第7章

Chapter11

TheCostTheories(continued)。InterestasanElementofCostIncalculatingthecostvalueofhisproductseveryundertaker，inadditiontothevalueofthecapitalconsumed，includesinterestuponthewholecapitalsunkandboundupintheproduction，evenonthatwhichremainsunconsumed，fortheperiodduringwhichthecapitalmustremainsunk。Itisamatteroffamiliarobservationthattheexchangevalueofproducts，insofarasitisinfluencedbycosts，expressesalsotheinterestthuscalculated。Iftheproductionofonearticlecostsmerelylabourandcirculatingcapital，whilethatofanotherrequires，inadditiontothesameexpenditureoflabourandcirculatingcapital，alargeoutlayoffixedcapital，thesecondproduct(neglecting，ofcourse，thequotaforamortisation)willbeconsideredthemorevaluablebytheinterestonthewholefixedcapital。Thequestionnowariseswhetherwehave，inthiscircumstancealso，aphenomenonofnaturalvalue；whetheritisintheinterestofsocietygenerally，ormerelyinthatoftheindividualundertaker，thatinterestshouldbecalculatedamongcosts，andwhetherthisprinciplewouldrequiretobeobservedinthecommunisticstatealso。

Thereissomethingthatstrikesoneaspeculiarintheideaofincludinginterestamongcosts。Torrens\'objectioniswellknown。Interest，hesays，isprofit，andmustfirstbeearnedthroughproductionasthesurplusofreturnovercosts。Thusitisimpossibletoreckonitamongcosts。

FromthepointofterminologyTorrens\'objectioniscertainlyjustified。Ifwewish，ontheonehand，tofixthenetreturn，weshallnotimputeinteresttocosts，butif，ontheotherhand，weareseekingforthecostvalueofproducts，interestmustbeincluded。Inthesetwocasestheterm“costs“isusedinanentirelydifferentsense。Andthisisanerrorinsofarasthedoublemeaningremainsunnoticed，andis，inanycase，amisfortune，whethernoticedornot。Itwouldbebettertohaveasecondnamefortheseconduseoftheterm。

Whenweputthenameononeside，andexaminetheactualmatterofTorrens\'objection，wecometoadifferentconclusion。

Heretheobjectionentirelybreaksdown。Itprovestoomuch。Itisnotonlyinterestthatisderivedfromthereturnanditsvalue，butthevalueofcapitalitself。Torrens\'argumentexpandedrunsthus:——thevalueofproductsisfirst；interest，capitalvalue，thevalueofproductiongoodsgenerally，second。

Rightenoughuptothispointwehavecometothesameconclusion，andarguedfromitthatproductiongoodshave，asagainstproducts，noindependentpowertocreatevalue。Ontheotherhand，wehaveacknowledgedthattheydopossessthepowertoequalisethevalueofproducts。Invirtueofthispower，andofnohigherone，dotheyinfluencecostvaluegenerally，andthispowercannotbedeniedtointerest，onaccountofitsorigininthereturn，sofar，thatistosay，astheconditionsinthiscasearesimilartothosewhichholdasregardstheelementsofcostshithertoconsidered。

This，asamatteroffact，isthecase。Asweknow，thereisaconstanttendencytowardsauniformrateofincrementforallcapitalinoneandthesamemarket，and，onthewhole，therateisrealised。Fromthisitfollows，ontheonehand，thatnothingcanbeproducedwhoseusevaluedoesnotatleastyieldtheuniversalincrementoncapital——whichisanindirectdeterminationofthevalueofproductsbyinterest，inthewayofdeterminingtheamountsproduced。Anditfollows，ontheotherhand，thateveryproductwhoseusevalue，regardedbyitself，mightyieldasomewhathigherincrement，canbevaluedonlyaccordingtotheuniversalrateofinterest，totheextentthatitcanbereproducedatthepriceofthesamewhichisadirectdeterminationofvalue。Ifthingsmaynotbeproducedunderthegeneralrateofinterest，andiftheycannotbevaluedabovethegeneralrateofinterest，theirfinalvaluemust，alongwiththeotherelementsofcosts，includetheinterestaccordingtotheamountanddurationofthecapitalemployed。

Theprincipleofincludinginterestamongcostsfollowsfromaplanofproductionwhichaimsatobtainingthehighestrateofincrementfromeveryemploymentofcapital。Andasitresultsfromthis，soagainhasitareflexinfluenceincontrollingtheplanandgivingitdefinitelimits。Ifinterestwerenotestimatedamongcosts，orwerenotestimatedonthewholeamountofcapitalexpended，orfortheentirelengthoftimeduringwhichthecapitalremainsemployed，thedistributionofcapitalgoodsamongtheindividualbranchesofproductioncouldnotbesorelatedastoattainthehighestpossiblerateofincrement。Itwouldthenbepermissibletoemploycapitalwhereitonlycovereditsconsumption，butbroughtnoincrement，orwhereitdidnotobtainthehighestincrement，ortheincrementonthewholeamountofcapitalsunk，ortheincrementoverthewholeperiodoftimewhenitwassunkintheproductiveprocess。

Undercertaincircumstancesitisnecessarytoincludeevencompoundinterestamongcosts；thatistosay，whentheperiodoftimeduringwhichthecapitalissunkexceedstheperiodattheendofwhichinterestwouldusuallybeexpected。Productsarethemselvesre-employedasinterestbearingcapital，anditisthereforesofarprofitabletofindproductionswhichhaveashorterprocess。Theproductsoflongerprocessesofproductionmustreceiveanequivalentagainstthisadvantageofhavinginterestoninterestatanearlierdate，andtheyobtainitbyacorrespondingincreaseintheirusevalue。Onlyinthiswayisthehighestdegreeofutilisationinproductionasregardstimeobtainedandregulated。

Connectedwiththisisanexceedinglycuriousconclusion。

Inthecostvalueofproducts，undertakersincludetheinterestduetothatportionoftheirmoneycapitalwhichtheymusthold，forpayingthewagesoftheirlabourers，untilthesaleoftheproductstakesplace。Inthecommunisticstatethismoneycapitalwouldnotberequired。Itwould，therefore，appearthat，inthecommunisticstate，theinterestexpenditureinproductionwouldbecorrespondinglylower，andthatthepresentmannerofdoingissofaropposedtothenaturallawsofvaluation。Asamatteroffactthisisnotthecase；inthispointalsotheinterestoftheundertakerisidenticalwiththatofthecommunityatlarge，andleadstotheeconomicvaluationofgoods。Theundertaker，inincludingtheinterestonhiswagefund，simplyestimatesandexpresses——withreferencetohumanlabour——thedifferencesintimeofemployment。Itisnotthesamethingtoemploytenlabourersduringoneyearortoemployonelabourerduringtenyears，anymorethanitisthesamethingtoemployacapitalof？00foroneyearoracapitalof？0fortenyears。Intheformercaseasinthelatter，theprinciplesofeconomicactionrequirethat，besidesordinaryinterest，compoundinterestalsobereckonedtothevalueoftheproduct，ifaproperdistributionofproductionistobeattained。

Itneedsnoexplanationthat，invirtueofthis，productionisthemorelimitedthelongertheperiodoftheprocess，forthereasonthatacorrespondingincreaseinthevalueoftheproductisrequiredtomakethelongerprocessappearsufficientlyprofitable。Productionsofverylongdurationmustyieldaveryrichreturniftheyaretobeartheburdenoftheinterestwhichaccumulatesuptillthetimewhentheyyieldtheirfirstreturn。

Chapter12

TheCostTheories(continued)。LandRentasanElementinCostLand——understandingthewordinthatfamiliartheoreticalsensewhichreferstotheindestructiblepartofland——suffersnolossofsubstanceinproduction。Amongthecostsofagriculturalproducts，consequently，thereisnothingtobecalculatedforwhatwemaycallthe“substance-value“ofland。

Ricardogoesfartherthanthis，andaffirmsthattherentofland，likethevalueofland，cannotenterintocosts。Thiscontentionisentirelyinharmonywithhistheorythatrentisanetdifferentialrent，onlyascribabletothebetterclassesoflandemployed，whilethepoorestclasses，thosewhichareavailableinsuperfluity，yieldnorent。Iftheclassesoflandwhicharelastemployedarefreeandbearnorent，thedeterminingcostswill，asamatteroffact，bemadeupwithoutconsiderationofrent，simplybythesumofcostsincapitalandlabourwhichareappliedtothepoorestclassesofland。Therentyieldedbythebetterqualitiesoflandoriginates，asweknow，fromthesurplusreturnofproductswhichtheyassuretoequalcostsofcapitalandlabourandequalvalueofproducts。Rentis，therefore，derivedfromthereturn，withoutfindingexpressioninthevalueoftheproducts。

Itisotherwiseifrentisnotmerelyadifferentialbutageneralone。Ageneralrentmustenterintocostsjustasinterestdoes。Itmustbeincludedinthecalculationifthedeterminingamountofcostsistobeobtained。Whereallqualitiesoflandsandallpowersoftheland，eventhoseofthelowestclass，arerequiredtomeetthedemand，andallbearrent，thecircumstancethatclassesoflandofthepoorestqualityaredevotedtoadefiniteproduction，andso“tiedup“throughoutthedurationofthatproduction，isnotamatterofeconomicindifference。For，solongastheyremaintiedup，theirservicesarewithheldfromotherproductionstowhichtheymighthavebeendevoted。Incaseoffailure，theirrent，whichwouldotherwisehavebeenobtained，islost。Theirrentconsequentlybelongstoandmustbeincludedinthecostoftheproducts。

ForRicardoitisofprimaryimportancetopersistinmaintainingtheforegoingcontention，thatlandrentisalwaysdifferential。Hiseconomicsystemcannotdispensewiththepropositiondependinguponit，thatrentdoesnotenterintothevalueofproducts。Heimaginesitpossibletobringthevalueofproductsunderagenerallaw，andconsiderthemsimplyasmultiplesofunitsofcapitalandunitsoflabour。Theinterventionofinterestalreadyformsadisturbingelementinhislaw，buthebelieveshimselfabletoprovethatthedisturbingelementthusintroducedisofnogreatimportance。Butif，besides，theelementofrentplaysapartinthevalue，thewholelaboriousstructureofhistheoryfallstotheground，andhisattempttoderivethevalueofproductsfromlabour，andtouniteempiricalamountsofvaluewithamountsphilosophicallydemanded，iscompletelyoverturned。

Forthetheoryofvaluewhichwerepresent，ontheotherhand，itisamatterofentireindifferencewhetherthecircumstancesaresuchthatrentremainspurelydifferential，andthusdoesnotenterintothevalueofproducts，oraresuchascauserenttobecomegeneral，andthustoenterofnecessityintothevalueofproducts。Theonecasefitsintooursystemaswellastheother。

Further，therearecertainexceptionstothepropositionthatadifferentialrentcannotenterintothevalueofproducts。

Alongsideofthoseemploymentsoflandwhichmayberegardedastheprincipalones，andofthoseformsofrentwhichmightbecalledtheoriginalones，thereexistotherswhicharesecondaryandderivative。Theprincipalemploymentoffertilelandisinagriculture，butthebuildingofafactoryuponlandsuitableforcultivationisanexampleofasecondaryemployment，——ofanemployment，toexpressitotherwise，forwhichlandingeneralwillbelessrequired，andwhichinitselfwouldneverexhausttheavailablesupplyoflands，astheagriculturaldemandmighteasilydo。Ifafertilefieldisemployedassiteforafactorytheagriculturalrentwhich，inothercircumstances，mightbeexpectedfromit，willhavetobesurrendered。Thesacrificeofthisrentmeansanoutlayofcostswhichcannotbeneglectedincalculatingthecostsofthefactory\'sproducts。Whatevertheamountoftherent，itmustbedeductedfromthevalueoftheproductsmadeonthatbuildingground，anditisnottilltheremaindercoversthecostsofcapitalandlabourthatthecalculationiscomplete。

Thecaseissimilarwiththeground-rentsofdwelling-houses。

Ground-rentinalargetownisneverasimpledifferentialrent。

Attheperipheryofthetown，house-rentfindsitsmeasureinagriculturalrent，andrisestowardsthebusinesscentre，accordingtodesirabilityofsituation。Themorevaluableforcultivationthelandroundaboutthetownis，thedearerwillbethehousesinthattown。Tothisextentagriculturalrentactsasauniversalelementofcostsinthecalculationofhouse-rents。

Thedifferentialrentsreceivedfromfavouredsitesdonotmakehousesdearer，butareratheraresultofthehighvaluationplaceduponhousesinafavourablesituation。Andinsofarastheneedfordwelling-housesandtheneedforbusinesspremisescompetewitheachother，doestheoneemploymentoflandactupontheotherasanelementofcosts。

InfollowingoutthislineofthoughtweseethatRicardo\'spropositiongraduallylosesitsapplicabilityalmostentirely，asthecultivationoflandbecomesveryartificial，andtheusesoflandmultiply。Thevariousemploymentsbegintocompetewitheachother，andonehasalwaystomakechoiceamongseveral；thusthedifferentialrentswhicharesurrenderedtakeeffectascosts。

Ricardo\'spropositionthattherentoflanddoesnotenterintocosts，canbelegitimatelyappliedonlytolanddevotedofnecessitytoonedistinctuse，suchasmines，vineyards，andthelike。

Chapter13

TheServiceofIndividualEconomicValueinNationalEconomy(1*)

Thesupremeprincipleofeconomicactionbeingutility，valuepresentsameansbywhichtograsptheutilityofgoodsinasimplifiedandcomprehensivemanner，andsotocontroltheemploymentofgoods。Thuswehavedescribedtheserviceofvalueineconomygenerally，indoingwhichwehaveassumedthatvalueisestimatedaccordingtonaturallaws，andthatweareconcernedwiththevaluationofgoodsinstocks，ormarginalvaluation。

Thereturnvalueofproductiongoodsandthecostvalueofproductsarelikewisephenomenaofnaturalmarginalvalue。Theyaffordusasimplifiedandwidelycomprehensiveestimateofutilityinthemostcomplicatedcircumstancesofproduction。Themostheterogeneouskindsofproductiongoodsobtainacommonmeasureofvaluationthroughtheircommonproducts:theirreturnvaluesaremultiplesofthevalueofthecommonmarginalproducts。Themostheterogeneousproductsreceiveacommonmeasureofvaluationthroughtheircommonelementsofcost；theircostvaluesaremultiplesofthevalueofthecommoncostgoods。

Differentreturnvalues，ordifferentcostvalues，bearthesamerelationtooneanotherasamountsofgoodswhicharemultiplesofthesameunit。Inthiswayitbecomespossibletoestimatethesevaluerelationsinfigures，althoughthevalueandtheamountsofvaluehavetheiroriginintheincalculableintensitiesofwant。

Andyet，itisnotthisconsiderationthatattractsourattentionatthispoint。Nowwhenwehavepursuedthemainthreadsofthemuch-tangledwebofproductivecombinations，firstfromthereturnuptotheco-operatingproductiongoods，andthenbackagainfromthecostgoodstotheproducts，anotherconsiderationforcesitselftothefront:namely，thatinanylargereconomywhatever，particularlyinsuchaoneashasthecompassofanationaleconomy，andisbaseduponacomplicatedsystemofproduction，itisquiteimpossibletodispensewithvalueifwewishtohaveanyclearnotionoftheutilityofgoods。ARobinsonCrusoedoesnotrequiretheaidofvalue；hecanarriveatarightdecisionineveryinstancebysimplytestingwhatmanneroftreatmentislikelytosecurehimthegreatestamountofutilityonthewhole。Inanationaleconomy，ontheotherhand，withacomplicatedsystemofproduction，itisimpossibleinanywaytomakethenecessaryeconomicdecisionsbytestingtheutilityofgoodsonthewhole。Noonecantakeinthetotalresultofacommunity\'sproductionataglance。Therearetoomanygoods，andtoomanypossibleemploymentsofgoods，topermitofmakingonesurveyofthewhole，andonecomparisononthewhole。Thingsmustbegoneintoindividually；utilitymustbedividedup，andeverygoodhavemeasuredouttoititsshareinthetotalresult；thenonlyisitpossibletorecogniseindividuallywhicharethepoorer，whichthemoreprofitable，andwhichthebest。Buthowotherwiseisutilitytobemeasuredouttoindividualgoodsthanbyapplyingtothemthemethodsofmarginalvaluation，theprincipleofwhichis，togivethemthatutilitywhichisdependentonthesmallestquantityofgoodsthatisyetpracticallytakenintoconsideration？

And，further，theeconomicalemploymentsofgoodsresultfromtherelationsofsupplyanddemand。Itappearsthenthatitwouldbeimpossibletodiscovertheseeconomicalemploymentsiftheamountsofsupplyanddemandwerenotknownnumerically。Butwhoknowstheamountsofsupplyanddemandinthewidely-extendedeconomyofanation，or，indeed，intheworldeconomy，therelationsofwhichmakethemselvesfelteverywhere？Wholesalemerchantsofcoursetrytomakethemselvesacquaintedwiththem，anddoasafactsucceedinobtainingcertainfiguresrepresentingwhatcomesfromproduction，whicharetolerablyexact，especiallyasregardslargeproduction。But，ontheotherhand，itisalmostimpossibleforthemtoobtain，withanymeasureofexactitude，theequallyimportantfiguresofdemand。

If，inspiteofthis，itcanbemaintainedthateconomyonthewholeiscapableofadjustingitselftothevariationsinsupplyanddemand，thisisduesolelytotheaidaffordedbymarginalvaluation。Value，asmarginalvalue，givesexpressioninthemarginalcalculationtotheeffectproducedbytheexistingamountsofsupplyanddemand，eveniftheseamountshavenothithertobeenmeasured。Noownercanattempttogetridofagood，nobuyercanbeeagertogetone，withoutthiscircumstancehavinganeffectonthemarket，andinfluencingthesensitivemediumofvalue。Althoughnooneisable，andeventhoughnooneshouldattempt，tofigureouttheamountsofsupplyanddemand，valueshows，withnumericalexactitudeanddowntothefinestgradationsthatpeopleusuallymakeinpracticallife，therelationbetweensupplyanddemandinsofarasthesetendtomakethemselvesfeltinexchange。Valueshowstheeffectofcauseswhichinthemselvesarehidden。Andthroughthefactthatweadaptourselvestothiseffect，thisvalue，itfinallybecomespossibletoadaptourselvestothecauses，theamountsofsupplyanddemand，andthustoregulateaneconomywithdueregardtoeconomiclaws。Ifatanygivenpointoftimethevalueofallgoodsremainsasithashithertobeen，wemaybeprettysureofactingeconomicallyandaccordingtothestandardofeconomicalinsightalreadyobtained，ifweretainthedispositionofallgoodsinproductionandconsumptionunaltered。Ifvaluehasalteredatanypoint，itisanindicationthatthepresentdispositionofgoodsmustbechanged，andchangedindirectaccordancewiththechangeofvalue。Wherevaluehasrisentheremustnewgoodsbedirected，beitforproductionorforconsumption:whereithasfallenthesegoodsmustbewithdrawn。

andthistransferringofgoodsfromonepointtoanothermustbecontinueduntilallvaluesarebroughtoncemoreintoequilibrium，andforeverystockofgoodsthelawofequalvaluationofallitsunitsisre-established。

Aknowledgeofthevaluesofgoods，suchashasexistedineveryeconomyuptillnow，isconsequently，initself，oneofthemostvaluableofpossessions。Itisalmostasvaluableasthepossessionofthegoodsthemselves，inasmuchasitisthekeytotheiruse。Thesumofthousandsofyearsofexperienceconcerningthesourcesofsupplyofgoods，andthesuitabilityorotherwiseoftheconditionsoftheirproduction，aswellasconcerningtheamountofdemandforthem，isrepresentedinthefiguresofvaluehandeddowntous。Wereanationtoloseallremembranceofthese，itwouldbeanenormouseconomicmisfortune。Analmostincalculableperiodoftime，analmostincalculableamountoferrorandloss，wouldhavetobegonethrough，beforethenationcouldagainobtainmasteryovertherelationsofgoodsformerlyexpressed，withnumericalclearness，foreachindividualgoodbymeansofvalue。

Bythesocialistprogrammeitisproposedtomanagethecountingofstocksandcalculationofdemand，inthestateofthefuture，bymeansofgovernmentstatistics。Couldthisplanbesufficientlycarriedoutitwouldbesofarpossibletodispensewithmarginalvalue。Ontheotherhand，itcanneverbedispensedwithwherethefindingofanexpressionfortheutilityintheindividualgoodisconcerned。Todispensewithitwouldbeequivalenttogivinguptheattempttodetermineutilityintheindividualcase，andbeingcontentwithmakingageneraldeterminationastothedirectionofproductionandconsumption，leavingoutconsiderationofthequantitieswhichitisdesirabletogainorconsume。

HereIleavethesphereofconditionsofvalueinprivateeconomies。ClearlyasIrealisetheimperfectionofwhatIhavetriedtodo，Iyettrustthatthereaderwillhavebeenconvincedthatexchangevalue，asexpressedinprice，isnotonlygovernedbypricecompetition，butcontainsadeepereconomiccontent；

thatexchangevalue，althoughmixedwithforeignelements，unitesinitselfalltheessentialelementsofthenaturalvaluationofgoods，thevaluationwhichisindispensabletoeconomicaction。

Ifthepricesforallsimilargoodsinoneandthesamemarketareequalinamount，itisbecause，inthelastresort，thevaluationsofallsimilargoodsinoneandthesameeconomyareequal。Ifthepricesforallgoodsinonestockarefixedatthemarginalpoint，itisbecause，inthelastresort，thevaluationsaresofixed。Insofaraspricesrepresentnaturalvalue，anenormousandarduousmentallabourofcalculatingtheexchangevalueofthingsissaved。Bythousandfoldweighingandconsiderationoftheproductiveandothereconomicalrelations，eachindividualgoodgetsmeasuredouttoitthatamountofthetotalreturnwhichmustbedirectlyimputedtoitoutofthetotalamountofthetotalproduction，ifthegoodsaretobeprofitablydealtwith。Ihavechosentheword“Imputation“aftermuchdeliberation。Itisnotonlytoproductiongoodsthatreturnisimputedanddistributed；allgoodsgetimputedanddistributedouttothemtheutilitywhichtheygiveonlywhenco-operatingwithoneanother。Thereisnosatisfactionthatisnotpreparedforandfollowedbyothers；alloursatisfactionsstandinmutualactionandreactionwitheachother。Everyman\'smeansarethuslinkedtogether。Individualeconomicvaluationsucceeds，nevertheless，indistributingthiswhole，andimputingtoeachseparateportionofwealthitsshareofreturn，insuchawaythat，asarule，everyoneiswelladvisedwho，withinthesphereofhisownindividualeconomy，takestheamountofvaluethusascertainedasmeasureforhiseconomicaction。

Whereexchangevaluedivergesfromnaturalvalue，somethingelsemustofcourseobtain，butitisbeyondourspecialtasktoenteronthisconsideration。

Itstillremainstoshowhowfarnaturallawsrequirethatindividualeconomicvaluationbecomplementedbytheeconomicalconsiderationsofacommunity，or，moreparticularly，ofastate。

NOTES:

1。SeeUrsprungdesWerthes，p。165。

NaturalValue byFriedrichWieserBook6

ValueintheEconomyoftheStateChapter1

IntroductionIntheexchangetransactionsofprivateeconomieswithoneanother，objectiveexchangevalueactsastheeconomicalmeasureofgoods，while，withinindividualprivateeconomies，thispartistakenbysubjectivevalueaseachindividualownerestimatesit，whetheritbesubjectiveexchangevalueinconnectionwithobjectiveexchangevalue，orusevalueindependentofit。Alltheseformsofvalue，reflectingwithmoreorlesstruththeircommonprototype，gobacktooneoriginalform，viz。thatwhichwehaveindicatedasnaturalvalue；naturalvaluebeing，inthelastresort，theresultantoftwosimplefundamentalcomponents，quantityofgoodsandutilityofgoods。Evensuchphenomenaaslandrent，interestoncapital，costs，arenaturalphenomenaofvaluewhichcouldbesuppressedonlybyaforcesopowerfulthatitwouldatthesametimeinjureeconomiclifeandactionitself。

Besidesprivateeconomiesthereexistagreatmanypubliceconomies。Thequestionnowiswhether，inthemalso，thevalueofgoodsholdsthesameplace，andwhetherinthemittakesonanynewandpeculiarforms。Ishalllimitmyinquirytothemostimportantofsocialeconomies，thatofthestate，anddealevenwithitonlyinthemostgeneralway。Thetheoryofsocialeconomiesisyetinitsinfancy，anditwouldbeimpossibletodiscussvalueinthematallexhaustivelywithoutfirsthavingthoroughlygoneintoagreatmanyothersubjects。It，therefore，appearstomebesttoconfinemyselftoanentirelygeneralandcomprehensivestatement。

Stateeconomydividesitselfintotwogreatspheres，theeconomyofincomeorfinance，andtheeconomyofexpenditureoradministration。Administration，however，belongstotheeconomyofthestateonlyinsofarasitisdeterminedbyeconomicalconsiderations。Thisisthecasemainlywhereregardishadtothematerialinterestsofthepeople，thatistosay，intheeconomicadministrationortheeconomicsuperintendenceofthestate；butthereisnosingleformofnationalactivitybutmustfolloweconomicprinciples，ifonlyinthesecondinstance；viz。

inregardtothecarefulandeconomicalemploymentofitsresources。

Uptillquiterecentlyeconomistshavenot，eitherinfinanceoradministration，recognisedinvaluethatimportancewhich，byanalogy，mightbesuspectedfromitsroleinprivateeconomy。

Withregard，inparticular，tofinance，theoryhasmanagedtodoalmostentirelywithoutvalue。Theprinciplesoftaxationhavebeenandarealmostalwaysstatedwithoutvaluebeingmentioned，orifmentionedithasbeen，atthemost，onlycursorilytoucheduponbywayofcomparison。Taxationgetsitswarrantinspecificconsiderations，notingeneraleconomicones。Wespeakofminimumofsubsistence，abilitytopay，sacrificeoftaxation，progressivetaxationandsoon，almostentirelyasiftheywerefactsandconceptionsbelongingtoadistinctsphere，whileneitheristherelationofthisspheretothefundamentalphenomenaofalleconomymadeclear，norisanyattemptmadetomakeitclear。

AdamSmithandhisschooltreattheeconomicadministrationofthestatealsoinasimilarmanner。Theyexplainitsimplybythenecessitiesofnationallife，andvalueneverentersintotheirconsideration。Wheretheydomakementionofitexchangevalueisalwaysunderstood，——thatbeingtheonlyvaluewhichtheschool，asarule，recognises。Anypeculiarvaluepertainingtotheeconomyofastateisneverdiscussed，asingeneralalleconomicconceptionsareborrowedentirelyfromthecircumstancesofprivateeconomies，andbeartheircharacteristics。Connectedwiththis——ascauseandeffect——thereisastrongtendencytolimitthesphereofstateeconomy，andtoextendthatofprivateeconomy。Everytheoryformulatesitsconceptionsinconformitywithitsfundamentaltendencies，butitstrengthensthesefundamentaltendenciesinturnbythelogicalweightwhichtheconceptionsonceconstructedexert。Apersonwhorecognisesnoothervaluethanexchangevaluewill，whereverhiscommonsensesaysthatitisaquestionofvalue，generallyallowexchangevaluetodecidethematterinitsone-sidedway，orwill，atallevents，givetoittoogreatapreponderance。ThewayinwhichAdamSmithrejectsprotectionandarguesforfreetrademayberegardedastypicaloftheschool。Thenationalincomeistobemeasuredbyexchangevalue:butthusmeasuredfreetradewillundoubtedlygivethelargerincomeinthenearfuture:

consequently，asitisalwaystheincomeofthepresentthatformsthecapitalofthefuture，freetradeassuresthegreatestamountofwell-beingforalltimetocome。

InGermanythisone-sidednessoftheEnglishschoolwasearlyrecognised。Manywriters，as，forinstance，FriedrichList，activelycombatedit。Listplacedhis“theoryofproductiveforces“alongsideofhis“theoryofvalue“:exchangevaluewastobethedeterminingforceinprivateeconomicrelations，whereas，intheeconomyofthestate，“productiveforce“wastotakeitsplace——anantithesiswhoseinadequacyismostclearlyshownfromtheconsiderationthat“productiveforces“arethemselvesestimatedaccordingtoexchangevalue。Mostwriterstookadifferentcourse。Theytried，gradually，andatfirstaltogetheracademically，tobroadentheprivateeconomicviewsoftheEnglishSchool，insuchawayastomakethemasfaraspossibleapplicabletoalleconomicrelations。Asregardsvalueinparticular，exchangevaluewastracedbacktothegeneralconceptionofusevalue，andthenconceivedofasnationalorsocialusevalue。Thuslittlebylittlethetheoryaltereditsformalcharacter。Itundoubtedlybecamemorerounded，moreplausible，moreadaptable，butatthesametimemoreindefiniteandinexact。Withoutfollowingaccuratelythefurtherdevelopmentofthistheory，Imaypointoutitsmostimportantfact:thatthescientificdiscussiondidfinallygiveupitsacademichesitation，and，inspiteoftheslightnessofitstheoreticfoundation，laiddownwithsuccessanddecisionprinciplesforthepracticalformationofastateeconomy。LikethefinancialsystemoftheEuropeanstates，theireconomicpoliticsweregraduallyreformedbytheactiveassistanceoftheory，althoughtheoryitselfhadnotcompletelyaccomplisheditstask，nor，indeed，wasquiteawarewhatthattaskwas。The“theory“wasahighly-developedtechnology，capableofgivingrightdirection，althoughitdidnotsucceedinfindingitsjustification——andwiththat，ofcourse，itslimitation——inabsolutelyconvincingclearness。

ThelatelypublishedworkofE。Sax(GrundlegungderTheoretischenStaatswirthschaft)isthefirsttocompletethetransitionfromtechnologytothetheoryofnationaleconomy，andhasthusatlastreachedagoalaimedatbytheGermaneconomiststhroughalongandsteadydevelopment。InthesphereofadministrationSaxhassucceededinindicatinghowpublicinterestsmayhavethewidestplay，whilestillmaintainingafixedeconomicconceptionwhichholdsfastbytheessentiallyeconomic。Theeconomicisoneandthesameinallitsforms，everywhereentirelydistinctfromthenon-economic。VeryimportantistheapplicationofSax\'sworktothesphereoffinance——allthemoreimportantthatherehehadalmostnopredecessors——andthattheideaisthoughtoutintodetailswithgreatclearness。Thewholesystemofimpostsrestsonvalue:

thissimplepropositionmakesthescienceoffinanceforthefirsttimewhatitshouldalwayshavebeen，apartofpoliticaleconomy。“Impostsofallkindsareexamplesofcollectivevaluationwhichfindtheirfullexplanationinthegeneralnatureofthephenomenonofvalue。Thetruthwhichfindsexpressioninthisformulaisdirectlydecisiveforthetheoryofnationaleconomy，asabranchofthetotaltheoryofpoliticaleconomy，balancingthatofprivateeconomy。Thesimplicityofthesolutionisaguaranteeofitscorrectness。Theapplefallsfromthetreeandthestarsdescribetheircoursesinobediencetooneandthesamelaw，thatofgravitation。ARobinsonCrusoeandanationnumberingahundredmillionsoulsobeyoneandthesamelawintheireconomicaltransactions，thatofvalue“(pp。307-8)。

ThestatementwhichfollowsissogeneralandsocondensedthatIhavehadbutlittlechanceofgoingintotherichcontentsofSax\'sbook。IntheinterestsofthestatementIhave，moreover，considereditwiser，evenwhereIdisagreewithSax，torefrainfromthemostpartfromanyattempttoprovemydivergenceswithanygreatexactitude，as，inthisportionofmywork，evenmorethanintheformer，Ihaveneglectedtheliteraryaspectofthesubject。Here，asformerly，mytaskhasbeentodemonstrate，comprehensivelyandasawhole，whathashithertobeenconsideredonlyinisolation，ifatall。Itappearedtomeforeigntotheplanofmywork，andlikelyonlytoincreasethedifficultyofthetaskwhichchieflyconcernedme，——thatofaffordingasurveyofthewholesubject，——wereItoletmyselfbecarriedawaybycriticismandpolemicintodetailwhichI

shouldnothavegoneintoforitsownsake。

Chapter2

TheProvinceofaStateEconomyItisgenerallyassumedthattheobjectoftheindividualeconomyisprovisionforthewantsoftheindividual——thatistosay，thosewantswhichtheindividualfeelsasanindividual；

andthattheeconomyofacommunityprovidesforthecommonorcollectivewants——thatis，thosewhichareexperiencedbytheindividualasmemberofacommunity，or，toputitdifferently，thewantsofacommunity。Theeconomyofastatethereforeprovidesforthewantsofthestate，i。e。thosewantsexperiencedbythecitizensofastateinconsiderationoftheircivicconnectionwitheachother。Thisconception，however，scarcelycorrespondswiththeactualdivisionoftheeconomicsphere。

Nationalinterests，whichareundoubtedlytobereckonedundertheheadofcollectiveinterests，arefrequentlyfurtheredbypersonalsacrificeandexpenditure。Andmorenumerousinstancesmaybeadducedofthecontrarycase——thatindividualinterestsarefosteredbycollectiveefforts。Thedesiretopossessameansofcomingandgoingtoone\'sbusiness，isundoubtedlypersonalinthehighestdegree；butthehighwaysoftraffichavebeenincludedamongtheconcernsofthecommonwealthalmostsincethebeginningoftime。Inthecommunisticstatethecareofprovidingfortheentiresumofindividualwants，wouldfallaltogethertotheeconomyofthestatewithoutthesewantshavingchangedtheirnatureinanyway。Itmust，therefore，besomecircumstancewhichdoesnottouchthenatureofthewantitselfthatdeterminesthedivisionoftheeconomicsphere。

Asimpleconsiderationenablesustorecognisewhatcircumstancethisis。

Thepersonalabilityoftheindividualisinmanycasessufficienttosecurehimtherealisationofhispersonalwishes。

Inparticular，thespherewithinwhichtheindividualiscapableofmakinghimselffeltwitheffect，isquiteextraordinarilyenlargedwhenmenhavelearnttomakeuseofthedivisionandco-operationoflabour。Bymeansofthistheyenterintocombinationsandexchangewithoneanother，andthusincreaseenormouslytheirpowerofwork，while，atthesametime，theycalculateanddistributeoutagaintotheindividualtheadvantagesobtained，andthusremainseparatefromeachother，asindividualswithindividualrights。Thereare，however，certainresultswhichdemandamoreintimatekindofconnection，——aconditionofrealcommunity，——andcannotbeobtainedwithoutit。Thedesiretoobtaintheseresults，whichoftenamountstothefeeingofaperemptorynecessity，leadstotheformationofthecommonwealth。

Therearevariousreasonswhichmaymaketheattainmentofacertainresultdependentupontheformationofcollectivebodies，anduponthecarryingoutofcollectiveactions。

Inthefirstplacemaybementionedthenatureoftheactioninquestion。Formanykindsofactiontheindividual，asindividual，isnotqualified；hefeelshimselftooweak，or，itmaybe，quiteincapable。Fromthefirstithasdevolveduponthestatetorepresentthecommonweal，incaseswherenothingbutthesolidarityofmanyorofallisabletocreatetheforcethatislackingtothescatteredindividuals。Onlyasaunitedstatecanapeoplehopetowardoffitsenemies，andtoprotectitscitizenswheninforeigncountries。Onlyaunionofpeoplecansucceedinguardingacountry\'speace，andpreservingorderagainstcrimewithinitsborders。Fromthegeneralfeeingofjusticeareobtainedtheweightandpowernecessaryforthelayingdownoflawswhichwillbindeveryone，andfortheappointingofjudgesandofficerswhowillmakeeveryonebowbeforetheonecommonlaw。Andthusnumerousinterests，partlycollective，partlythemostordinarygeneralinterestsoftheindividual，leadtoanever-wideningextensionofthesphereofthestate\'sactivity，wherevertheopinionprevailsthatonlythestatepossessesthepowerofofferinganyguaranteeofthesatisfaction，orthefullsatisfaction，thatisdesired。

Inthecaseofsuchactionsasareexecutedincommon，thereisanoverwhelmingtendencytobeartheburdenincommon，andtoenjoytheresultsincommon。Evenifthepowerofthestateissetinmotionforthesakeofonesolitarycitizen，theoccasioncannotwellbejudgedmerelyfromthestandpointoftheinterestofthatonecitizen。Theveryfactthatthepowerofthestatehasbeensetinmotionatall，engagestheinterestofthepublic，becausethispower，oncesetinmotion，cannotbeallowedtomoveinvain。Allitsfuturesuccessdependsontherecognitionofthis。Forthisreasontheoutcome，forinstance，ofeverysinglecriminalorcivilprocessisfullofimportancetothewholecommunity。Everysuchprocessmustbesoconductedthatrespectforthelawmaybestrengthened，notshaken。Butgenerallyspeakingtheoccasionsonwhichthemachineryofthestateappearsonthesceneare，intheirorigin，mattersofgreatimportanceandofgreatcompass——frequently，ofthegreatestimportanceandthegreatestcompass；theyareindeedsuchmattersasonlytheunitedstrengthofthewholepeopleissufficientfor。Thiscircumstanceofitselfmakesitimpossible，asarule，todivideoutamongtheindividualcitizenstheresultobtainedbythecombinedeffort，oreventochargeittotheindividualaccordingtoitseffects；hencethenecessityofwakingthebenefituniversallyaccessible，orascribingittothepeopleasawholewithoutfurtherdistinction。Ithappenscomparativelyseldomthatindividualscanbeindicatedandsingledout，whoseinterestsareexceptionallyconcerned，andforwhomtheservicesofthestatemaybeexceptionallyinterposedandcharged。

Inthesecondplace，justastheresultsofawararenottobeboughtorsold，andawarcannotthereforebecarriedonasaprivatematter，(1*)soithappensthat，amongtheundertakingforwhichthemeansandpowersoftheindividualcitizenssuffice，thereareverymanywhichmustbeexcludedfromthecircleofprivatebusinessbecauseoftheimpossibilityofobtaininganyprofitoutofthem。Themostvariouscircumstancesmayhavethiseffect。Thestreetsofatownwouldbeuselessforpurposesoftrafficiftheywerenotfreetousewithoutpayment；thismakesitimpossiblethatanycitizenshouldretainpublicroutesforhisownbenefit。Thesameprincipleholdsinallcaseswheregoodswhoseproductioncostssomethingmustbemadeovertothepublicfreeofcharge——“quasi-freegoods，“asMengercallsthem。Manyundertakingsalso，althoughthepublicinterestdemandsthematonce，givepromiseofreturnonlyinthedistantfuture；——sodistantindeedthatnoprivateindividualcouldbeexpectedtowaitforit:thisisthecase，e。g。，asregardsmanyrailways。Veryoftenagainitisdoubtfulwhetherthereturnofanundertakingwilleverbesufficienttocoverthecosts，whileatthesametimetheresultsincaseofsuccessaretemptinglylarge；hereprivateenterprisewouldhesitate，eitheronaccountofthegreatamountofcapitalnecessaryorforotherincidentalreasons。Veryoftenthereisascarcityofcapableandenergeticprivateundertakers，simplyonaccountofthedefectiveeconomicaldevelopmentofthecitizens。Andthereareoftencaseswherethegoodsconcernedare，fortheprivateeconomy，onlyinprocessofbecoming——stillincomplete，unripe，latent；wherethegoodsmustfirstbegotat，orthegoodsthataretosupplementandcomplementthembediscovered，beforetheybecomecapableofrenderinganyusefulservice。Howmuchlatentlabourpowerthereiswhichmustfirstbecomeconsciousofitsownexistenceandtrainitself，beforeitcanfindamarket！Whathiddenwealthmaynotslumberinalandfavouredbynaturebutuncultivated，itsexistencesuspected，evenknown，butoutofreachowingtothegeneralbackwardconditionofindustry，ofwealth，ofeducation，ofcredit，oflaw，orofpeace！And，although，insuchacase，thereisasyetnosecurefoundationforprivateenterprise，whatgovernmentwouldnotregarditasadutyitselftocomeforwardandtakehold，notonlyinthewayofgeneraladministration，butbyeconomicundertakingswhichtrainandripenhumanfacultythoughtheymaygivenodirectreturn？

Sometimesonlythewantisthere，cryingurgentlyforsatisfaction，whilethosewhofeelithavenopowertopayforitssatisfaction；inthiscasenoprivateundertakercandoanything，andthestatemuststepintomitigateanevilwhichmightgrowtobeagreatpublicill。Manyothersimilarcircumstancesmightbeadded，allactinginthesamedirection；

thatistosay，excludingprivateenterprisebyreasonoftheirunprofitableness，butdemandingtheactivityofthestateonaccountoftheimportanceofthegoodsconcerned。

Inthethirdplace，manyundertakingswhichliewithinthepowerofacitizen，andwhichalsoholdforthtohimapromiseofgain，arereservedtothestate，forthesimplereasonthattheywouldputtoomuchpowerintothehandsoftheprivateundertaker，orassurehimtoogreatagain。Thefearisthattheexceptionalpositiontheywouldnecessarygivetothepersonwhoundertookthemmightbemisused。Thebusinesseswhichbelongtothisclassaremostlynecessarymonopolies，——particularlymonopoliesofgreatextent，suchasthepostandtherailway。Wedonotexpect，inanindependentprivateundertaker，therequisitereliableness，orthewilltoundertakesuchhugebusinesses，ortocarrythemthroughasweshouldlike；orweexpectthattoohighapricewouldbechargedfortheservice。

Butinallthesepointspeoplelookforsomethingbetterfromagovernment。Thisdoesnot，however，intheleastinvolvethattheformofundertakingforprofitbeentirelyrejected。Itmayberetained，but，withtheendeavourtoobtainthehighestbusinessreturn，mustbeconjoined，insomewayorother，theendeavourtoservetheinterestsofthepublic。Inparticular，whereanyconsiderablewantisconcernedwhilethepowertopayiswanting，theservicemustbeundertakenatlimitedprices，——thatistosay，valuationaccordingtoexchangevaluemustbereplacedbyvaluationaccordingtonaturalvalue。Thusemergesthe“publicenterprise。“Inthecommunisticstateallproductionwouldbetheaffairofthestate，andfallunderpublicenterprise，fromaconsiderationwhichamountsessentiallytothis；——thatprivateproductionisone-sided，andlookstotheinterestsofthericherclasses，whileputtinginthebackgroundtheinterestsofthecommunityingeneral。Eventheaffairsoftheprivatehouseholdwouldbe，forthemostpart，givenovertothestate。

Ifwecastaglanceoverthewholeseriesofdutieswhichconstitutetheeconomyofthestate，itwilleasilybeseenthat，apartfromthediversityoforiginatingcausesjustdescribed，theyarealsodistinguishedfromeachotherbytheircontent。

Certainofthem——ofwhichthelast-mentionedgroupisthebestinstance——areverycloselyrelatedtoprivateundertakings。

Likethemtheyhavetodowiththedirectapplicationoflabourtogoods；theyhavetodowithdetailandwithindividualproduction；andtheyarescatteredincountlessseparateactionsandoccupations——manyoftheseofasimilarnature——overcountlessseparategoods。Hereitisconsiderationsmoreremoteandfar-reachingthatexcludeprivateadministrationinmatterswhere，otherwise，itmightbesuitableenough。Thiscanbemostclearlyrealisedifweconsiderthebusinessesofproductionandofhousekeepingastransferredtoacommunisticstate。Thesewouldindeedceasetobemattersofprivateeconomyinthepersonalsense，but，essentiallyortechnically，theywouldremain，iftheexpressionmaybeemployed，“economicindetail。“

Quitedifferentisthecharacteroftheremainingactsofstateeconomy，whichchieflybelongtothefirstandsecondgroupsjustdescribed。Theirdutiesdonotadmitofbeingdischargedbyprivateeconomiesforvariousreasons，butthesereasonsalllead，inthelastresort，tothesameissue；——thatsuchactsarebeyondthecalculationoftheindividual，eitherbecausetheirproductscannotbeboughtandsold，orcannotbeboughtandsoldindividually。Theirresultsgowithoutmoneyandwithoutpricetothepublic，——eitherinwholeoringreatpart，——accordingtowhatSaxcallsthePrincipdesallgemeinenGenussgutes。Theyaretransactionsonagreatscale，workingwithlargemeans，andlargereturns，——returnswhichitisoftenentirelyimpossibletodistribute。Theyassurethegeneralfoundationsofpersonallifeandofeconomicaction。Theirresultsmustbedistributedoverallthecommunityandnotdividedoutindividually，evensupposingitpossibletoconceiveofthemasdistributedtotheindividual。Ofcoursetheyareundertakenonaccountoftheutilitytheypromise；butitisfrequentlyfarfromcertain——ase。g，inthecaseofwar——

whetherthedesiredresultwilleverbeattained。Andevenifitisattaineditsamountcan，forthemostpart，beonlyapproximatelydetermined，partlyonaccountofthewiderangewhichitcovers，partlyonaccountofthelargenumberofpersonsconcerned，partlyonaccountoftheimpossibilityofconceivingtheindividual\'sshareinit，partlyonaccountofthelongprocessofdevelopment，andthelongtimethatmustelapsebeforemanyofitseffectsemerge。Veryoftenallthatoneknowsofanactionisthatitmustnotbeneglected，andthatwemustsummonallourforcestoundertakeit；whileitisalmostentirelyuncertainhowintheendthelifeofthepeoplemaybeaffectedthereby。Oftenitisothergenerationsthatmustpassjudgmentuponit。

Inthecommunisticstatealso，ifalleconomicalmattersaretodevolveuponthestate，decisionswillcertainlybemadefromthispointofview；theaffairsofthehouseholdandofordinaryproductionwillbekeptseparatefromthoseofthegeneraleconomicandstateadministration。Intheformercasegoodswillbeestimatedattheirnaturalvalueasthatisnowdeterminedinprivateeconomy，i。e。accordingtomarginalvalue；inthelattercase，thisformofvaluationwillbe——asweshallgoontoshow——toagreatextentabandoned。Alongsideofit，orinitsstead，willbeplacedanotherformofvaluation，whichwemaybestcall“nationaleconomic“valuation，——atermwhichcertainlydoesnotexpresstheformulasofcommunism，butthoseofexistingeconomicalconditions。

Chapter3

ValueintheNaturalEconomyoftheStateSupposetheutopianstateofcommunismactuallyrealised，therealso，aswehavejustseen，wherealleconomiclifehasbecometheconcernofthestate，mustthesamedistinctionasnowbemadebetweenprivateeconomyandstateeconomy，thoughpossiblyunderdifferentnames。Ononesidemustbegroupedbythemselvesallthosebusinessesofthehouseholdandofproductionwhicharenowleftinthehandsofprivateindividuals，togetherwithmanyundertakingwhichessentiallybelongtoprivateeconomy，butareatpresent，forspecialreasons，conductedbythestate。Ontheothersideanddistinctfromthese，mustbeplacedallmattersofthegeneraladministrationofthestate——orofallthatiseconomicinit——andofeconomicpoliticsingeneral。Ofcourse，therewouldbenolackoftransferencestoandfromeachgroup，andwhatevermightbetherulingconsiderationintheonegroupwouldhaveaplaceintheother。Thisdoesnot，however，inanywayconflictwiththestatementthattheleadingprinciplesineachmustbedifferent。

Intheformer，orprivateeconomicgroup，wheregoodsarecapableofbeingmeasuredveryaccuratelyastotheiramountandutility，themainendeavourmustbetoobtainfromeverypracticallymeasurableportionofgoodsthegreatestamountofgenerallyrecognisedutility。Thisendeavourmustfinditsexpressioninanestimateofvaluewhichtakesitsmeasure，foreachsinglegood，fromthemarginatwhichthemostperfectlyutilisedsupplymeetsthemostperfectlysifteddemand。Inthesphereofproductionsuchanestimateofvaluetakes，asweareaware，theformofanestimateofreturnorofcosts。Thevalueofstocksofsimilargoodsmustberepresentedasmultiples:thevalueofproductiongoodscombinedintheshapeofproductsassumsofmultiples。Theindividualamountsmustbecalculable——

inmanyinstancesveryexactlycalculable——againsteachother。

Anexacteconomiccalculusmustbeestablished，theadvantageanddisadvantageofeverysufficientlyfamiliarprocessbeingputinfigures；anditmustberegardedasthetriumphofeconomicarttoexactlyascertainandexactlyrealisethatplanwhichthevaluecalculationindicatesasthebest。

Inthelatter，ornationaleconomicgroup，thefirstprinciplemustalsobetosecurethegreatestamountofutility，thehighestwell-beingofthecitizens。Buttheutilityanditsamountwillnotbesoexactlyestimated；willoften，indeed，aswehavealreadyprovedatlength，beveryinexactlyestimated。Asthemeansnecessarytoachievetheendsofthestateareforthemostpartveryextensive，andthemoreorlesscannotbesoexactlydetermined，theindefinitenessofthevaluationwillbeincreasedfromthesideofthegoodsalso。Theestimateofvaluewilloftenbeveryvague，andinmanycasesunanimityofopinionregardingitisnottobeexpected。Moreexactestimateswillbeobtainedonlyasregardssuchgoodsasarealsoemployedinprivateeconomy，bytransferringtothemthedefiniteestimateobtainedbyprivateeconomy，andalsoasregardssuchgoodsasareobtainedthroughproduction。Butwherenationaleconomymakesuseofspecificgoodswhichdonot，eitherbyreasonoftheiremploymentororigin，taketothemselvestheestimateofprivateeconomy；(1*)wherenationaleconomystandsabsolutelyandentirelybyitself，andseekstoguardpublicinterestsbyspecificpublicmethods；there，inplaceofthequantitativeestimateofthevalueofgoodsinmasses，willemergethevagueanddisputablevaluationofinterests，influencedbyinclinationsandpassions。(2*)

Theoppositionbetweennaturalvalueinnationaleconomyandnaturalvalueinprivateeconomyreducesitself，ineffect，toanoppositionbetweenvaguenessanddefiniteness，subjectivevaluationandexactcalculation。Eventhusthecontrastissufficientlygreattoobtainclearandpeculiarexpressioninpracticalpolitics。Theoretically，ofcourse，therecanneverbeanydoubtastotherelationofthetwo。Justasprivateeconomicinterests，wheretheycompetewitheachother，arerankedaccordingtotheirrelativeimportance，sotheinterestsofprivateandofnationaleconomyarerankedinrelationtoeachother。Themoreimportantaimtakesprecedenceofthelessimportant——thisformsthetheoreticbasisonwhichtheestimateofvalueisbuilt。Buthowwillthisruleworkinpracticewhenanydoubtarisesastothedegreeofimportance？Asamatteroffact，theindefinitenatureofnationaleconomicvaluationsmustinpracticefrequentlygiverisetodoubtsastotheexactrelationwhichtheactsofprivateandofnationaleconomyshouldbeartoeachother。Veryfrequentlyitisthesamegoodsthatmaybeemployedbyeitherprivateornationaleconomy；inthelastresort，indeed，thereisnothingbutonefundoutofwhichtoprovideforboth，andonlyafewgoodsarefromthefirstspecificallyreservedforoneortheothersphere。A

characteristicandcommoninstanceofthecompetitionbetweenthetwointerestsoccurswhereanundertaking，whichisprofitableasaprivatebusinessasshownbyitscalculablereturnindirectresults，ismaintained，fromthesideofnationaleconomy，tohaveanunfavourable，destructive，orunderminingeffect；thatistosay，asregardsresultswhicharemoreremoteanddifficulttofollow。Alongsideofthiswehavetheconverseinstance，thatanundertakingwhichisunprofitableasaprivatebusiness，andwhosevaluablereturnsdonotcoverthecosts，may，fromthepointofviewofnationaleconomy，beregardedasprofitable，whethertendingtoprogressorconservativeasthecasemaybe。

Whatholdsasregardsindividualundertakings，alsoobtainsasregardswholegroupsofthese，——ofthegreatactsoflegislationandadministration，ofthevariousbranchesandspheresofproduction，oftheactivityoftheproducingclassofanation。Itmighte。gbedisputedwhetheragricultureorthelabouringclassesoughttohavepublicsubsidy——i。e。supportwhichmightnotbejustified，fromthepointofviewofprivateeconomy，bythevalueofthelandproductsortheresultsoflabour，butmightbejustifiedifonelookedatthemaintenanceofthestabilityofthenationaleconomyandofthelifeofthepeople。

Inthecommunisticstate，asintheeconomyofto-day，therewillbenolackofoccasionswhichwillcontinuallyforcepeopletodecideanewbetweenconsiderationsofthequantitativeandcalculableproximatereturns——considerationsofdirectprofit，——andofresultsmoreremoteandlesscalculable——

considerationsofgeneralinterests。Supposethatthesubjectweresometechnicalimprovementliketheestablishingofrailways，discussionswouldundoubtedlyarise，——astheydidatthetimewhenrailwayswereintroduced，——astotheirutility，feasibility，andconsequences。Andevenafterexperiencehasputanendtothegeneraldiscussion，therewillstillcontinuetobeaconflictofopinionsastothemoreexactrelationbetweenthecalculableresultsandtheincalculable。Or，possibly，theremaybeadoubtwhethertheindustryofapeopleshouldtakethedirectionoftradeorofagriculture；whetherthepowerofthelabouringclassesshouldbemoreutilised，ormoreeconomised；

possibly，also，whetheritwouldbewisetocarryonwar，whetherpreparationsshouldbemadeforit，orwhetheritmighthebettertofostertheartsofpeace，andsoforth。Andcertainlytherewillalwaysbeonepartywhichcalculates，andwhichlooksdispassionatelytotheprofitablenessorunprofitablenessofanyscheme，andanotherpartywhichlooksfaraheadandleavesroomforimaginationandpassion。Underdifferentnamestheeconomicaloppositionsofinterestto-daywillrecur。Theconflictwhichwemayobservenowbetweenexchangevalueandpublicinterests，dependsaccordingly——apartaltogetherfromtheoppositionofpersonaladvantage——uponadifferenceineconomicaimswhichisinevitable，andarisesoutofnaturaleconomicconditions。

Ifitmustbeconfessedthat，inthecommunisticstate，theprivateeconomicalvaluationofgoodsisnotsatisfactorybecauseitsometimesneglectsnecessarydeductions，sometimesessentialadditions，andsocomesouttoohighortoolow，wemustafortiorisaythesameofexchangevalueinthepresentorderofthings，whereitgoestoofarinemphasisingthecharacteristicsoftheprivateeconomy。Itistheexactcalculationandtheincalculablebutactuallyobservedinfluences，that，together，makeupthefullvalueofgoods。Thetheoristmustadmitsomuch，howeverharditisforhim，whenheconsidershowgreatlyeconomictheorylosesbyitinexactconceptionofitsformulasandprecepts。Howsimpleandhoweasytoapplyanyadvicewheneveronlycalculablequantitiesareconcerned；——whatever，calculatedbyexchangevalue，yieldsaprofitiseconomicallypermissible；everythingelseisforbidden！Andhowmistyandobscurealltheoreticalsolutionsbecomewhentheyputabsolutelawsaside，andareobligedtoappealtoconcreteexistingcircumstancestodecideforthem！Intheenditistopoliticswemustleavethetaskofdeciding，aswellasofcarryingoutitsdecisionsintheconcrete——rememberingthatpoliticsbelongsnotonlytothepoliticianbuttopoliticalscience。howevermuchtheprideoftheorymaysufferinrecognisingthis，itisafactnottobegainsaid。Inordertoobserveandunderstandthings，theyareoftenthoughtofasbeinglesscomplicatedthantheyreallyare:andthisisrightenoughwhennothingfurtherisintendedthantosimplifytheprocessofthoughtbybeginningattheeasiest。Butitisnotpermissibletocallahaltatthispoint，andapplythesolutionthusfound，withoutmoreado，toreality。Thisisthesortofthingthatmightbedescribedas“thediseaseoftheory“:totakethingsfirstinthewayinwhichtheycanbemostsimplygrasped，andthentorepresentthewholeworldaccordingtothepicturewehavejustbeenabletothinkoutforourselves；totakewhatismosteasilygrasped，oratalleventsmostpreciselygrasped，fortheactual。

Likeeveryexaggerationthisalsoproducesitsownreaction，viz。theoppositiontoalltheorywhatever。ThebookwhichmyreadersnowholdintheirhandsisaproofthatIdonotshareinthisopposition。PossiblyitmaynotproveequallyclearlythatI

considereveryotherdirectionofinvestigation，besidesthepurelytheoreticalone，necessaryandsignificantinitsownplace；butnocandidcriticwill，Ihope，findanyreasontodisputethis。

Thatthetheory，evenwhenitrecognisestheinfluencesofnationaleconomyuponvalue，insomesortpavesthewayforpolitics，isnotlikelytobedenied。Themanwhohasthoughtoutthetheoryofvaluetotheend，evenwithinthelimitsjustmentioned，willhavecausetopointwithpridetothehelpwhichthishasaffordedhiminpoliticalscienceandpracticalstatecraft。Itisamatterofthefirstimportance——onewithoutwhichnodecisioncanbearrivedat，——torecognisethatthereisaspherewithinwhichtheestimateofexchangevalueisapplicable，andanotherinwhichitisnot。Nowifwecoulddefinethesespheres，eveninthemostgeneralway；ifwecouldkeepentirelyandclearlyseparatethelawsofthenationalestimateandthelawsoftheprivateestimateofvalue，sothateveryonewhofollowedwithsufficientearnestnesswouldbeconvincedthattheycorrespondedtotheessentialdemandsofeconomicaction；ifitwerepossible，besides，toindicatethedirectionsinwhichtheactualcourseofthingsdivergesfromtheselawsmostfrequentlyandwiththemostseriousresults:inthatcasethefoundationforpoliticalactionwouldbesoplainlylaiddown，andwouldcomparesowellwithalltheerrorsanddifficultieswhichbesetitspathwithouttheseprinciples，thatnoonewoulddenythatsuchatheoryhadjustifieditsexistence。

Tomentiononlyonespecialcase。Therepresentingofgoodsbyweighedandcountedsumsofbarrenmetalorpaper，andtheconsequentvaluationofgoods，andofthewell-beingtheysecure，bynumbersandfigures，byitemsandweights，isinitselfasomewhatmysteriousmatter；amatterwhichamanwhowishestoobtainaclearviewofthingsmightimaginetohaveanartificialandunhealthyorigin；amatterwhichdoes，infact，leadmanyanhonestandintelligentthinkertosuchaconjecture。Itis，then，aconclusionwellworthyofconsiderationwhenasciencesucceedsinprovingthatsuchamannerofprocedureis，atbottomandinitsownplace，soundandsimple，andthatitwouldbeimpossibletoobtainamoreexactanddistinctmeasureforthethousandfoldvarietyofeconomicsatisfactions，thanthatafforded，underthenecessaryconditions，bythenaturalmarginalvalueofgoods。

NOTES:

1。Wemaytakeasillustrationthecaseofabarrenislandwhoseoccupationisdemandedbymilitaryorpoliticalconsiderations。

2。Eveninprivateeconomy，allthingconsidered，onehastodealwithmassesofgoodsandwithwantsofgreatcompass:privateundertakingareinfactmorenumerousthanstateundertaking，andformtheprincipalpartofthebodyeconomic。Allthesame，theextentoftheundertaking，inprivateeconomy，hasonlytoatriflingextentthatindefinitenessofvaluationwhichitsoeasilygivesrisetoinnationaleconomy。Inprivateeconomyonehastodealwithmore，butsmallerobjects；instateeconomy，withisolatedbutmorewide-reachingmatters。Intheformerallquantitiesfinallyresolvethemselvesintodivisiblesums；inthelatter，theydonot。Thiscontrastissoimportant，andrecognitionofitaffordssodeepaninsightintothestructureofexchangevalue，that，attheriskofrepeatingmyself，Ishalltryoncemoretogivetoitasexactexpressionaspossible。

Therearetwoconsiderationswhichmustbecarefullytakenintoaccountifwewouldunderstandthecalculusofprivateeconomy。

First:allstocksofgoodsofasimilarkind——and，alongwiththese，allgoodswhich，asproducts，relatethemselvesthroughcoststosuchstocks——comewithintherangeofthemarginallaw，andaremeasuredasdivisiblesumsmadeupofthesmallestunits，eachunitestimatedatoneandthesamevalue。

Thismakesitappearasthoughallwealthweresplitupinto“atoms，“butitissoonlyinappliance；asamatteroffactwithinthesphereofthemarginallawevery“atom“inthewholecircleofwealthisvaluedbythismethodofmeasurement；notonlyareallthemarginalemploymentsputinevidencebut，withandthoughthem，allpermissibleemploymentsfromthehighestdowntothosestandingonthemargin，——onlythatwearesavedthetroubleofputtingintothecalculationanybutthemarginaluses。Thismakesitpossibletocalculateeventhealmostinfinitequantitieswhicharedestinedtomeetalmostinfinitelyvariouswants。Forthepurposesofcarryingonordinaryprivatebusiness，forinstance，thewholeenormousagriculturalwealthofanationcanbequiteproperlygraspedthroughtheordinaryeconomicestimateofthesame，evenalthoughthisestimate，whichonlytakesstocksandmarginalemploymentsintoconsideration，isveryfarfromgivingexpressiontothewholeimportancewhichthosesatisfactionsthatareprovidedthroughagriculturehaveforthelifeofthenation。Thereis，therefore，nothingmoremisleadingthantointroduceatreatiseonthepriceofagriculturalproductsbyadisquisitionupontheimportanceofagricultureinthislattersense。The“surplusvalue“leftoutfromthecalculationneednotbetakenintothecalculation；foronething，thatitisomitted，notonlyinagriculturaltaxation，buteverywhere，and，foranotherthing，that，asregardsdetail，aquiteadequatebalancingofagricultureagainsttrade，industry，andtheotherbranchesofeconomy，andalsooftheindividualbusinessesofagricultureagainsteachother，maybeobtained，ifonlythemarginbeeverywhereobserveddowntowhichwantsaresatisfied，productionextended，andcostgoodsexpended。

Ifthissameagriculturalwealthbeconsideredwithregardtothepurposesofgeneraleconomicpolitics，thepointofviewchanges。Wearenolongerconcernedwithinnumerableindividualgoodsasopposedtoeachother，butwiththatwhichaffectsthemallincommon。Thusagriculture，orgreatpartsofit，becomeawhole；thenisthetimetoconsidertheimportanceofallitsservices；andthenwehavetofaceanenormouscomplexofresultswhichmustallbeestimatedintheirentireextent。

Second:byprivateeconomythewholeproductivereturn——

againtakingintoaccountthesmallestquantities——isdistributedamongthecomplementaryproductivefactorswithoutremainder。Thesumofallthe“productivecontributions“isequalinvaluetothetotalreturn，andtheproductivevalueisconsequentlyasclearlycalculableasthevalueoftheproducts。

Ontheotherhand，inquestionsofeconomicpolitics，ifthedestiniesoflargequantitiesofproductiongoodshavetobeweighedallatonetime，theestimateofthe“contribution“doesnotsuffice。Itbecomesnecessarytoundertaketheexceedinglydifficulttaskofconsideringhowdeepthe“complementarity“oftheproductivefactorsinitsultimategroundmayreach，andhowfarthesefactorsmutuallyconditiononeanother——inthewayoffructifyingorservingasfoundation——iftheyareallatoncebroughttogetherinmasses，orseveredfromeachother。Here，again，inthe“contribution“ofprivateeconomywecalculateonlythemarginalvalue，whereas，inthetotal“co-operation“ofnationaleconomy，wecalculatethemorefar-reachingandlesseasilycalculableimportanceofthegoods。

Thismustallbeunderstoodwiththeabove-mentionedlimitation，thatwehavehereindicatedonlytheleadingcharacteristicofthetwoeconomicsystems，whileeachsystemalwaysshowstracesoftheother，andthetransitionsfromonetotheotherescapenotice。

Chapter4

ValueinthePresent-DayEconomyoftheStateTheconductofeconomiclife，asactuallycarriedon，addsanotherandastrongercontrasttothatwhichnaturallyexistsbetweenprivateandnationalvaluation。

Thestateasitactuallyexists——unlikethecommunisticstate——hasnotthemanagementofalleconomicmatters，butonlyofatriflingportionofthem。And，again，alleconomicgoodsdonotbelongtothestate。Indeeditdoesnotpossessevenenoughforthepropercarryingoutofitsownobjects。Asaruleitpossessesonlythebuildingsandthefixedplantnecessaryfortheexerciseofitspubicfunctions。Whateverbeyondisrequiredforthecurrentservicemust，forthemostpart，behandedovertoitbythecitizensintheshapeofannualcontributionsfromtheirpropertyandincome。Themostimportantofthesecontributionsareraised，asweknow，intheshapeoftaxation，andtotheconsiderationofthisaloneweshallhereconfineourselves。

Schaffle(Steuerpolitik，p。17)hasalreadylaiddowntheprincipleonwhichthegoodswhichformtheincomeofthecitizensshouldbedividedout，betweentaxesontheonehandforthesatisfactionofpublicinterests，anddomesticoutlayontheotherforthesatisfactionofprivatewants。Hecallsitthe“principleofproportionateprovisionforthewantsoftheindividualandthewantsofthegovernment。“Theincomeofthecitizensmustalwaysbedevotedtothoseemploymentswhichatthetimearethemostimportant。Theremustnotbetoorichanendowmentofthepubichousekeepingattheexpenseofkeepingdownthecitizen\'s，noroftheprivatehousekeepingatthecostofdeteriorationinthepubicservice。

Saxhasdevelopedthesameideastillfurther。Goodsobtaintheirvaluefromtheusestowhichtheyareput。Thecorrectprinciplefortheappropriationofincometothepurposesofthestateisthereforesimple；itistheuniversalprincipleofeconomicalemployment，viz。thatgoodsbeemployedinaccordancewiththeirvalue。Ifthestateshouldclaimtoomuch，itdiminishesvalue，byexpendinggoodsforpurposesofstateeconomywhichwouldhaveahighervalueifemployedinprivateeconomy。Ifitclaimstoolittle，valueisagaindiminished——asinthiscasealsotheentireimportanceofthegoodsisnotrealised。

Thislawobtainsitsfullsignificanceinconsequenceofthefactthatrichesareunequallydistributed，andthatpersonalincomesand，moreover，personalwantsareofdifferentdegrees。

Ifeveryonehadthesamewealth，income，andwants，allthecitizenswouldhavetocontributethesamequotaoftaxes。Butasthisisnotso，theymustcontributeunequalquotasandagainitisvaluewhichprovidesthemeasure。Everyindividualeconomy，inrespectoftherelationofsupplyanddemandpeculiartoit，haswhatSaxcallsan“individualWerthstand。“Thesameamountsofgoodsarevalueddifferently，or，whatamountstothesamething，thesameamountsofvalueareexpressedindifferentquantitiesofgoods。TounderstandthisexpressionofSax，itmaybebesttorecurtoafactwhichwehavealreadytakenasastarting-pointinarrivingatthelawofprice。Wesaidthateveryintendingpurchaserwhogoesonthemarketcalculatestohimself，oroughttocalculate，themoneyequivalentofthegoodshewishestobuy，i。e。thesumofmoneywhosevaluetohimwillequalthevalueofthegoods，sothatitisnoteconomicallypermissibleforhimtogobeyondit。Nowasimilarmoney-equivalentmustbecalculatedforthevaluewhichtheservicesofthestatehavetotheindividualcitizen。Morethanthismoneyequivalentitcannot，economicallyspeaking，bethedutyofanycitizentopayintaxation，but，ontheotherhand，itisthedutyofeveryonetopaytaxesuptothisamountinordertomeetthecostsofthepublicservice。

Thisacknowledged，thenextmatteristhemoreexactestimateoftheindividualequivalents。Thecircumstanceswhichdecidearewealth，income，andwant。Thegreaterthewealthandincome，thegreaterwillbethesubjectiveequivalentorthetaxation；andthegreaterthedegreeofwant，thesmallerwillbethesubjectiveequivalentorthetaxation。Allthesame，taxationcannotsimplybefixedproportionallytowealthandincome:aprogressiverateoftaxationisjustifiable。Themanwhoonlyearnsenoughtosustainthephysicalminimumofexistencehasnothinglefttogiveuptothestate。IcannotgofurtherthanthisandshowthereasonswhichSaxgivesfortheclaimofexemptionofthosewhoareattheminimumofexistence，fortheprogressiverateoftaxation，andalltheotherfamiliarclaimsofmoderntaxation。Whileitneedscarcelybesaidthat，asthesciencegrows，manythingswillprobablybeformulatedotherwise，stillhehasreachedtheessentialmatter。Inallpointswhichhavebeenindicatedasimportantbyeconomicdiscussionuptillthepresent，andwhichdevelopedlegislationhascalledintonotice，hehasdiscoveredtheconnectionbetweenthemandgeneraleconomicfactsandprinciples，andthusgiventowhathasbeenempiricallyreachedabasisintheory。

Hitherto，asregardsthemostimportantpointsofthetheoryoftaxation，thescienceoffinancehasresteditstenetsonanappealtotheclaimsofjustice。Inthisalmostunanimousdependenceuponoutsideandnon-economicconsiderations，theimperfectconditionofthatsciencebetraysitselfevenmorethaninitslackofagreementoverthepurelyeconomicpartofitsinvestigation，andsofarasthisremainsitmustresignallclaimtoberegardedasanessentiallyeconomicdoctrine。ThankstothelaboursofSaxthisistoagreatextentaltered。Alltheprincipalrequirementsofthetheoryoftaxationhaveobtainedaneconomicfoundationinbeingderivedfromthegeneraleconomiccategories——Want，Goods，Economy，Value。Inspiteofthis，however，Icannotbelieve——thoughthisbringsmeintooppositiontoSax——thattheeconomicbasisoftaxationhasprovedsoperfectastobeabletodispensealtogetherwithconsiderationsofjustice。Withoutattemptinganycompleteproofofthisstatement——whichcouldnothedonewithoutthedifficultandtediousworkofdistinguishingbetweentheeconomicandthejust，——Ishouldliketoadvanceonesingleargumentwhichappearstomesufficientlytocorroborateitscorrectness。

Saxaswehaveseenrequiresthateveryonepayintaxationthefullmoneyequivalentinwhich，accordingtohisownindividualstandpointofvalue，isexpressedthevalueoftheservicesofthestatetohim。Thisclaimiscertainlyabsolutelyeconomic，insofarasitpreventsthelessablebeingtaxedattheirmaximumoraboveit，whileittaxesthemoreableundertheirmaximum。Theclaimis，further，certainlyaneconomicone，insomuchasitexcludesthepossibilityofanyonebeingtaxedabovehismaximum。Butinsofaritisnotanabsolutelyeconomicclaim；itrestsalsouponthelegalassumptionofprivateproperty；itwouldbeuneconomicifitcouldbeprovedthatprivatepropertyisitselfuneconomic。Buthowwoulditbeifthisclaimweresetagainstonewhichdemandedthattherich，andpossiblythemiddleclassesalso，shouldbetaxedattheirmaximum，whilethepoorerandpoorestclassesweretaxedbelowit？Whatcouldbeopposedtothisclaim？Certainlynoabsolutelyeconomicconsideration；fortheresultofthisbeingrealisedwouldbe，economicallyconsidered，amoreperfectsatisfactionofthepeople\'swant。Theonlythingthatcouldbeopposedtoitwouldbetheconsiderationthat，asamatterofjustice，thesameformalfundamentalpropositionmustholdforall，——equaljusticeforall；aconsiderationwhichmight，perhaps，inthelastinstance，betracedbacktoaneconomicbasis，butwhich，inthepresentstateofscientificdevelopment，issimplyderivedfromthefeelingofjustice，andrepresentsaquitedistinctphaseofthatfeeing。Itmaypossiblybethat，atalaterperiodoftime，itwillbedeclaredthedutyoftherichtofreethepoorerclassesfromallpubicburdens，inordersomewhattomitigatetheprivationstheysufferfromtheunequaldistributionofwealth。Saxhimselfsuggests(page522)that，whenthattimecomes，theremaybeanactiveendeavour，basedonaltruisticmotives，toextendexemptionfromthe“physical“minimumofsubsistencetoa“culture“minimum。Itispossiblethatthisendeavourmightbeonlyasymptomofgradualdevelopmentinthedirectionoffreeingtheweakestandweakerclasses，entirelyorinpart，accordingtothedegreeoftheirweakness，fromtheburdenoftaxation。(1*)

Asitiswiththeorderingoftaxation，soisit，inmyopinion，withallvaluationsinprivateandnationaleconomy，insofarastheyhavetoweightheconflictinginterestsofmanypersons。Theprinciplewhichwillreducetoacommonmeasureofadvantagetheinterestsofpersonswhoaredifferentlysituatedinrespectofwealth，has，IthinkImayventuretosaywithouthesitation，notyetbeenfound。Solongasitremainsundiscovered，itisimpossibleinsuchcasestodispensewithsomereferencetothatrankingofpersonalclaimswithwhichthefeeingofjusticeissomewhatsatisfied。Ifwegiveourassenttotheprincipleoftaxationdemandedbyeconomictheory，itisonlybecause，withouthavinganentirelystricttheoreticaljustificationforit，practicalconsiderationswhichcannotberejectedcompelustoapproveofprivateproperty，and，moreover，ofadegreeofitsutilisationquitedefiniteandinaccordancewithmodemideas。

NOTES:

1。Sax(page522)remarksthat，inanycase，asregardstheover-burdeningoftherich，theeconomicmarginisalreadygivenintheir“individualvaluationlookingtopossibletaxation。“Butevengrantingthatthismarginisofpurelyeconomicorigin，thereremains，aswehaveseen，insideofit，sufficientroomfortheactivityofotherthanpurelyeconomicconsiderations。

Chapter5

TheFundamentalLawofCollectiveValuationIftheburdenoftaxationisdistributedamongthecitizensinthemannerjustdescribed，averyremarkablecontrastemergesbetweenthelawwhichregulatespubicimposts，andthatlawofprice(underfreeexchangeonamarketuncontrolledbythestate)

whichregulatestheburdenthatmustbebornebyallindividualswhentheywishtoacquiregoodsproducedorofferedforsalebyprivateindustry。Asreturnfortheservicesofthestate，orascontributiontowardsmeetingthecostsoftheseservices，eachindividualgivesthemaximumwhichheisabletogive，thefullequivalent。Infreeexchange，ontheotherhand，the(approximate)maximumispaidonlybythemarginalpurchaser；theotherpurchasersgetoffmorecheaply，astheonepriceisestablishedforall，andnoonerequirestopaymorethantheequivalentofthemarginalpurchaser，evenalthoughhisownvaluationmaybemuchhigher。Thestate，accordingly，takesadvantageofthepurchasingpowerofeveryoneinamuchmorethoroughway；and，moreespecially，thepurchasingpowerofthewealthiercitizens。Itdoesnotsuffertherichtopayaccordingtothestandardofthepoor，butinsiststhateveryoneshallbetaxedinaccordancewiththefullmeasureofhisownpersonalestimateofthevaluewhichtheservicesofthestatehaveforhim。

Henceisderivedapeculiarlawofnationaleconomicvaluation——asofcollectivevaluationgenerally。Ineveryself-containedeconomyequalquantitiesofgoodshaveanequalvalue；similaritems，orfractions，orunits，ofastockhavefortheirownerthesamevalue。Thislawholdsalsoinallfreeeconomies，andfortheeconomicbodiescreatedbyit；similargoodshaveonthesamemarketthesameprice，thesameexchangevalue。Butitisdifferentinthecaseofthenationaleconomicbody，as，generally，inthatofeverycollectiveeconomywhichbindstogetherseveralotherwiseindependenteconomicsubjectstocarryoutdistinctpurposes。Herethegoodswhichbelongtotheindividualeconomicsubjects，andfromwhichthetaxesaretobedrawn，arevaluedasunequal，——equaltaxeshaveunequalvalue，thesamevalueisexpressedbyunequaltaxes。Thevaluationofindividualwealthandincomeonthepartofagovernmentagreesexactlywiththeindividualdegreeofvaluationforpurposesoftaxation；agovernmentestimatesthepropertyofeachpersonexactlyasheestimatesithimself，andinsofarthecollectiveeconomyisnotlikeaself-containedeconomy。Notuntilthegovernmentcomestothespendingofthetaxesdoesitactinaccordancewiththeuniversallaw；nottillthendosums，whichwerevaluedasunequalsolongasthegovernmenthadtocollectthem，cometobeequalinvalue。(1*)

Notonly，then，doesthelevyingoftaxesrestonvaluation，butinthelevyingoftaxesisdirectlyexpressedadistinctvaluation；avaluationwhich——asregardsthewantsofthepublichousekeeping——estimateseverygoodatalowerfigureinproportiontothenumberofothergoodswhichareboundupwithitinoneindividual\'swealth，orinproportiontothelimitedcharacteroftheprivatewantstowhichitisdevoted。Inotherwords，thetheoryoftaxation，initseconomicfoundations，belongsnottotheapplicationsofthetheoryofvalue，buttothetheoryofvalueitself。

Thefactthat，whenlevyingtaxes，agovernment，incontrasttothegenerallawofordinaryeconomiclife，rateseconomicpropertydifferentlyaccordingtotheindividualcircumstancesofthosewhoaretaxed，has，economicallyspeaking，undoubtedlybeneficialresults。Itallowsthatthepublicburdensofthepoorerclassesbeputatalowerfigure；itallowstheabilityofthewealthiertobeartaxationtobemorefullyutilised；anditthusplacesthetaxeswheretheywillcauseleastinjurytothesatisfactionofprivateneeds。Werethestatetoactotherwise；

wereittoimposeequalcontributions，likepolltaxes，oneverycitizen；itwouldinflictonthepoorerclassesprivationsinnowaycompensatedbytheextendedindulgenceinluxurythatwouldnowbepossibletothericher。

Tothisextentitmightbedesirablethatthesameprincipleshouldalsoapplyinfreeeconomiclife；thattherealsoeachshouldpayaccordingtotheamountofhispurchasingpower。Inthiswayauniversalequalisationofsatisfactionmightbeattained；ifeverypersonwereobligedtopayadearerpriceaccordingashepossessedmoremeans，richeswouldoffernoadvantage，povertynoprivation；allwouldhaveinthelongrunthesamesatisfactions。Itneedscarcelybesaidthat，solongasoureconomyremainsfree，thiscannotbe。Forsolongasitisso，everyonewillstrivetobuyascheaplyaspossible，andsellerswillmeetbuyersinthesamespirit——inasmuchastheywillmaketheslightestadvanceinpriceanoccasiontogivethepreferencetothebuyerwhooffersit，andwillnotintheleastinsistonadaptingtheobjectiveamountsofpricetothesubjectivepurchasingpowerofthebuyers。Andjustbecausethislawofthefreeeconomyissocloselyunitedwiththefreedomofthateconomy，itwouldbeuselesstocondemnitfortheundoubtedevileffectswhichitdirectlyhasuponthedistributionofthesatisfactionofwants。Inordertojudgeadequately，onemustinanycasetakeintoconsiderationaswelltheeffectsofeconomicfreedom——or，toputitdifferently，ofprivateeconomiesandprivateproperty——onallothereconomicrelations，andparticularlyasregardstheformationofproductivereturns。Itmayverywellbethatprivatepropertygivesrisetogreatinequalitiesinthesatisfactionofwants，whileit，nevertheless，secures，eventothosewhoreceivethesmallestshareinthegeneraldistribution，anenormouslyincreasedsatisfactionofwantonthewholethereasonbeingtheenormousincreaseinproductivereturnwhichitallowsandbringwithit。

Andhere，perhaps，maybefoundareasonfortheremarkablephenomenonthatoneandthesamecommunityshouldcontainatthesametimetwosuchdiverseorganisationsasafreeeconomyandacollectiveeconomy。Intheformeroftheseitdivergesfromthenaturalmeasureofvalueinthatitover-estimatesthegoodsreservedforacquisitionbytherich，while，inthelatter，itdivergesfromitinthatitputsallgoodspossessedbytherichatalowfiguresofarasthepublichousekeepingisconcerned。

Intheformerthecommunityisgovernedbyalawwhichsparestherich，exceptwheretheycomeintocompetitionwitheachother；

whileinthelatteritlaysdownalawforitselfwhichutilisestheirpurchasingpowertoaquiteunlimitedextentIntheformeritfavourstheunequaldistributionofsatisfactions:inthelatter，ithelpstoequalisethem。Suchdeeply-rooteddivergencescanonlybeexplainedbyshowingthatthetwoorganisationsservedifferentpurposes，——purposesinwhichpersonalfreedomdemandsdifferentscope。

Wecouldnotfollowoutthislineofthoughtwithoutleavingthesphereofthetheoryofvalue，andtrespassingintothewidesphereofeconomicjusticeandeconomicphilosophy。Theexplanationofthesocialorganisationwithinwhichthevaluationstakeplace，isataskwithwhichthetheoryofvalue，withitslimitedmeans，isnotcapableofdealing。Anditisnotonlythetheoryofvaluewhichisunequaltothistask；onlyatheoryofsociety，whichtookintoconsiderationotherthanmerelyeconomicfacts，couldadequatelyundertakeit。

Ifnow，inclosing，thereisonethingwhich，morethananother，Iwishtorepeatwithspecialemphasis，itistheintentionwhichhasdominatedmethroughoutthewholework，andineverypartofit，——theintentiontobe，inthebestsenseoftheword，empirical。Imayperhapshopethattheattainmentofthisobjecthasnotbeendisturbedbythefiction——undoubtedlyunempirical——ofanaturalvalueandoftheutopianstateofcommunism。SofarasIcanjudgeofmyownwork，Ihavenowherepointedtoanyforeignnon-empiricalpowerintheactualityofeconomiclife。TheonlylibertyIhavetakenhasbeentoleaveoutofconsiderationfactsofwhoseactivitytherecouldbenodoubt:——theactualimperfectionsofvaluation，theindividualismofoureconomy，and，finally，theinequalityofwealth。Atthesametime，however，Ihavenotneglectedtoindicate，atalleventsinageneralway，thedirectionsinwhichthesecircumstancesmustofnecessitycausevalue，bothintheprivateeconomyandintheeconomyofthestate，todeviatefromthenaturalstandard。Ihopethatmystatementhasnotbythismeansbecomeuntrue，thoughIknowverywellthatitmustofnecessitybeimperfect。Butwhatisincompletelystatediscertainlynot，onthataccountalone，non-empirical——ifitwereso，whatstatementwouldbeempirical，seeingthatweareunableevertodomorethaninvestigatemerefragmentsofthegreatorganicstructureofourworld？Alljudgmentasregardsanyattemptatinvestigationmustdependonwhetherthefragment，withwhichtheinquiryisconcerned，belargeenoughandsolidenoughtohaveacoherenceofitsown，andtodeserveconsiderationbyitself。Iftheimperfectdescriptionofthephenomenaofvalue，whichIhaveattemptedtogive，isjustifiedinthissense，itisempirical。

Theformofthefictioncannothavemisledanyone。Imight，ofcourse，havestateddrilythatIintendedtoabstainfromtheconsiderationofcertainfacts。Butlikeonewhowishestolookatcertainthingsundisturbedbytheimpressionsofotherthings，andaidshissensesbyspreadingaveiloverthedisturbingobjects，Ithoughttoaidimaginationbymakinguseoftheeasilycomprehendedfigureofacommunisticsociety，concernedtoabolishinactualityallthatIwishedtodisregardinthought。

ThefictionwhichIhaveemployedmustberegardedinthatlightalone，andItrustthattheveilhasbeentransparentenoughtoallowthecompletebodyofphenomenatobeclearlyoutlinedateveryturnunderitsslightdisguiseNOTES:

1。Agreatdealofthehistoryoftaxationmaybeexplainedbythefactthatpeopleonlylearntgraduallytodistinguishbetweenthevaluationofgoodsinnationaleconomyandinfreeeconomy。

Inordinaryeconomiclifeonefeelsinjuredwhohastopayahigherpricethananyoneelse；anditcanbeeasilyunderstoodthatinfaceofthisrootedopinion，itwashardtointroducetheprinciplethateverypersonshouldpaymoretaxationforthesamestateservicesaccordingashepossessedmoregoodsforthesatisfactionofhiswants——andthatnotsimplybutprogressively。