formulation has not tended rather to darken than to clarify counsel. Ruskin, after his manner, was careless as to consistency of exposition. Thus he will expound, with impartial emphasis, a labour theory of value on one page (the exchangeable value of a commodity is that of the labour required to produce it, multiplied into the force of the demand for it'); the verum pretium on another (the value of a thing is independent of opinion and of quantity'); yet I do not know of a clearer exposition of the Final Utility theory than the following: 'Price depends on four variable quantities: A, the quantity of wish the purchaser has for the thing; opposed to a, the quantity of wish the seller has to keep it. B, the quantity of labour the purchaser can afford to obtain the thing; opposed to ẞ, the quantity of labour the seller can afford to keep it. These quantities are operative only in excess; i. e. the quantity of wish (A) means the quantity of wish for this thing, above wish for other things; and the quantity of work (B) means the quantity which can be spared to get this thing from the quantity needed to get other things.' 3

Unto This Last, however, was published only in 1860. As far back as 1776, Condillac, a French contemporary of Adam Smith's, wrote: "The value of things increases by scarcity and diminishes by abundance. It may even by abundance diminish to a point where it disappears. A thing that is superabundant will be without value wherever it cannot be turned to account, since it will then be absolutely useless.' In 1834 an Englishman, W. F. Lloyd, published a remarkable Lecture on the Notion of Value, in which he clearly distinguished between 'abstract' (total) utility and 'special' (marginal) utility illustrating the latter by the case of a hungry man, to whom the supply of successive ounces of bread are of diminishing utility. 'Value', he says, 'in its ultimate sense, signifies a feeling of mind which shows itself always at the margin of separation 1 Unto This Last, p. 81. 2 Ibid., p. 118.

* Ibid., p. 136.

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between satisfied and unsatisfied wants'. This comes very near to the modern theory of marginal utility.

That theory affirms (i) that value is determined by subjective utility; (ii) that the utility of successive units of a given commodity gradually decreases, since the intensity of a want diminishes as the number of units possessed increases; and (iii) that it is the utility of the last unit possessed (the least useful since it corresponds to the least intense desire) which determines and limits the utility of all the others. A hungry man would pay very highly for two eggs, something less for a third, and for a sixth very little. If he and the possessor of six eggs were alone in the world the value of each egg would be determined not by the value of the first but by that of the sixth. Or as Wieser, the Austrian economist neatly expresses it: 'The value of a supply of similar goods is equal to the sum of the items multiplied by the marginal utility.' But to every exchange there must be two parties. There is a marginal utility to the buyer and a marginal utility to the seller. If A's desire to possess the sixth egg is represented by 3d., while B's willingness to part with it is represented by a minimum price of 4d., no exchange will take place, and the fifth egg will represent the marginal utility and will change hands say at 5d. Hence both demand and supply are, as we have seen in the case of the Vandyk picture, elastic, one might almost say conditional, terms. So long as the minimum price of a bicycle was £20, the demand was limited, say, to 1,000 persons. A diminution of price to £10, would perhaps encourage 1,000,000 persons to try to secure one. In the case of a bicycle, the supply of which is, up to a point, subject to the law of increasing returns, the mere increase of effective demand would bring down the price: supply and demand thus reacting upon each other until equilibrium was reached.

The doctrine of marginal utility is then of universal validity. One small qualification only would seem to be necessary. There are clearly some articles the value of Cp. Haney, p. 529. 2 Gide, p. 55.

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each unit of which increases instead of diminishing in proportion as wants are satisfied. A collector, for instance, of first editions, who already possessed twelve out of twenty of the works of a given author will increase his price the nearer he gets to the goal of his ambition, until he will probably be willing to give twenty times as much for the twentieth volume as he gave for the first. But this is an exceptional case which need not deter us from giving a general assent to the truth of the theory.

ciliation.

One question remains to be answered: Does acceptance Reconof the Utility doctrine necessarily exclude the older cost of production theory? Dr. Alfred Marshall would answer in the negative. He declares that the theory of value is like the keystone of an arch and is maintained in position on the one side by marginal utility and on the other by cost of production. Ultimately, the exchange value of by far the greater number of commodities is limited by cost of reproduction. Within that ultimate limit the precise terms upon which the exchange is effected depend upon marginal utility.

of the

In considering the problem of exchange we have thus Ethical far been concerned solely with the operation of Economic aspects laws. We have attempted to discover an answer to the problem. question how those laws will, in fact, operate on the hypothesis that all parties are actuated by economic motives. Can this matter be allowed to rest there? Will the moralist be satisfied that it should? Ought men and women, who desire to deal justly with their neighbours, to act as Economic law suggests that they will? Is it morally right to attempt, under all circumstances, to sell at the highest price a purchaser can be induced to pay, and to buy as cheaply as you possibly can? May the juristic maxims be accepted as a guide to commercial transactions? Will it suffice to add to caveat emptor, caveat vendor?

Was the pretium verum no more than mediaeval superstition?

The State has already decided that in certain cases the emptor cannot be left without protection in regard to his purchases. By enacting laws against adulteration, for example, the State admits the validity of the assumption that buyer and seller are not always on equal terms. If both were omniscient the protection afforded to the buyer would be impertinent and superfluous; but, as a fact, the seller is, or may be presumed to be, an expert, the buyer cannot be a universal expert. But there are cases where the converse is true. An expert dealer purchases from an ignorant cottager a bit of old furniture or old china at what he knows to be a tithe of its market value. The price measures the willingness of the seller to sell; the law of utility is not violated; but can such a transaction be defended before the tribunal of ethics? Plainly, it cannot. Every right-minded person would condemn it.

Would the verdict be different if one dealer was buying from another? Presumably it would; and for two reasons: firstly, the two men might be presumed to be on equal terms; if one was more ignorant than the other, he might fairly be made to suffer for his inadequate professional equipment. Secondly, the seller would be protected by the fact that he would expect and presumably would get his own profit on the transaction. Cost of production -or its equivalent, the prime cost of the commodity to the seller would limit the sphere within which the law of utility would operate. If the seller obtained his anticipated profit, what matter to him if the purchaser were subsequently able to make a much larger, or even an exceptional, profit? Is it indeed possible to lay down rules as to what may be regarded as the limit of 'legitimate' profits? It is, of course, only in exceptional cases, such as that imagined in the illustration that the question can arise. Costs of production on the one side, free competition on the other, may be trusted to avert, in ordinary cases and in the long run, any danger of illegitimate' profits.

It will, however, be remembered that normal price is Sweated such as will cover the normal cost of production. Plainly, labour. 'sweated' labour does not contribute an adequate amount to the aggregate cost of production. Of the underpaid labour the ultimate purchaser of the commodities may or may not get the advantage. Is he morally justified in taking it? But how can he know or be expected to know that 'it isn't linen he's wearing, it's human creatures' lives'? Various devices have been adopted by well-meaning persons and societies to meet this difficulty, and to enlighten the individual purchaser on the conditions under which the goods he proposes to purchase have been produced. But the efforts have been on a relatively small scale and have not been uniformly successful.

An attempt has consequently been made to meet the difficulty, as we have seen, from the other end. The State has introduced and has established Trade Boards for the regulation of wages in those industries which afford special opportunities to the less scrupulous employers for the exploitation of cheap labour. To the economic results of this experiment reference has already been made.1

Apart from the product of sweated labour, and certain exceptional cases to which reference has been made, it would seem to be reasonable and safe to leave the determination of value to the operation of economic laws as expounded above. Those laws operate over the whole of the vast area of trade, save only in an obscure and relatively unimportant corner; and their operation is in the main consistent not only with law but with equity. There are, of course, circumstances under which the buyer or seller is not really free to accept or refuse the bargain suggested: when owing to urgent necessity the scales are heavily weighted against the one party or the other. Where that is the case the State may legitimately intervene to secure the reality of freedom to all parties, even if it be at the sacrifice of the semblance of liberty to individuals. But plainly, it is to the common advantage that the 1 See supra, p. 163.