elsewhere, time and strength are expended, discriminations are dulled and sharpened, sympathies and sensitivities are narrowed and broadened, every trait and bent of character is directly or indirectly affected in some way by every resolve concluded and every action embarked upon. If one moves a certain way along a certain line he can never return to the starting-point and set out unchanged along any other. If one does one thing one cannot do another. And when the sufficient reasons for this mutual exclusion lie in the structure and organization of the human mind and body our deliberation as between the two alternatives, our constructive comparison of them remains upon the ethical plane.

If one does one thing one cannot do another. If we substitute the well-worn saying "one cannot eat his cake and have it" we indicate the economic plane of constructive comparison with all needful clearness.

This is in fact the situation that has been already under discussion at such length above and the economic quality of which we are just now in quest arises from neither more nor less than the fact of our dependence in the working out of our personal problems upon limited external resources. The eventual solution sought under these circumstances remains ethical as before. But to reach it, it is necessary to bring into consideration not only such other interests and ends as the psycho-physical structure of human nature and the laws of character-development show to be involved, but a still wider range of interests less intimately or "internally" related to the focal interest of the occasion but imperatively requiring to be heard. If my acquisition of a phonograph turns upon the direct psychological bearing of the new interest upon my other interests, its probable effects whether good or bad upon my musical tastes and the diplomatic complications with my neighbors in which the possession of the instrument may involve me, the problem of its purchase remains clearly in the ethical phase. But when I count the cost in terms of sacrifices which the purchase price makes necessary, from literature down to food and fuel, and must draw this whole range of fact also into the adjustment if I can, the economic phase is reached. In principle two entire and very concrete schemes of life now stand opposed. Just _what_ concrete sacrifices I shall make I do not know--this, in fact, is one way of stating my problem. Nor, conversely, do I know just what I shall be able to make the phonograph worth to me. It is my task to come to a conclusion in the case that shall be explicit and clear enough to enable me to judge in _the event_ whether my expectation has been realized and I have acted wisely or unwisely. Thus a problem is economic when the fact of the limitation of my external resources must be eventually and frankly faced. The characteristic quality of a problem grown economic is a certain vexatiousness and seeming irrationality in the ill-assorted array of nevertheless indisputable interests, prosaic and ideal, that have to be reduced to order.

It is perhaps this characteristic emotional quality of economic problems that has insensibly inclined economists to favor a simpler and more clear-cut analysis. As for ethical problems--they have been left to "conscience" or to the jurisdiction of a "greatest happiness" principle in which the ordinary individual or legislator has somehow come to take an interest. That they arise and become urgent in us of course does human nature unimpeachable credit and economics must by all means wait respectfully upon their settlement. So much is conceded. But economics is economics, when all is said and done. What we mean by the economic interest is an interest in the direct and several satisfactions that a man can get from the several things he shrewdly finds it worth his while to pay for. And shrewdness means nicety of calculation, accuracy of measurement in the determination of tangible loss and gain. Here, then, is no field for ethics but a field of fact. Thus ethics on her side must also wait until the case is fully ready for her praise or blame. Such is the _modus vivendi_. But its simplicity is oversimple and unreal. It pictures the "economic man" as bound in the chains of a perfunctory deference that he would throw off if he could. For the theory of constructive comparison or creative intelligence, on the other hand, instead of a seeker and recipient of "psychic income" and a calculator of gain and loss, he is a personal agent maintaining continuity of action in a life of discontinuously changing levels of interest and experience. His measure of attainment lies not in an accelerating rate of "psychic income," but in an increasing sense of personal effectiveness and an increasing readiness and confidence before new junctures.

The possession and use of commodities are, then, not in themselves and directly economic facts at all. As material things commodities serve certain purposes and effect certain results. They are means to ends and their serving so is a matter of technology. But do I seriously want their services? This is a matter of my ethical point of view. Do I want them at the price demanded or at what price and how many? This is the economic question and it obviously is a question wholly ethical in import--more broadly and inclusively ethical, in fact, than the ethical question in its earlier and more humanly inviting form. And what we have now to see is the fact that no consideration that has a bearing upon the problem in its ethical phase can lose its importance and relevance in the subsequent phase.

There can be no restriction of the economic interest, for example, to egoism. If on general principles I would really rather use goods produced in safe and cleanly factories or produced by "union labor," there is no possible reason why this should not incline me to pay the higher prices that such goods may cost and make the needful readjustment in my budget. Is there reason why my valuation of these goods should _not_ thus be the decisive act that takes me out of one relation to industrial workers and sets me in another--can anything else, indeed, quite so distinctly do this? For economic valuation is only the fixation of a purchase price, or an exchange relation in terms of price and quantity, upon which two schemes of life, two differing perspectives of social contact and relationship converge--the scheme of life from which I am departing and the one upon which I have resolved to make my hazard. It is this election, this transition, that the purchase price expresses--drawing all the strands of interest and action into a knot so that a single grasp may seize them. The only essential egoism in the case lies in the "subjectivism" of the fact that inevitably the emergency and the act are mine and not another's. This is the "egocentric predicament" in its ethical aspect. And the egocentric predicament proves Hobbes and La Rochefoucauld as little as it proves Berkeley or Karl Pearson. No social interest, no objective interest of any sort, is shown ungenuine by my remembering in season that if I cannot fill my coal-bin I shall freeze.[57]

Sec. 15. This logical and psychological continuity of the ethical and economic problems suggests certain general considerations of some practical interest. In the first place as to "egoism." I am, let us say, an employer. If I am interested in procuring just "labor," in the sense of foot-pounds of energy, then undoubtedly labor performed under safe and healthful conditions is worth no more to me than other labor (provided it does not prove more efficient). But is this attitude of interest in just foot-pounds of energy the attitude _par excellence_ or solely entitled to be called economic? And just this may be asserted for the reason that an exclusive interest in just _labor_ is the only interest in the case that men of business, or at least many of them, can entertain without going speedily to the wall. If, then, I do _in fact_ pay more than I must in wages or if I expend more than a bare minimum for conveniences and safety-guards this is not because of the valuation I put upon _labor_, but only because I take pleasure in the contentment and well-being of others. And this is not "business" but "uplift"--or else a subtle form of emotional self-indulgence. Suppose, however, that by legislation similar working conditions have been made mandatory for the entire industry and suppose that the community approves the law, even to the extent of cheerfully paying so much of the additional cost thereby imposed as may be shifted upon them.

Shall we say that this is an ethical intrusion into the sphere of economics or shall we say that the former economic demand for labor "as such" has given place to an economic demand for labor better circumstanced or better paid? The community at all events is paying the increase of price or a part of the increase. It seems arbitrary to insist that the old price is still the _economic_ price of the commodity and the increase only the price of a quiet conscience. The notion of a strictly economic demand for labor pure and simple seems in fact a concept of accounting. To meet the community's demand for the commodity a number of producers were required. The least capable of these could make both ends meet at the prevailing price only by ignoring all but the severely impersonal aspects of the process. Taking these costs as a base, other more capable or more fortunate producers may have been able to make additional expenditures of the sort in question, charging these perhaps to "welfare" account. The law then intervenes, making labor in effect more expensive for all by requiring the superior conveniences or by compelling employers' insurance against accidents to workmen or by enforcing outright a higher minimum wage. The old basic labor cost becomes thus obsolete. And without prejudging as to the expediency of such legislation in particular industrial or business situations may we not protest against _a priori_ and wholesale condemnation of such legislation as merely irresponsibly "ethical" and "unscientific"? Is it not, rather, economically experimental and constructive, amounting in substance to a simple insistence that henceforth the hiring and paying of labor shall express a wider range of social interests--shall signalize a more clearly self-validating level of comprehension, on the part of employers and consumers, of the social significance of industry than the old? And may we not protest also, as a matter of sheer logic, against carrying over a _producer's_ distinction of accounting between "labor" cost and "welfare" cost into the _consumer's_ valuation of the article? How and to what end shall a distinction be drawn between _his_ "esteem" for the trimmed and isolated article and _his_ esteem for the men who made it--which, taken together, dispose him to pay a certain undivided price for it?

For the egoism of men is no fixed and unalterable fact. Taking it as a postulate, a mathematical theory of market phenomena may be erected upon it, but such a postulate is purely formal, taking no note of the reasons which at any given time lie behind the individuals' "demand" or "supply schedules." It amounts simply to an assumption that these schedules will not change during the lapse of time contemplated in the problem in hand. And it therefore cannot serve as the basis for a social science. As an actual social phenomenon egoism is merely a disclosure of a certain present narrowness and inertness in the nature of the individual which may or may not be definitive for him. It is precisely on a par with anemia, dyspepsia or fatigue, or any other like unhappy fact of personal biography.

Sec. 16. There is another suggestion of ethical and economic continuity that may be briefly indicated. If our view of this relation is correct, a problem, by becoming economic, may lose something in dramatic interest and grandiosity but gains in precision and complexity. In the economic phase an issue becomes sensibly crucial. It is in this phase that are chiefly developed those qualities of clear-headedness, temperateness of thought and action, and well-founded self-reliance that are the foundation of all genuine personal morality and social effectiveness. And one may question therefore the ethical consequences of such measures as old age, sickness, and industrial accident insurance or insurance against unemployment. In proportion as these measures are effective they amount to a constant virtual addition to the individual's income from year to year without corresponding effort and forethought on his part. They may accordingly be condemned as systematic pauperization--the "endowment of the unfit." There is evidently a fundamental problem here at issue, apart from all administrative difficulties. Clearly this type of criticism assumes a permanent incapacity in "human nature" or in most actual beings therewith endowed, to recognize as seriously important other interests than those upon which hinge physical life and death. The ordinary man, it is believed, is held back from moral Quixotism as from material extravagance by the fear of starvation alone; and it is assumed that there are no other interests in the "normal" man that can or ever will be so wholesomely effective to these ends. And two remarks in answer appear not without a measure of pertinence. First, if what is alleged be true (and there is evidence in Malthus' _Essay_ and elsewhere to support it) it seems less a proof of original sin and "inperfectibility" than a reproach to a social order whose collective tenor and institutions leave the mass untouched and unawakened above the level of animal reproduction and whose inequalities of opportunity prevent awakened life from growing strong. And second, the democratic society of the future, if it exempts the individual in part or wholly from the dread of premature physical extinction must leave him on higher levels of interest similarly dependent for success or failure upon his ultimate personal discretion. And is it inconceivable that on higher levels there should ever genuinely be such a persisting type of issue for the multitude of men?[58]

Sec. 17. We have held constructive comparison in its economic phase to be a reciprocal evaluating of the "salient members" of two budgets. The respective budgets in such a case express in the outcome (1) the plane of life to which one is to move and (2) the plane one is forsaking. It was the salient member of the former that presented the problem at the outset. In the course of the process its associates were _gathered about_ it in their due proportions and perspective. The salient member of the latter (i.e., whatever the purchase is to oblige one to do without), it was the business of constructive comparison to _single out_ from among its associates and designate for sacrifice. In any case at all departing from the type of substitution pure and simple, the commodities sacrificed will come to have a certain "value in exchange" that clearly is a new fact, a new judgment, in experience. This value in exchange, this "subjective" or "personal" exchange value, may fittingly be termed a "value for transition." The transition once made, the exchange once concluded, I shall deem the motor-car, for example, that I have _not_ bought to replace one used-up, to be worth less than the piano I _have_ bought instead. This indeed (in no disparaging sense) is a tautology. But does this lesser relative value equal or exceed or fall short of the value the car would have had if no question of a piano had been raised at all and I had bought it in replacement of the old one as a matter of course? How can one say? The question seems unmeaning, for the levels of value referred to are different and discontinuous and the magnitudes belong to different orders. In a word, because a "value for transition" marks a resolve and succinctly describes an act, it cannot be broken in two and expressed as an equating of two magnitudes independently definable apart from the relation. The motor-car _had_ its value as a member of the old system--the piano _has_ its value as a member of the new. "The piano is worth more than the car"; "the car is worth less than the piano"--these are the prospective and retrospective views across a gulf that separates two "specious presents," not judgments of static inequality in terms of a common measure.

Is value, then, absolute or relative? Is value or price the prior notion? Was the classical English economics superficial in its predilection for the relative conception of value? Or is the reigning Austrian economics profound in its reliance upon marginal utility? By way of answer let us ask--What in our world can be more absolute a fact than a man's transition from one level of experience and action to another? Can the flight of time be stayed or turned backward? And if not can the acts by whose intrinsic uniqueness and successiveness time becomes filled for me and by which I feel time's sensible passage as swift or slow, lose their individuality? But it is not by a mere empiric temporalism alone that the sufficient absoluteness of the present act is attested. My transition from phase to phase of "finitude" is a thing so absolute that Idealism itself has deemed an Absolute indispensable to assure its safe and sane achievement. And with all Idealism's distrust of immediate experience for every evidential use, the Idealist does not scruple to cite the "higher obviousness" of personal effort, attainment, and fruition as the best of evidence for his most momentous truth of all.[59] And accordingly (in sharp descent) we need not hesitate to regard value in exchange as a primary fact in its own right, standing in no need of resolution into marginal pseudo-absolutes. A price agreed to and paid marks a real transition to another level. There are both marginal valuation and _Werthaltung_ on this level, but they are subordinate incidents to this level's mapping and the conservation of its resources. On this level every marginal utility is relative, as we have seen, to every other through their common relation to the complex plan of organization as a whole.[60]

Sec. 18. In conclusion one more question closely related to the foregoing may be briefly touched upon. We have held that the individual's attitude toward a commodity is in the first instance one of putting a price-estimate upon it and only secondarily that of holding it in a provisionally settled marginal esteem. If this principle of the priority of price-estimation or exchange value is true, it seems evident that there can be no line of demarcation drawn (except for doubtfully expedient pedagogical purposes) between (1) "Subjective valuations" with which individuals are conceived to come to a market and (2) a mechanical equilibration of demand and supply which it is the distinctive and sole function of market concourse to effect. In such a view the market process in strict logic must be timeless as it is spaceless; a superposition of the two curves is effected and they are seen to cross in a common point which their shapes geometrically predetermine. Discussion, in any proper sense, can be no inherent part of a market process thus conceived. Once in the market, buyers and sellers can only declare their "subjective exchange valuations" of the commodity and await the outcome with a dispassionate certainty that whoever may gain by exchanging at the price to be determined, those who cannot exchange will at all events not lose. But considered as a typical likeness of men who have seen a thing they want and are seeking to possess it, this picture of mingled hope and resignation is not convincing. Most actual offering of goods for sale that one observes suggests less the dispassionate manner of the physiologist or psychologist taking the measure of his subject's reactions, sensibilities, and preferences than the more masterful procedure of the physician or the hypnotist who seeks to uproot or modify or reconstruct them. This is the process known in economic writing since Adam Smith as "the higgling and bargaining of the market."

In fact, the individual's ante-market valuation, when there temporarily is one, is an exchange valuation of the constructive or experimental and therefore (in any significant sense of the word) perfectly objective type, and the market process into which this enters is only a perfectly homogeneous temporal continuation of it that carries the individual forward to decisive action. There is no more reason for a separation here than for sundering the ante-experimental sketching out of an hypothesis in any branch of research from the work of putting the hypothesis to experimental test. The results of experiment may serve in a marked way in both sorts of process to elucidate or reconstruct the hypothesis.

The "higgling and bargaining of the market" has been accorded but scant attention by economists. It has apparently been regarded as a kind of irrelevance--a comedy part, at best, in the serious drama of industry and trade, never for a moment hindering the significant movement and outcome of the major action. As if to excuse the incompetence of this treatment (or as another phase of it) theory has tended to lay stress upon, and mildly to deplore, certain of the less amiable and engaging aspects of the process. The very term indeed as used by Adam Smith, imported a certain aesthetic disesteem, albeit tempered with indulgent approbation on other grounds. In Boehm-Bawerk's more modern account this approbation has given place to a neutral tolerance. A certain buyer, he says (in his discussion of simple "isolated" exchange), will give as much as thirty pounds for a horse; the horse's owner will take as little as ten pounds--these are predetermined and fixed valuations brought to the exchange negotiations and nothing that happens in the game of wits is conceived to modify them. The price will then be fixed somewhere between these limits. But how? "Here ..." we read, "is room for any amount of 'higgling.' According as in the conduct of the transaction the buyer or the seller shows the greater dexterity, cunning, obstinacy, power-of-persuasion, or such like, will the price be forced either to its lower or to its upper limit."[61] But the higgling cannot touch the underlying attitudes. Even "power of persuasion" is only one part of "skill in bargaining," with all the rest and like all the rest; if it were more than this there would be for Boehm-Bawerk no theoretically grounded price limits to define the range of accidental settlement and the whole explanation, as a theory of price, would reduce to nullity.[62]

With this, then, appears to fall away all ground for a one-sided, or even a sharply two-sided, conception of the process of fixation of market-values. A "marginal utility" theory and a "cost of production" theory of market price alike assume that the factor chosen as the ultimate determinant is a fixed fact defined by conditions which the actual spatial and temporal meeting-together of buyers and sellers in the market cannot affect. In this logical sense, the chosen determinant is in each case an ante-market or extra-market fact and the same is true of the blades of Marshall's famous pair of scissors.

The price of a certain article let us say is $5. According to the current type of analysis this is the price because, intending buyers' and sellers' valuations of the article being just what they are, it is at this figure that the largest number of exchanges can occur. Were the price higher there would be more persons willing to sell than to buy; were it lower there would be more persons willing to buy than to sell. At $5 no buyer or seller who means what he says about his valuation when he enters the market goes away disappointed or dissatisfied. With this price established all sellers whose costs of production prevent their conforming to it must drop out of the market; so must all buyers whose desire for the article does not warrant their paying so much. More fundamentally then, Why is $5 the price? Is it because intending buyers and the marginal buyer in particular do not desire the article more strongly? Or is it because conditions of production, all things considered, do not permit a lower marginal unit cost? The argument might seem hopeless. But the advantage is claimed for the principle of demand. Without demand arising out of desires expressive of wants there would simply _be_ no value, no production, and no price. Demand evokes production and sanctions cost. But cost expended can give no value to a product that no one wants.

Does it follow, however, that the cost of a commodity in which on its general merits I have come to take a hypothetical interest can in no wise affect my actual price-offer for it? Can it contribute nothing to the preciser definition of my interest which is eventually to be expressed in a price offer? If the answer is "No, for how can this external fact affect the strength of your desire for the object?"--then the reason given begs the question at issue. _Is_ my interest in the object an interest in the object alone? And _is_ the cost of the object a fact for me external and indifferent? It is, at all events, not uncommon to be assured that an article "cannot be produced for less," that one or another of its elements of cost is higher than would be natural to suppose. Not always scientifically accurate, such assurances express an evident confidence that they will not be without effect upon a hesitant but fair-minded purchaser. And in other ways as well, the position of sellers in the market is not so defenseless as a strict utility theory of price conceives--apart from the standpoint of an abstract "normality" that can never contrive to get itself realized in empirical fact.[63] It is true that, in general, one tends to purchase an article of a given familiar kind where its price, all things considered, is lowest. In consequence the less "capable" producers or sellers must go to the wall. But the fact seems mainly "regulative" and of subordinate importance. Is it equally certain that as between branches of expenditure, such as clothing, food, and shelter, children, books, and "social" intercourse, the shares of income we expend upon them or the marginal prices we are content to pay express the original strength of separate and unmodified extra-market interests? On the contrary we have paid in the past what we have had to pay, what we have deemed just and reasonable, what we have been willing experimentally to hazard upon the possibility of the outlay's proving to have been worth while. In these twilight-zones of indetermination, cost as well as other factors of supply have had their opportunity. Shall we nevertheless insist that our "demands" are _ideally_ fixed, even though in fallible human fact they are more or less indistinct, yielding and modifiable? On the contrary they are "in principle and for the most part" indeterminate and expectant of suggested experimental shaping from the supply side of the market. It is less in theory than in fact that they have a salutary tendency (none too dependable) toward rigidity.

CONCLUSION

Sec. 19. The argument may now be summarily reviewed.

I. How are we to understand the acquisition, by an individual, of what are called new economic needs and interests? Except by a fairly obvious fallacy of retrospection we cannot regard this phenomenon as a mere arousal of so-called latent or implicit desires. New products and new means of production afford "satisfactions" and bring about objective results which are unimaginable and therefore unpredictable, in any descriptive fashion, in advance. In a realistic or empirical view of the matter, these constitute genuinely new developments of personality and of social function, not mere unfoldings of a preformed logical or vital system. "Human nature" is modifiable and economic choice and action are factors in this indivisible process (Sec.Sec. 2-4). Now "logically" it would seem clear that unless a new commodity is an object of desire it will not be made or paid for. On the other hand, with equal "logic," a _new_ commodity, it would seem, _cannot_ be an object of desire because all desire must be for what we already know. We seem confronted with a complete _impasse_ (Sec. 5). But the _impasse_ is conceptual only. We have simply to acknowledge the patent fact of our recognition of the new as novel and our interest in the new in its outstanding character of novelty. We need only express and interpret this fact, instead of fancying ourselves bound to explain it away. It is an interest not less genuine and significant in economic experience than elsewhere (Sec.Sec. 6, 7). Its importance lies in the fact that it obliges us to regard what is called economic choice not as a balancing of utilities, marginal or otherwise, but as a process of "constructive comparison." The new commodity and its purchase price are in reality symbols for alternatively possible systems of life and action. Can the old be relinquished for the new? Before this question is answered each system may be criticized and interpreted from the standpoint of the other, each may be supplemented by suggestion, by dictate of tradition and by impulsive prompting, by inference, and by conjecture. Finally in experimental fashion an election must be made. The system as accepted may or may not be, in terms, identical with one of the initial alternatives; it can never be identical in full meaning and perspective with either one. And in the end we have not chosen the new because its value, as seen beforehand, measured more than the value of the old, but we now declare the old, seen in retrospect, to have been worth less (Sec.Sec. 8-12). There are apparently no valid objections to this view to be drawn from the current logical type of marginal-utility analysis (Sec. 13).

II. Because so-called economic "choice" is in reality "constructive comparison" it must be regarded as essentially ethical in import. Ethics and economic theory, instead of dealing with separate problems of conduct, deal with distinguishable but inseparable stages belonging to the complete analysis of most, if not all, problems (Sec. 14). This view suggests, (_a_) that no reasons in experience or in logic exist for identifying the economic interest with an attitude of exclusive or particularistic egoism (Sec. 15), and (_b_) that social reformers are justified in their assumption of a certain "perfectibility" in human nature--a constructive responsiveness instead of an insensate and stubborn inertia (Sec. 16). Again, in the process of constructive comparison in its economic phase, Price or Exchange Value is, in apparent accord with the English classical tradition, the fundamental working conception. Value as "absolute" is essentially a subordinate and "conservative" conception, belonging to a status of system and routine, and is "absolute" in a purely functional sense (Sec. 17). And finally constructive comparison, with price or exchange value as its dominant conception, is clearly nothing if not a market process. In the nature of the case, then, there can be no such ante-market definiteness and rigidity of demand schedules as a strictly marginal-utility theory of market prices logically must require (Sec. 18).

Sec. 20. In at least two respects the argument falls short of what might be desired. No account is given of the actual procedure of constructive comparison and nothing like a complete survey of the leading ideas and problems of economic theory is undertaken by way of verification. But to have supplied the former in any satisfactory way would have required an unduly extended discussion of the more general, or ethical, phases of constructive comparison. The other deficiency is less regrettable, since the task in question is one that could only be hopefully undertaken and convincingly carried through by a professional economist.

For the present purpose, it is perhaps enough to have found in our economic experience and behavior the same interest in novelty that is so manifest in other departments of life, and the same attainment of new self-validating levels of power and interest, through the acquisition and exploitation of the novel. In our economic experience, no more than elsewhere, is satisfaction an ultimate and self-explanatory term. Satisfaction carries with it always a reference to the level of power and interest that makes it possible and on which it must be measured. To seek satisfaction for its own sake or to hinge one's interest in science or art upon their ability to serve the palpable needs of the present moment--these, together, make up the meaning of what is called Utilitarianism. And Utilitarianism in this sense (which is far less what Mill meant by the term than a tradition he could never, with all his striving, quite get free of), this type of Utilitarianism spells routine. It is the surrender of initiative and control, in the quest for ends in life, for a philistine pleased acceptance of the ends that Nature, assisted by the advertisement-writers, sets before us. But this type of Utilitarianism is less frequent in actual occurrence than its vogue in popular literature and elsewhere may appear to indicate. As a matter of fact, we more often look to satisfaction, not as an end of effort or a condition to be preserved, but as the evidence that an experimental venture has been justified in its event. And this is a widely different matter, for in this there is no inherent implication of a habit-bound or egoistic narrowness of interest in the conceiving or the launching of the venture.

The economic interest, as a function of intelligence, finds its proper expression in a valuation set upon one thing in terms of another--a valuation that is either a step in a settled plan of spending and consumption or marks the passing of an old plan and our embarkation on a new. From such a view it must follow that the economic betterment of an individual or a society can consist neither in the accumulation of material wealth alone nor in a more diversified technical knowledge and skill. For the individual or for a collectivist state there must be added to these things alertness and imagination in the personal quest and discovery of values and a broad and critical intelligence in making the actual trial of them. Without a commensurate gain in these qualities it will avail little to make technical training and industrial opportunity more free or even to make the rewards of effort more equitable and secure. But it has been one of the purposes of this discussion to suggest that just this growth in outlook and intelligence may in the long run be counted on--not indeed as a direct and simple consequence of increasing material abundance but as an expression of an inherent creativeness in man that responds to discipline and education and will not fail to recognize the opportunity it seeks.

Real economic progress is ethical in aim and outcome. We cannot think of the economic interest as restricted in its exercise to a certain sphere or level of effort--such as "the ordinary business of life" or the gaining of a "livelihood" or the satisfaction of our so-called "material" wants, or the pursuit of an enlightened, or an unenlightened, self-regard. Economics has no special relation to "material" or even to commonplace ends. Its materialism lies not in its aim and tendency but in its problem and method. It has no bias toward a lower order of mundane values. It only takes note of the ways and degrees of dependence upon mundane resources and conditions that values of every order must acknowledge. It reminds us that morality and culture, if they are genuine, must know not only what they intend but what they cost. They must understand not only the direct but the indirect and accidental bearing of their purposes upon all of our interests, private and social, that they are likely to affect. The detachment of the economic interest from any particular level or class of values is only the obverse aspect of the special kind of concern it has with values of every sort. The very generality of the economic interest, and the abstractness of the ideas by which it maintains routine or safeguards change in our experience, are what make it unmistakably ethical. Without specific ends of its own, it affords no ground for dogmatism or apologetics. And this indicates as the appropriate task of economic theory not the arrest and thwarting but the steadying and shaping of social change.

THE MORAL LIFE AND THE CONSTRUCTION OF VALUES AND STANDARDS[64]

JAMES HAYDEN TUFTS