difference is verbal, for present purposes, at least), must be so considered. A ratio of exchange, then, is a ratio between two quantities of social marginal utility, or social value, rather than between two physical objects, and price, in this view, is a particular sort of ratio of exchange, namely, one where one of the terms of the ratio is the social marginal utility, or the social value, of the money unit.
It is important to contrast value as thus conceived, in its formal and logical aspects, with other historical conceptions of value. In the classification which follows, the writer has by no means attempted an exhaustive list. Definitions of value are very numerous, but it is not necessary to list them all, since many differ, not so much in their logical or formal aspects, as in the theory of the origin of value which the definition is made to include. There are two principles of classification which will be used, however, which, used in a cross-classification, will enable us to exhibit the contrasts of most importance for present purposes.
The first line of cleavage is between the conceptions which treat value as an ethical ideal, often different from the market fact, and those which accept the value which is expressed in prices in the market as the "real or true" value for economic science. The medieval conception of the justum pretium belongs to the first class, as does also the conception of President Hadley: "The price of an article or service, in the ordinary commercial sense, is the amount of money which is paid, asked, or offered for it. The value of an article or service, is the amount of money which may properly be paid, asked, or offered for it."[17] And the value theory of Karl Marx, though differing from either of these in points, is yet like them in this one respect: value and price do not necessarily agree for Marx. The value of a thing for him depends on the "socially necessary" labor embodied in it, while some things, as land, command a price in the market, even though embodying no labor.[18] Opposed to this group of theories are, doubtless, the greater part of present-day writers, who, while differing among themselves at many points, would insist that value is a fact, and not an ideal.
The second line of division is between the conceptions of value as a quantity and value as a ratio, or, to put the thing more generally and more accurately, between the value of a thing as a definite magnitude, independent of exchange relations, and that value as a relative thing, not only measured by the process of exchanging, but also caused by it, and varying with the value of the things with which the article is compared. Professor Clark and his followers belong in the second group of the first classification, and in the first group of the second classification. The social value of which they speak is a fact, and not an ideal (though Professor Clark has often been interpreted as teaching that the fact corresponds closely with an ideal), and social value as treated by them (noting the exception of Professor Seligman, who does not follow Professor Clark closely), is an absolute magnitude.[19] Karl Marx and Henry George agree with them upon this latter point. Value is a quantity, and not a mere relation, for both.[20] Wieser would concur here.[21]
Professor Carver, in a recent article in the Quarterly Journal of Economics,[22] insists on the conception of value as a quantity. Gabriel Tarde states the matter illuminatingly in a passage in his Psychologie Économique:[23]—
Value is a quality which we attribute to things, like color, but which, like color, exists only in ourselves.... This quality is of that peculiar species of qualities which present numerical degrees, and mount or descend a scale without essentially changing their nature, and hence merit the name of quantities.
On the other hand, the doctrine of relativity has characterized the teachings of the English School, of the Austrians (except Wieser), and of many of the more eclectic followers of each in this country. It will appear later that this relative conception follows naturally from their individualistic method of approaching the subject. The essence of the relative conception of value, whether defined as "power in exchange," or "ratio of exchange," or, with Professor Fisher,[24] and others, as a quantity of goods to be got in exchange, comes out in the statement, so common in the text-books, that, while there can be a general rise or fall of prices, there cannot be a general rise or fall of values, since a rise in the value of one good implies a corresponding fall in the value of all other goods. The incompatibility of the two opposing conceptions comes out strikingly here: if value be an absolute magnitude, then there can be a general rise or fall of values without disturbing exchange ratios at all—12:6::6:3. All values might be cut in half, or multiplied by any factor, and, provided all decreased or increased in the same degree, exchange relations would not change.
Now this difference is fundamental. Vastly more than terminology and definition is involved. Is value a quantity or a relation? Is value a thing which determines causally exchange relations, or is value determined causally by them? To the writer, the former conception seems a logical necessity. Value as merely relative is a thing hanging in the air. There is a vicious circle in reasoning if, when I ask you what the value of wheat is, you refer me to corn, and then when I ask you the value of corn, you refer me again to wheat. And if you put in intermediate links, even as many links as there are different commodities in the market, the circle still remains: the value of A is its power over, or its ratio with, B; the value of B its relation to C; the value of C ... its relation to Z; and the value of Z, the last in the series, must come back to its relation to one of those named before. This circle is noted and sharply criticized by Wieser:[25]—
Theorists who have confined themselves to the examination of exchange value, or, what comes to the same thing, of price, may have succeeded in discovering certain empirical laws of changes in amounts of value, but they could never unfold the real nature of value, and discover its true measure. As regards these questions, so long as examination was confined to exchange value, it was impossible to get beyond the formula that value lies in the relation of exchange;—that everything is so much more valuable the more of other things it can be exchanged for.... Absolutely and by itself, value was not to be understood. It is significant of this conception to state that one thing cannot be an object of value in itself; that a second must be present before the first can be valued.
Theory has only very gradually shaken itself free from this misconception, this circle. Where an absolute theory was attempted—such as the labour theory, or that which explained value as usefulness—some logical leap generally reconnected it with the relative conception.
Now the validity of this reasoning might be admitted, in so far as it applies to "Crusoe economics"—though Professor Seligman, with strict consistency, insists that even there value arises from a comparison in Crusoe's mind of apples with nuts[26]—by those who would object to its application to value in society. Value there, it would be insisted, is determined through exchange, and does not have any meaning except as a ratio between physical commodities.[27] But even here, it seems to me, the same reasoning must hold. We really do not find a ratio between physical commodities at all. Four gallons of milk exchange for one dollar, or 23.22 grains of gold. The exchange ratio is four to one. But milk is in units of liquid measure; gold in incommensurable units of Troy weight. The ratio, 4:1, is not on the basis of any physical commensurability. If any physical basis of comparison be taken, whether weight, or bulk, or length, or more subtle and less easily measurable physical qualities, the ratio would be found very different. But 4:1 is the market ratio. Now a quantitative ratio is between commensurable quantities. Gold and milk must be, then, commensurable quantities,