unit.1

But how can this average disutility of the final minute of labor be estimated or measured?

From this standpoint we see the weakness of Professor Clark's unit, if we propose to use it practically as a standard of value. We still have no unit of disutility in terms of which we can say that this man's final minute of labor costs him three units while this other man suffers four units. Without some means of measuring and comparing these subjective disutilities it is impossible to determine the average disutility of final labor, which, in turn, is a requisite for determining the average subjective value of a dollar.

But instead of taking the final increments of labor for equal increments of time, let us see if a better result can be reached by considering the disutility involved in securing the last increment of the day's earnings. Our unit of personal disutility will be that of earning the last cent rather than that of working the last minute. If we could add these final disutilities as experienced by each member of society respectively, and divide by the number of members, we should at once arrive at the average value of a cent to society.

But here again we meet with the difficulty of expressing the subjective feelings of different people in terms of a common subjective unit. We have no means of adding these disutilities because other people have no means of accurately telling us the amount of disutility which they experience. It may be said, however, that this practical difficulty of measurement need not interfere with a purely theoretical study. We should first determine what the true unit of value would be and then meet the obstacles to its attainment as best we can. Let us consider then whether this second method of averaging final labor sacri

Should this average value of a dollar remain constant it might still be an unjust standard of deferred payments, because in forming the average according to the above method a wealthy man has more weight than a poor man.

Should a hundred railway presidents double the money earnings of their final labor, the average value of a dollar as obtained above would decrease much more than when a hundred switchmen doubled their final earnings. The greater weight of large incomes in determining the average earnings of the final minute of labor is not fully compensated by the greater weight of the poorly paid labor in determining the average disutility of the final labor.

2 It should be said that Prof. Clark does not indicate that his unit of value was designed for such use.

fice would give us a true standard of value if the indicated computations could be made.

Let us grant that the disutility experienced at the time one chooses to stop work is a true index of his valuation of the earnings, and is equal to the final utility of the earnings. Then add together the disutilities experienced by all the members of a society in attaining the last cent of their daily earnings. Multiply this sum by one hundred, and divide by the number of the members in the society. The result will be the average value of one dollar to the people involved. If similar calculations made in succeeding years and decades gave the same average disutility, we could say that the average value of a dollar had not changed. Would this then be the ultimate standard of social value? Would it also be the just standard of deferred payments?1

To the former question an affirmative answer seems necessary, for inasmuch as the value of a dollar must vary with the individual we can only take an average to represent the value to society as a whole; and when the average is taken according to this method, any change in the value of a dollar to one person will affect the result just as much as an equal change on the part of any other member of society, whether rich or poor.2

1 Léon Walras (Éléments d' Économie Politique Pure, 2d edition, p. 125) proposes to take the arithmetic mean of the marginal utilities of an object to the different members of a society to represent the marginal utility of the object to the society, but (p. 432) instead of having this average marginal utility of the standard of value remain constant, he would have it rise or fall with the marginal utilities of other commodities, so that average prices would remain constant.

Walras' successor at Lausanne, Prof. Pareto (Cours d'Économie Politique, sec. 386), prefers to take the harmonic mean of the marginal utilities of gold to each individual to represent the marginal utility of gold to society, but (sec. 390) he does not recognize that the best interests of society require either that average prices or the average marginal utility of money should remain constant.

cent.

Let society be represented by ten men of whom two have incomes of $10 a day, three have incomes of $5 and five have incomes of $2 a day. Eliminating personal differences, we may assume roughly that each man's estimate of money will be represented by the reciprocal of his income, and++} + {+} + {+} + ++ divided by 10, or the fraction, represents the average valuation of a These fractions may represent the time required by the respective individuals to earn a cent, or if you please, they may represent the number of groans which a cent would offset. Now it is evident that a change of a second of labor time or of one groan in the estimation of the cent on the part of one of these individuals will have the same effect upon the average valuation that an equal change on the part of any other of the individuals will make.

The question in regard to a just standard of deferred payments is not so easily answered. When one rich man accommodates another with the loan of a hundred dollars, the sum is of little account to either; but if, while the debt is unpaid, both men become poor the hundred dollars comes to embody a much greater value to both men, and, from the standpoint of personal value and sacrifice, the repayment of five or ten dollars might justly cancel the original obligation. But if, for instance, the creditor has grown richer while the debtor has become poor, such an equalization would be impossible. Either one man would be obliged to repay more (in personal value) than he had received, or the other would have to accept much less than he had parted with. The dollar which has increased in value to one has decreased in value to the other.

In cases where the relative economic condition of the contracting parties has changed while a debt is standing, there seems to be no way of attaining ideal justice; and expediency doubtless justifies the present custom of holding a debtor, except in cases of bankruptcy, to the payment of the same number of dollars which he has borrowed, irrespective of their importance to either party.1

No attempt is made to adjust debts to the personal standard of the individual, but the attempt is often made so to regulate the currency that the dollar may embody a constant amount of value to society in general. Much of the discussion of the currency question would be less vain if the disputants had a clear conception of what is meant by constant value. Relying upon the definitions of value as the ratio of exchange, or power in exchange, many writers have taken the ground that constant value to society would mean constant purchasing power, but the rapid progress of industrial development is making so great changes in man's relation to commodities that the theorist is

1 In fact, as Prof. Fisher observes (loc. cit. p. 90), "the phenomenon of borrowing and lending is to some extent itself a consequence of the different degrees in which money appreciates or depreciates to borrower or lender." A person who expects to need money in the future more than now, lends to one whose greater need is present. The exchange is profitable to both parties on account of the unlike changes in the subjective values of money to them. The undeserved losses in transactions of debt and credit, as in other lines of business, come from the value changes which cannot be foreseen.

turning naturally to the deeper significance of value. It is found to be subjective in its nature, and evidently the ultimate standard of value must be a subjective standard.1

The principle of marginal utility, as measured in terms of personal gratification or in terms of the disutility of final labor sacrifice, gives us the rule for measuring values upon the part of the individual, and the modern conception of society as the social organism has led to the application of the same principle to the determination of social values, and the expressions "final utility to society" and "final labor sacrifice of society" are brought into economic literature.

When all values are expressed in terms of the unit of exchange, this principle of final or marginal utility is, doubtless, the chief force in the determination of prices and must figure largely in the theory of prices.2 But, as we have already seen, when we attempt to ascertain the real value of the monetary unit itself, we find that the conception of a final utility to society will not bear inspection. The final utility of the dollar or the cent varies with each individual. To represent its value to society as a whole, we must be contented with an average.

Then the question arises whether this average value of a dollar should remain constant in order to make it the best possible standard of deferred payment. Contrary to the views commonly expressed, I would question whether, from the standpoint of social welfare, a unit of constant average value would be the ideal standard of deferred payment. Suppose a few members of a community to grow very rich, so that the

1 Walras (pp. 463, 464) proves mathematically the evident truth that the mean of the variations of prices does not indicate the variation in the value of money, but the relation between the variation in the value of money and the mean of the variations in the values of commodities. See also, Pareto (loc. cit. sec. 389). This is the fundamental error in the numerous methods of measuring variations in the value of the monetary unit by averaging prices through index numbers. Investigations through index numbers are very useful in determining the course of general movements in prices. They show changes in the relationship of money to commodities, but do not show the absolute changes in the value of either money or commodities.

A commodity always goes to the one who will pay most for it. So the price of anything does not depend upon what would be its marginal subjective utility to society, its natural value as Wieser would say, but upon the smallest offers that can be satisfied with the available supply.

dollar represents much less value to them than formerly; in that case ought the coinage to be restricted, or some other means be resorted to for increasing the value of a dollar to other people enough to keep the average constant? We see at once that this would work injustice to the debtor class. We do not think it unjust if the dollar represents somewhat less toil and anxiety now than it did a few decades ago.

Of course fluctuations in the value of currency are pernicious, and a sudden detraction from its value would be robbery, but it may well be questioned whether the natural depreciation which comes from industrial progress is not more in keeping with justice and social welfare than a more strictly constant unit of value would be. President Walker has noticed that a gradually increasing currency is conducive to prosperity, and Professor Ross presents strong reasons for the claim that the debtor rather than the creditor class should reap the benefit of industrial progress. Of course the debtor whose economic standing has fallen would still suffer hardship in paying his debt. That is one of the punishments which society imposes upon the unsuccessful. But the debtor whose economic standing has remained stationary would not be obliged to pay back more in personal value than he had received on account of the success of other members of society.1 If society were in a static condition, the best standard of deferred payment would doubtless be a unit whose average subjective value remained constant, but in a progressive society a slightly depreciating standard seems just as fair, and we may at least conclude that the subject of a just standard of deferred payments would not be entirely settled by the determination of a perfectly constant unit of average subjective value.2

' Prof. Clark says (Political Science Quarterly, Sept. 1895, p. 398): "If a unit of currency conforms to the amount of commodity secured by a day of labor it will be an ideally right one; for it will divide equally between debtor and creditor the gains that come through industrial progress."

This proposition supposes the working day to grow shorter and less burdensome, while its product increases.

As the social estimate of a dollar must be an average of individual estimates, so the standard of deferred payment must be of constant value or otherwise according to an average of individual estimations. It might seem therefore that justice would require a standard of constant average value, not to society as