Chapter XXV: The Reconciliation of Statics and Dynamics (3)

New York City, 233-35, 259, 259, n., 340ff., 383, 392, 430-31,
439, n., 502, 503, 506, 511, 514-16, 520, 541-42;
as "clearing house" for country, 236, 353ff.;
contrasted with London, 541-42;
"deposits" in, 233, 340ff., 392, 515;
"all other deposits" in, 235-37;
Cotton Exchange, 252, 503, 541;
Coffee Exchange, 252, 268, 503, 541;
Stock Exchange. See STOCK EXCHANGE.
Money market. See MONEY MARKET.
Clearings. See CLEARINGS.

Newcomb, Simon, 156.

Nicholson, J. S., 81-82, 124, 129-32, 134, 151, 167, 325-29.

"Nominalism" in monetary theory, 433, n., ff.
See _Staatliche Theorie_.

"Normal tendency," 176, 218, 254, 262-66, 293, 298-99, 315, 392-93,
395, 536ff.;
"normal _vs._ transitional."
See "TRANSITION PERIODS," STATICS, DYNAMICS.

Norton, J. P., 179, n., 287, n.

Note-brokers, 496-97, 499.

O

"Odd lot" dealings in securities, 249, 370.

"One house bonds," 147.

Origin of money, 394, Ch. XXI.

Ornament, and origin of money, 408ff.

Orthodox economist, 258, 549, 560.

"Other collateral security," analyzed, 502ff.

"Other loans and discounts," analyzed, 500ff.

"Overcertification," 200, 376, 509, 510.
See "MORNING LOANS."

Overcounting in estimates of volume of trade, 168, n., 200, n.,
230, 243-45, 247, n., 255, 339-40, 364-81.
See UNDERCOUNTING.

Overproduction, 258, 550.

"Over the counter" dealings in securities, 249, 370.

P

Panics, 174, 273, 435, 446, 448, 520, 548-49, 555.
See CRISES, BUSINESS CYCLES.

Paper money, 143, 150, 151, 418, 421, 473, 495, 496, 538;
inconvertible, 57, 84, 108, 132, 134, 136, 140, n., 141, 321-23,
391;
credit theory of, 141, 146.
See GREENBACKS, AUSTRIA.

Parasitic occupations, 482;
gold mining as, 262, n.;
American banking as, 527.

Patten, S. N., 558, n.

Paulsen, F., 22.

Payments, 177-78, 338, 367, n.;
proportions of money and checks in, 174, 338, 383, 447, 449, 463;
wage, 174, 531;
relation of, to volume of trade.
See OVERCOUNTING, UNDERCOUNTING, BARTER.

Pay rolls, money for, 174, 349.

Pearson, Karl, 237, n.

Perry, R. B., 3, n., 16, n., 21, n., 25, n., 97, n., 117, n., 118, n.,
119, n.

Persons, W. M., 241, n., 276, n.

Phillips, C. A., 174, n.

Phillips, Osmund, 272, n., 353, n., 354, n.

Physiographic factors in social life, 571-73, 574, 590.

Pierson, N. G., 221, n.

Pittsburg, "deposits" in, 245-46.

"Platform" of quantity theorists, 155.

Poker chips, 132.

Pope, J. E., 316, 317, 319, n., 502, n., 504, n., 505.

Populists, and quantity theory, 141.

Positive doctrine, in Parts I and II, summarized, Ch. XX.

"Power in exchange," 9-10, 388.

Pragmatism in economic theory, 41-42, 93, 96-97, 98-99, 553, 571-72.

Pratt, S. S., 248, n., 251, n., 252, n., 369, 370, 374, 476, n.

Premium, 146, 194, 322, 332, 390, 442-50, 471.
See AGIO.
Gold, _vs._ general price level as index of value of money, 194.

Prestige as economic power, 33, 37, 41, 405, 409, 411, 438-42, 463,
465-66, 487, 489, 570;
prestige values.
See VALUES.

Price, Theodore, 222.

Price, 7ff., 388, 440, n.;
and value, 8ff., 298.
See VALUE.
"Buying price" _vs._ "selling price," 402-04, 406-07, 476;
"just price," 24.

Price level, 56, 86, 87, Ch. VI, Ch. VIII, 188-89, Ch. XV, 315-17,
328, 381-82, 388-89, 416, 416, n., 456, 520-23;
relation of, to particular prices, 156, 183, 295, 311-12, 315-17,
388-89;
_weighted_ average, tied to T, 163ff., 363, 381-82;
supposed "passiveness" of, 126, 186, 187, 192, 290, Ch. XV, 389;
"reciprocal of," _vs._ value of money.
See MONEY, VALUE OF.

Price-theory _vs._ value-theory, 49, 78, 389, 558-59, 570-77, 589-90.
See SUPPLY AND DEMAND, COST OF PRODUCTION, CAPITALIZATION THEORY,
IMPUTATION THEORY.

Prices, concatenations of, 112-13, 300, 310, 313-14;
customary, 144;
fluid, 143;
world prices, and gold production, Ch. XVIII.

Private banks, 338, 343-45, 348, 355, n., 357, 488, 498-99, 514-16,
527-28, 531;
deposits in, in New York City, 344, 515;
"deposits" in, in New York City, 343-45, 515-16.

Produce exchanges, 200, 251ff., 406, 541.
See SPECULATION, COMMODITY, CHICAGO BOARD OF TRADE, LONDON MONEY
MARKET, NEW YORK COTTON EXCHANGE, ETC.

Production, confused with trade. See TRADE.
Relation of, to trade, 257ff., 269, 393;
exchange as.
See EXCHANGE.
Factors of, 268, 481-82; index of, 278;
money as instrument of.
See MONEY.

"Productive," meaning of, 257, 591.

Prosperity, theory of, 262, 395, 548, 555, 556, 569, 573ff.
See STATICS, DYNAMICS.

Protective tariffs, 550-52, 553, 580-81.

Pujo Committee, 344, 373, n., 375, 491, n., 515, n., 518-19.

"Purchasing power," 9-10, 88, 98-99, 484;
of money, 86, 88, 155-56, 388, 583-86.

Q

Qualitative _vs._ quantitative thinking, 191-92, 195, 324, 433, n.,
553, 586-88, 590.
See JURISTIC _vs._ ECONOMIC THINKING.

Quantity theory, 42, 79, 81, 99, 110, Pt. II, esp. Ch. XV, 435, n.,
444, n., 448-49, 478, 520-23, 537ff., 550, 558, n.;
modicum of truth in, 195, 330, 448-49;
as basis of prediction, 334-35;
doctrine of, that quantity of money is of no importance, 219,
219, n., Ch. XIII, _passim_, 265, 391-92;
conflicts with other theories, see SUPPLY AND DEMAND, COST OF
PRODUCTION, CAPITALIZATION THEORY, IMPUTATION THEORY,
GRESHAM'S LAW.
"Long run" _vs._ "short run" versions of, 170-71, 188-89, 192ff.,
262, 393;
not a functional theory, 262-66, 400-401;
not logically related to bimetallism, 219, n.;
applied to international trade, 61, 129, 183, 280-81, 292,
Ch. XVI;
not related to general theory of value, 46ff., 305;
psychological assumptions of, 143-44, 305, 444;
relation to medium of exchange function, 152, 266;
contrasted with commodity theory, Ch. VII, esp. 151-53;
types of, Ch. VII, Ch. VIII, 172, 177, n., 182-85, 192-94,
210, n., 216-17, 218, n., 219, n., 220, Ch. XVIII, 521, n.,
522, n., 537, 538, n.
See RICARDO, MILL, J. S., TAUSSIG, NICHOLSON, FISHER, WALKER,
F. A., JOHNSON, J. F., JEVONS, BARBOUR, ANDREW,
DAVENPORT (p. 218, n.), KEMMERER.

R

Railway gross receipts, 240-41, 278, 516;
relation of, to clearings, 240-41.

"Ranks" or "orders" of goods, 34, 38, 96, 481, 562, n.
See IMPUTATION THEORY, AUSTRIAN SCHOOL, CAPITALIZATION THEORY.

Ratio of exchange, 6ff., 25, 92, 388, 584;
abstract, as value, 25, 92.
See VALUE, ABSOLUTE _vs._ RELATIVE, PRICE, "PURCHASING POWER."

Ratio, fixed, M:M', Ch. IX, 187, 206, 281, 288, 290, 294, 328-29,
529-44.
See RESERVES, DEPOSITS, "MONEY IN CIRCULATION."

Real estate trade. See TRADE.

Rediscounting, 490, 494, 518-20.

_Reichsbank._ See GERMANY.

Religious values, 414.

Rent, 316, 439-41;
as cost, 70;
of money, as "money rates," Ch. IV, 145, 149, 424, 438-42, 451-57;
capitalization of. See CAPITALIZATION.

Reserve cities, 233, 343, n., 357, 359, n.

Reserve function of money, Ch. XVIII, 418, 421, 424, 436, 536-44;
special case of "bearer of options" function, 426, n., 536ff.
See FUNCTIONS OF MONEY.

Reserves, Ch. IX, Ch. XVIII, 393, 395, 447, 451, 491, 517, 529-44;
bills of exchange as, 181-82, 444;
legal reserve requirements, 175, n., 184, 447, 448, 449;
ratio of, to deposits, 175, n., 179, 286-87, 298, 324ff., 529-44;
ratio of, to "money in circulation," 175, n.;
relation of, to money rates, 378;
"secondary reserves," 530.

Resumption of specie payments, 146, 323.

Retail "deposits," see "DEPOSITS."

Retail trade. See TRADE.

Ricardo, David, 47, 50, 51, 64, 65, 66, 106, 131, 550.

Ridgeway, W., 407, n.

Ripley, W. Z., 275.

Risk, 67, 527, 542-43.
See DYNAMICS, "BEARER OF OPTIONS."

Ross, E. A., 37, 568, 571.

Royce, J., 18, n.

Rupee. See INDIA.

Rural banks, 232-35, 491, 517-18;
"all other deposits" in, 233-35;
loans by, in Wall Street, 517-18;
small volume of transactions of, 235, 342, n.

S

Saleability, 10, 94, 99, 401-07, 430, 440-41, 453, 475-78, 489,
493ff., 524-25, 526-27, 529, 540ff., 591.

Santos, coffee speculation in, 252.

Savings banks, 342, n., 409, 472, 498-99, 523.

Savigny, F. C., von, 24, 398.

Schumpeter, J., 44, 49, n., 80, 83, 90-100, 111, 113, n., ff.,
264, n., 265, 401, 429, n., 484-85, 488, 526, 549, 554-55,
558, n., 583-86.

Scott, DR, 78, n.

Scott, W. A., 13, 48, 81, 132, 141, 144, 327, n., 418, n., 419, n.,
422, n., 431, n., 498, n., 501, n.

Seager, H. R., 301, n., 303.

Sea Board Air Line Adjustment 5's, 471.

Seasonal changes, 187, 192, 533.

Seignorage, 131.

Self, the, 19.

Seligman, E. R. A., 73, n., 301, n., 418, n., 548.

Selling costs, 257ff., 393, 565.

"Selling price" _vs._ "buying price." See "BUYING PRICE."

Senior, N. W., 14, n., 67.

Sex, social transformation of, 35-36;
role of, in origin of money, 409-13.

Shakspere, 25.

Share sales. See STOCK EXCHANGE, CLEARINGS.

Shaw, A. W., 259, n.

Silver, 139, n., 150, 151, 152, 219, 221, n., 327, 397, 412, 414,
415, 421, 434;
certificates, 432.

Simmel, G., 101, 418, n.

Single tax, 318-19, 552, n.

Smith, Adam, 12, 50, 64, 65, 222, 526-27, 550, 556.

Smith, B. F., 366, n.

Smith, Munroe, 24.

Social control, Ch. I, 395, 409, 435. n., 482, 584;
technology of, 577ff., 589, 591;
"radiant points of," 37, 576.

Social psychology, 17, 36-37, 143-44, 560, 569-70, 577-78, 586.

Social value theory, Ch. I, 87, n., 98-99, 137ff., 158, 279, 310-11,
Ch. XX, 402, n., 408-16, 433, n., 435, n., 438-42, 464-67,
469, 480, 560, 569-82, 586-89;
pragmatic character of, 40-42;
applied to law, 24, 586-89;
applied to morals, 22-24, 589.

Social advantage, relation of, to individual interest, 397-99.

Social "consciousness," 16;
social expectation, 409;
social forces, 26;
"social marginal utility," 12;
social mind, 7, 12, 34, 87, n., 557, 560, 570, 578;
social objectivity, theories of, 20ff.;
social organism, 16, 577;
social "oversoul," 16;
"social use-value," 12;
social _vs._ individual values, 43-45.

"Socially necessary labor-time," 12, 15.

Society and individual, 16-26, 118.

Soetbeer, A., 413, n.

Sombart, W., 220.

South Atlantic States, "deposits" in, 233, 246.

Spahr, C. B., 274.

Specie, 182.

Speculation, 60, n., 85, 143, Ch. XIII, 221, 225, 231, 233-41, 248ff.,
267, 298, 363-64, 382, 392, 503, 514-28, 540ff., 566-67, 579,
585;
by manufacturers, wholesalers, and retailers, 243-44, 252-54;
commodity, 251ff., 379-80, 406, 503, 540-42;
influence of, on bank clearings, 237-41;
land, 254;
in London, 540ff.;
"odd lot," 249, 370.

Speculators, 31, 249, 263, 322, 488, 499, 523-27, 529, 544;
_vs._ investors. See INVESTMENT.

Spencer, Herbert, 571.

"Spot" transactions, 251.

Sprague, O. M. W., 174, n., 200, 354, n., 378, 502, n.

_Staatliche Theorie_, 433, n., ff.

Stabilizing the value of money, 152, 194.

Standard, of deferred payments, 326, 391, 418, 436;
of value, 133, 201, 390, 418-23.
See MEASURE OF VALUES.
Money, 135, 325-26, 421, 445;
"primary" and "secondary," 422;
tabular, 152, 436.

State banks, 234, 322, 338, 342, n., 343, 345, 347, 498-99, 505-09;
collateral loans in, 505-06, 507.

Static theory, 11, 42, 93, 106ff., 176, n., 177, n., Ch. X, 219, n.,
223, 254, 262-66, 292-93, 395-96, 403, 426, 433, n., 474,
481, n., 485, 487, 488, 536-44, Ch. XXV;
abstracts from money, 99, 265-66, 392;
relation of, to speculation, 263ff., 392, 474;
dynamics and, reconciliation of, Ch. XXV.
See also, SALEABILITY, LIQUIDITY, FLUIDITY, "NORMAL TENDENCY,"
EQUILIBRIUM, "WEALTH OF NATIONS, THEORY OF," DYNAMICS,
TRANSITION PERIOD, PROSPERITY, THEORY OF, GOOD WILL,
"BUSINESS CAPITAL," FRICTION, HISTORICAL _vs._ CROSS-SECTION
VIEWPOINTS.

Statistics, 237, n., 272, n., Ch. XIX;
of banking assets, 498, 503-04, 506, 509-11;
of bank-drafts on New York and other centres, 357;
of "equation of exchange," 191, 213, Ch. XIX;
of foreign and domestic trade, appendix to Ch. XIII;
of gold consumption, 412, n.;
of money in banks, _vs._ money in circulation, 179;
of money-rates, 430-31;
of net income of the United States, 246, 247, n., 278;
of prices, 278;
of quantity theory, 285, n., Ch. XIX;
ratio, loans to deposits, 286-87, n.;
reserves, 178-79, 286-87, n.;
of speculation, 248ff.;
of trade, 227ff., Ch. XIII, 363-81;
"ordinary trade," 240-47;
of velocity, 339, 361-63.
See WEIGHTING IN STATISTICS.

Stevens, W. S., 199, n.

St. Louis, 246, 252, 289, n., 503; Merchants' Exchange, 253.

Stock exchange, 31, 145, 254, 282, n., 369ff., 406, 458, 491, 520,
521-23, 527, 541, 564;
New York Stock Exchange, 242, 248ff., 268, 344, 430-31, 514, 521-23,
541;
clearing house in, 199-200, 369-75;
share sales on, volume of, 248ff., 521, n., 522, n., 541;
share sales on, correlated with bank clearings, 237ff., 516;
bond sales on, 249, 370;
"odd lot" dealings on, 249, 370, 374;
security dealings outside, 250-51, 514;
compared with other exchanges, 250, 541.

Stocks and bonds, essential identity of, 460-61, 476-77;
"borrowing" of, 145-46, 371-74, 471-72; value of.
See VALUE.

"Stop loss" orders, 249, 373, n.

Store of value, 314, n., 408, 418, 424, 426, 451.
Sec FUNCTIONS OF MONEY.

Substitutes for money. See MONEY, NOT UNIQUE.

Suess, Eduard, 413, n.

Suggestion, 18, 36-37, 97, 118, 405, 410, 411, 464-66, 560, 570,
577-78.

Supply and demand, Ch. II, 80, 295, 299-300, 311, n., 389, 453;
applicable to general price level, 299-300, 389;
assumes fixed absolute value of money, 52ff., 313-14, 389;
conflicts with quantity theory, 299-300, 310-11, 389;
not related to quantity theory, 46-47, 59-61, 295;
inapplicable to money, Ch. II, 389;
applied to money, 59-62, 325, 453, n.;
in "money market," 62-63, 224, 453;
relation of, to cost of production, 50, 69-70;
relation of, to marginal utility, Ch. II, Ch. V, esp. 94-95,
and 114, n.

T

Tabular standard, 152, 436, 451.

Tarde, G., 18, 37, 466, 568.

Tariff. See PROTECTIVE TARIFF.

Taussig, F. W., 48, 49, 107, 123, n., 129, 151, n., 155, 182-85, 192,
216, 254, 276, n., 379, 532, n., 537.

"Taxonomy" in economic theory, 563-64, 565, 566.

Taylor, Jas. H., 252, n.

Taylor, W. G. L., 13.

Technology, 571-74, 576, 590-91;
"technology of social control." See SOCIAL CONTROL.

Temporal _regressus_. See HISTORICAL _vs._ CROSS-SECTION VIEWPOINTS.

Thompson, Burton, on barter in New York City real estate dealings,
198, n.

Ticker, 248-49, 373, n.

"Till money," 183, 530, 539.

Time credit. See CREDIT, FUTURITY, BOOK-CREDIT, BILLS OF EXCHANGE.

Time discount, Ch. IV, 92, 93, 224.
See INTEREST, CAPITALIZATION.

Time, influence of, of money-rates, 428-32.

Timeless-logical _vs._ causal-temporal, relationships, 403, 548.
See CAUSATION, STATICS.

Token money, 325, 326.

Touzet, A., 412, n.

Trade, various meanings of, 267ff.;
"domestic" _vs._ foreign, appendix to Ch. XIII;
"ordinary," volume of, 241-47, 369.

Trade, volume of, 59-61, 117, Ch. VI, 144, 149, 159ff., 194, 215,
Ch. XIII, 332, n., 339-40, 363-81, 521-23;
an abstract number, distinguished from concrete goods, 161;
a pecuniary magnitude, 16-64, 271, 277-78;
confusions of, with production, or with stock, 225ff., 281,
296, n., 306-07, 363, n., 521, n.;
governed by dynamic causes, 262-66, 392, 474;
quantity theory doctrine of causes governing, 217-18, 218, n.,
240, 255, 256, 257, 294, 522, n.;
real estate trade in, 198, 254, 264, 317;
relation of, to money and credit, Ch. XII, Ch. XIV, 391-92,
532-36;
relation of, to price level, 160-66, 363, 381-82, 536;
retail trade in, 173, 184, 232, 242-44, 369, n., 444-45, 447,
448-49, 463, 489, 531;
speculation chief factor in, Ch. XIII.
See SPECULATION.
Wholesale trade in, 232, 243, 244-46, 253-54, 369, n., 381.
See also BARTER, TRANSACTIONS, PAYMENTS, OVERCOUNTING,
UNDERCOUNTING.

"Transactions, total," relation of, to bank clearings, 348-51, 353,
359, n., 360;
relation of, to "deposits," 349-51, 353.

"Transition periods," Ch. X, 196, 218, 262-66, 293, 298-99, 392-93,
537ff., 548, 578-81, 589.
See "NORMAL TENDENCY," STATICS, DYNAMICS.

Trosien, 319, n.

Trust companies, 338, 342, n., 343, 345-48, 498-99, 505-09, 516, n.;
New York City, "deposits" in, 345-48;
clearings of, 345-47;
deposits of, 345, 516, n.;
collateral loans of, 505-07;
reserves of, 346-47, 531

Turgot, 78, n., 301, n.

U

Undercounting in estimates of volume of trade, 168, n., 200, n.,
231, n., 364-65, 369-81.
See OVERCOUNTING, BARTER.

Underwriters, 32, 488, 523, n.

Urban, W. M., 29, n.

"Use theory." See INTEREST.

Utility. See MARGINAL UTILITY.

V

Vacuum, monetary, 323.

Value, Part I, 388-89 and _passim_;
absolute _vs._ relative, 7ff., 56-57, 77-78, 81, 86ff., 109-110,
123, 156, 158-59, 303, 312, 328, 388-89, 402, n., 440, n.,
449;
abstract units of, 451;
exchange and, 9-11, 401ff., 483-84;
wealth and, 5, 41, 388;
as generic, 26, 288, 467;
_differentiae_ of species of, 26ff.;
as quality, 5, 41, 97-98, 388;
as quantity, 5, 41, 97, 98, 388;
control over, 575ff.;
causal theory of. See CAUSAL THEORY.
Definition of, 5-7, 388;
derived, becomes independent, 40, 137ff., 391, 480, 481, n.,
562, n., 563, n.
See also IMPUTATION THEORY, CAPITALIZATION THEORY, RANKS OR ORDERS
OF GOODS.
Formal and logical aspects of, 5ff., 41, 86, 98, 388-89, 401-02, n.;
functions of, 10, 27, 43, 57, 87, n., 388, 440, 487, 552, 562, n.,
572, 585-86;
"human nature," 30, n.;
"inner objective," 13, 88, 110, 402, n.;
institutional. See INSTITUTIONAL VALUES.
"Intrinsic," 24;
"intrinsic causes of," 14, n.;
objective, 85, 87, 100;
of consumers' goods, 34ff., 300;
of diamonds, 438-42;
of gold. See GOLD.
Of instrumental goods, 38ff., 297, 300ff., 304, 467;
of money. See MONEY and ANALYTICAL TABLE OF CONTENTS.
Of stocks and bonds, 30-31, 32, 36-41, 300ff., 462;
"participation," 29, 30, n.;
"personal," 19, 86, 88, 89;
"prestige," 410-11, 438-42, 452-53;
"public economic," 13, 86, 88, 89;
"something physical," 135;
subjective, 85, 86, 88, 99, 100, 401-02, n.;
subjective, in exchange, 88, 89, 91, 99, 100, 101, 112-119,
137, n.
See MONEY, VALUE OF, SOCIAL VALUE, PRICE, RATIO OF EXCHANGE,
"PURCHASING POWER," "POWER IN EXCHANGE," MARGINAL UTILITY,
COST OF PRODUCTION, SUPPLY AND DEMAND, ETC.

Value theory _vs._ price theory. See PRICE THEORY.

Values, concatenation of, 313-14;
simultaneous rise or fall of, 8.

Van Antwerp, W. C., 372, n., 374, n.

Van Hise, C. R., 208, n.

Variables and constants, 97, 119, 143-44, 204-05, 256-57.

Veblen, T. B., 37, n., 411, 439, 477, n., 556, 560-64, 569, 570, 580,
582, 585.

Velocity of circulation, 85, Ch. VI, 117, 131, 143, 194, Ch. XII, 290,
292, 298, 309, 310, 333, n., 339, 361-63, 394;
"coin transfer" _vs._ "person-turnover" concepts of, 203-04, 308;
as causal entity, 204, 209, 213-13, 214;
quantity theory analysis of causes governing, 143, 203, 205ff., 309;
most highly flexible factor in "equation of exchange," 205;
varies with trade, 209ff., 306-08, 394;
varies with prices, 308-10, 394;
varies with value of money, 215;
meaningless abstract number, 204.

W

Wagner, A., 25, n.

Walker, Amasa, 401, n.

Walker, F. A., 46, 62, 169, 170, n., 219, 220, n., 237, 414, n.,
419, n., 521, n.

Wall Street. See NEW YORK CITY, STOCK EXCHANGE, NEW YORK CITY CLEARING
HOUSE, SPECULATION, MONEY MARKET, "MONEY TRUST," ETC.

Walras, L., 91, n.

Walsh, C. M., 188, n.

Wants, social nature of, 35ff.;
competitive. See COMPETITIVE DISPLAY.

War, 108, 140, n., 194, 427, 549-51;
World War, 136, 139, n., 142, 416, 427, 481, 521, 539, 550, n.;
American securities returned during, 521, n.

War loans, 463, n., 464, n., 480-81.

Wealth, 440;
definitions of, 5, n.;
relation of, to value, 5;
distribution of. See DISTRIBUTION OF WEALTH.

"Wealth of nations," theory of, 262, 395, 556, 569.

Weighting, in statistics, 163ff., 229, 229, n., 272, n., 341, 361,
383.

Weston, N. A., 339, 341, 342, n., 360.

Wheat as money, 407.

Whitaker, A. C., 65, 154, 319, n.

White, Horace, 209, 211, 345, n., 401, n.

Wholesale "deposits." See "DEPOSITS."
Trade. See TRADE, VOLUME OF.

Wicksell, Knut, 128.

Wicksteed, P. A., 91, n., 115, n., 116, 117, 214.

Wieser, F. von, 14, 48, 49, 70, 80, 83-90, 99, 100, 101, 102, 106,
109, 111, 308, n.

Williams, A., 152.

Williams, Clark, 347.

Willoughby, W. W., 18, n.

Wilson, E. B., 164, 165.

Withers, Hartley, 221, 222, 540, n.

Wittner, Max, 289, n.

Wolfe, O. Howard, 349, 353, n., 359, n.

Wolff, S., 289, n.

X

_xy = c_, 149.

Y

Yule, G. U., 237, n.

Printed in the United States of America

* * * * *

FOOTNOTES

[1] _Social Value_, Houghton Mifflin, Boston, 1911.

[2] Cooley, C. H., "Valuation as a Social Process," _Psych. Bull._, Dec. 15, 1912; "The Institutional Character of Pecuniary Valuation," _American Journal of Sociology_, Jan. 1913; "The Sphere of Pecuniary Valuation," _Ibid._, Sept. 1913; "The Progress of Pecuniary Valuation," _Quart. Jour. of Econ._, Nov. 1915. Clark, J. M., "The Concept of Value," and "A Rejoinder," _Quart. Jour. of Econ._, Aug. 1915. Anderson, B. M., Jr., "The Concept of Value Further Considered," _Ibid._; "Schumpeter's Dynamic Economics," _Pol. Sci. Quart._, Dec. 1915. Perry, R. B., "Economic Value and Moral Value," _Quart. Jour. of Econ._, May, 1916. Bilgram, Hugo, "The Equivalent Concept of Value," _Ibid._, Nov. 1915. Haney, L. H., "The Social Point of View in Economics," _Ibid._, Nov. 1913 and Feb. 1914. Johnson, A. S., in _American Economic Review_, June, 1912, pp. 320 _et seq._ Carver, T. N., in _Jour. of Pol. Econ._, June, 1912. Mead, G. H., in _Psych. Bull._, Dec. 1911. Ellwood, C. A., in _American Jour. of Sociology_, 1913. Ansiaux, M., in _Archives Sociologiques, Bulletin de l'Institut de Sociologie Solvay_, May 25, 1912, pp. 949-55.

Professor Cooley's articles, which I have listed first in this note, have in certain important particulars shifted the emphasis and changed the method of approach. He is more interested in the general sociological aspects of the value problem than in the technical economic aspects. In considering economic value, he is more interested in its general social functions than in its function as a tool of thought for the economic theorist. He has, therefore, been less bound by schemata than I have in the discussion. This different method of approach, coupled with a singular charm in exposition which characterizes everything Professor Cooley writes, makes it seem probable to me that readers who may find the doctrine as I set it forth unconvincing, will be convinced by Professor Cooley's exposition. I hope, too, that Professor Cooley's articles, which have been scattered among three periodicals, may soon appear together under one cover.

[3] Including many whose formal definitions are quite different, and who would repudiate the contentions here advanced! _Cf._ my article, "The Concept of Value Further Considered," _Quarterly Journal of Economics_, Aug. 1915, and _Social Value_, chs. 2 and 11.

[4] Definitions of wealth differ, and there are few if any definitions of wealth broad enough to make it true that only items of wealth have value. All wealth has value, but not all value is embodied in wealth. Thus, stocks and bonds, and "good will" have value. Few writers would classify them as wealth. The distinction between wealth and property is employed by many writers to meet the difficulty here presented, and it is held that these intangibles have only the value of the wealth to which they give title. In a logical schema, on the assumption of a fluid, static equilibrium, this may serve. It is true in fact, however, that many of these intangibles have value apart from the wealth to which they give title. But these are complications which I reserve for a later part of this chapter, for the chapter on "Statics and Dynamics," and (in the case of irredeemable paper money) for the chapter on "Dodo Bones."

[5] The notion of ratio of exchange as a ratio between values is strictly accurate only under static assumptions. Goods, in actual life, are not always exchanged strictly in accordance with their values. _Cf._ my article, "The Concept of Value Further Considered," _Q. J. E._, Aug. 1915, pp. 698-702. In cases where prices, or exchange relations, are not in accord with values, the term "ratio of exchange" is inapplicable, since there are no quantities to be terms of the ratio--except the pure abstract numbers of the commodities, each measured in its own unit, exchanged.

[6] In chapter 17 of _Social Value_, I have followed the German usage in broadening the term, price, to cover all exchange relations. This has led to misunderstanding on the part of some readers, and it has seemed best to me to return to what appears to be the more familiar usage. It is purely a question of convenience. Practically, ratios of exchange which are not money-prices rarely come in for discussion, outside the preliminary chapter on definition! Professor Fetter, in his article on the "Definition of Price," in the _American Economic Review_, Dec. 1912, proposes to broaden the term price in the manner which I am here abandoning, and his count of economists would seem to leave usage about equally divided between the broader and narrower uses of the term. It does not seem to me to be a point worth arguing about, however, and since I am practically convinced that cause of misunderstanding will be removed by using price to mean "money-price," I shall so use the term in this book, using ratio of exchange, or exchange relation, to express the broader concept.

[7] E. g., Boehm-Bawerk, _Grundzuege der Theorie des wirtschaftlichen Gueterwerts_, Conrad's _Jahrbuecher_, 1886, p. 478, n.; Carver, "Concept of an Economic Quantity," _Quarterly Journal of Economics_, 1907.

[8] This distinction is elaborated _infra_, in the chapter on the "Origin of Money."

[9] It is a matter of high importance that the value notion should be extended beyond exchange, if the economist is to be able to apply his theory to such highly important economic problems as socialism. _Cf._ Schaeffle, _Quintessence of Socialism_, and Clark, J. M., _Quart. Jour. of Econ._, Aug. 1915, p. 710.

[10] As shown, _infra_, in the chapters on "Supply and Demand," "Cost of Production," "Capitalization Theory," etc.

[11] _Vide Social Value_, p. 176, n. _Cf._ Davenport, _Value and Distribution_, chapter on "Ricardo."

[12] Knies, _Das Geld_, vol. I of _Geld und Credit_, Berlin, 1873, pp. 113-125, esp. 124.

[13] Chapter on "Value" in the _Philosophy of Wealth_, and ch. 24 of the _Distribution of Wealth_.

[14] _Social Value_, ch. 7.

[15] T. S. Adams, "Index Numbers and the Standard of Value," _Jour. of Pol. Econ._, vol. x, 1901-02, pp. 11 and 18-19; Kinley, "Money", p. 62; W. G. L. Taylor, "Values, Relative and Positive," _Annals of the Amer. Acad._, vol. ix; Merriam, L. S., "The Theory of Final Utility in its Relation to Money and the Standard of Deferred Payments," _Annals of the American Acad._, vol. iii. and "Money as a Measure of Value," _Ibid._, vol. iv; Scott, W. A., "Money and Banking", 1903 ed., ch. III. Professor Scott, in a letter to the writer, expresses the opinion that a value concept which makes the value of a good a quantity, socially valid, regardless of the particular holder of the coin or commodity in question, and regardless of the particular exchange ratio into which the value quantity enters as a term, "is absolutely essential to the working out of economic problems." Johnson, A. S., "Davenport's Economics and the Present Problems of Theory," _Quarterly Journal of Economics_, May, 1914, and _American Econ. Rev._, June, 1912, p. 320.

[16] Cf. also Wieser's _Natural Value_, p. 53, n. Senior's "intrinsic causes of value" comes to the same thing.

[17] Cf. _Quarterly Journal of Economics_, Aug. 1915, pp. 681-82, esp. 681, n.

[18] Among the leading figures in economics to whom this doctrine is unacceptable, I would mention especially Professor H. J. Davenport, _Value and Distribution_ and _The Economics of Enterprise_. A writer who seeks to minimize the importance of the issue between the relative and the absolute conceptions of value is Professor J. M. Clark, in _Quarterly Journal of Economics_, Aug. 1915. Professor Clark seems to agree with much of what has been said here, and the present writer would agree with Professor Clark, as indicated above, that for many purposes we do not need to look behind prices--entering a _caveat_ that this is true only so long as we can assume a fixed absolute value of money.

[19] The psychology of this statement, which involves hedonism, needs improvement, but the issue need not be discussed here. _Cf. Social Value_, ch. 10.

[20] As Professor R. B. Perry, _Quart. Jour. of Econ._, May, 1916.

[21] In this I am following a line of thought developed by Professor John Dewey in a lecture delivered before the Harvard Philosophical Club in 1913-14.

[22] For the elaboration of these ideas, cf. Hegel, _Philosophy of History_, _passim_; Willoughby, _The Nature of the State_, _passim;_ Davidson, T., _History of Education_, New York, 1900, _passim_; Bosanquet, B., _Philosophical Theory of the State_; Royce, J., _The World and the Individual_.

[23] Tarde, _Laws of Imitation_; Baldwin, _Social and Ethical Interpretations_.

[24] _Human Nature and the Social Order._

[25] _Cf._ Ellwood, C. H., _Some Prolegomena to Social Psychology_, Chicago, 1901, and Cooley, C. H., _Social Organization_, New York, 1909. See also _Social Value_, ch. 9.

[26] _Cf. Social Value_, ch. 8. H. J. Davenport is the best modern representative of this extreme individualism in economics. Individualism is nearly dead in modern political, ethical, and sociological theory. Revivals of it appear, however, in W. Fite, _Individualism_, and in a recent article by R. B. Perry, "Economic Value and Moral Value," _Quart. Journal of Economics_, May, 1916. (I have discussed Professor Fite's views in the _Pol. Sci. Quart._ of June, 1912.) Professor Perry would there appear to reduce ethical value to a purely individual phenomenon. But he really brings in a "categorical imperative," not derived from the values of the individual, by the "back door." "Now our general moral law prescribes that an agent shall take account of all the interests which his conduct affects, or shall judge his conduct by its consequences all round." (_Loc. cit._, p. 481.) Just how this "general moral law" is to be derived from individual values, is not made clear. That the wants of every man should count equally with the wants of the agent is a principle which one would expect from Kant or Fichte, but hardly one which individualism can expect to maintain.

[27] I use "volition" here in that wide sense which makes it cover both the motor and the affective phases of mind. Munroe Smith would emphasize the motor aspect, where Savigny stresses feeling and sentiment.

[28] "Jurisprudence," a lecture delivered before the faculty of Columbia University, Feb. 1908, New York, The Columbia University Press, 1909, p. 14.

[29] I ran across this in Wagner's _Grundlegung_. Wagner had found it in Raul. It is from _Troilus and Cressida_, Act II, Scene II.

[30] Davenport, _Value and Distribution_, pp. 184, n., and 330-31, n.; Jevons, _Theory of Political Economy_, pp. 14, 78-84, esp. 83. _Cf. Social Value_, ch. 4. This seems to be the position of Professor R. B. Perry, also, though he is not so extreme as Davenport. _Loc. cit._

[31] This term carries no connotation of teleology, as here used. I am merely trying to state what the different kinds of value _do_, as a matter of fact.

[32] The _extent_ to which the values of consumption goods and services are reflected in other economic values will receive attention below, in the present chapter.

[33] _Cf. Social Value_, p. 125, and Urban, _Valuation, passim_. Urban's idea of "participation values" is better expressed by Cooley's phrase, "human nature values," while Cooley's excellent phrase, "institutional values" characterizes the more complex values in which classes and institutions are specially _weighted_. _Cf._ Cooley's articles referred to above, and _Social Value_, chs. 11-15, inclusive.

[34] "The Institutional Character of Pecuniary Valuation," _American Journal of Sociology_, Jan. 1913, p. 546.

[35] This, unfortunately, is not high praise, as the Federal Judiciary in general sets a lamentably low standard in these matters.

[36] Neither "desire" nor "satisfaction" is really accurate here, but I do not wish to digress for a discussion of the psychology of value in the individual mind. The present argument can be developed without it. The matter is discussed in detail in ch. 10 of _Social Value_.

[37] Ross, E. A., _Social Psychology, passim_.

[38] _Cf._ Veblen, T. B., _Theory of the Leisure Class_, and Carlile, W. W., _Evolution of Modern Money_.

[39] _Social Value_, chs. 3-7, esp. ch. 5.

[40] But land does often have value which it is impossible to explain on the basis of any income which may reasonably be expected from it, even in the remote future.

[41] P. 174.

[42] _Cf._ the discussion of Wieser, Schumpeter and von Mises in the chapter on "Marginal Utility," _infra_.

[43] Flux, W. A., _Economic Principles_, London, 1904, pp. 4, 27, 29; Taussig, F. W., _Principles of Economics_, New York, 1911, vol. I, pp. 141-143. _Cf._ my _Social Value_, ch. 5.

[44] _Cf._ the present writer's _Social Value_, chs. 3-6, inclusive.

[45] I am here abstracting from an important factor, namely, that not all prices are affected equally by changes in the value of money. Some prices are fixed by law and custom, and some incomes are tied by long time contracts. Thus, it will happen, in many cases, that supply and demand for a given good will be unequally affected by a change in the value of money. This means that certain values are _tied_ to the value of money, rising and falling with it, so that the amount of _power_ which some elements in the economic situation are able to exert through supply-price-offer and demand-price-offer are at the mercy of changes in the value of money. But this is an element which is incalculable, on the basis of the supply and demand concepts, and must be abstracted from if we are to make any definite assertions as to the effect of increase or decrease of demand in the active sense on supply in the passive sense, or vice versa. Unless we make this abstraction, and unless we assume a fixed value of money, we might find increase of demand in the active sense (nominal) leading sometimes to an increase, and sometimes to a decrease of supply in the passive sense, or rather, being accompanied by either increase or decrease of supply in the passive sense. No law would be possible. In practice, both of these abstractions are more or less consciously assumed.

[46] I think that it is a feeling that Mill has left out the psychological factors in supply and demand which led Cairnes to the effort to give definiteness to other and vaguer notions on the subject.

[47] _Cf. Social Value_, ch. 2; "The Concept of Value Further Considered," _Quart. Jour. of Economics_, Aug. 1915. For the doctrine that supply and demand, and other elements of current price theory, assume a fixed absolute value of money, see _Social Value_, p. 166, n., and ch. 17.

[48] _Leading Principles_, ch. on "Supply and Demand."

[49] _Cf. Social Value_, pp. 29-30, and 64-71.

[50] _Cf._ the discussion, _infra_, of "T" in the "equation of exchange."

[51] Cotton is chosen for this illustration because it has actually happened, more than once, that a large crop has sold for a smaller aggregate price than a smaller one. Thus, not to take an extreme illustration, the crop of 1910-11 was 11,568,334 bales. That of 1911-12 was 15,553,073 bales. The average price of spot cotton at New York from Oct. 1910 to June, 1911, inclusive, was almost 15c. per lb.; the average price of spot cotton in New York during the same months in 1911-12 was not quite 10 cents per lb. On this basis, the eleven million odd bales of 1910-11 sold for substantially more than the fifteen million odd bales of 1911-12.

[52] Nor is there anything in the hypothesis to reduce the number of times any good needs to be exchanged against money. Rather there would be an increase of exchanging, as speculation took place to bring about the needed readjustments. For the present, I abstract from this. _Cf. infra_, the chapter on "Volume of Money and Volume of Trade."

[53] I shall recur to this point in the chapter on "The Quantity Theory and International Gold Movements."

[54] _Quart. Jour. of Economics_, 1894-95, p. 372.

[55] _Cf._ Davenport, _Value and Distribution_, and Whitaker, _Labor Theory of Value_.

[56] _Cf. Social Value_, pp. 29-30; 64-71.

[57] I incline to the view that the explanation of costs by foregone positive values needs supplementing by a recognition of the role of _negative social values_, and that thus interpreted, "real costs" have a minor part to play. But I have not thought the matter through satisfactorily, and shall find no occasion to use the doctrine in the present volume.

[58] This doctrine as applied to rates on call loans appears in Seligman's _Principles of Economics_, 1912 ed., p. 395. The peculiarities of call loans have also been discussed by C. A. Conant, _Principles of Money and Banking_, I, p. 171. Conant there refers to a discussion by Joseph F. Johnson, in _Pol. Sci. Quarterly_, Sept. 1900, p. 500. There are some very interesting distinctions between the "hire price" and the "purchase price" of money developed by J. A. Hobson, in his _Gold, Prices and Wages_, pp. 153 _et. seq._

[59] One "pure rate" of interest, for loans of all periods over, say, three years, is doubtless, a myth, or better, a methodological device for simplifying thinking in connection with the theory of interest, and the capitalization theory. It is not necessary for our purposes, however, to give detailed analysis to the notion. We shall discuss the capitalization theory as we find it, assuming that, as a matter of fact, the difference between loans of 20 years and loans of 35 years, or in perpetuity, of equal quality in other respects, may be abstracted from, with safety.

[60] The price-level is a _weighted_ average. These elements dominate it. _Cf._ our discussion, in the chapter on the "Volume of Money and the Volume of Trade," _infra_, of the elements entering into trade. We shall make use of the capitalization theory at various points in our discussion of general prices. _Cf._ the chapter on "The Passiveness of Prices," where it is shown that the capitalization theory and the quantity theory are irreconcilable.

[61] There is an extensive body of controversial literature connected with the capitalization theory, which it is unnecessary, for present purposes, to consider. One interesting line of doctrine is that developed by DR Scott (_Jour. of Pol. Econ._, Mar. 1910) and H. J. Davenport (_Yale Review_, Aug. 1910), in which ordinary formulations are criticised as assuming a "social rate" of interest, and in which the effort is made to work the thing out on the basis of extreme individualization, each man having a rate of discount of his own. I have accepted the doctrine in the general form in which it has been developed by Boehm-Bawerk (in criticism of Turgot and Henry George in his _Capital and Interest_), by Fetter, in his _Principles of Economics_, and by Fisher in his _Rate of Interest_, abstracting from points on which these writers disagree. My criticism of their doctrines, were it necessary here to develop it, would rest on the ground that their treatment of the general interest problem is too individualistic, and I should side with them as against Scott and Davenport. But these matters are aside from our present problem.

In our chapter on "Marginal Utility" we shall meet the capitalization theory again, as applied to the value of money by David Kinley. We shall also take it up in the chapters on "Dodo Bones," and "The Functions of Money."

[62] _Social Value_, chs. 3-7. The point is discussed _infra_ in the present chapter.

[63] Fisher, I, _Purchasing Power of Money_, p. 32.

[64] Edition of 1903.

[65] _Cf._ the chapter on "Dodo Bones," _infra_.

[66] _Cf._ Menger's art. "Geld," Conrad's _Handwoerterbuch_, 328, 3rd ed., vol iv, p. 566.

[67] _Cf._ Helfferich, _Das Geld_, ed. 1903, p. 480.

[68] Discussed more fully _infra_, chapter on "Dodo Bones."

[69] I make virtually no reference to the "spoken" part, which is chiefly concerned with index numbers.

[70] Chapter on "Dodo Bones."

[71] Chapter on "Barter."

[72] In its psychological explanation, this bears somewhat the same relation to the social value concept of the present writer that the social mind concept of Giddings and Lewes bears to the social mind concept of the present writer. _Cf._ _Social Value_, ch. 9. Wieser's concept excludes individual peculiarities. It is an abstraction from individual values, a distillation of their common essence. The social value concept of the present writer is a focal point in which are summarized all the individual values, whether alike or divergent, and not merely the individual marginal utilities of the goods in question (Wieser's only factors) but also the individual emotions which affect the distribution of wealth. Wieser's concept is based on a study of individual marginal utilities considered as atomic elements; that of the present writer looks on the social mind as an organic whole, in which individual mental processes are phases, and does not try to synthesize a social value out of elements, but rather, to analyze it into elements. In the function in economic theory for which they are destined, however, the two concepts have much in common. Both seek to be the fundamental economic quantity. Both seek to be causal forces, lying behind prices, even though expressed in prices; both oppose the conception of value as merely relative.

[73] _Social Value_, chs. 5, 6, 7, and 13. _Infra_ in the present chapter.

[74] See especially the chapter on "The Passiveness of Prices."

[75] _Cf._ the writer's "Schumpeter's Dynamic Economics," _Political Science Quarterly_, Dec. 1915. Schumpeter's theory, as there presented, is based on the brief discussion in his _Theorie der wirtschaftlichen Entwicklung_ (Leipzig, 1912), pp. 61 et seq., 105, 166-667, 116, 464, and on Schumpeter's verbal expositions of the theory during his American trip. Since that account was published, Professor W. C. Mitchell has given an account of Schumpeter's doctrine, based on the fuller discussion in Schumpeter's _Wesen und Hauptinhalt der theoretischen Nationaloekonomie_, which is in accord with the account here given. (Mitchell, in _Papers and Proceedings_, Supplement to March, 1916, _American Econ. Rev._, p. 150.) Mitchell attributes the essential elements of Schumpeter's theory to Walras. The first exposition in English of the conception, so far as the present writer is aware, is in Irving Fisher's _Mathematical Investigations in the Theory of Value and Prices_, _Trans. Conn. Acad. of Arts and Sciences_, 1892. Professor Fisher, in his preface, accords priority to Jevons, Auspitz and Lieben, and to Walras. The conception is not to be found in Jevons, though many of the ideas involved in it are. The first non-mathematical exposition of the doctrine, so far as I know, is by Schumpeter. As will be made clear in a footnote at the end of the present chapter, neither Wicksteed nor Davenport has really forced the problem through, to the full equilibrium picture, and neither has escaped the Austrian circle. I do not concur with Professor Mitchell's interpretation of Wicksteed on this point. It may well be that mathematical method, with a system of simultaneous equations, was necessary for the development of the idea. If so, it illustrates both the strength and the weakness of mathematical economic theory: it clarifies thinking, but it gets no causal theory! At all events, no causal theory emerges in this case.

[76] _Positive Theory of Capital_, Bk. IV, and _Grundzuege der Theorie des wirtschaftlichen Gueterwerts_, in Conrad's _Jahrbuecher_, 1886. The writer who would adhere to Schumpeter's doctrine must give up all notion that any individual occupies a critical "marginal" position. All men are equally marginal in Schumpeter's scheme.

[77] _Positive Theory of Capital_, p. 156.

[78] Schumpeter's scheme gives no money-prices. No form of this scheme gives any quantitative values. Nothing but ratios can come from it.

[79] _Supra_, chs. on "Value" and "Supply and Demand."

[80] See, _infra_, the chapters on "Volume of Money and Volume of Trade," and "The Functions of Money."

[81] _Infra_, chs. on "Origin of Money," "Functions of Money," and "Credit."

[82] _Supra_, ch. on "Supply and Demand."

[83] See note at the end of this chapter.

[84] _Supra_, chapter on "Cost of Production."

[85] That this is wholly alien to Boehm-Bawerk's thought is sufficiently indicated by Boehm-Bawerk's vigorous criticism of Professor J. B. Clark, in "The Ultimate Standard of Value," _Annals of the American Academy_, vol. v, pp. 149-209. It may be noticed that Schumpeter makes use of Menger's and Boehm-Bawerk's general doctrine of imputation of the value of goods of the first order to goods of higher orders, without seeing that his equilibrium picture gives no basis for such a procedure.

[86] _Cf._ comments on Professor R. B. Perry's view, in the long note at the end of this chapter.

[87] _Cf._ Boehm-Bawerk, _Grundzuege_, etc. (_loc. cit._), pp. 5, 478, n.; _Social Value_, chs. 2 and 11; J. M. Clark and B. M. Anderson, Jr., in _Quarterly Journal of Economics_, 1915--"The Concept of Value." I may add that this equilibrium scheme is, in my judgment, equally useless as the basis of a hedonistic theory of _welfare_, since it is _absolute_ amounts of utility that are significant there.

[88] _Theorie der wirtschaftlichen Entwicklung_, pp. 83-84.

[89] _Loc. cit._, ch. 3, part ii.

[90] _Ibid._, p. 199.

[91] For the assimilation of credit phenomena to the general phenomena of value, by means of the social value doctrine, see _infra_ our section on "Credit." The social value doctrine is still further generalized in the chapter on "The Reconciliation of Statics and Dynamics."

[92] _Ibid._ p. 169.

[93] _Vide Mathematical Investigations_, _loc. cit._, p. 62, where Fisher assumes _one_ price to be unity, "to determine a standard of value." _Purchasing Power of Money_, pp. 174-175.

[94] _Loc. cit._, pp. 72 _et seq._

[95] Pp. 132-136.

[96] See _Social Value_, chs. vi and vii.

[97] Bk. ii, ch. vi.

[98] "_Cf._ Davenport, _Value and Distribution_, 560. 'For, in truth, not merely the distribution of the landed and other instrumental, income-commanding wealth in society, but also the distribution of general purchasing power ... are, at any moment in society, to be explained only by appeal to a _long and complex history_ [italics mine], a distribution resting, no doubt, in part upon technological value productivity, past or present, but in part also tracing back to bad institutions of property rights and inheritance, to bad taxation, to class privileges, to stock-exchange manipulation ... and, as well, to every sort of vested right in iniquity.... _But there being no apparent method of bringing this class of facts within the orderly sequences of economic law, we shall--perhaps--do well to dismiss them from our discussion_....' [Italics are mine.] It may be questioned if the 'orderly sequence' is worth very much if it ignore facts so decisive as these! It is precisely this sort of abstractionism which has vitiated so much of value theory. Most economists slur over the omissions; Professor Davenport, seeing clearly and speaking frankly, makes the extent of the abstraction clear. We venture to suggest that the reason he can find no place for facts like these within the orderly sequence of his economic theory is that he lacks an adequate sociological theory at the basis of his economic theory. A historical _regressus_ will not, of course, fit in in any logical manner with a synthetic theory which tries to construct an existing situation out of existing elements. Our plan of a _logical_ analysis of existing psychic forces makes it possible to treat these facts which have come to us from the past, not as facts of different nature from the 'utilities' with which the value theorists have dealt, but rather as fluid psychic forces, of the same nature, and in the same system, as those 'utilities.'"

[99] Of course, we do not mean to question the immense light which history throws upon the nature of existing social forces.

[100] _Theory of Political Economy_, 4th ed., p. 34.

[101] Art. "Geld," in _Handwoerterbuch der Staatswissenschaften_.

[102] _Cf._ Helfferich, _Das Geld_, Leipzig, 1903, for the same terminology, pp. 485-486.

[103] Exchange creates _values_. It does not necessarily create _utilities_. Wheat going from a famine-stricken part of India to a place where it will sell for higher prices does not gain in utility thereby.

[104] A possible exception to this general statement might be made for Professor H. J. Davenport, who would insist that his version of the utility theory is based on "relative marginal utility," rather than on marginal utility in Boehm-Bawerk's fashion. No critic has been more merciless than he in the criticism of the Austrian confusions of demand-curves with utility-curves, etc. But it is not clear to me that Professor Davenport has freed himself from the general doctrine that he criticises. I am not sure that he would accept Schumpeter's version of the Austrian theory as correct. It may be possible to _read_ Schumpeter's doctrine _into_ chapter 7 of Davenport's admirable _Economics of Enterprise_, but it is not clear that one could read it _in_ the chapter! That individual price-offer depends on the marginal utilities of alternative goods, in comparison with the marginal utility of the good in question, Davenport does emphasize. But the complication that not merely the utilities of alternative goods, but also their _prices_, have to be taken into account, and that this involves circular reasoning when an effort is made to give a summary of the whole system of prices by means of individual utility calculations, he does not, so far as I can see, grapple with. He summarizes the thing on p. 104: "The steps, then, are from (1) utility to (2) marginal utility, thence to (3) the comparison of marginal utilities, and finally to (4) price-offer." He takes no account here of the complication that the third step is in large degree a comparison, not of marginal utilities proper, but rather, of "subjective values in exchange." Yet just in this lies a vital difficulty of utility theory, in so far as it attempts to explain causation. Moreover, Professor Davenport is seeking to explain the _causal_ relation of utility to _demand_, the old Austrian problem. The explanation of demand is, indeed, the problem with which all theories of value must come to terms, if they are to be of any use. As we have seen, Schumpeter's schema has no bearing whatever on the explanation of demand, or on _causation_ of any sort. Schumpeter's scheme leaves money out, and demand-curves run in money terms. Davenport's scheme assumes money--and "purchasing power." (_Loc. cit._, 91.) We have seen in the chapter on "Supply and Demand" that the notion of demand and supply involves money and a fixed absolute value of money. Professor Davenport is thus doubly assuming value, the thing to be explained! Laws of "relative marginal utility" developed on the assumption of money, and in abstraction from changes in the value of money, are not likely to be of service when the problem of the value of money itself is taken up. On pp. 95-96, Davenport comes closest to Schumpeter's doctrine, saying that "the total situation is directive of each individual in it," and that there are "mutual reactions," such that particular facts are both effects and causes, illustrated by the last person who jumps on a crowded raft--does he sink the others, or do they sink him? This recognizes the complexity of the problem, but it is not clear that it even purports to do more than that. What is called for is a _definition_ of the essential elements in that "total situation," with precise statement as to what is assumed constant and what is allowed to vary, and an analysis of the "mutual reactions," with a starting point and a _terminus ad quem_,--an equilibrium in which "mutual reactions" cease to trouble with their endless circle! Schumpeter's schema, though meeting criticism on other scores, does meet this logical test, but Davenport's does not appear to do so.

It is interesting to note that Professor Alvin S. Johnson, in his review of the _Economics of Enterprise_, concludes that Professor Davenport, instead of meaning by "relative marginal utility" anything of the sort that Schumpeter has in mind in his equilibrium picture of all utilities to all individuals, really has an absolute value in mind. (_Quarterly Journal of Economics_, May, 1914, pp. 433-436.) There is much in Professor Davenport's book to justify this interpretation.

Professor Davenport's application of "utility" to the problem of the value of money will be found on pp. 267-275 of the _Economics of Enterprise_. The general discussion of money and credit in the _Economics of Enterprise_ has been exceedingly illuminating to me, and my indebtedness to it will appear in the present book.

Much of what has been said of Davenport's "relative utility" theory may also be said of Wicksteed's. (_Common Sense of Political Economy_, London, 1910.) This is in many ways a remarkable book, characterized by excellencies of many different sorts. But it fails to present the utility theory in such a way as to avoid circular reasoning. Wicksteed sees the confusion of utility-curves with demand-curves, and protests vigorously and at length against it. (_E. g._, pp. 147-150.) He starts out by assuming money and a set of market prices. His earlier chapters are given to showing how the individual adjusts himself to the market, bringing his "marginal utilities" of various goods into harmony with the market prices. He recognizes that he has made these assumptions (pp. 130-131), and that he cannot use the results thus achieved as an explanation of the market prices. They are "our goal, not our starting point." But by pp. 161-162 he finds himself with the "suspicion" that nothing special or peculiar is to be found in the laws of "market or current prices--a phenomenon which it is obviously impossible to regard as ultimate, which demands explanation, and which we have not yet explained.... Much remains to be done, but we can already see that the preferences of each individual help to determine the terms or conditions under which the choice of other members of the community must be exercised. If you take the individuals of the community two and two it is clear that the marginal preferences of each determine the limits within which direct exchanges with the other can be entertained, and we must already have at least a presentiment that the collective scale is the register of the final and precise 'resultant' of all these mutually determining conditions and forces."