The communistic theory of value is akin to the "classical" theory in holding that capitalists absorb all the benefits of progress. But the communists refused to recognize that any useful and necessary service in social production is performed by the owners of wealth, or by the savers and lenders of cap ital, or by the employers of labor. They did not even attempt to distinguish the part in the production of value due to man ual labor from the part due to brains, to science, to art, to supervision, or that part in turn from the part due to the sav ing, conserving, and provision of the agents of production. The whole elaborate industrial environment and its skilful management that made possible modern industry they took for granted as at the laborer's command and credited to him the whole value of the product. All profits made by employ ers were called robbery, and capital was looked upon merely as the weapon by which the act was committed. They ac cepted the conclusion of "orthodox" economic theory and mag nified it, declaring that under a competitive condition of soci ety the laboring man, tho he produces everything, must be forever ground down in hopeless misery. This they called "the iron law of wages." They held, therefore, that the only hope of the laboring masses was to do away with competitive society and to substitute for it the governmental control of all § 3. The single-tax doctrine. The single-tax doctrine of Henry George was likewise built upon a value theory. Tho George eloquently denied the law of diminishing returns (in cluding the principle of proportionality applied to land uses), he accepted the conclusions that the classical economists drew from it, that ground rent must be an ever-increasing share of the national income. He believed that the landholders get all the gains that come to society as a result of science, inven tion, and machinery. Hence his belief expressed in the title of his work, "Progress and Poverty," that, with private prop erty in land, the outlook for the laboring classes is hopeless. In George's opinion neither wage-earners nor such capitalists as are not landholders have any share in the benefits of in dustrial progress. He saw no problem of monopoly anywhere except in connection with land ownership. The evil, as George saw it, called for a radical measure of reform, namely, the taking of all the rent of land (a single tax), for public purposes as a common instead of an individual income. This, 1 The communist theory of that period was originated or elaborated by such men as Karl Marx, Friederich Engels, and Ferdinand Lassalle, labor leaders and political agitators, who found a ready weapon in the bungling economic analysis of the time. The claim of a scientific basis for communism (now usually called social-democracy or socialism) has continued to be made by their followers, most of whom still boast that it is nothing but the (now admittedly defective) orthodox theory of value carried to its logical conclusion.
he believed, would be enough to replace all other forms of tax ation.
§ 4. Optimistic theories of wages. Some recent theories of value have assigned to labor a more hopeful position. Most optimistic was "the residual claimant theory," of wages pre sented by the American economist, Francis A. Walker. His view was that the various shares of production, such as land rent, the income from machinery, etc., and the enterpriser's profits, were fixed by forces independent wages, and any increase in the output must therefore fall to the laborer as the residual claimant. This appears to explain somehow the rise in wages in the past century, but the fallacy of its method is evident. It involves the circular reasoning that land-rent (a
surplus over cost of production) is fixed regardless of wages, whereas the cost of production itself is made up chiefly of wages.
Another American economist, John B. Clark, was led by his theory of profits to a most hopeful view as to the future of wages. Profits he considers to be essentially the reward for introducing new methods into the productive processes, which gradually accrue to the general benefit. As profits thus disappear, the average wage-earner is correspondingly up lifted. In reaching this conclusion Clark omits from con sideration the growing scarcity of natural resources and nar rows his conception of profits to the point where industry is self-organizing and self-directing. Some facts lend support to every one of these theories of social progress, radical and conservative, gloomy and hopeful, but other facts refuse to be harmonized.
§ 5. An organic theory of value. Let us turn from nega tive criticism to a summary of the positive ideas as to value that are contained in the foregoing chapters. We have not been content with an easy but superficial explanation of value. We have come to see that the value of the simplest commodities (a dozen eggs, a pound of butter, a bushel of wheat), is a part ,of a great complex problem. We have not explained it fully, we have only begun to understand it, when we take the desires of a group of traders in a market as a starting point, and have even drawn a diagram showing the meeting point of price. For these desires in turn have been conditioned by manifold influences, stretching on to other men, other goods, other lands, and other times. Nor can we rightly conceive of a theory of value as being a thing apart from a theory of usance, of labor-incomes, of time-preference, etc. These are all but special aspects of a general theory of value, and each must be thought of as a part, or aspect, of what might be called an organic whole, or perhaps better, a general economic situation. From the first and repeatedly this thought was brought to the reader's attention, in treating the static the ories; 2 and the thought has pervaded our whole discussion of the dynamic aspects of economics. In respect to value, as in other ways, it may be said: "We are all members, one of another." With this thought now clearly in mind we may take a final view of the subject.
The productive process is a unity and the values of the dif ferent agents and incomes in our actual economic organization bear a mutual relation to each other. Yet the unit itself (the total to be divided in an industry) rises or falls as a result of many forces cooperating or conflicting; any share, therefore (as that of the laborer), depends both on the size of the total product and on the proportion he gets out of it. The factors and agents of production mutually employ each other and thus prices are fixed by reciprocal demand. (See Chapter 34.) The value of any one in terms of the other rises as its relative quan tity and efficiency fall and falls as its quantity and efficiency rise. But the absolute amount of goods obtained, the income obtained by any one, may and does rise with its quantity and efficiency and vice versa. Labor and natural materials are complementary agents, and the more abundant and accessible 2 Among many examples note: ch. 7, sees. 9, 10; ch. 13, sec. 4; ch. 15, sec. 11; ch. 18, sec. 10; ch. 27, sec. 13; ch. 28, sec. 10; ch. 30, sec. 3.