MIA > Archive > Hyndman > Economics
The growth of general interest in political economy, or economics, and the increasing number of people of all classes who devote themselves to the serious study of this difficult subject is one of the most hopeful signs of the times. We are manifestly in a period of crucial transition, alike economically and politically. It is impossible, however, to deal consciously with this development, due in the main to the productive forces of our time, unless the system in which we are at present living is understood, and its tendencies are comprehended, by, at any rate, a considerable fraction of the active part of the Community. Consequently, discussions on the theoretical basis of economics are more necessary now than ever before. If there are among educated and thoughtful men two diametrically opposed and incompatible theories in regard to what regulates the exchange value of the commodities which constitute the wealth of our modern society, nothing is to be gained by shading over the antagonism between these conflicting schools of thought. Far better is it, in my opinion, to accentuate the differences which undoubtedly exist on this point, in order that students may be led to think out the whole question for themselves, uninfluenced by mere authority, or great reputations on either side.
The object of this lecture is to expose what seem to me to be the fallacies of the theory of Final Utility as a measure of value. The theory is, of course, associated with the name of the late Professor Stanley Jevons, and is accepted at the present time by many academic economists, of whom the chief is Professor Alfred Marshall. If I can show that this theory is merely an obscure way of restating the old supply and demand thesis of Lord Lauderdale, Bastiat, and others; that its originator does not adhere to it himself; that neither in his own hands nor in those of his followers has it solved any great problem or led the way to any discovery, but, on the contrary, has rendered confusion worse confounded, and has given rise to the most ridiculous conjectures and absurd assumptions; that also his principal pupil and supporter himself abandons his master’s own dialectic – if I succeed in doing this I venture to think that I shall have justified the title of my lecture.
I may say, however, that I do not propose to inflict any portion of the Differential Calculus upon my readers. If it pleases my critics to aver that my not having set out in full Homersham Cox’s proof of Taylor’s Theorem is irrefragable evidence that I am incapable of understanding how it comes about that a quarter of wheat and 22s. in gold constitute an equation of value in London today, I shall not attempt to controvert them. Neither shall I raise any objection if they constate that my inability to discover the locus of the curve of human greed, or to express the limits of human happiness in the form of an algebraic expansion, inevitably prevents me from fathoming the mysteries of capitalist production for profit. I shall allow all the missiles of dy/dx to fly round my head without dodging, and the fragments of Conic Sections that may be aimed at me will not disturb my intellectual equanimity for a moment – impavidum ferient ruinae – the débris of shattered arguments are not rendered more formidable by being enveloped in useless mathematical formulae.
“Repeated reflection and inquiry,” says Jevons at the beginning of his work on The Theory of Political Economy, “have led me to the somewhat novel opinion that value depends entirely upon utility.” Ricardo had already answered this bald and “somewhat novel” statement by anticipation at the time he wrote:
“When I give 2,000 times more cloth for a pound of gold than I give for a pound of iron does it prove that I attach 2,000 times more utility to gold than I do to iron? Certainly not; it proves only that the cost of production of gold is 2,000 times greater than the cost of production of iron. If the cost of production of the two metals were the same I should give the same price for them; but if utility were the measure of value it is probable I should give more for the iron. It is the competition of producers ... which regulates the value of different commodities. If, then, I give one shilling for a loaf and 21 shillings for a guinea, it is no proof that this in my estimation is the comparative measure of their utility.”
But it would appear that Jevons, who protests most reasonably, as other economists have done before and since, against the use of the word “value” to express various meanings in economics, plays the same trick with the word “utility” on his own account. He is analysing, or attempting to analyse, the ratio of exchange in a society in which, economically speaking, exchange is the dominant factor. It is not merely the superfluity which is exchanged after the needs of the producers themselves are satisfied, nor is production for exchange the object of one portion of the community, and production for immediate use that of another. All goods are produced for exchange on the free market of the world; and, in the majority of cases, the articles produced are of no utility to the persons who produces them. The commodities are produced under the control of a particular class, namely, the capitalists, for profit; and chemical, mechanical and other improvements arc going on which fall into the hands of this dominant class and are used by them, in competition with their fellows, to extend their own market, and lessen that of their rivals. The determining element in this struggle is cheapness. The scale of production is, however, determined by these same social considerations. A manufacturer cannot produce on the scale which he himself pleases. That is determined for him by his surroundings. He must use the best machinery, and organise his hands in the most approved method, or submit to being crushed out by those who read the signs of the times and translate them into action better than he can.
Nowadays, also, it is not demand which invariably precedes supply, but supply which in many cases anticipates and almost forces demand. Furthermore, the utility of different articles thus produced by capitalists for exchange is determined, not by their real utility, in the sense of usefulness to the consumers, but by the social position and purchasing power of those consumers in the society of the time. Purchase and sale of course involve sale and purchase: a quantity of saleable values on the one side which the owner is ready to sell, and a quantity of saleable values on the other side with which the owner is willing to buy. The production and the consumption are in such conditions purely and manifestly social; but the exchange, likewise a social function, is conducted under individual control, because appropriation of the product is still under individual (or capitalist company) ownership.
It is the production and exchange of commodities in such conditions, I say, which Professor Jevons sets himself to examine. According to him, when two commodities are exchanged on a free market, the production of such commodities being practically capable of indefinite increase and not restricted or monopolised – this is the, essence of competitive capitalism – then that exchange, so effected, proclaims that the “final utility” of the two sides of the trade equation is the same. This, and not the quantity of simple, abstract, social human labour embodied in the commodities on either side, determines the “ratio of their exchange,” their relative value. But let Jevons speak for himself, only taking note of the fact that he investigates social phenomena from the purely individual point of view of individual interest, individual desire, and individual labour.
“Utility,” he says, “though a quality of things, is no inherent quality. We can never, therefore, say absolutely that some objects have utility and others have not. The ore lying in the mine, the diamond escaping the eye of the searcher, the wheat lying unreaped, the fruit ungathered for want of consumers, have no utility at all. The most wholesome and necessary kinds of food are useless unless there are hands to collect and mouths to eat them sooner or later.”
How scientific, how enlightening, how truly philosophic is all this! Platitude reduced to its final imbecility could surely no further go.
“Nor, when we consider the matter closely (!), can we say that all portions of the same commodity possess equal utility. A quart of water per day has the high utility of saving a person from dying in a most distressing manner. Several gallons a day may possess much utility for such purposes as cooking and washing; but, after an adequate supply is secured for these uses, any additional quantity is a matter of comparative indifference. All that we can say, then, is that water, up to a certain quantity, is indispensable; that further quantities will have various degrees of utility; but that beyond a certain quantity the utility sinks gradually to zero; it may even become negative, that is to say, further supplies of the same substance may become inconvenient and harmful.”
That is to say, a flood may sweep everything away and drown “a person” who might, without a quart of it, have died of thirst!
Jevons proceeds to apply the same luminous method of investigation to bread and clothes, and then goes on:–
“Utility must be considered as measured by, or even as actually identical with, the addition made to a person’s happiness. It is a convenient name for the aggregate of the favourable balance of feeling produced – the sum of the pleasure created and the pain prevented. We must now carefully discriminate between the total utility arising from any commodity and the utility attaching to any particular portion of it. Thus the total utility of the food we eat consists in maintaining life, and may be considered as infinitely great” – didn’t Esau, when famishing, sell his birthright for a mess of pottage? – “but if we were to subtract a tenth part from what we eat daily our loss would be but slight. We” – who are we? – “should certainly not lose a tenth part of the whole utility to us. It might be doubtful if we should suffer any harm at all” – obviously Jevons had only the well-fed or over-fed classes in his mind. “Let us imagine the whole quantity of food which a person consumes on an average during twenty-four hours to be divided into ten equal parts. If his food be reduced by the last part, he will suffer but little; if a second part be deficient, he will feel the want distinctly; the subtraction of the third tenth will be decidedly injurious; with every subsequent subtraction of a tenth part his sufferings will be more and more serious until at length he will be on the verge of starvation” – last of all the man died also! And then Mr. Jevons is good enough to squirt a few pages of mathematics at us to illustrate, or obscure, this his most exquisite reasoning on the theory of value in exchange. But he gives it all over again a little later, returning to his favourite water illustration. “We cannot live without water, and yet in ordinary circumstances we set no value on it. Why is this? Simply because we have so much of it that its final degree of utility is reduced nearly to zero. We enjoy every day the almost infinite utility of water, but then we do not need to consume more than we have. Let the supply run short by drought, and we begin to feel the higher degrees of utility of which we think but little at other times.”
What is all this but the old “supply and demand” with a veil over its face? Compare Lord Lauderdale:–
“With respect to the variations in value, of which everything valuable is susceptible, if we could suppose for a moment that any substance possessed intrinsic and fixed value so as to render an assumed quantity of it constantly, under all circumstances, of equal value, then the degree of all things, ascertained by such a fixed standard, would vary according to the proportion betwixt the quantity of them and the demand, and every commodity would of course be subject to a variation from four different circumstances.
“1. It would be subject to an increase of its value from a diminution of its quantity.
“2. To a diminution of its value from an augmentation of its quantity.
“3. It might suffer an augmentation in its value from the circumstance of an increased demand.
“4. Its value might be diminished by a failure of demand.
“As it will, however, clearly appear that no commodity can possess fixed and intrinsic value so as to qualify it for a measure of value of other commodities, mankind are induced to select as a practical measure of value that which appears to be least liable to any of these four sources of variation which are the sole causes of alteration of value.
“When in common language, therefore, we express the value of any commodity, it may vary at one period from what it is at another, in consequence of eight different contingencies:-
“1. From the four circumstances above-stated, in relation to the commodity of which we mean to express the value.
“2. From the same four circumstances in relation to the commodity we have adopted as a measure of value.
“Water, it has been observed, is one of the timings most useful to man, yet it seldom possesses any value; and the reason of this is evident; it rarely occurs that to its quality of utility is added the circumstance of existing in scarcity; but if, in the course of a siege, or a sea-voyage, it becomes scarce, it instantly acquires value; and its value is subject to the same rule of variation as that of other commodities.” [1]
Reduced to their elements, all Jevons’ “final utility,” “esteem,” and the like, are contained in that passage. It is unnecessary to quote Ricardo’s criticism in view of other portions of this paper which follow. But it is surely manifest that in a free market, for commodities which may be increased to practically any extent, the phenomena of supply and demand are but superficial. What really regulates the relative exchange value is the quantity of social human labour embodied in the commodity on the two sides, the demand and supply fluctuations being averaged over longer or shorter periods. The form of price to which Lord Lauderdale refers does but give the quantity of labour embodied in commodities, its name in money. Now “magnitude of value expresses a relation of social production; it expresses the connection that necessarily exists between a certain article and the portion of the total labour-time of society required to produce it. As soon as the magnitude of value is converted into price, the above necessary relation takes the shape of a more or less accidental exchange-ratio between a single commodity and another, the money commodity. But this exchange-ratio may express either the real magnitude of that commodity’s value or the quantity of gold deviating from that value for which, according to circumstances, it may be parted with. The possibility, therefore, of incongruity between price and magnitude of value” – the productive power of labour remaining constant – “or the deviation of the former from the latter, is inherent in the price-form itself. “This is no defect, but, on the contrary, admirably adapts the price-form to a mode of production whose inherent laws impose themselves only as the mean of apparently lawless irregularities that compensate one another.” [2]
But our Professor is not content with “utility,” “final utility,” and “commodity,” He treats us to a theory of “discommodity” or “disutility,” which it seems, too, is a something which, being a nuisance, helps us to realise the conception of value in exchange. So fond is he of this notion also that he repeats it two or three times. The sewage of great towns, for instance, “we can hardly call it a commodity,” “acquires a higher and higher degree of disutility the greater the quantity to be disposed of.”
But now, to use Jevons’s phrase, let us investigate the subject a little more closely:–
“In exchange for a diamond we can get a great quantity of iron, or corn, or paving-stones, or other commodity of which there is abundance; but we can get very few rubies, sapphires, or other precious stories. Silver is of high purchasing power compared with zinc, or lead, or iron, but of small purchasing power compared with gold, or platinum, or iridium.”
Why is this? Because – it is Professor Jevons who tells us so – “nothing can have a high purchasing power unless it be highly esteemed in itself; but it may be highly esteemed apart from all comparison with other things” – what on earth has this to do with exchange value then? – “and, though highly esteemed, it may have a low purchasing power because those things against which it is measured are still more esteemed.” From which it should now appear that not “utility” but “esteem” is the measure of the value of commodities. But then Jevons puts the whole thing right in this way:–
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“(1) Value in use equals total utility. (2) Esteem equals final degree of utility. (3) Purchasing power equals ratio of exchange.” |
All which no doubt advances our knowledge greatly!
But the main point is that labour embodied in commodities is not the measure of their value; though, strange as it may seem, “economists have not been wanting” who have advanced this monstrous proposition.
“But though labour is never the cause of value” – what does the word “cause” mean here? – “it is in a large proportion of cases the determining circumstance, and in the following way: – Value depends solely on the final degree of utility [otherwise ‘esteem’]. How can we vary this degree of utility? By having more or less of the commodity to consume. But how shall we get more or less of it? By spending more or less labour in obtaining a supply. According to this view, then, there are two steps between labour and value. Labour affects supply, and supply affects the degree of utility, which governs value, or the ratio of exchange. In order that there may be no possible mistake about this all-important series of relations I will re-state it in a tabular form as follows:–
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“Cost of production determines supply; |
The italics throughout are Professor Jevons’. I think everyone will agree with me that nothing can be more strenuously put. The Professor was exceedingly anxious that there should “be no possible mistake” about that which he manifestly regarded as the keystone of the arch of his whole theory.
Now hear his most distinguished disciple and follower on this very passage. He speaks of the “loose and inaccurate” terms of the statement quoted, and goes on:–
“Let us turn then to examine the chain of causation in which Jevons’s central position is formulated, in his second edition, and compare it with the position taken up by Ricardo and Mill. He says: – ‘Cost of production determines supply,’ &c., as above. Now if this series of causations really existed there could be no great harm in omitting the intermediate stage and saying that cost of production determines value. For if A is the cause of B which is the cause of C, then A is the cause of C.”
Surely a very economic Daniel come to judgment. “But,” pray mark this Mr. H.S. Foxwell, read it Mr. Philip Wicksteed, and inwardly digest it Mr. Sidney Webb – “but in fact there is no such series!” So far as I am aware not one of the minor lights of the Jevonian firmament has twinkled out a reply to this direct and rather brutal contradiction. Which is right and which is wrong, or whether both are in error, does not concern me at present.
For, in truth, it is not necessary to go beyond Jevons himself to show how much importance we need attach to his utility views. For instance (at p.186 of the third edition, p.181 of the first edition, of his Theory of Political Economy) he says:–
“It may tend to give the reader confidence in the preceding theories when he finds that they lead directly to the well-known law, as stated in the ordinary language of economists, that value is proportional to the cost of production.”
When I first read this passage, nearly three and twenty years ago, I threw down the book. I felt that I had been made a fool of through the previous 180 pages, which indeed, had conveyed not a single fresh idea to my mind. It is as. complete a self-exposure as Henry George’s famous economic bull, that which is not wages is rent. But Professor Jevons must needs set out an equation of ratios to confirm the matter. At p.191 we find the following:–
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“Value per unit of x = cost of production per unit of x |
or, in other words, value is proportional to cost of production.”
Once more the italics are Professor Jevons’. “As moreover, the final degrees of utility of commodity are inversely as the quantities exchanged, it follows that the values per unit are directly proportional to the final degrees of utility” – have we reached the final degrees of futility through all this wearisome logomachy? For if “the ratio of exchange” – in other words, the value – “of any two commodities will be determined by a kind of struggle between the conditions of consumption and production,” which is the temporary higgling of the market, influenced by supply and demand on either side, and “value is proportional to the cost of production,” we are merely landed where the classical school of economists placed us 50 years ago. We have, in fact, what Jevons himself calls “the well-known and almost self-evident law that articles which can be produced in greater or less quantity exchange in proportion to their cost of production. The ratio of exchange of commodities will, as a fact, conform in the long run to the cost of production.”
And again,
“Thus we have proved” – by certain, mathematical formulae – “that commodities will exchange in any market in the ratio of the quantities produced by the same quantity of labour. But as the increment of labour considered is always the final one our equation also expresses the truth that articles will exchange in quantities inversely as the cost of production of the most costly portions, i.e., the last portion added.”
The sentence italicised by Jevons is most unscientifically and incorrectly expressed. If, for example, in an open market, say for type-writers, “the last portion added” is more cheaply produced than all the rest, then beyond all question this last portion, if added in sufficient quantity, will reduce the exchange value of all similar articles to its own lower level in comparison with other articles whose cost of production remains stationary. But all this is temporarily determined by the higgling of the market. The law that commodities exchange on the average in relation to the quantity of simple, abstract, social human labour embodied in them, asserts itself in despite of fluctuation.
No attempt whatever is made by our professor, be it observed, to analyse this “cost of production,” this “quantity of labour.” Jevons takes the phrase as he found it and leaves it there. Jevons was wholly ignorant of German, an ignorance which his followers have for the most part themselves assiduously cultivated. Yet it might have been thought that, by the year 1879, Jevons would have heard of the celebrated system of Marx, based upon simple, abstract, social human labour, the measure of the value of commodities in exchange; of the mehrwerth theory growing out of it; of the complete analysis of the categories of capital and the circulation of commodities which followed; and even of the admirable criticisms on Adam Smith, Ricardo, the physiocrats, and others which are now to be found in the second German volume. Apparently he had not. At any rate, Professor Jevons was content with the old confusions, and made no effort to clear them up. “Fixed and Circulating Capital” he supplements by such a meaningless phrase as “Free and Invested Capital”; but of Constant Capital, Variable Capital, Money Capital, Goods Capital, Circulation Capital, in addition to Fixed and Circulating Capital, he and his followers seem to be equally ignorant, regardless of the flood of light which Marx’s subtle and exhaustive investigations have thrown upon the whole sphere of the production and circulation of commodities in modern society.
With labour it is the same. The value of labour is spoken of as if it had not been shown conclusively that labour has no value, that labour can have no value, apart from the commodities in which it is embodied.
“I hold labour,” he says, “to be essentially variable, so that its value must be determined by the value of the produce, not the value of the produce by that of the labour.”
Which means – what? That the labour of a Zulu embodied in a diamond is worth more than the labour of the same Zulu for an equal time embodied in cane sugar? I am glad I am not called upon to answer. But Jevons actually jumbles up the productive labourers with barristers, merchants, schoolmasters, and the like. The exertion of vital force which incorporates labour in commodities he puts on the same economic plane as the exertion of vital force to secure the acquittal of a murderer, or the successful placing on the market of a large parcel of adulterated goods. Old Sir William Petty taught him better than that two hundred years ago. For the father of modern political economy speaks of such “labourers” as these as persons “who properly and originally earn nothing from the public, being only a kind of gamesters who play with one another for the labours of the poor, yielding of themselves no fruit at all.” But a Professor of Politic a Economy at the University of Oxford at the end of tin reign of Queen Victoria who could write as if the labour of a lawyer is the same in kind as the labour of an artisan, who also was quite ignorant of the meaning of social human labour in its simple, abstract form, was not a man likely to learn from a genuine thinker on Political Economy of the reign of Charles II.
Professor Jevons himself, I may note, made no distinction whatever between labour-power and labour. Yet labour-power is the value-creating commodity, which the capitalist buys, like other commodities on the market, and pays for in the form of money wages; and labour is the measure of the value of the commodities produced, in exchange with other commodities. Professor Alfred Marshall takes the distinction, without a word of acknowledgment, from Marx, but does not know what to do with it when he has got it. Do what he would, however, he could not possibly make a greater mess of his analysis than his master, Professor Jevons, did before him. For instance, Jevons says:–
“The view which I accept concerning the rate of wages is not more difficult to comprehend than the current one. It is that the wages of a working man are ultimately coincident with what he produces after the deduction of rent, taxes and the interest on capital.”
Is not that luminous? The wages of “a working man” are what he can get, after landlord, government and (shall we say) banker have scrambled for their portions! To begin with, in our present form of production, no human being can tell what any single working man has produced. It is quite impossible to differentiate his single bit of social work from the mass in which it is blended and lost. How much further forward, therefore, are we for this? But in his other explanations, Jevons is much less clear even than Adam Smith or Quesnay; for he omits altogether to take into consideration the “constant capital,” the raw materials, the incidental materials, &c., which, though changed in form, appear, unchanged in value, in the complete product. Are we to understand that this belongs to “a working man”? Of course not. But such foolish omissions are only of a piece with the astounding statement which follows:–
“The fact that the workers ARE NOT THEIR OWN CAPITALISTS introduces complexity into the problem”!!
The fact that the workers, as a class, are not themselves capitalists, as a class, that they do not own and control their own means of production and exchange and pay themselves their own wages, this fact “introduces complexity” into the solution of the problem of modern production; in which all the means and instruments of production are in the hands of the capitalists and the workers have only their labour-power to sell! If I had tried to invent nonsense in order to have the pleasure of fathering it upon the late Professor, I am confident that I could not have hit upon anything so undescribably silly as this. Yet this is the genius before whose shrine our University Professors of Political Economy still prostrate themselves!
If, however, Professor Jevons showed himself inconsistent, incapable, and confused in his theories of value in exchange, labour, and capital, he was equally at a loss when he came to the discussion of practical questions. His foolish utterances on the exhaustion of our coal supply have long since been forgotten. His speculations on the depreciation of gold have been absurdly falsified. His analysis of the problems connected with money has not advanced us a single step. His remarks about gluts and commercial crises are ridiculously weak. This last, I know, is a very tender place with economists of Professor Jevons’ school. For what has “the master” said? “Over-production is not possible in all branches of industry at once, but it is possible in some as compared with others.” Now, as a matter of fact, the history of the commercial crises of this century, if it throws into relief one point more clearly than another, proves that over-production, or glut, in all branches of industry at once – a complete industrial crisis owing to social causes in every department of industry – is not only possible but inevitable.
How to explain these recurring crises? Jevons was quite incapable of doing it. His “final utility” gave him no clue, and his followers, save in cases where they convey without acknowledgment from others, are as much at sea as he was himself. But – not to be beaten at once, he went off out of our social arrangements – the very idea of the antagonisms between social production and individual exchange, between commodities and money, between production for use and production for profit, never entered his mind – he went off, I say, out of our social arrangements, and even out of our planet, right away to the sun, the source, he thought, of economic as of other light. It was the spots on the sun that did all the mischief! Unluckily for this hypothesis – but really it is not necessary to deal further with that ridiculous aberration. His own followers are ashamed of the nonsense, and I only refer to it now as further evidence of the utter futility of his own system. Fortunately, the entire theory of commercial crises has been worked out by a very different school of thinkers, and Jevons’ “Commercial Crises and Sun Spots” may be left to gather dust on its neglected shelf, until some writer, with nothing better to do, thinks it worth while to publish a monograph on “the Strange Hallucinations of Professors of Political Economy.”
Professor Alfred Marshall has likewise his pretty little excursion into the realms of fancy in that huge tome of his that elucidates not a single problem which he takes upon himself to solve. Professor Marshall’s hallucination assumes the shape of “Consumers’ Rent.”
This learned gentleman from Oxford teaches the young gentlemen at Cambridge that if they would rather pay £1 for a half-penny box of matches than go without lucifers they pocket a Consumers’ Rent to the tune of 19s. 11½d. This fallacy arises directly out of the notion that “final utility” or “esteem” constitutes the measure of value. When, however, the consumers, whether they be happy young undergraduates at Trinity, or luckless dockers at the East-end of London, grope in their breeches’ pocket for the 19s. 11½d. which is their just rent for having been able to buy matches so much below their “final utility,” they will appreciate the humour of the learned professor at its true exchange value. “But for the honour of the thing now,” said an Irishman (whom I take to have been a lineal ancestor of Mr. George Bernard Shaw) when he was conveyed to a ball in a sedan-chair with no bottom to it – “but for the honour of the thing now, bedad, I might just as well have been walking”!
What now are the tests of really scientific method in Economics, as in every other department of human knowledge? Rigid and logical analysis, accurate induction, luminous and pregnant hypothesis, masterly synthetic verification, preparation of the ground for reasonable forecast.
On every one of these points, Professor Jevons is markedly deficient. His analysis is absolutely worthless; his induction is loose and useless; his working hypothesis is “conspicuous by its absence”; having nothing to verify, his verification is unattempted; while forecast on his lines is utterly hopeless. The school of economists which has followed closely in his footsteps has been as barren of improvement or discovery as he was himself. Only when they have abandoned his crude and ill-digested commonplaces in favour of a widely different method, have his pupils done any good work whatever. The Final Futility of Final Utility is conclusively proved by the utter incapacity of any thorough-going Jevonian to give a reasoning explanation of the daily working of the capitalist system of production and exchange. Surely it is high time that, at whatever expense to individual reputations, this involved and bootless theory should be generally recognised as the jumble of confusion which it is.
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NOTE. – Nobody who knows anything about economics has ever disputed that there are things which command a monopoly price; nor that this price is regulated not by the quantity of social human labour that is embodied in them, but by the desire of the purchasers and the means which they have of gratifying it. This monopoly price rules with articles of exceptional quality, whose quantity cannot be increased by the application of any amount of human labour; and in the sphere of every day industry the excess paid for them over and above the actual cost of production usually goes into the pocket of the landlord, as a portion of his rent, before they enter into the general market for manufacture and exchange. The purchase and sale of old china, rare stamps, ancient statuary and pictures are also outside the relations of labour-value: the price depending in each case upon the estimation of the value of the article by the wealthy buyer, alone or in competition with other buyers. It is also true that a monopoly price may sometimes be secured for a considerable period, by an artificial limitation of the supply in relation to a demand previously existing, even with commodities which, given time, are susceptible of almost indefinite increase. If the late Professor Jevons and his followers had confined themselves to the examination and illustration of such monopoly price in its various forms, as bearing upon the operations of modern commerce, they would have done some service to the science of economics.
1. An Inquiry into the Nature and Origin of Public Wealth, pp.15-6.
2. Karl Marx, Das Capital, p.132.
Final Futility of Final Utility from the Economics of Socialism, Twentieth Century Press, 1896, pp.225-241 being the last (see Preface) of a series of seven lectures on political economy, republished by Twentieth Century Press 2nd edition; 1900 3rd edition, republished by Twentieth Century Press 1909, pp.258; republished by Grant Richards as The Economics of Socialism; Marx Made Easy, 1922, 286pp.
In the Preface to the book Hyndman says the following about the essay below:–
“The seventh lecture, which is wholly critical and controversial, was read before the Political Economy Circle of the National Liberal Club. I have left this lecture, with the exception of one foot-note, precisely as it then stood. It was written as a direct challenge to the whole of what is called the Jevonian school, the followers of the late Professor Stanley Jevons. My friend, Mr. J.H. Levy, the Secretary of the Circle, kindly sent proofs of the address, with invitations to attend, to the leading Professors of Political Economy in Great Britain, who hold Jevons’s views on Final Utility, some weeks before the evening on which it was delivered. I was told confidentially, beforehand, that my rashness in making such an attack would then receive exemplary chastisement, and that, after the discussion of my paper, no more would be heard of the Socialist theories as an important contribution to the science of political economy. I confess that I did not feel at all afraid. But I also admit that I did not expect that, after all that they had said and written as to the absurdity of our views, neither Professor Foxwell nor Professor Wicksteed, neither Professor Marshall nor Professor Sidney Webb would put in an appearance. Possibly, now that the paper is reprinted, some of these learned gentleman will either attempt a defence of the opinions which they have adopted and champion or will honestly abandon them as wholly untenable.”
Last updated on 21.1.2006