CHAPTER SEVEN MARGINISM I. PREMISES Marginism Defined. The term Marginism has been applied to the doctrine which branched off from Utilitarianism and Historism beginning about 1870. As the word is now understood, and as it for that reason will here be used, it means the explanation of exchange values by states of feeling and of consciousness in general, but especially also the use of least ("marginal") fractions as a standard for determining the value of aggregates. Again, marginism differed from the earlier economic systems in that it compared units of want and feeling instead of things. Even in measuring productivity the standard was one of differential values psychologically determined, although deviations were now and then tolerated for the sake of a particular argument. However, it is not at all impossible that this difference between objective measurements of price through labor-time or expenses, and subjective measurements of price with the aid of an intellectualistic theory of feelings and demands, will be considered less momentous in the future than to-day. For on the one hand, Marginism has much in common with both Naturalism and Utilitarianism; and on the other, hedonism is only one feature in the Marginal philosophy. The immediate occasion for Marginism was the breakdown, in various parts, of Utilitarianism. It had become apparent by the middle of the nineteenth century that the Ricardian scheme could be maintained only at the cost of empirical truths. The world without did not bear out what abstruse thinkers demonstrated so ably. Too many qualifications, amplifications, rectifications, and even contradictories had slipped into the treatises that started with the psychology of Bentham and Mill! Historism however, it was soon realized, could not fill the void either. For while it did good yeoman service in pressing the enemy back, in opposing static with dynamic concepts, it could not claim the field permanently. The kernel of truth in its argument was recognized and acclaimed by many who took long-time views of events, desirous of a moral solution of economic questions. But the hope-if any had entertained it at all—of discovering laws historically or statistically was soon given up. Nothing, it became evident before long, could be done if vast masses of material had to be turned over for purposes of induction. If Utilitarianism had made the work too easy, the Historians had made it unduly complicated. Only a prolonged sociological study could have satisfied men like Knies and Schmoller. Hence, while as a correction of older deductions, of economic generalizations whose fallacy external conditions and policies increasingly revealed, the Historical movement had scored a certain success, as a program for reconstruction it had failed. The question remained: What was at the root of the Utilitarian decadence? What must be done to protect economics against an art of "political economy?" How much could be retained of the old, and where lay the means for its development into a science comparable with physics or mathematics? Marginism was the answer to this question. The Mar ginal doctrine turns on a few fundamentals, largely taken over from Utilitarianism, but in part peculiar to itself. For to begin with, the concept of an "economic man" and of hedonism in general was accepted as an indispensable, unassailable fact for the purposes in hand. In the second place, the entrepreneur standpoint, tentatively adopted by Smith, but consciously cultivated first by the Utilitarians as the only one compatible with a pretense to an "exact" economics, continued to predominate, sometimes to be sure under protest because of its apparent one-sidedness and menace to morality, but on the whole with the approval of those who held system higher than sentiment. But on the other hand Marginism replaced the objective view of the Naturalists, Utilitarians, and Historical group by a subjective one, the source of value being found in men and not in materials. Back of things, they said, lay thoughts, and these latter must furnish the key to the problem that all other systems had practically left unsolved. So wants and ideas took the place of wealth and objects in the concrete. Totals and their changes were referred to least doses in successive additions or subtractions of wants and values. Ratios dealt with feelings, but not with units of goods. Or rather, these latter were reduced to units of the former, the differences between feelings or preferences, between efforts or sacrifices, serving to explain ratios of supply, rates of output, and shares of income as originating within the exchange régime. This reckoning of everything, of prices and incomes, of wealth and of capital, by differentials and margins psychologically measured, is the quintessence of Marginism. It was, in a brief phrase, a theory of least values and productivities, based on premises and definitions for the most part originating in Utilitarianism. Subjectivity of Value. The notion of subjectivity however is much older than Marginism. It was mentioned, now vaguely, now definitely and with emphasis and purpose, by a host of writers before Jevons announced his discovery to the world. Condillac, e. g., in his "The Interrelation between Commerce and Government," 1776, showed that without want there can be no value, that imagined scarcity is as important in price-determination as real scarcity, that utility is not something inherent in things, but imputed to them by man, wherefore manufacture was as truly an act of production as agriculture; and he furthermore pointed to the differential preferences among men for one and the same thing or for different things as the proof of advantage in trading. No essay of like scope went deeper into the subject of value and exchange. Few of his contemporaries spoke so prophetically on an old topic that even then seemed exhausted! 1 But particularly after his time was the personal aspect of value brought out both in Germany and in England. Thus Hufeland in 1807 wrote: "All goods are goods only because of our conception of this utility in them"; 1 Thompson in 1824: "The desire removed, no labor will, except by compulsion, be employed upon the production of goods"; " Jennings in 1854: "Value is an attribute ascribed by man to objects from a remembrance of their services in the past, and conviction that such services are still available"; 3 Courcelle-Seneuil in 1858: "Utility of an object lasts as long as our opinion of it; that is, it is 2 1 Quoted by Roscher, W., in his Geschichte der, Nationalökonomik in Deutschland, 1874, p. 658. 2 Principles of the Distribution of Wealth, 1824, p. 12. The Natural Elements of Political Economy, pp. 72 and 202. above all subjective"; 4 and MacLeod in 1872: "Value, like color and sound, exists only in the human mind. There is neither color nor sound nor value in nature," 995 the question thus arising: "If labor is the sole cause of value, what is the cause of the value of labor?" MacLeod, to be sure, published his "Principles of Political Economy" a year after Jevons' "Theory" had been published, but certainly the question, why labor had value, was nowhere put so bluntly; not by Lauderdale nor Lloyd, nor Baudrillart who in "The Relation of Ethics to Political Economy,"7 1860, simply made a distinction between utility in things and values created by man, following Storch in this regard. CourcelleSeneuil came the nearest to a marginal interpretation of price in that he defined it as a balance of wants, and virtually did away with objective costs. In other words, he adapted J. S. Mill's statement to a subjective viewpoint, so that preferences took the place of differentials in cost. Lloyd in his lecture on the "Notion of Value," 1833, differentiated between absolute and exchange value, associating the former with valuations independent of exchange. The importance of scarcity for economic value, the rise of value with decreasing supply, and the principle of illimitable wants due to the diversification of products-all these now familiar ideas gave a touch of novelty to Lloyd's treatment. Similarly Banfield 8 in 1844 dealt with the effects of variety in our scaling of wants. However, one must go to Jennings and Gossen, and the better-known treatises of the seventies to appreciate the drift of Marginism in its earlier stages. Traité, vol. 1, pp. 45 and 243. See also Book I, ch. 8 passim, where the effect of differential wants on trade is succinctly stated. Principles of Political Economy, 1872, vol. 1, ch. 5, Sect. II, §§ 9-16. See especially pp. 244-57 of Des Rapports de la Morale et de l'Economie Politique. Banfield, J. E. Lecture on the Organization of Labor, 1844. |