NOTES:
1。Ihaveformulatedthelawofcostsonlywithrelationtotheso-calledcostsofproduction。Besidesthiswespeaksometimesofcosts，whenwerefertoexpensesofpurchase。Bythisismeantthesumsofmoneyabuyerhastoexpendtoobtainpossessionofgoods。Anexactlyanalogouslawobtainsasregardsthesecosts。
Allsumsofmoneyofequalamountdestinedforthepurchaseofgoodsaveequalvaluetotheoneowner，andallgoodspurchasedformoney——undercertainassumptionsentirelyanalogoustothoseconditionswhichholdasregardsthelawofcostsinproduction——havetotheoneowneravalueinproportiontotheircostsofpurchaseseeBookII，chap。ii。Thelawofcostsofproductionhas，however，amorefar-reachingimportancethanthelawofcostsofpurchase，inasmuchasitisnot，likethelatter，limitedsubjectively，butalsoholdsasregardsobjectiveexchangevalue。Inconsiderationofthesemorefar-reachingeffectsitisentitledtoaspecialstatement。
Saxhasstatedtheconceptionofcostsstillmorecomprehensivelyseechap。56inhisGrundlegungderStaatswirthschaft。Nevertheless，importantthoughtheresultsthusobtainedmaybe，itappearstomethat，forthereasonjuststated，itisrighttoholdbythenarrowerconceptionofthecostsofproduction，asagainstthiswiderone。
Inconnectionwiththepresentbook，seeUrsprungdesWerthes，pp。97，103，and146；further，inB鰄m-Bawerk\'sWerth，pp。61and534；asalsoSax，p。327；and，finally，thepartsreferringtothissubjectinJevonsandWalras。Mengerdoesnottreatofcosts。
Chapter2
TheConceptionofCostsWhatevereconomicproductiongoodsamanhaswithinhisdisposal，whetherlands，capital，orlabourpower，hecountspartofhiswealth——althoughtheydonotdirectlyincreasehissatisfactions；andhedoessowithjustasmuchrightashecountsthoseconsumptiongoodswealthwhichpermitofdirectenjoyment。Thepossessionofproductiongoodsgivesthepromiseofacquiringconsumptiongoodslater。Production，therefore，notonlycreatesvalue，italsodestroysvalue。Onlysolongasoneistakenbysurpriseattheemergenceofproductivevalue，inthatitisunexpected，isitreckonedaspuregain。WhenthePhoenicians——asthefablegoes——accidentallycameuponglassamongtheashes，onlythegainofproductionwouldbepresenttotheirminds；butwhoever，thereafter，begantoproduceglass，andindoingsowasobligedtopayattentiontothematerialsofitsproduction，wouldlearnperforcethedestructivepartofproduction。Ifproduction，ontheoneside，bringsforthproducts，itlimits，ontheother，theproducingpowers。Onthisaccountitiseveryone\'sdutytoseethathisproductionisalwaysdirectedtowardsthegreatestpossibleresult，incaseheshouldconsumemorevaluethanhewilleventuallygain。
Thiscircumstancereceivesmoredistinctformandemphasisinthecaseofproductiongoodscapableofmanyandvariousemployments。Herecaremustbetakentochoosethoseemploymentswhichwillprovethemosteconomicallyefficient，bothasregardskindandamount。Circulatingcapitalorlabourpowerdevotedtoanyoneproduction，istherebyabsolutelywithdrawnfromallothers；thesameistrueoffixedcapital，andevenofunconsumableland，duringtheperiodoftheproductiontowhichtheyaredevoted。Inconsiderationofthisfactthedevotionofmeansofproductiontoindividualundertakingmustalwaysbewellconsidered。Itisnecessary，forthisend，thatthemanwhoresolvesonthemakingofonespecialproduct，shouldformanexactideaofthevalueofalltheotherproductswhosemanufactureistherebyrenderedimpossible。Buthowcanthisbedone？Itisdonebytakingaccountofthevalueoftheircommoneconomicfactorsofproduction。Inthesefactorsthevalueofall“cognate“products，withoutexception，isincorporated。
Productivevalue，consequently，occupiesapositionofmentionamongthewholecircleofcognateproducts。Wheneverthevalueofanyclassofproductsfallsorrises，andtherebyeithertheextensionorthelimitationofotherbranchesofproductionisdemanded，1*theeffectisfirstcommunicatedtoproductivevalue，andisthenpassedonfromproductivevalue。Theproductsandthevalueoftheproductsadjustthemselves，ineachindividualcase，totheproductivevalue，andtheproductivevalueindicatesthelimitofproductioncommontoall。
Inthiswaywereachthepointofviewfromwhichproductiongoodsareconceivedofascosts。Thefirstelementinitisthattheproductiveemploymentfiguresasoutlay，assacrifice，asloss；thesecondisthat，invirtueofthis，attentioniscalledtotheequalisationofseveralconnectedproductions。Tosaythatanykindofproductioninvolvescost，simplyimpliesthattheeconomicmeansofproduction，whichcoulddoubtlesshavebeenusefullyemployedinotherdirections，areeitherusedupinit，oraresuspendedduringit。Costsareproductiongoodswhenthesearedevotedtooneindividualemployment，and，onaccountoftheircapacityofbeingotherwiseemployed，taketheshapeofoutlay，expenditure。2*Themeasureforestimatingcostsisalwaystheproductivemarginalutility，asitisfoundonconsiderationofalltheemploymentseconomicallypermissible。
ThusonlythoseproductiongoodswhichwehavealreadyinBookIII。chap。xiicalled“costgoods，“asopposedto“monopolygoods，“canberegardedascosts。Productiveelementswhichadmitofonlyonekindofemployment，donotsharethemultiplicityofconditionsnecessaryfortheemergenceofwhatwerecogniseascosts。Amineralspring，whichcanbeusedonlybydrawingoffitscontentsandputtingthemintobottles，must，obviously，standinaquitedifferentrelationtothevalueoftheproductfromtheunskilledlabourwhichfillsthebottles，butiscapableofahundredotherusesbesides。“Monopolygoods“simplytaketothemselvesthevalueoftheproductsimputedtothem，anddonotconductitbackagaintotheseproducts，asdo“costgoods，“——
whilecostgoodsaretheparentgoodsofthegreatproductiverelationships，withinwhichtheyactascombiningforcesandequalisersofvalue。Themorevarioustheemploymentsofanyproductiveelementare，andtheshortertheprocessesare，——asthiscontinuallynecessitatesnewdeliberationsastohowthegoodsaretobeemployednext——themoredoestheiremploymentinproductionobtainthecharacterofasacrificewhoseamountmustbewellweighediftheproperbalanceofproductionistobemaintained。Unskilledlabourandthecommonestkindsoffloatingcapital，are，consequently，thegoodstowhichtheconceptionofcostsmostfrequentlyapplies。
NOTES:
1。If，forinstance，thepriceofcottonthreadisreduced，threadmanufacturerswillnotpaytheformerpriceforcottonyarns。Butifcottonspinnersarecompelledtoquotealowerpricetothreadmanufacturerstheycannotaskahigherpricefromclothweavers。Thustheweaversgettheirrawmaterialcheaperbecauseofthefallinthepriceofthecognateproduct，thread，andthistendstoanextensionoftheclothmanufacture——W。S。
2。Thisdefinitionrequiresaslightreadjustmentonlyinsofarasinterestandlandrentseebelow，BookV。chaps。xiandxii
arereckonedamongcosts。Interestandrent——orthegoodswhichconstitutethem——arenotproductiongoods；theyaresimplyelementsoftheproductioncalculusasproductiongoodsare。
Chapter3
FoundationoftheLawofCostsThevalueofcostsdeterminesthevalueofproductsintwoways。Ingeneralitdeterminesitindirectly，byregulatingthesupplyproduced；but，inindividualcases，itdeterminesitdirectlybycommunicatingtheamountofitsownvaluewithoutanyintermediary。
First:asregardstheindirectactionofcosts。Inthevalueofthecostsisexpressedtheexpectationofthegreatestpossiblereturnfromproduction。Inordertofulfilthisexpectation，therelationbetweentheamountsofallcognateproductsturnedoutmustbewellweighedandproportioned。Iftoomuchbeproducedinanyonedirectionalosswillhavetobeborneelsewhere，whichwillbemoresensiblethanthegainresultingfromtheover-production。Iftoolittlebeproducedinanyonedirectionasimilarlosswillbefelt，whichitwillbeimpossibletomakegoodbyover-productionelsewhere。
Whethertoomuchortoolittlehasbeenproducedisseenexactlyinthevalue。Ifthevalueofproducts——asitresultsfromtheequationbetweensupplyanddemand——islessthanthatofthecosts，toomuchhasbeenproduced；thecostswhichshouldhavebroughtforthproductshavinghighervaluehavebroughtforthonlygoodshavinglessvalue。Wherethevalueoftheproductexceedsthatofthecosts，toolittlehasbeenproduced——withoneexceptionwhichwillbementionedshortly；——thecostshavenotbeenemployedentirelyinbringingforthproductsofthehighestvaluetheveryanticipationofwhichgavethecoststheirvalue。Ifproducts，then，aretobeproducedneitherovernorundercosttheymustbeproducedexactlyatcostvalue，iftheyaretofindthemosteconomicallyadvantageousdistributionofproduction。
Ifweaskwhyproductsthusproduced——neitherundernorovercosts——havevalue，andwhytheyhavedefiniteamountsofvalue，weshalldoubtlessfindthattheyhavethemselvesalonetothankforit。Theycreateitoutoftheirutility，takingintoconsiderationtheamountsproduced。Thecircumstancethatcostsofacertainvaluehavebeenexpendedinmakingthem，isofnoconsequenceasregardstheirvalue。Thecostvaluedoesnotdeterminetheusevalue；theusevalueexistsofitself，andsanctionsthecostvalue。
Second:asregardsthedirectactionofcosts。Undercertaincircumstancesitiseconomicallypermissibletoproducethingswhoseusevalueexceedstheircostvalue，whiletheymust，nonetheless，beestimatedattheircostvalue。Thisdirectactionisthemoststrikingofthetwo。Assumethattheamountofcostsnecessaryforanarticlehasthevalueof6，andthatthefirstarticleproducedhasausevalueof10，whiletheusevalueofasecondarticlewouldamounttoonly1compareBookI。chap。ivandBookIII。chap。viii:theproductionmustbeconfinedtoonearticle。Howisittobevalued？Thiswilldependuponcircumstances。Inamomentofextremedangeraweaponwillbeestimatedaccordingtoitsusevalue。Butsupposeamantobeleisurelypreparingandequippinghimselfforanadventuresomejourney，hewillnotthinkofvaluingthebestofweaponsmorehighlythanthematerialsandlabouravailableforthepurposeofproducingandreproducingthem。Thelossoftheweaponcanalwaysbemadegood——supposingonehasthenecessaryleisureandmeansforitsreproduction——byasacrificeincosts，theamountofwhichiscertainlylessthantheimportancepossessedbytheweaponitselfinamomentofurgentneed。Agoodhavingausevalueequalto10，andacostvalueequalto6，mustbeestimatedat6，solongasitsreproductionispossibleandthesatisfactionofwantisnotprejudicedbythedelay。
Thesameargumentasleadstoourvaluingatmarginalutilityanysingleitemofastockwhichhappenstobeactuallydevotedtosatisfyingawantofhighergrade，leadstoourvaluingatcostvalueandnomore，aproductwhosespecificusevalueexceedsitscostvalue，supposingwehavealsoinourpossessionthemeansofproducingandreproducingitatthepropermoment。
For，as，intheonecase，themarginaluseisreallytheonlyusethreatened，so，intheother，thecostvalueistheonlyvaluethreatened。Hereisanewapplicationofthemarginallaw。
Casesofthekindjustdescribedattractparticularnoticeonaccountofthefactthattheinfluenceofcostsuponthevalueofproductsisindependentofamountsproduced。Ifthecostvalue，intheexamplejustgiven，risefrom6to9，orfallto2，oneproductonlywillbeproduced，anditsvaluelikewisewillfollowthechangesofthecostvalue，andriseto9orfallto2，withouttheamountsproducedbeingchanged。Ricardo，withthekeennessofobservationpeculiartohim，pointedtotheconsiderationofthoseinstances，inwhichthevalueoftheproductadjustsitselftothecostvaluewithoutanychangeofamounts，asaveryimportantonefromthepointoftheory。Asamatteroffactitisso，althoughRicardowaswrongintheplacehegaveit。Hewishedtoprovefromitthatcostsarefundamentallyanindependentsourceofvalue，whereas，asamatteroffact，itprovessimplythatcostsmay，incertainisolatedcases，directlydeterminetheamountofthevalueofproducts。Itis，however，chieflydecisiveinthatitgivesusaninsightintotheconnectionsoftheprocessofvaluationsuchascouldscarcelybeobtainedotherwise。Itgivesus，indeed，themostunequivocalandumdeniableapplicationofthemarginallawthatitispossibletofindanywhere。
Moreover，eveninthiscase，thefactthatcostshavebeenexpendedisofnoimportanceasregardsthevalueofproducts。
Thedecisivecircumstanceis，thatcostscouldagainbeexpended，andsecureahigherutilityatalesssacrificeofutility。1*
NOTES:
1。Thefoundationofthelawofcostsgiveninthetextappearstobeapplicableonlytonaturalvalue，andnottoexchangevalueorprice。Butitisalsoapplicabletothem。Theproximateexplanationofthevalidityofthelawofcosts，inthecaseofprice，isthatproducersarenotwillingtosellundercost，and——wherethereisfreecompetition——arenotabletosellovercost。Butwhyisitthattheywillnotsellintheformercase，andwhydoescompetitionmakeitimpossibletosellinthelatter？Inthelastresortitisbecauseeveryoneappliesforhimself，aswellasheisable，thenaturallawsofvaluation，andthoselawsbringhimtothatamountofproduct，orthatvaluationofwhatisproduced，fromwhichthelawofcostsresults。Competition——i。e。theeffortsofotherswhoapplythesamenaturallaws——thenforceshimtogiveexpression，inthepricewhichheasksfromtheconsumers，tothevaluationwhichhehasmadeforhimself。Theactualpositionofpricedepends，therefore，essentiallyupontheactualpositionofcompetition，particularlyonhowfartheeffortsofcompetitionarelimitedbythe“hindrancestoequalisation。“These“hindrances“arepeculiarlystrongininternationaltrade，inwhich，accordingly，thelawofcostsholdsonlyveryslightly。
Chapter4
ConditionsUnderWhichtheLawofCostObtainsItisunnecessarytosaythatproductsonlycomeunderthelawofcosts。Theproductswhichprincipallycomeunderthislawarethosewhichareproducedfrequently，regularly，andinlargeamounts，and，inparticular，thoseintheproductionofwhichcost-goodsareexclusivelyemployed。Productswhosemanufactureisstrictlyandnarrowlylimitedbyconfessedlymonopolygoodsdonotexperiencetheinfluenceofcostsatall。Allalterationsincostsinsuchcasesgo，nottoproducts，buttothemonopolyfactorsofproduction；everydilutionofcostsraises，andeveryincreaselowers，thevalueofthesefactors。1*
Suchproductstooasaretobere-employedinproduction——
i。e。allproducedconcreteformsofcapital，or“capitalgoods，“
aswemaycallthemforconveniencesake——comeunderthelawofcosts。Thusthevaluationofcapitalbecomesanexceedinglycomplicatedmatter。Onehasalwaystocombinetwothings；——thereturntothecapitalanditscosts。Bothamountsstandinmutualrelation，andtend，sofaraspossible，towardsequality。Thegreaterthevalueofthereturn，thegreaterthecoststhatmaybeexpendedinproducingit；andthegreaterwillbetheexpenditureofcosts，sofarasispracticableandnecessary:thesmallertherequisiteexpenditureofcosts，thesmallerwillfinallybethevalueofthereturn，whetherthisresultfromthefactthatproductionfinallyiscorrespondinglyextended，orfromthefactthatthevaluationoftheutilityisdirectlypresseddowntothelevelofthecosts。Ifamachinedoesverygoodwork，thatisacauseforvaluingithighly；butifitcanbecheaplyproduced，themachineitself，and，finally，itsproductsalso，willfindalowvalue。Thecostsofproducingcapitaltransmittheireffectsrightdowntothefruitsofthecapital，howeverremotethesemaybe，solongastheyfallwithintheproducer\'sfieldofvision，andcanbetakenintoconsiderationintheestimatesofvalue。
Productswhichcomeunderthelawofcostsdonot，however，comeunderitinallcircumstances。Todosotheymustcomeunderconsiderationasproducts，i。e。asdependentupontheelementsfromwhichtheyareformed。Iftheyareestimatedindependently，iftheyarevaluedinisolationandforthemselves，theirownutilityalone——ortheirmarginalutility——willdeterminetheirvalue，withouttheirproductivemarginalutilitybeingtakenintoconsiderationatall。
Thisismostclearlyseeninthecaseoftheimmediatedeterminationofvaluebycosts。Whyinthiscaseisthevaluationmadeaccordingtocosts？Becausetheproductscanalwaysbeobtainedagainatthesacrificeofthecosts，and，justonthataccount，onlywhentheycanbeobtainedatthissacrifice。Ifthepossibilityoftheirreproductionbeexcludedthroughanycircumstancewhatever——saye。g。thattheimportofsomearticleisstoppedbyablockade，orthatdemandhasincreasedsorapidlythatproductioncannotkeeppacewithit，——
thevaluewillbeestimatedatthefullamountoftheutilityormarginalutilitywhichtheproductsareexpectedtogive。Asarule，therearesuchabundantsuppliesofallproducts——partlyinthepossessionofprivatehouseholders，partlyinthelargerstoresofproducersandmerchants——thatpeopleareprovidedagainstthesmallerincreasesindemand。Valuationbycostsissuspendedonlyinthecaseoflargeandpermanentdisturbanceofproduction。Ifreproductionremainspossible，althoughatahigheroutlaythanbefore，——not，however，cominguptotheheightofutility，——thelawofcostswillstillobtain，onlythatthedeterminingamountofcostswillhaverisen。Ifdemanddecrease，orunforeseensuppliesincreasethestock，tosuchanextentthatthemarginalutilityfallsbelowtheamountofcosts，thelawofcostswillbesuspendeduntilmarginalutilityshallhavesofarrisenastorenderproductionagainpracticable。
Thesameapplieswherecostsdonotdirectlydeterminevalue，butdetermine，inthefirstinstance，onlytheextentofproduction。Theinfluenceofcostsceasessosoonas，andsofaras，thepossibilityofproductionceases。Hereagainmaybeobservedthesameinfluenceofaccumulatedstocks——that，throughthemediumofthem，allsmallerdisturbancesintheprovisionforwantareequalised。2*
Whenthedisturbanceswhichcausedthesuspensionorimitationofthelawofcostsareover，itagainbecomesactive。
Sofarasisatallpossible，mentrytoconductproductionaccordingtoauniversalplanwhichembracesalltheproductions“cognate“atthetime。Isolatedproductionpreventscompleteutilisationofthemeansofproduction；itlimitsprovisionsforhumanwanttoogreatlyatcertainpoints，whilegoingtoofarinotherdirections，or，whatisstillworse，leavingproductionatcertainpointsentirelyalone。Onthisaccountthereisalwaysatendencytoreturntothemostcomprehensiveconditionsofproduction，andthus，sofarasispossible，tothevaluationaccordingtocosts。
Ifsocietywereevertoarrive，initseconomiclife，atsuchperfectionandcontrolthatnoplanofproductionevermiscarried，thattherewasnointerruptioninexchange，thatnounforeseenlossofgoodshappened，thatallacquisitionsofgoodscouldbeanticipatedtothefullestextentandinthemostexactdegree，that，finally，thedemandsshouldnevervaryor，atleast，thatthevariationsshouldalwaysbeadequatelyanticipated:——insuchcircumstancesthelawofcostswouldbetheonlyforminwhichthegenerallawofvaluewouldappearasregardsthosegoodsinrespecttowhichitholds。Itisnottobeexpectedthatanydispositionofaffairscouldbringsocialeconomytosuchperfection。Eveninthemostperfectconditionofsocietytherewillbechanges，suchasmustforthemomentlimitorextendthesphereoverwhichthelawofcostsholdssway。
Ifthesocialistsexpectthat，intheirfuturestate，valuationbycostswillbeall-sufficient，theyareinerror，unlessmanisabletoexertsuchmasteryoverthenaturalconditionsofthelifeofgoods，thatnoharvestshalleverfail，or，indeed，beoverabundant；and，moreover，unlessthenationallifecanbeassuredofaperfectlypeacefulcourse，suchascanbeconceivedofonlywhenwarhasceased，wheninventionisnomore，andwhennonewneedeveremerges。
NOTES:
1。Thusinthecottonthreadtradeneitherchangesinwagesnorinthepriceofrawmaterialseemtoaffectprices；theyonlyincreaseordecreaseprofits——W。S。
2。Uptoacertainpointcostsdo——eveninsuchcasesasthese——directlydeterminevalue。Allgoodsthatcanbesupplementedfromstocksinwarehousesandthelike，whichstocksagaincanberenewedthroughproduction，therebyappeartousdirectlyasmerecombinationsoftheirproductiveelements。Andtothisextentitmaybesaidthat，onthewhole，thecaseswherecostsdirectlydeterminevaluepredominate。
Chapter5
TheDeterminingAmountofCostsThecircumstance，assuch，thatagoodhasinvolvedcosts，andthatithasinvolvedacertainamountofcosts，doesnotdetermineitsvalue。Notonlymusttheconditionsunderwhichthelawofcostsobtainsbefulfilled，butthejustifiableamountofcostsmustbeobserved。
Itisonlythe“sociallynecessary“costs，thesmallestamountofcostsrequired，thatdeterminesvalue，whetherthedeterminationis“indirect“or“direct。“Incasesof“indirect“
determination，costvaluerequiresthesanctionofusevalue。
Whateverisexpendeduselesslyreceivesnovalue，andwhateverissuperfluouslyexpended，——expendedinexcessofwhatisnecessarytoobtaintheutility——receivesnovalue。Incasesof“direct“determinationofvalue，theimportantthingfromthefirstistheoutlayrequisiteforreproduction。
Thevalueofproductswhichareeconomicallyproducedwiththesmallestcost，mustconsequentlyaltershouldtherebe，lateron，anychangeinthedeterminingamountofcosts。And，inparticular，iftheamountofcostsshouldbecomeless，thevalueofcommoditiesproducedattheolddearerratemustfall，fromthemomentwhenthenewandcheapgoodsarecapableofmeetingthedemand，orevensoonerthanthis，sofarastheoldstocksarelargeanddarenotbeheldbackinviewoftheincreasingproduction。
Itmaybethatalltheproductsindemandcannotbeproducedattheonecheapestrateofcost。Then，ofnecessity，theamountofcostsmustrise。Thevalueofgoodsproducedatdifferentcostsisdeterminedthroughoutbythehighestcostnecessary；theportionwhichhasbeenproducedatthegreatestexpensemustbevaluedcorrespondinglyhigh，ifitispermissibletoproduceitatallatsogreatanexpense；andtheotherportion，whichhasbeenproducedmorecheaply，mustbevaluedequallyhigh，becauseallproductsofequalqualitymusthaveequalvalue。
Allthesepropositionsarewellknownboththeoreticallyandpractically，sofarasregardsexchangevalue。Itisofinterestforustoknowthattheyalsoobtainasregardsnaturalvalue。
Chapter6
TheLawofCostsandtheGeneralLawofValueIfthestatementofthelawofcostsjustlaiddownbecorrect，therecanbenodoubtregardingitsrelationtothegenerallawofvalue。
Betweencostsandutilitythereisnofundamentalopposition。
Costsaregoodsvalued，intheindividualcase，accordingtotheirgeneralutility。Theoppositionbetweencostsandutilityisonlythatbetweentheutilityoftheindividualcase，andutilityonthewhole。Whoeverthinksof“utility“withoutthinkingof“costs，“simplyneglects，intheutilityofoneproduction，theutilityoftheothers。Andwhoeverproduces，intheindividualcase，attheleastcost，produces，onthewhole，withthehighestutility，inasmuchashethussavesalltheopportunitiesofutilitypossible，andconsequentlyinthelongrunutilisesalltheseopportunitiestotheutmostextent。
Thuswherethelawofcostsobtains，utilityremainsthesourceofvalue。Morethanthis，marginalutilityremainsthemeasureofvalue。Theonlythingisthatutilityandmarginalutilityarenolongerdeterminedinaone-sidedwaywithinthelimitsofeachparticulargroupofproducts，butovertheentirefieldofcognateproduction。Overthisfielditisalwaysthecommonproductivemarginalutilitythatdecides。Theresultoftheproductivecombination10a10b10cpossessesthecommonmarginalutilityofallproductivegoodsoftheclassAtentimes，andsowiththeclassesBandC。Itconsequentlystandsinadefiniteratioofvaluetotheproductresultingfrom10a20b10c，andthisratiocorrespondstothegenerallawofvalue，accordingtowhichseparatepartsofastockaretobevaluedbymultiplyingthenumberofitemsbythemarginalutility。Evenproductswhich，inoutwardappearanceanddestination，areentirelydifferentfromoneanother，iftracedbacktotheproductiveelementsoftheirmanufacturecomeultimatelyintothesamevaluerelationsasdotheseparatepartsofastock。A
cupboardandatableareinthemselvesdifferentgoods；reducedtotheirproductivefactorstheyareofthesamenature，belongtothesameclassofsupply，andreceiveacorrespondingexpressionofvalue。Thelawofcostsisapeculiarandcomplicatedconceptionofthegenerallawofvalue，usedinapeculiarandcomplicatedcase，vis。wheretheconnectionofgoodswithoneandthesamestockisnotapparentfromtheiroutwardappearance，butcanonlyberecognisedafterreductiontotheproductiveelementsoftheirmanufacture。
Thisstatementwouldbeimperfectifwedidnotaddthatthelawofcostsasregardsproductsisbyfarthemostusualformassumedbythegenerallawofvalue。Productsofalmosteverykindarecontinuallybeingreproduced，andconsequentlytheirvaluemustcontinuallybedecidedbycomparingtheamountoftheproductivesupplieswiththeamountoftheproductivedemand。Thevastmajorityofchangesinvalueareoccasionedbythechangeswhichoccurinthecomingforwardofproductiongoodsorintheirproduction，wheretheyarethemselvesobjectsofproduction，asalsobytechnicalchanges，orchangesintheconditionsofproductionwhichmakethequantityofcostsnecessarytoproducethegoodsgreaterorless。Thusithappensthatvariationsinthevalueofproductsaretraceable，inthemajorityofcases，tosomecausewhichistobefoundinproductiongoods。Evenincaseswherethechangeofvaluefirstarisesinthedemandandintheproducts，theeffectofthiscircumstancecommunicatesitself，throughthemediumofthecostgoods，tothecognateproducts，andcausestheirvaluetoriseorfall。Aproductwhichis“cognate“withahundredothers，will，inallprobability，beaffectedahundredtimesbychangesintheirsupplyanddemandrelations，foroncethatitisaffectedbyachangeinitsownrelations；andalltheseinfluencesarecommunicatedtoitfromoutsidethroughthecostvalue。Andthusitisthatchangesinanysinglesupplyanddemandmustpasswithoutleavinganytrace，unlesstheychancetobeexceedinglycomprehensive，andare，therefore，capable，asagainstthesupplyanddemandoverthewholecircleofcognateproduction，ofdisturbingthedeterminingmarginalutility。
Thephenomenaofcostsare，therefore，anewproofofhowgreatlytheobjectiveconditionsoftheexistenceofgoodsinfluencethevalueofgoods。Howfarthevalueofgoods，initsfinalformof“costvalue，“isfrombeingthemirrorofthatsubjectivefactfromwhichitisderived——thevalueofwants！
Thecircumstancethatcognateproductsareproducedbydifferentquantitiesofthesameproductiveelements，bringstheirsubjectivevaluationsintoaratio，thetermsofwhicharederivedentirelyfromtheobjectiveconditionsofproduction；
whiletheimpulseswhichcallfortheiremergence，aswellastheabsolutevalueamountsoftheelementswhosemultiplesenterintotheratio，remainsubjective，andthusprovethesubjectivityofthesourceandnatureofvalue。
Itwasimpossiblethattheinfluenceofcostsuponthevalueofproductscouldescapetheobservationofeconomists。Nonethelesshasrecognitionbyeconomictheoryofthelawofcostsremainedforlongveryimperfect。Itwasconceivedofonlyasarelativelaw——thatthevalueofproductswasasthequantityofcosts；butastowhatwasthenatureofcosts，whencetheythemselvesreceivetheirmeasure，whatabsoluteamountsmightaccruetothevalueofproducts，——onthesepointseconomistswerenomorecapableofsayinganythingthantheywerecapableofexplainingthenumerouscontradictionswhichwereinevitablesolongascostswereconceivedasthefinalcauseofthevalueofproducts。Possiblyitisthegreatesttriumphofthetheoryofmarginalutilitythatitfullyexplainstheobscureconceptionofcosts，withwhicheveryothertheoryhadtoreckon，andwithwhichnotheorycouldcometoanyreckoning。Thelabourtheoryalonehasattemptedit，butithasthereby——asweshallgoontoshow——introducedintotheoreticpoliticaleconomythegreatesterrorsthathaveeverbeenperpetratedwithinitssphere。
Chapter7
TheSo-CalledCostsofProductionofLabourThroughaverystrangeerrorinjudgmenttheclassicalschoolofpoliticaleconomyhasputforwardthepropositionthattheexchangevalueofhumanlabouralsoisdeterminedbycostsofproduction。
Thecostsofproductionofhumanlabour——ifwesubstitutetheprosaicpersonalmeaningofthisexpressionfortheimpersonalandfigurativeonewouldbethecostsofproducingthelabourer。Whatamonstrousidea！Canitbethatthereisa“production“oflabourersinthesamesenseasthereisaproductionofmaterialthings？Hassuchathingeverbeensaideveninthedarkestagesofbarbarism？Surelyanothernameatleastmighthavebeenchosen。Butleavingthename，letusgettothesubstance。
Thesubstanceis，that，bythecostofproductionoflabourismeantthenecessarycostofmaintainingthelabourerandhisfamily；themeansofsubsistencewhichthelabourersthemselvesregardastheminimumnecessarytokeepthemselvesinlife，instrength，andinabilitytowork，tobringchildrenintotheworld，andtobringthemuptolabour。Andasthepriceofgoodscanneverstandpermanentlyeitheraboveorbelowthecostsofproduction，soitisassertedthatthewagesoflabourcanneverstandpermanentlyeitheraboveorbelowtheexistence-minimum。Ofcourse，thispropositioncanneverbeunderstoodtoapplytoanybutthecommonestandworstpaidformoflabour，seeingthatthebetterpaidlabourdoesraiseitselfabovethelowestwagelevelthatcanbeconsideredpermissible。
Ontheoneside，sofarasregardstheimpossibilityofsinkingbelowtheminimum，thereis，asafact，aclose，indeedafrightfulanalogybetweenthelawofwageandthelawofcosts。
Wherethelabourerhasnootherincometospendthanhiswage，wagescannotindeedfallpermanentlybelowtheamountmarkedbythepricesofthenecessarymeansofsubsistence。Ifthemeansofsubsistencearescarceanddear，ahigherwagemustultimatelybeconceded。Miseryanddeatharetheimperiousforceswhichbringaboutthisresult，inasmuchastheyreducethenumberoflabourersuntilthereducedsupplyhasraisedwagessufficientlytocoverthenecessariesoflife。
Buthowisitasregardstheotherside？Isittruethatwagescanneverrisepermanentlyabovethecostsofsubsistence？
Istherethesmallestanalogy，orevenanapparentanalogy，betweenthepressureexercisedbythecognisanceofcheaperconditionsofproductionuponthevaluationofproducts，andthepressurewhichmightbeexerciseduponthevaluationoflabourbycognisanceofcheaperconditionsoflife？Economistsoftheclassicalschoolassertthatthereis，andtherebytheybringagainintothequestionmotiveswhichhaveaslittleincommonwiththeconsiderationsthatgoverntheproductionofgoods，asthelawofnature，whichsaysthathewhocanfindnomeansofsustenancemustdie，haswiththeconsiderationsthatgovernthemanufacturerwhodiscontinuesabusinesswhenitfailstoreturnhimitscosts。Themotivewhichiscalledupontoprovethatwagecannotmaintainitselfabovetheminimumofsubsistenceisthepowerofthesexualinstinct。Ifmeansofsubsistencebecomecheaperandmoreabundant，thereisthemoreroomforincreaseofpopulation，formarrying，producingchildren，andsupportingthem。Thesupplyoflabourerscangoonincreasing，andwagesgoondiminishing，untilthemaximumofpopulationpossibletomaintain，andtheexistenceminimumofwage，areagainreached。
Thisresultispossible。Butmustiteverhappen？Doesitalwayshappen？Whathasexperiencetosay？Itspeaksplainlyenough——
soplainlythateventhosewhoassertthatthelawofcostsobtainsforlabourfindthemselvesforcedtoaddtothatlawcertainclauseswhichamounttonullifyingit。Thusaclauseisaddedwhichsaysthatwhatdetermineswageisthatamountofsubsistencewhichthelabourersthemselvesregardasthepermissibleminimum，sinceexperienceshowsthattheminimumwagediffersfromtimetotime，fromplacetoplace，andfromnationtonation。Butthisclausecancelsthelaw。Iftheopinionofthelaboureristobedecisive，therecanbenomoretalkofacompulsory，objective，fixedstandardofwage。Inyetanotherdirectionexperiencespeaksstillmoreconclusively。Wenoticeeverywherethatthewagefordifferentkindsoflabourisofvaryingamount。Onlysomeofthelabourers，andthatnotbyanymeansthemajority，arealwayshelddowntothelowestpossiblewage。Buthowcouldthisbethecaseifthewholepositionoflabourwereentirelygovernedbythepowerofsexualimpulseasisasserted？Wouldnotthesupplyoflabourundersuchasuppositionbeoverwhelminglylarge，——asarule，andinthelongrunatallevents，——andwagesbereducedtotheminimuminallbranchesofproduction？Wouldnotallwagesbeequallylow？
Thefactthathigherwagesarecontinuouslymaintainedinthehigherbranchesoflabour，isaclearproofthattheheightofwagecontinuestobedeterminedbyconsiderationswhicharetoopowerfultoadmitoftheirfavourableresultsbeingsuspendedbythesexualinstinct；or——whatamountstothesamething——thatthesexualimpulsedoesnotpossessthatdestructivepowerwhichisascribedtoit。Andifitdoesnotpossessthisasregardsoneclassoflabour，itisimpossibletoseewhyitshouldbeheldnecessaryasregardstheotherclass。
Ifthelawofcostsweretrueasregardswagesoflabour，itwouldalsobetrueasregardsthenaturalvalueoflabour。Theforceswhicharereliedontoprovethelawofcostsinregardtolabour，would，ofnecessity——iftheydoactasisassertedofthem——haveanequaleffectunderanysocialorganisation。Ifthesexualimpulsewerepossessedofsuchsurpassingstrength，itwould，eveninacommunisticstate，increasethenumberoflabourerstothehighestpointwhichcouldbemaintainedattheexistenceminimum；onlythathere，wherethelabouringclasswouldincludethewholenation，theconsequenceswouldbesomuchthemorecomprehensiveanddestructive。To-day\'s“ironlawofwage“wouldbeextendedinthefuturetoanironlawofuniversalmisery。
Moderneconomistsarealmostunanimousinrepudiatingtheapplicationofthelawofcoststolabourinitsolderandcruderform，but，ontheotherhand，theyconcedetotheconsiderationofthecostsofmaintainingthelaboureranothereffect。Itistheeffortofeveryclassoflabourers，theysay，toretaintheleveloflifetowhichtheyhaveonceattained，makingtheirclaimofwagesincorrespondencetherewithandstrivingtorealisetheirclaim，besidesregulatingtheirmarriagesandthesizeoftheirfamiliesinconformity。Thewage，oncebecomecustomary，issaidtohaveatendencytomaintainitselfasapermanency，andtoresistthetendencieswhichwouldpressitdown。Thislawalso，ifitwereatruelawofwage，wouldhavetoberecognisedasanaturaleconomiclaw，asitalsoisfoundeduponauniversalforce。Experience，however，doesnotseemtojustifyit。Donotwagescontinuallyriseandfall？Itistobefearedthatthequiteintelligiblewishoftheworkertoretainastandardofincomeoncereachedhasnottheefficacyascribedtoit，ofresistingthechancesofanunfavourableissuetolabour。
Ifthereturntolabourfalls，thenaturalvalueoflabourfalls，withoutbeingintheleastpreventedbythepreviouscustomarylevelofcomfort，anditisinthehighestdegreelikelythatitsexchangevaluewillfallalongwithit。Foralthoughthesedonotbyanymeansinvariablycoincide，——dowenotoftenseewagesfallingshortofnaturalvalue？——asthingsare，itmaybeconsideredanexceedinglyrareoccurrencethatwagesareinexcessofnaturalvalue。Theresultwhichmightbeexpectedfromthepostponingofmarriageandproductionofchildrenwould，inanycase，comemuchtoolate；itcouldonlybefeltafteryears，inasucceedinggeneration，whencircumstanceswouldprobablyhavebeenlongbeforecompletelychanged。Ofcourse，thedesiretoobtainthehighestpossibleincomeisamotivewhichcannotbeconsideredasquiteinsignificantamongthemanymotivesdeterminingthereturnfromproduction。Itisasfraughtwithconsequencesasareintelligence，skill，favourablenaturalcircumstances。Butwhyshouldthismotivebebroughtprominentlyforwardonlyasregardsthereturntolabour？Isitnotequallypowerfulasregardstheproductsobtainedfromlandandcapital？
Andwhyshoulditsinfluencebelimitedtotheamountofincomeonceobtained？Doesitnotgobeyondthistotheprocuringoffreshincome？Thetruthisthatmenendeavourtomakeallproductivereturnsaslargeasevertheirpersonalcapacitieswillallow，andthatthereturnssoobtaineddeterminethevalueoftheproductivefactors，——oflabour，asofalltheothers。Itisimpossibletoconsideritevenplausible，thatacauseshallbeeffectiveasregardslabouralone，bywhichthelevelofwageoncereachedobtainsapeculiarpowertomaintainitselfpermanentlyunimpaired。
Heretoothemoderneconomists，whoadvancesuchtheories，probablydosomerelyinordertobringthelawofwageintocorrespondencewiththegenerallawofthepriceofcommodities。
Inoneasintheother，theystartwiththefalseassumptionofafundamentaloppositionbetweencostsandutility，andwishtofindvaluebetweenthe“uppermarginofutility“andthe“undermarginofcosts。“Butevensupposingsuchanoppositiondidexist，itwouldnotatalleventsbeintheleastapplicabletolabour。Itisnotpossibletoforcelabourintoalltheeconomiccategoriesinwhichmaterialgoodsbytheirnatureareplaced。A
produciblearticleisagood，thatis，ausefulthing——intworespects；firstly，invirtueofitseffects——theeffectsinwhichitis“ofuse“；and，secondly，invirtueofitsoriginandupkeep，inwhichrespectsitismateriallyamatterofproperty。
Labourcanonlyberegardedasathingintheformerrespect:inrespectofitsusefuleffectstheeconomicuseoflabourmayandoughttobeconsidered。Inthelatterrespect，labourisanaffairofpersons，anditsoriginandupkeepcannotbedecidedbypurelyeconomicconsiderations。Itisoversteppingthepermissiblesphereofeconomiccontrolwhentheattemptismadetointerferewiththepersonalityofthelabourerwithoutregardtootherconsiderations；andeconomictheorygoesbeyonditsspherewhenitclaimstoexplainthefactsofpersonallifeexclusivelybyeconomicconsiderations。1*
NOTES:
1。Aslabourisnottheproductofthelabourer\'smeansofsubsistence，so，conversely，themeansofsubsistencecannotberegardedastheproductivefactorsoflabour。Inotherwords，thelabourer\'smeansofsubsistencearenotcapital。Iflabourbeagoodofthesecondrank，producinganykindofgoodofthefirstrank——aconsumptiongood——thelabourer\'sfundofsubsistenceisinnowayagoodofthethirdrank，producingthelabourer；itisagainmerelyagoodofthefirstrank，aconsumptiongoodforthelabourer。Thishasaresultofgreatimportanceasregardsvalue。Valueiscommunicated，aswehaveseen，firstfromthewantforgoodsofthefirstrank，andthenfromthesetothegoodsofsecondrank，andsoonthroughalltheranks。Ifmeansofsubsistencewerecapital，theywouldreceivetheirvaluefromthevalueoftheservicerenderedbythelabourer。Butastheyaresimplymeansofsubsistence，theyreceivetheirvaluefromthewantswhichtheyprovidefor。
Chapter8
TheCostTheoriesIhavehithertoalmostentirelyrefrainedfromcriticisingoutsidetheoriesofvalue。Uptothispoint，thesubjectofcosts，noneofthesecontainsanyforeignelementwhatever。Whatrenderstheminadequateischieflytheirinadequateexplanationofthetrueelementsofvalue。ShouldIhavesucceeded——asI
scarcelydarehope——inprovingbeyonddisputethetheorytowhichIhavegivenmyadhesion，allothertheoriesinthemselvesaretherebyconfutedinasmuchasitcompleteswhattheybegan。
Wheretheyhavesaidonlyhalf，thewholehasbeensaid；wheretheyhaveonlyapproximatedtotruth，thetruthitselfhasbeenfound。Butitisotherwise——thoughofcourseonlyinthecaseofsomeofthem，——withthosetheorieswhichderivethevalueofgoodsfromcosts。TheyappealtoaforeignelementwhichdoesnotlieinthepathIhavechosentofollow，andmustthereforebedealtwith，asitwere，onabye-pathofcriticism。Atthesametime，itmustbesaidthatthisforeignelementcontainssomuchthatisplausible，thattherewouldbeapresumptionagainstanyonewhopasseditbywithoutremark，andasuspicionthathisstatementdidnotembracetheentiretruth。
AsIsaid，itisonlysomeofthetheoriesofcostswithwhichwearehereconcerned。
Allsuchtheorieshavethisonepointincommon，thattheyplacecostsandutilityinoppositiontoeachother，andexplainthemasdissimilarprinciplesofvalue。Theydiffer，however，intheirmanneroftreatingtheprincipleofcosts。Somelimitthemselvestocollatingtheindividualelementsofcosts，andshowingtheirinfluenceuponvalue，withoutanswering，orevenbringingup，theessentialandfundamentalquestionastowhatcostsreallyare，andwhencetheyobtaintheirinfluenceandeconomicimportance。Criticismofthesetheoriesissuperfluous。
Theycontainnoerrortocriticise。Theirfaultliesintheirsilence；intheirstoppingshortattheveryheartofthesubject。
Therestofthecosttheoriesmustbejudgeddifferently。
Theygivetotheideaofcostsanentirelydistinctmeaning；ameaningwhichiscertainly——takingitallinall——incorrect；
butonewhich，inviewofthelargenessofitstheoreticintention，maybepardoned，andevenregardedwithsomerecognitionandrespect。ThisdivisionofthecosttheoriesmaybemarkedbythetitleofLabourTheories，astheelementoflabourformstheirtheoreticstarting-point。Ricardo\'ssystemindicatesthehigh-watermarkofthelabourtheory；thesocialistsystemisitsfinalconsequence。Manywriterswhorejectbothofthesesystems，neverthelesstakethefundamentalmotiveofthelabourtheoryintotheirownsystems。Infact，thereareveryfewwriterswhohavekeptentirelyfreefromit。Thecritichasconsequentlyalargetaskbeforehim。Imakenosecretofitthattodobattlewiththoseviews，asdevelopedbyeconomicwriters，seemstomeamatterofconsiderablymoreimportancethattheyarise，inthelastinstance，frompopularopinionswidelyheld。
Thefundamentalideaofthelabourtheoryisforeigntonoone；
everybodyhasfrequentlyenoughhadpracticaloccasiontoapplyit。Butforthis，Ricardo\'ssystemwouldneverhaveobtaineditsgreathold，andthiscircumstancemayprepareustoexpectinthefutureevernewformulationsofthelabourtheory，shoulditnotbepossiblemeantimetopurifytheoreticallythepopularview，andleaditbackfromitsexaggerations，whichareeasilytraceabletotheimperfectionofpopularreasoning，intoitstrueandincontestableform。1*
NOTES:
1。InhisWerththeorienundWerthgesetz，inConrad\'sJahrbucherfor1888，W。Scharling，oneofthelatestwritersuponthetheoryofvalue，hasagaintracedittothefundamentalmotiveofthelabourtheory，althoughwithconsiderableamplificationandmodification。Hederivesvaluefromthedifficultyofattainment，or，moreexactly，fromtheamountofeffortwhichhewhowishestoacquireanobjectissparedbyattaininghisendthroughexchange。IshallnotatthispointdwellonScharling\'spositivework，butratherreferthereader，inregardtohisfundamentalmotif，tothesucceedingchapter。Only，inpassing，Imaynotethat，amongtheeffortswhicharetogivethestandardtoprice，Scharlingincludesthatp。558“whichitcostsatanauction
todistanceotherbidders，“orwhatitcosts“toovercomeanowner\'sdisinclinationtopartfromhisgoods。“Bothoftheseeffortshavetheirorigininnothingelsethanthepaymentofthatverypricewhosestandardtheyaresupposedtoexplain。Inthissensetheremightbeincludedamongthedifficultiesofattainmentthefactthatthingmustbepaidforwithmoney，whilepeopleareboundtobeeconomicalwithmoney。Hisviewsonthetheoryofmarginalutilityaregiven，inanillustrationcitedbyB鰄m-Bawerk，ofaboytowhom“thepleasureofeatinganappleismorethanseventimesbutlessthaneighttimesthatofeatingaplum。““LetusSuppose“continuesScharling“thatthefathercomesandsaystohisboy:\'Ourneighbourhasgivenyoupermissiontopullasmanyapplesfromhisgardenasyouwish\'；
theboywillatoncealterhisopinionastotherelationbetweenapplesandplums，althoughhistasteforandhisenjoymentinconsumingthefruitremainsunchanged。Buttheeffortwhichthepossessionofoneapplesaveshimfromputtingforth，isnolongerthesame。“Tomymindthisillustration，whichScharlingadvancesinoppositiontothetheoryofmarginalutility，isreallyaproofofthattheory。Inwhatwayhasthesituationchangedafterthefather\'sspeech？Clearlythattheboymaynowhaveasmanyapplesashewill，whileformerlyhehadonlyone，i。e。theavailablesupplyhasbeenincreasedtosuperfluity。Andthustheresultisattainedwhichthetheoryofmarginalutilitydemands；thevaluationoftheapplesisentirelyaltered。
Scharling\'soppositionwouldbejustifiedifitweredirectedagainstatheorywhichmadevaluedependsimplyuponutilityandnotonmarginalutility。Inourtheory，alongwithutility，alltheinfluencesareweighedwhichdeterminethedegreeofutilisation，andofestimationofutility，bythesupply；indeed，eventhoseinfluenceswhichdeterminetheamountofsupplybytheconditionsofproduction。
Chapter9
TheCostTheoriescontinued。LabourasanElementinCostItcannotwellbequestionedthat，amongthecostsofanyproduct，thelabournecessaryforitsmakingcomesfirst。Everyproductwithdrawsthelabour-powerthatisdevotedtoitfromotherproductstowhichitmighthavebeendevoted。Therewouldbenothingfurthertosayonthesubject，wereitnotthatlabourcallsforeconomicdeliberationastoitsemploymentonasecondgroundbesidesthatofitsutility。Labourcarriedtoofarbecomesaburden，andbringsasuccessionofseriouspersonalevilsinitstrain。Wherelabourbringspain，strain，ordanger，thereisgoodreasontothinkseriouslyovertheseconsequences；
and，ontheiraccountalone，toregardeveryactoflabourasasacrificewhichshouldbemadeonlyifitiscertaintobeadequatelyrecompensedbyitsresult。Itisinthissensethatitiscommonlysaidthatproduction“costs“labour，anditisinthissensethatmosteconomistsconceiveoflabourasacostgood。Nottheutilitybutthepersonalsacrificeofthelaboureristodeterminetheeconomicvaluationoflabour，anditsinfluenceuponthevalueofcommodities。
Todecidehowmuchisrightinthisconceptionisoneofthemostdifficulttasksofpoliticaleconomy，and，asthetheoryhasdeveloped，oneofthemostimportant。Beginningwiththeideathatlabourisvaluedaccordingtothepersonalsacrificeitinvolves，andgoingontothewiderideathatlabouristheonlyproductiongood，thatallproductsaredirectlyproductsoflabour，andthatallcostsarelabourcosts，theconclusionhasbeenreachedthatthesacrificeoflabournecessaryfortheproductionofagoodistheexclusivesourceofitscostvalue，indeed，ofitsvaluepureandsimple。Fromitsrelationtothelaboursacrificetheconceptionofvaluereceivesitscontent，theamountofvalueitsstandard。InAdamSmithwefind，aswassaidinthepreface，this“philosophical“conceptionofvaluecomingintocollisionwithasecond“empirical“conception。
Ricardo\'ssystemaimsatprovingthatthis“philosophical“
conceptionisalmostrealisedintheempiricalformationofvalue。Finallythesocialistsroundlydemanditscompleterealisation，andcondemntheempiricaldeviationsasdisturbances。Inconnectionwiththisconceptionofvalue，asecondconclusion，whichrelatestotheoriginandaimofhumaneconomy，isdrawnfromthesamepremises。Humaneconomyderivesitsorigin，inthelastresort，fromthefactthatgoodsmustbeobtainedatthepriceofthesacrificeoflabour，andtheaimofalleconomyisultimatelytomakethesacrificeoflabournecessaryfortheproductionofgoodsassmallaspossible。Andthus，whenweendeavourtoexaminethepositionoflabourasacostgood，wefindourselvesplungedintothequarreloftheoryastothefundamentalquestionsofpoliticaleconomy。
TheopponentsoftheLabourTheorydonotinmyopiniongiveitfulljustice。Theytrytooverturnitcompletely，whereasitisbynomeansentirelyfalse。Itisconceivable，onlyitdoesnotfitinwithfacts；itis，iftheexpressionmaybeallowed，philosophicallyright，butitisnotempiricallyrealised。
Itispossibletoconceiveofaconditionofeconomiclifeunderwhichthesingleconsiderationofthesacrificeinvolvedinlabourwoulddeterminethevalue，bothoflabouritselfandofallproducts。ThewidespreadrecognitionwhichRicardo\'stheoryhasobtainedcanonlybeexplainedbythefactthatitisfoundeduponaconceivableandattractivefundamentalidea。Menlearnedthemeaningof“value“asawhole——notasaphilosophicalconception，butasappliedtothecircumstancesofeverydaylife——forthefirsttime，andthenoverlookedthefactthatthe“value“ofactuallifewasnotcompletelyexplained。Ishallendeavourtoformulatewithallpossibledistinctnessthoseconditionsunderwhichthelabourtheorywouldapply。Thisisthebestmeansofenablingustorecognisehowfarthesefallshortofrealisationinexistingeconomiccircumstances。
Supposethatacommunity——alreadyabundantlyprovidedwithallthematerialauxiliariesforlabour——hadattheirdisposalsogreatasupplyoflabourpower，andsofewwants，thattheywereabletosatisfycompletelyandwithoutdelayanydesirethattheymighthappentofeel，simplybyputtingforththeexertionnecessarytoproducethemeansofsatisfaction。Inthiscasethemeansofsatisfactionsoproducedwouldhavenovaluefromtheconsiderationoftheirutility，becauseasassumed——theyweretobehadimmediatelyatalltimesandinsuperfluity。Ontheotherhand，theconsiderationoftheexertionoflabourrequiredtoproducethemmustgivethemvalue。Everyproductmadeandpossessedwouldsaveaneffort；theeffort，namely，involvedinitsreproduction。And，sofar，onewouldhavealivelyinterestinholdingontoanypossessiononceobtained。Theamountofthisinterestwoulddependupontheexertionsavedbythepossession。
Aproductwithautilityexpressedbytheintensityof100，andnecessitatinglabourequalto10，wouldhaveavalueof10，andwouldhavenovalueatallifitsreproductioncostnoeffort。
Theconceptionsofvalueandwealthevolvedfromtheassumedcircumstanceswould，formallyconsidered，besuchasshouldariseifvalueandwealthwerederivedfromconsiderationoftheutilitywhichthegoodsassure，while，allthetime，materially，theywouldbecompletelydifferent。Valuewouldbetheimportancewhichgoodswouldthenhaveinvirtueoftheinteresteveryonewouldfeelinsecuringexemptionfromtheundesirablepainoflabour。Wealthwouldbeequivalenttogreatpossessionsofgoodssecuringimmunityfromthepainoflabour。Theadvantageofwealthwouldberest。Povertywouldnotmeanwant，butonlyunrest，pain。Byalittleincreaseofexertionanyadvantageofpriorpossessioncouldsoonbeovertaken。
Thatthisisnotthepovertywhichthepoormanknows:thatthisisnotwealthasmenreallyestimateit:thatthisisnotthevalueortheeconomyofwhichwehaveanyexperience:——
requiresnoproving。Ifmerelybypainmencouldberich，theverypeoplewhoareto-daythepoorestwouldlongerethishavebecometherichest。Nothinginrealityisasassumedbythelabourtheory。Ourdesiresaretoogreat，thematerialresourcesatourdisposaltoolimited:ourlabourpowertoosmall。Noeconomicalpossessioncanbelostwithoutsomeenjoymentbeinglost。Theideaofutilitycannotpossiblybeseparatedfromthepurposesofeconomyandtheconceptionofvalue。
Thereisonlyonequestionthatmaystillbeasked。Itiswhetherconsiderationofthesacrificeoflabourdoesnotalwaysenterintothevaluationoflabourasacost-good，andthusintotheCostvalueofallproducts，alongsideofandboundupwiththeconsiderationoftheutilityoflabour。Butneitheristhisthecase。Itcouldnotbeso。Suchapossibilityisexcluded，notempiricallybutlogically。Productivelabourcanneverhavevalueonaccountoftheutilitywhichisdependentuponitssuccessornon-success，andalsoonaccountofthepersonaleffortwhichitinvolves。Inwhatcircumstancesdoesanactoflabourhaveusevalue？When，ineventofitsfailure，theutilityhastobegivenup，becausethelabourcannotbeputforthasecondtime；orwhen，inthesamecase，therepetitionoftheservicedemandsthatanotheruseofthelabourbeabandoned，anditsexpectedutilitywithit；inotherwords，whenthereisnotsufficientlabouravailabletomeetthedemand，whenlabourpowerisnotavailableinsuperfluity。Andinwhatcircumstanceswouldaservicebeestimatedaccordingtothesacrificeinvolved？When，ineventoffailure，onewouldnotneedtogiveuptheutility，becauseitcouldalwaysbeobtainedagainatnogreaterexpensethantherepeatedeffort；inotherwords，whenalltheavailablelabourpowerhadnotapredeterminedanddistinctdestination，butwhentherewasalwaysfreelabourpoweravailableinsuperfluity。Labourcouldonlybeestimatedatoncebyitsutilityandbypersonaleffort，ifitwereatoncecapableandincapableofrepetition；iftherewereatonceadeficiencyandsuperfluityoflabourpowers。Wheretheavailablelabourpowerislessthanthedemand，labourvaluewillbeestimatedexclusivelyaccordingtoutility。Wheretheavailablelabourpowerisinexcessofthedemand，itwillbevaluedexclusivelywithreferencetothelaboursacrifice。1*
Evenwherelabourvalueisestimatedbyutility，naturallyonedoesnotceasetoconsiderthetoilsanddangersoflabour。
Andalthoughtheconsiderationofthesedoesnotdirectlyenterintothevalueoflabour，itwillcontinuetobeaconsiderationsolongastoilisfelttobetoil，anddangerdanger。Itmayevenobtainanindirectinfluenceuponvaluation，asitmustcontinuetoreceiveeconomicconsiderationinseveralconnections。
Theseconnectionsmaybeexactlyenumerated。
First，beforeundertakinganylabouramanhastoconsiderwhethertheutilityoutweighstheeffort。Onlythoseactsoflabourwhoseresultoutweighsthehardshipentailedcanbereasonablyperformed。Herein，moreover，iscontainedthereasonwhylabour，estimatedbyamountofhardshipalone，islesshighlyvaluedthanwhenitreceivesitsvaluefromitsreturn。Thisalsogivesrisetoanotherimportantissue。Thecircumstancethatexpenditureoflabourisfelttobeaburden，mustsomewhataffecttheselectionofemploymentstowhichitisdevoted。Itmayoccur，asSaxseenotehasforciblyshown，thatalessusefulemploymentoflabourischosenbeforeamoreusefulone，becausethelatterrequirescomparativelyagreateramountofexertion。
Second，whenlabourisoncedecidedonitsperformancemustalwaysbeorderedinsuchawaythatthetoilanddangeraremadeaslightaspossible。
Third，thefactthatlabourisfelttobeaburdenhastheeffectofcurtailingsomewhatthesupplyoflabourasawhole。Iflabourwerenotburdensomeandexhausting；morelabourwouldbeexpendedthanis。Andthustheusevalueoflabouris，aswehavealreadysuggested，indirectlyaffected，bybeingplacedataslightlyhigherlevelonaccountofthediminishedsupply。
Servicesofequalutility，butofdifferentdegreesofhardship，aresoregulatedinregardtovaluethatthemoretroublesomelabourismorehighlyappraised。Butthisresultcanonlyensuewhenthesupplyisreallydiminished。Whereverthefearoftoilanddangerdoesnothaveanactivelydeterrenteffect，orwhereitisovercomebythepresenceofothermotivestosuchanextentthatthesupplyremainsundiminished，thevalueoflabourdoesnotincrease。Experienceshowsthatthemostwearisome，wearing，andleasthealthyofemploymentsarevaluedleasthighly，becausetheyarethemosteasilyaccessibletothegreatmajority，andareconsequentlythemostamplysupplied。Inthecommunisticstateitwouldnot，inallprobability，beinanywisedifferent。
Thegreatmajorityofthecitizenswillalwaysbesuitedforthecoarsestkindofworkonly，andthosekindsofworkareatoncethemostburdensomeandthesimplest。Andwhilethecommunisticstatewouldbeplentifullysuppliedwiththissortoflabour，sothatitcouldbeemployeddowntothesmallestpossiblereturninutility，thebetterlabourpowers，invirtueoftheirmorelimitednumber，wouldrequiretobeeconomisedandhavecarefulconsiderationgiventotheiremployment，justashappensto-day。
Utilityandnottoilwould，ingeneral，affordthestandardforthevaluationofpersonalservices。
Butwearenotfinishedwithourconsiderationofthelabourtheory。Itsgreatesterrorsrelatetothevaluationwhichitgivestocapitalasanelementincost。2*
NOTES:
1。Itisnotatallimpossiblethat，atoneandthesameplace，theremaybealackoflabourincertaindepartments——e。g。
skilledlabour——whilethereissuperfluityintheavailablesupplyinothers——e。g。commonhandlabour。Insuchacasetheservicesoftheformerareestimatedbyutility，andthelatterbyamountofhardship。Underprimitiveeconomicconditionsthe“supplyoflabourpower“isfrequencytoolarge；notuntiltherehasbeenaconsiderableadvanceincivilisationdoesitbecometherulethatlabourisinsufficient。Further，eventhelabourpowerofoneandthesameindividualmaybetoosmallasregardscertainrequirementsoflabour，andatthesametimetoogreatasregardsothers。Ithappensalmostinvariablythatlabourerswhosecapacityforperformingsomeparticularformofserviceisnotsufficienttomeettheeconomicdemandforsuchservices，havealwayssufficientcapacityremainingtomeetthetriflingnecessityforlabourintheirownprivatelives。Withthisisconnectedthefactthatlabourpowerisneverentirelywornout；
afterperformingthelabourofhisparticularvocation，manrefreshesandrestoreshisenergybestbylightanddistractingemployments。Eveninacountrywheretheeconomicdemandforlabourisentirelyinsufficient，therearenotlackingoccasionsinwhichlabourmaybeestimatedaccordingtotheamountofhardshipinvolved。Everyindividualiscontinuallyfindingsuchoccasions；andeveryonethuslearnsfromhisownexperiencethefundamentalmotifofthelabourtheory。
2。SeeUrsprungdesWerthes，p。103，andalsoB鰄m-Bawerk\'sWerth，p。42，and，ontheoppositeside，Sax，chapter45。Sax，startingfromthecorrectpropositionthatonlythosegoodsshouldbeproducedwhoseutilityoutweighstheburdenoflabourtheyinvolve，appearstometogoratherfarintheconclusionshedraws，whenhesays:“IftheUnlustconnectedwiththewantinquestioni。e。theUnlustwhichoriginatesfromthewantnotbeingsatisfiedislessthanthatoftheburdenoflabour，thenthedesireforthegoodwillbeapassiveone。Thewantitselfceasestobefelt。“Onlyinsofarasthedesireis“active“doestheexpectedproductreceiveavalueinthought。That，asIhavesaid，seemstometogotoofar。Inconsideringwhetherathingshouldbemadeornot，thevalue，asderivedfromtheexpectedutility，willbeestimatedundiminished；and，atthesametime，theexpectedtoilwillbeweighedasathingbyitself。IfI
hungerbutamtoolazytowork，Istillcontinuetofeelthehunger，andthusestimatethevalueoffoodaccordingtothemeasureofmyhunger；onlyitmayhappenthatthepresentationofthisvalueisnotsufficienttoovercomemylaziness。
Chapter10
TheCostTheoriescontinued。CapitalasanElementinCostInanycompeteestimateofcoststherecanbenodoubtthatthefiguresrepresentingthenecessaryconsumptionofcapitalmustbeaddedtothecostsoflabour。Oftwoproductscostingequalamountsoflabour，thatonemustbedearerforwhichthegreaterconsumptionofcapitalisrequired。Thusithasbeencalculatedeversincecapitalwaspossessedbyman，andthusitwillcontinuetobecalculated，eveninthecommunisticstate。
Thenecessityforitissoobviousthateventheadherentsofthelabourtheorybowbeforeit。Eventheyadmitthatthecostsofcapitalco-operateindeterminingthevalueofproducts。Thereisnothingforitbuttotryandreconciletheirtheorywiththisincontestablefact。Todothisthereisonlyoneresource，butonesosingularthatonlyakindoftheoreticalinfatuationcouldavailitselfofit。Ifallcostsgobackinthelastresorttolabour，andiftheexistenceofcapital-costscannotbedenied，capital-costsmustultimatelygobacktolabour-costs——capitalmustbelabour。
Theattempttoreducecapitaltolabourhasbeenmadeintwoways，bothofthemfollowingoutthesamefundamentalidea。
Labourmustbeshowntobetheprimaryeconomicelement，andcapitalrepresentedasasecondaryorderivativeformofit。
Labourvalueappearsastheprimitiveeconomicvaluefromwhichcapitalvalueisderived。
Thefirstofthetwoeffortsmadetoprovethispropositionisdeducedfromthemannerinwhichcapitalworks。Theeffectofallcapitaliseithertosavelabourortoincreasetheresultoflabour。Doesnotamachinesavehumanlabour？Doesitnotbringittogreaterproductiveness？Asamatteroffact，thereareformsofcapitalwhichareabletorenderservicesashumanlabourrendersthem，andwhichcan，tothatextent，besubstitutedforlabour。Butcanthisbemaintainedofallcapital？Whatlabourpower，forexample，doesarawmaterialreplace？And，ontheotherhand，itmayundoubtedlybesaidofmanykindsoflabour，withequalright，thattheireffectsareeithertosavecapitalortoincreasecapital。Capitalfrequentlysupplantslabour，butfrequentlyalsolaboursupplantscapital。
Wherewagesareloweveryundertakerwillsavehiscapitalandemploymorelabourers。
Thesecondattemptismuchmoreimportant。Itpointstotheoriginofcapital。Herewegobacktothefirstbeginningsoftheacquisitionofcapital。Allcapitalhas，inthelastresort——
saysthistheory——beenobtainedbylabour，andonthisgroundallcapitalultimatelyrepresentslabour。Inthemostvariedforms，andillustratedbyaperfectwealthofexamples，thisthoughtfindsitselfinmanywriters。ItisfoundinAdamSmithandRicardo，anditistriumphantlyadoptedbythesocialistsinordertomakegoodtheircontentionthatallcostsarelabour-costs，andthatcapitalissimply“materialisedlabour。“
Itisnoteasytoimaginegreatercontradictionsthanthelabourtheorypresentswhenittakesupthisline——moreparticularlyintheextremesocialisticconceptionofit。Letthereaderjudge！First，theeconomicvaluationoflabourisexplainedbythepeculiarnatureoflabour——thatitsemploymentnecessitatespersonalsacrifice。Thencapital，afterbeingrecognisedasmaterialisedlabour，andsolabourthathasbecomeimpersonal，issubjectedtothesamevaluation；——aproceedingforwhichthereisnopossiblejustification。First，itisassertedthatlabouristheonlyproductivepower；thatitaloneproduces，createsgoods，createsvalue；thatcapitalismerelyitsdeadinstrument:andthencapitalemergesfromitsshellandbecomeslabour，whichcontributesitspartindeterminingthecostvalueofgoods。Atfirstitisassertedthatcapitalandlabourstandinthestrongestoppositiontooneanother，andtheneverydistinctiondisappearssavetheone，thatcapital，likelabour，mayindeedgivevalue，butmaynot，likeit，receivevalue。Materialisedlabourislabour，butnoshareinthereturnshallbeimputedtoit。
Itwouldnotberighttoentirelyrejectatheoryonaccountofitscontradictions。Theremightbeakerneloftruthinit，andthatkernelmightberejectedalongwiththerest。Weshall，therefore，submitthecontentionwearediscussingtoafurthertest，though，truthtotell，itwillonlybetofindthatseldom，ifever，hassosmallatruthbeenclothedinsomucherror。
Aswehaveseen，productsarevaluedbytheircostsonlywhentheycanbereproducedfortheamountofthesame。Capital，asarule，consistsofproducts，andthispropositionappliestocapitalastootherproducts。Capitalmaybevaluedaccordingtoitscostsinsofarasitcanbereproducedfortheamountofthecosts。Thecostsactuallyexpendedsincethebeginningofhistoryingraduallyformingourpresentcapital——anditmaybenotedinpassingthatnooneknowstheamountofthesecosts，andthattherehasneverbeenofferedalessaccuratestandardforanymeasurementwhatever——aretakenaslittleintoconsiderationasanycostswhich，thoughactuallyexpended，wouldneveragainbesoexpended。Ifallthatwaswantedeconomicallytoreplacethecapitalconsumedwastoregainitbylabour，thencapitalmightbeeconomicallymeasuredbylabouralone，andwouldrepresenteconomicallynothingbutlabour。If，forinstance，coalconsumedcouldbereplacedsimplybythelabourersbringingnewcoaltothesurface，withoutanyassistancewhateverbeyondthelabouroftheirhands，thecoalwouldbeworthjustsomuchlabouraswasneededtobringittothesurface。Ifamachinecouldbemadebylabourers，withoutanyotherassistancethanthataffordedbyotherlabourerscollectingforthemvaluelessmaterials，andsimplyusingtheirbodilystrengthtoshapeandcombinethem，thevalueofthismachinewouldbemeasuredbythequantityoflabourthathadbeenexpendeduponit。Solong，however，ascapitalisconsumedinordertoproducecapital，thefactorofcapitalcannotbedismissedfromamongthecostsofcapital，and，therefore，fromthecostsofalltheproductsofcapital；and，solongasitiscreditedwiththeusevaluewhichexperienceassuresusmaybereceivedfromit，thisfactorwillcontinuetobecountedalongsideoflabourintheestimatesofcosts。
Theideathatcapitalrepresentslabourandnothingmore，maybeheldsolongaseconomistsdrawtheirexamples，astheyusuallydo，fromthecircumstancesofaCrusoeorasavage，wherethechieffeaturesaretheslayingofwildanimals，primitivebowsandarrows，barkcanoes，rudeaxes，andthelike——wherecapital，sotospeak，isalwaysconceivedofinastateofnature。Infaceofthecomplicatedeconomicalphenomenaofawealthyanddevelopedsocietytheidealosesallweight。Thelabourtheory，withitsassumptionswhichtakenocountofhistoricaldevelopment，waswellenoughinasciencebelongingtothetimewhenmenspokeofNaturalRightsandthePhilosophyofNature。Atthatperiodofhistorythistheorywasworthbeingtakenupbyanygiftedgeniuswhocouldmakeitthrowafirstrayoflightintothedarkmassofeconomicphenomena。Evenatalaterperioditmighthavetemptedsomethoughtfulmindtogiveathoroughsystematicexaminationtoitsillusiveideas。Butformenwhohavegonethroughtheschoolofthefoundersofourscience，andhavehadthebenefitofalltheexperienceandelaborationofthesefounders，andoftheirsuccessors，itisonlyworthyofaschoolboytoholdforeverbytheopinionsofthefirstteachers。Agreatthoughtmayinthelongrunturnintoachildisherror。
Tothemanufacturerwhoownsit，astothelabourerswhomitaids，andasindeedtoeveryone，amachineisaninstrument，capableofcertainusefulwork，whoseproductionnecessitatesacertainconsumptionoflabour，ofothermachines，oftools，andsoforth。Whatmustpeoplethinkofasciencewhichcastsasidethissimpledefinition，andinformsthemanufacturerthat，inhismachine，hepossessesmerelythe“materialised“labour，the“previous“labour，ofallthosewhohaveevercontributedanythingtowardsthecompletemachinesincethemakingofthefirstroughtoolonward？Itisaningeniouswayoflookingatthings，nodoubt，butonethatlendsextraordinarylittleaidtowardsadvancingthepracticalpurposesofeconomiclife。Whatbuyerhaseverpaidaprice，orsellerdemandedone，whatproducereverexpendedcosts，orwhatchancelloreverlaidataxuponvalue，baseduponsuchaconsiderationasthis？Isitconceivablethatanyonewilleverallowhiseconomicconclusionstobeguidedbysuchaconsideration？Afterall，ineconomictheorywemustmakeupourmindswhetherweintendtoexplaineconomiclife，ortopursueafteruselessandfancifulideas。