Essays in political economy

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II. Value

Since we saw at the very beginning of our study that "One of the most fruitful sources of human error is a misty, indistinct apprehension of the meaning of the terms we use," let us consider the meaning which would be the most philosophical, to adopt in Political Economy, for the word ''value,.''

It is true that to write clearly, we must think clearly. And to interchange ideas, with satisfactory results, we must have a clear agreement as to the meaning of our words.

Let us try to bring about that agreement. We put the matter in this way, advisedly.

For words are conventional, or are used by common consent, as signs to represent our ideas.

Of course, in this, as in everything else, we ought to be reasonable, for we are rational beings.

We leave it, very cheerfully, to the philologists to say what was the meaning of a given word, at a particular period in the past, or in a particular country in times past.

We are concerned in the question — what ought to be the meaning agreed upon, in order to be philosophical and consistent throughout.

Mr. Senior, in his appendix to Whately's "Logic," has well written "As value is the only relation with which Political Economy is conversant, we might expect all economists to be agreed as to its meaning. There is no subject as to which they are less agreed."

Professor Fawcett, M. P., says: "Value is a relative expression and implies comparison." In his "Manual of Political Economy," page 315, he says: "Many of the most widespread errors arise from confusing the words value and price." Perhaps it would be more true to say that the errors arise from not discarding the word value and rising the word price instead. On page 316 he says: "Price is a particular kind of value." Again, on page 349, he says : "The investigation of a subject which must always be complicated is rendered more difficult by speaking of the value of a commodity instead of its price ; the public almost invariably speak of the price of a commodity, and seldom consider its value by directly estimating the quantity of every other commodity for which it will exchange."

Mr. Devas writes, on page 209, of his "Political Economy": "Surrounded with these pitfalls, let the student ever keep in mind as his safeguard the following brief proposition : (a) That the only measure of value is price, (b) That if we seek precision, we should speak of prices not of values." With this we cordially agree.

Professor Jevons prides himself on having discarded the term value altogether, and using the term "ratio of exchange instead."

John Stuart Mill, in his "Principles of Political Economy," Book III, page 265, says: "The word value, when used without adjunct, always means, in Political Economy, value in exchange ; or as it has been called by Adam Smith and his successors, exchangeable value, a phrase which no amount of authority that can be quoted lor it can make other than bad English. Mr. De Quincey substitutes the term Exchange Value which is unexceptionable."

But "exchange value" and "ratio of exchange," when precisely expressed are nothing else than the market price.

Furthermore, Mill says, on page 297: "It is unfortunate that in the very outset of the subject we have to clear from our path a formidable ambiguity of language. The value of money is to appearance an expression as precise, as free from possibility of misunderstanding, as any in science. The value of a thing is what it will exchange for ; the value of money is what money will exchange for."

Henri Ceornuschi, in his evidence before the United States Monetary Commission, February, 1887, says, page 7 : "I will give you my definition of money: Money is a value created by law to be a scale of valuation and a valid tender for payments."

Then he says: "This fact, that money is a value created by law, is one of great importance, and I can cite you the highest authorities in proof that what I say is true. Mr. Chairman, the doctrine that money is a value created by law was promulgated twenty-two centuries ago. It was advanced by Aristotle, the great philosopher — so practical and so positive that I would dare call him an American philosopher. I quote from his writings : ' Money [nornisma in Greek) by itself is but a frivolity, a futility, a trifle, and has value only by law [nomas in Greek), and not by nature : so that a change of convention between those who use it is sufficient to deprive it of all its value and power to satisfy all our wants (Politica). In virtue of a voluntary convention, money {7iomisma) has become the medium of exchange. We say 'nomisma' because it is not so by nature, but by law 'nomos,' and because it is in our power to change it and render it useless (Ethica).' "

Now let us give this some careful study. We have to consider the definition of money given by M. Cernuschi, and the doctrine of Aristotle.

For what purpose do we read Aristotle } Is it, simply, that we may commit to memory the teachings of

Aristotle, as if he were divine, and that we may assent to all his doctrines: or is it that we may strictly analyze, in order to see how much is true, and how much is error : and then, that we may retain the true and discard the error ? Surely, we must analyze, for we are not devoid of reason, and his words are not divine revelation. Now M. Cernuschi says "money is a value created by law." Aristotle says "Money has value only by law." These two statements are essentially different. It is one thing to say money is ; quite another to say money has. The statement of Aristotle is questionable. The statement of Cernuschi is absurd. The effect would be very ludicrous, if Cernuschi were to say he is a hat, instead of saying he has a hat. Now, as to the doctrine of Aristotle, much defect is visible in it. Thus: " money is a futility" and "has value only by law." But money, qua money, does not come into existence except by law. Therefore money by itself can never be a futility : for a thing cannot both be and not be at one and the same time. Money cannot be a thing which has value, and a futility, at one and the same time. Money is not a natural thing. Money is a legal thing — a legal instrument. The instrument is made, and has been made, in the world's history, of more than one material.

Then Aristotle says: "Has value onlt/ by law." What is value ? Value is an effect. Is law exclusiyely the cause ? Let us see. Since value is an effect, let us ask what kind of an effect ? It is an effect produced in the mind, a vague, relative estimate of things. It takes definite and exact, outward, concrete, form in the proportionate exchange of things, or, to use precise and therefore the most scientific terms, in market price.

Let us ask what is the proximate cause of concrete value or market price ? The proximate cause of value or market price, is the offer of something accompanied • by the request or demand for that thing which before had no value or market price. That request or demand is called now the "effective demand," a clear and useful term. Thus "effective demand" is the proximate cause of value. Trace this back. What is the cause of the "effective demand.^" We see at once that desire — desire to possess — is the cause. What causes this desire .'' Admiration of the thing desired. What causes this admiration ? A perception of the qualities of the thing" and of the uses to which those can put it who admire and desire it. Then an offer of something is made for the thing desired, and value, which before did not exist, now comes into being. We have come to the last analysis. The first cause of value is the perception of the qualities of the thing and of its usefulness. The proximate cause of value is the "effective demand." This thing may have been created by God, in the order of nature, or it may have been made by man artificially. In either case it is effectively demanded by men because they perceive that they can put it to use. In order to make a thing have value, the law must make a thing which men will desire and effectively demand for the uses to which they can put that thing.

Now money is a legal thing, a legal instrument made bylaw. Has it "value only by law.'" Manifestly not. It has, manifestly, its value, partly by law and partly by effective demand. The maker and the demander partly cause the effect^ — value or market price. But can we say, even now, that we have seen all the causes, the "only" causes of value ? Let us continue to investigate and to analyze. The thing made by law may be of different materials. It is clear that money made of some materials can draw forth effective demand only for the use of it as money. Money of other materials may have value also because of the material, which men can put to other uses.

ESSAYS IN POLITICAL ECONOMY.

This much is certain : that no money can pass which is not esteemed, admired and eagerly desired. No government can overcome the absence of those requisites.

Every child knows that goods cannot be sold if no one wants them. No trader will retain in his store goods which no one wants.

Now value does not come into being by nature. The value of a thing does not begin to be, until some one wants or desires that thing. But that is not enough. Some one must offer something for it, before that thing can hegin to have value. Needless to say the thing offered must be desired.

Now when a government makes and issues money, no matter of what material the money may be made, it can not begin to have value until some one offers a valuable thing for that money. Thus it is plainly not true to say that money " has value only by law." Money has value partly by law, partly by effective demand, partly by subcauses affecting the supply and the demand.

Times may change, place may change, and men may find that the use to which they can put the inferior material far exceeds the use to which they can put the superior material ; and thus they may come forward with a far greater effective demand for the money made of the so-called inferior material. Thus the material previously called inferior might come to have the greater value. Again the material may be produced with greater or less labor, with greater or less expenditure of other material, in greater or less abundance. The supply might be ' increased or decreased, absolutely, or relatively. Those who make the effective demand might bid against each other, endeavoring to obtain possession. Some men might hoard the thing desired, whether money or some natural commodity, such as wheat. The law might make a thing in such foolish abundance as to destroy its usefulness. That would tend to destroy the value either entirely or in part. There was one year that nature produced such an abundant supply of herrings in Dublin Bay that they were looked upon with contempt, trampled on and used as manure. The effective demand was not sufficient to give them much value or much market price, although the great supply was just as nutritious in quality as any previous small supply. They were perishable goods and could not be used quickly enough.

Thus we see there are many factors partly creating value, partly increasing value, partly lessening or tending to destroy value, and we can not at all assent to the proposition of Aristotle that "money has value only by law." It is too sweeping. Money [qua money) has existence only by law.

Now when Aristotle says "so that a change of convention between those who use it (money) is sufficient to deprive it of all its value," we must note that the term "convention" is ambiguous. It may mean unwritten convention or custom; or it may mean legal or written convention. If a legal convention we have seen that the proposition is not tenable. If change in the unwritten convention, or custom, follow the change in the legal convention then it is perfectly clear — manifest to the dullest intelligence — that the thing which has been subjected to that change cannot retain any value. A thing can have no value if no one gives anything for it.

A thing can have no value when no one uses it. Again a thing can have no value — water or air for instance — as long as men can have it without making an effective demand for it, without* having to offer anything in exchange for it.

From this point of view we are led to consider what some men say as to value. They say that cost of production determines value; that labor causes or creates value.

ESSAYS IN POLITICAL ECONOMY.

Now value did not exist from the beginning. That is manifest. When men fed, clothed, and sheltered themselves with the product of their own labor, directly, there was no value in the world. Not until the first exchanges took place, not until the first man offered some of the product of his labor to his neighbor and asked or demanded effectively that his neighbor would give him some of the product of his labor, not until then did value begin to be.

Thus labor did not create value. The effective demand meeting with limited supply owned by another created value. Then men began to labor and to collect commodities, in order to secure other commodities in exchange, as well as for the purpose for which they labored previously.

Then there came a time when gold and silver were first discovered. We may assume that when examined they were admired for such of their qualities as were then perceived. When the first finder, as we may also assume, showed his gold and silver to his neighbor, the neighbor admired them and perhaps asked for some. But that was not enough. He then made an effective demand for some of the gold and silver, he offered a horse, we will say, or some other goods. The exchange was made and then for the first time the value of gold and silver was created.

The exchange of horse for cow was barter. The exchange of corn, for horse, cow, and sheep, was barter. Then the exchange of horse for gold and silver was still, essentially, barter.

In the lapse of time the gold and silver came to be coined, stamped, and called "money" by law.

Then money was exchanged fer horse. It was still, essentially, barter. Commodities were bartered, directly, for money, and money for commodities.

Now when this gold and silver came to be coined, stamped, and called money by law, it had value previously created.

The law, alone, did not create the value. The law did not create the value at all. The law increased the value. It might, perhaps, be said that the law created the new or increased value. But, granting that the law thus created part of the total value, still, it can not be truly said that "money has value only by law."

Then when men labored to obtain some good which had value or market price the labor was not the cause or creator of value, on the contrary, the value or market price was the cause of labor. Value was the banner with the strange device "Excelsior," beckoning the toiler, and alluring him on and on, and urging him to ascend to greater and still greater heights. The value or market price of labor is the jprize, thenceforward, for which men strive and toil and waste away, by unceasing strain, their fragile frames.

The horses which enter the enclosure for the race do not cause the prize to come into existence, but the prize causes the owners of the horses to enter them for the race. Or, if we must be very strict, the prospect of a prize causes the owners of the horses to enter them.

But it may, perhaps, be true to say that labor and cost of production which are themselves the effect of value, being caused or brought into being by value, in turn become the cause of new value. Labor may become more skillful, or cost of production may be increased for improved implements or machinery, and the product may secure a higher value.

Again that > combination may multiply the product so as to lessen the value of the product and yet labor may secure the same reward as before.

From all this we cannot possibly say that labor is the sole creator of value.

Whether this is, or is not, a fact, it is. a truth to be ascertained by the light of human reason alone, and depends upon its own proper evidence. The most that can be said, on the evidence we have, is that labor and the cost of production have both a share in causing some new value. But to recognize this truth, and to endeavor to think accurately, does not in any way obscure the moral truth that labor should obtain a just share of the prize for which it contended.

We may, however, safely assent,* it seems to me, to this proposition : That prospective value or market price is the chief cause of, or inducement for, all production.

There are some men who say, with a sickly smile, that the value of gold never changes, is invariable. But by "value" they mean not the value but quality of brightness, or of yellowness, or of malleability, or of indestructibility, or all these qualities combined. But "value" is a word which does not express the intrinsic qualities of anything. It expresses a relation between things. And the relation between things, in Economy, is their relative market price.

Thus market price expresses the relationship between things, or between money and commodities. And "value" expresses the relationship between commodities. And as things which are equal to the same thing are equal to one another, and as market price and value both express, or are equal to, the same thing — the relationship between commodities and money — ^therefore, market price and value are equal to one another.

Thus the value of bread is not its nutritous qualities, or its constituent elements, or the use which is made of it by man, to sustain life, but its value is its market price. And so, also, with water, its value, where such exists, is its market price. Where there is no market price for water, there, water has no value.

Again if "value" is a vague term, and it is admitted to be vague, indeed, it is manifestly vague and ambiguous.

then it is an unscientific term. For "scientific" means exactness, as opposed to vagueness — exact knowledge as opposed to vague knowledge. But "value" is vague: therefore, "value" is opposed to "scientific" as a term in Political Economy.

Now, in close connection with our present argument, we may observe that: Everything which alters supply and demand tends to alter value: But the currency laws of the United States alter supply and demand: Therefore the currency laws of the United States alter or tend to alter value.

A great mistake is often made by comparing the yardstick, as a standard of length, with money as a standard of value.

A standard is something held aloft before men for comparison. In the present day it is, here and now, something more.

Nothing is recognized as a standard of length except a legal standard of length.

Nothing is recognized as a standard of value except a legal standard of value.

In both cases we have, so to speak, one thing for comparison.

In length we have an abstract thing — three feet.

In value we have a concrete thing — money.

The abstract thing — length — is fixed, absolutely, by law, and never varies.

The standard of value is fixed, as to essentials, legal, and one thing invariably held aloft, as a standard for comparison of values. That one thing is money.

Commodities are never compared to any thing else ' except money, in order to ascertain their values. And they are compared to legal money, and to legal money exclusively.

In this sense then, that we have exclusively one thing, and always, and invariably, that one thing, money, in this sense we have 2. fixed standard of value.

Nothing is recognized as money except legal money.

Nothing is legal money except that which is full legal tender for all debts, both public and private.

And currency, whether gold, silver or paper, which is not full legal tender for all debts public or private, is not only not money, but it is not even a true substitute for money. Currency, which is not full legal tender, is a demand for money and not money itself.

As long as silver or paper must be redeemed in gold they are not money. Money is not redeemable. That which is redeemable is not money. The tender of money, and of money alone, is the redemption of debt. Debt can not be redeemed by any other means except by the tender of money. But money is not a natural thing. Money {qua money) is essentially and exclusively a legal thing.

But, while we can have a fixed standard of value — money, we cannot have a fixed value of money, by law, or by any other means on earth. The idea is absurd, absolutely ridiculous.

Value, as we have seen, expresses a relation between commodities, which relation is changing every hour in the day faster than the telegraph can announce the changes.

And now, in view of all this, if we desire, and we ought to desire, and God knows we do desire, to extend, as widely as possible, private ownership of property in land, amongst the masses of the people, then we must issue bonds, we must borrow money. But we see, alas, that money is steadily and surely appreciating in value, and must continue to do so, as long as redemption in gold is insisted upon, by law, for any debt whatever.

It is criminal folly, or lunacy, to propose to borrow money, on long time, with a steadily appreciating currency. Thus the money question blocks the way.

But our Most Holy Father Pope Leo XIII wrote in his '"'Encyclical Letter on the Condition of Labor," in regard to property in land as follows: "On the other side there is the needy and powerless multitude, sore and suffering, always ready for disturbance. If working people can be encouraged to look forward to obtaining a share in the land, the result will be that the gulf between vast wealth and deep poverty will be bridged over, and the two orders brought nearer together. Another consequence will be the greater abundance of the fruits of the earth. Men will always work harder and more readily when they work on that which is their own; nay, they learn to love the very soil which yields in response to the labor of their hands, not only food to eat, but an abundance of the good things for themselves and those that are dear to them. It is evident how such a spirit of willing labor would add to the produce of the earth and to the wealth of the community. And a third advantage would arise from this: men would cling to the country in which they were born; for no one would exchange his country for a foreign land if his own afforded him the means of living a tolerable and happy life. These three important benefits, however, can only be expected on the condition that a man's means be not drained and exhausted by excessive taxation. The right to possess private property is from nature, not from man; and the state has only the right to regulate its use in the interests of the public good, but by no means to abolish it altogether. The state is therefore unjust and cruel, if, in the name of taxation, it deprives the private owner of more than is just."

If then it be unjust to tax the holder of land to the "full rental value," as the single-tax men propose, and to tax directly, by law, so that all men can at least see at a glance how much tax has been imposed; is it not unjust to tax the holder of land, indirectly by law, to the half, or more, of the capital value of his land and goods, unperceived by the laboring masses, through currency laws which cause a steady appreciation of money? Then what injustice to all tax-payers? What injustice to those who have mortgaged their land on long time? What injustice to those who would wish to buy land on long time? What injustice to those states, cities, and counties, who would wish to borrow money on long time for improvements or for schools? And all this done by legislation, willfully and deliberately, adverted to with full knowledge, before the whole world, as to what would be the effects of such legislation.

And yet there are not wanting those who say that the money question is not a moral question, but a business question.

What? Is justice not a moral question? What is a moral question? Tell us, oh! ye scribes and pharisees, ye whited sepulchres, and ye "shylocks" of the Protestant, Catholic and Jewish persuasions!!! Let no man single out the Jews; there are worse "shylocks" amongst professing Christians than ever were known in Venice or in Israel.

We know with absolute certainty that "oppression of the poor and defrauding the laborer of his hire" are sins especially cursed by God and that those sins cry to heaven for vengeance, and we know that those sins can be and have been committed through unjust legislation, and we see with our own eyes, now, at this moment, that the whole world groans beneath the most unbearable oppression it has ever known, like a curse of God, through unjust money laws, and yet we are told that the money question is not a moral question but a business question.

Scribes and Pharisees! Ye are quick enough to tell us that the legislation proposed by socialists and communists to take away property from the rich is a very, very much moral question. But to tax and to take away property from the poor and from the laboring classes, unjustly, is only a business question!

But it cannot be said that the poor and the laboring men alone suffer from such unjust money laws. Manufacturers, merchants and traders, generally, cannot afford to have their profits filched from them by laws which appreciate the <:urrency; for they find that they have to give more goods than they had counted upon giving in order to obtain the money which they must get to meet their engagements. Prices fall, necessarily, when money is appreciated. The prices must continue to fall as long as gold monometallism is continued.

In the year 1859 Mr. Richard Cobden translated a work by Chevalier on "The Probable Fall in the Value of Gold." The fall in the value of gold, caused by the increased supply of gold! That meant a rise in the value of goods!

This was well noted and widely discussed. All adverted to the fact. Mr. Cobden adverted to it and published it. Professor Fawcett, M. P., also adverted to it, and Mr. Giffen has adverted to it in his "Essays in Finance."

The American law of 1834 changed the ratio of silver from 1:15 to 1:16. The effect of that, and the effect of the change from the Spanish ratio of 1497, and from the English ratio of i 560, was to counteract the effect of the increased supply of money metal given by a beneficent providence in the course of nature. Was the effect of that legislation unknown to the beneficiaries of those

I refuse to believe in such simplicity, and in such a plea of gross ignorance. I refuse to believe that simplicity and ignorance passed the laws of 1834, 1873 and 1890. It can not be that all were in simple ignorance.

To show public advertence, I may extract from the evidence of M. Cernuschi in 1877 as follows: " In connection with this subject of the relative value of gold and silver, I would call the attention of the committee to the edict of Medina, which is frequently referred to in treatises on money, issued by Isabella of Spain in the year 1497. The legal ratio between gold and silver coins was then established by Isabella and her advisers as one to ten and three-quarters. Some years prior to that the ratio had been different; it had been one to eleven and three-quarters."

Then he says: "Your law of 1834, raising the value of gold as against silver from 1:15 to 1:16, was enacted precisely with the aim of inviting the importation of gold, . . . This difference in the cost of mintage gave certainly more preference to gold against silver."

Liars who lie by evasion will pretend even now not to see the point herein involved. The effect was an appreciation of gold, or a tendency that way, and a tendency to depreciation of the value of silver, and the law was "enacted precisely with the aim."