The use-value of a commodity is what other economists call utility, its capacity to satisfy a human want of some sort. Exchange-value, on the contrary, appears at first sight to be something quite apart from commodities, viz. a proportion in which values of one sort are exchanged for values of another sort. Since this proportion is constantly changing, it seems to be accidental and purely relative. But a closer analysis shows that when we say one commodity is equal in value to another commodity, this equation is possible only by the existence of something common to both as a term of measurement. Each of the two members of the equation must be reducible to this common element before equality can be affirmed between them. In general, therefore, exchangevalues must be capable of expression in terms of something common to all, of which they represent a greater or less quantity. This common element in all commodities, by which they may be measured, must be labor; since all are products of labor that is the one invariable element that enters into all, and by which they may be measured and compared. Two sentences sum up this theory of value: "A use-value or useful article, therefore, has value only because human labor in the abstract has been embodied or materialized in it." 1 "That which determines the magnitude of value or exchange-value of any article is the amount of labor socially necessary for its production." 2

1. This theory of value contains a self-contradiction. Marx begins by saying that the utility of a commodity constitutes its use-value that is, the capacity of the

1 "Capital," p. 5.

2 Ibid. p. 6.

thing to satisfy a human want. Later he says that usevalue exists only because human labor has been embodied in the commodity. Both cannot be true. As a matter of induction from experience, the first statement stands as true: the use-value of any commodity is its capacity to satisfy a human want, quite irrespective of the labor embodied in it. For example, a man opening an oyster finds a fine pearl - that has frequently happened. Another man spends days in hard work, digging a well, but fails to find water many a farmer has had that experience. The first man has expended no labor, but he has something that satisfies a human want and so is very valuable. The second man has expended great labor, but that empty hole in the ground satisfies no human want, and is utterly without value. An American disciple of Marx virtually surrenders the whole contention that labor is the source of value, when he says: "If I make something to satisfy some want of my own, it will have no value unless it will satisfy the want of some one else also." A useful article has value, not because labor has been embodied in it, but because it is useful. Allthe labor of mankind since the creation could not make a thing valuable if it were not useful. The backache value of an article may or may not be actual value, it depends on whether the backache has been wisely incurred.

1

2. Marx's theory of value notably fails to correspond to fact when applied to land. Land should be worth, according to the theory, which entirely ignores what nature contributes to the value of any commodity, the amount of labor that has been expended on it; in

1 Spargo, "Socialism," p. 240.

other words, what we call "improvements." But this is notoriously not the fact. Land is usually worth much more than the improvements; in exceptional cases it may be worth much less. Even the improvements themselves are not valuable according to the labor embodied in them. Those made by one occupier of the land may be considered undesirable by the next occupant, in which case they will be worthless and may even be an encumbrance.1 On the other hand, it often happens that land on which the owner expends no labor whatever continually increases in value, simply because population increases in that locality and so the demand for land tends steadily to surpass the supply.2

The thing that makes land valuable anywhere is that somebody wishes to occupy it. Whether labor has or has not been expended on it, is an irrelevant circumstance. Witness the fact that in New England there are to-day hundreds of abandoned farms, on which the labor of generations has been expended - abandoned because nobody cares to live on them, or is willing to buy them at any price. But besides this qualitative factor in the value of land there is a quantitative: land is limited, and

1 "Improvements" are to a certain degree, though to a less degree than the land itself, subject to the same law of value. Let a rich man build a "palace" on Fifth Avenue, in New York, and an equally costly "cottage" in a remote spot by the sea. The house will be worth more than the cottage at a forced sale, simply because it is desired by more people, since it stands in the most fashionable location of the largest city in America. The "palace" will therefore bring under the hammer something like its cost, while the lonely "cottage" will sell for a small fraction of its cost.

2 This increase in the value of land without the owner's labor is now generally known as "the unearned increment," and a heavy tax is levied on it in the famous Lloyd-George budget of 1909, as well as in some of our American States, on the ground that society at large has a right to take back at least a portion of a value that society at large has conferred.

so capable of being appropriated, as the other bounties of nature, the sea and the atmosphere, are not. These two factors the strength of human desire for possession of the soil, and the limited quantity - determine the value of land, usually without any question of the labor expended on it.

3. Marx's theory contradicts universal experience regarding things produced by human labor. The value of each article, he tells us, must be scientifically determined by the amount of labor-time required for its production. In general, the greater the productiveness of labor the less labor-time is required to produce a given article, the less is the amount of labor-material in the article, and the less therefore is its value. Per contra, the less productive labor is, the more labor-time is required to produce a given article, and the greater is its value. We are able, therefore, to state this general formula for value: The value of a commodity varies directly as the quantity and inversely as the productiveness of the labor incorporated in it.

This is a good example of Marx's impressive quasimathematical "proofs" of his theories. The formula has a very convincing air and is well calculated to make the thoughtless believe that here is a law quite as true and nearly as important as gravitation, and that the name of Marx should be ranked alongside of Newton's among the great men of science. But the difference between Marx's formula and the law of gravitation is that Newton's law will bear every test, while Marx's breaks down at the first attempt to apply it. For this is what the Marxian law means, in a practical case: the more unskilful a shoemaker, the more valuable will be the shoes

that he makes; if he puts twice as much labor into making a pair of shoes as his more skilful neighbor, his shoes are just twice as valuable; even though the latter makes his in half the time and makes them better, they are less valuable, because they embody less labor. A watch made by hand is more valuable than a watch made by machinery, though the latter is the better timepiece, because the former represents more labor. Or, reducing the formula to its ultimate absurdity, in a shop where men of different capacities are employed, the better the workman and the faster he turns out good product, the less he ought to be paid; while the more stupid and slow he is, the more valuable is his product!

It may be that Marx perceived the absurdities involved in his formula; at any rate he devised a modification of it that was believed to free it from undesirable inferences: value is to be measured by the average labortime socially necessary for the production of an article. And his illustrations of his principle make it plain that he means by "average labor-time socially necessary" exactly what previous economists meant by the term "lowest cost of production." The exchange value of any article tends to be lowered by competition to somewhere near the least amount for which it can be made. This will, of course, be the general effect of competition under the law of supply and demand. But what is left of the theory that labor is the exclusive source of value?

4. The theory neglects some factors of value that must be taken into consideration. So far from labor constituting the total element of value, nature always contributes something, generally a great part, and sometimes by far