Wednesday, April 4, 2012

On Value - Frédéric Bastiat - 2

On Value

Let us now pass to the second of our most elemental wants: security.
A certain number of men land on an inhospitable shore. They set to work. But not one of them ever knows at what moment he will have to stop his work to defend himself against savage beasts or men more savage still. Beyond the time and effort spent directly in defending themselves, more is required to provide arms and munitions. They finally realize that the total loss in effort would be infinitely less if some of them gave up their other work and devoted themselves entirely to this service. They would assign to it those with the most skill, courage, and strength. These latter would perfect themselves in an art that would be their constant occupation; and while they watched over the safety of the community, the others would bring in from their labors more satisfactions for everybody than would have been possible if ten of their number had not been removed from the general working force. Consequently, the arrangement is carried out. What can we see in this except more progress in the direction of the division of labor, introducing and requiring an exchange of services?
Are the services of these troops, soldiers, militiamen, guards—call them what you will—productive? Undoubtedly, since the arrangement is made solely in order to increase the ratio of total satisfactions to the general effort.
Do these services have value? They do indeed, since they are appraised, assigned a price, evaluated, and, after all, paid for by otherservices against which they are compared.
The form under which the remuneration is stipulated, the manner of assessment, the procedure whereby the terms of the arrangement are discussed and agreed upon, all this in no wise alters the principle. Do some save the others effort? Do some procure satisfactions for the others? If so, then there is exchange, comparison, evaluation of services, and there is value.
Services of this type, in a complex society, often lead to terrible consequences. Since the very nature of the services demanded from this class of workers requires that force be placed in their hands, and enough force to overcome all resistance, those to whom it has been entrusted may abuse it and turn it against the community itself. It can also happen, since they receive from the community services that are proportionate to the community's need for security, that they foment a sense of insecurity and, through overcunning diplomacy, involve their fellow citizens in continual warfare.
All this has been known to happen and still happens. It results, I admit, in upsetting frightfully the just balance of reciprocal services. But it does not result in altering in any way the fundamental principle or the scientific theory of value.
One or two more examples. I beg the reader to believe that I am just as aware as he is of the wearisomeness and dullness of this series of hypothetical cases, all presenting the same proofs, all reaching the same conclusions, all couched in the same terms. I am sure that it will be realized that this procedure, if not the most entertaining in the world, is the surest way to establish the true theory of value and thus open the road that we must travel.
We are in Paris. This vast metropolis seethes with countless desires; it also abounds with the means of satisfying them. A host of men, wealthy or well-off, turn their energies to industry, the arts, politics; and, when evening comes, they are eager for an hour's diversion and relaxation. First among the pleasures so avidly sought after is that of hearing Mme. Malibran sing Rossini's beautiful music or Rachel interpret Racine's admirable poetry. Only two women in all the world can provide such noble and exquisite pleasure; and, unless recourse could be had to violence or torture, which probably would not succeed, they will perform only on their own terms. Thus, the services requested from Malibran and Rachel will have great value. This explanation is prosaic enough, but nonetheless true.
Let a wealthy banker decide that, to gratify his vanity, he will have one of these great artists appear at his home, and he will discover, through personal experience, that my theory is correct in all respects. He seeks a great satisfaction; he desires it keenly; a single person in the world can provide it. The only means of inducing the person to accept is by offering a very considerable remuneration.
What are the extreme limits within which the transaction will be conducted? The banker will go to the point of preferring to do without the satisfaction rather than pay the price demanded for it; the diva, to the point of preferring the price offered to not being paid at all. The point of balance between these two extremes will determine the value of this special service, as it does all others. In many cases it happens that usage may have fixed this delicate point. People in high society have too much good taste to haggle over certain services. It may even happen that the remuneration will be gallantly disguised to mitigate the crassness of economic law. Yet economic law presides over this transaction just as surely as it does over the most commonplace transactions, and the nature of value is not changed because the experience or urbanity of the contracting parties enables them to dispense with certain details of the bargaining.
Thus are explained the vast fortunes earned by great artists of exceptional talent. Another circumstance favors them. The nature of their services is such that they can be rendered, for the same effort, before a great multitude of persons. However large may be the auditorium, provided Rachel's voice can fill it, every spectator there receives the full impact of her inimitable rendition. This, we can see, forms the basis of a new arrangement. Three or four thousand persons sharing the same desire can settle upon a certain amount to be contributed by each one; and the sum total of their combined services represented by this contribution, which is offered as a tribute to the great tragic actress, exactly balances the unique services that she renders simultaneously to all her listeners. This is value.
Just as a great number of auditors may reach an agreement to listen, so a group of actors may reach an agreement to sing in an opera or present a play. Agents may be called in to spare the contracting parties countless petty details of production. Value is multiplied, is made more complex, is ramified, is distributed more widely; but its nature does not change.
Let us end with what are called exceptional cases. They are the acid test of good theories. When a rule is correct, the exception does not weaken it, but confirms it.
Here is an old priest walking along, pensive, a staff in his hand, a breviary under his arm. How serene his features! How expressive his countenance! How rapt his look! Where is he going? Do you not see the church spire on the horizon? The young village vicar does not yet trust his own prowess; he has called the old missionary to his aid. But, before he could do so, a number of arrangements had to be made. The elderly preacher will indeed find bread and board at the rectory. But between one Lent and another, one has to live; it is the common law. Therefore the young vicar has taken up a collection, modest, but sufficient, from the rich of the village; for the old pastor was not demanding, and in response to the letter he had been written he replied: “My daily bread, that is my necessary expense; a sou to give as alms to the poor, that is my luxury.”
Thus, the economic prerequisites are duly satisfied; for political economy insists on slipping in everywhere and is involved in everything, and I really believe that to it should be attributed the quotation: Nil humani a me alienum puto.
Let us pursue this illustration a little further, from the economic point of view, naturally.
This is a true exchange of services. On the one hand, an old man agrees to devote his time, his energies, his talents, his health, to bring some degree of enlightenment to the minds of a small number of villagers, to raise their moral level. On the other hand, bread for a few days, a superb bombazine cassock, and a new broad-brimmed hat are guaranteed the man who preaches the word of God.
But there is something else here. There is a veritable bombardment of sacrifices. The old priest refuses everything that is not absolutely indispensable to him. Of this poor pittance half is taken care of by the vicar; and the other half is raised by the Croesuses of the village, relieving the other villagers of the cost of providing their share, who nevertheless will be edified by the sermons.
Do these sacrifices invalidate our definition of value? Not in the least. Every man is free to render his services on his own terms. If the terms are extremely easy, or indeed gratis, what is the result? The service retains its utility, but loses its value. The old priest is convinced that his efforts will receive their reward in another world. He does not expect it here below. He knows, doubtless, that he renders his auditors a service by speaking to them; but he also thinks that they render him a service by listening to him. It follows that the transaction is made on a basis advantageous to one of the contracting parties, and with the consent of the other. That is all. In general, exchanges of services are motivated and evaluated by considerations of self-interest, but sometimes, thank Heaven, by the promptings of altruism. In such cases either we surrender to others satisfactions that we had the right to keep for ourselves, or we exert for them efforts that we could have devoted to ourselves. Generosity, loyalty, self-sacrifice are impulses of our nature that, like many other factors, influence the current value of a service contracted for, but do not change the general law of value.
In contrast to this reassuring example, I could introduce another of a quite different character. For a service to have value in the economic sense of the word, that is, actual value, it is not obligatory that the service be real, conscientiously rendered, or useful; all that is necessary is that it be accepted and paid for by a service in return. The world is full of people who foist upon the public and receive from it payment for services of highly questionable worth. Everything depends on the judgment passed on the services, and for that reason morality will always be the best auxiliary of political economy.
Some rogues succeed in spreading a false belief. They are, they say, the special emissaries of Heaven. They can open as they choose the gates of Paradise or of Hell. When this belief has taken root, they say, “Here are some little images to which we have given such power that they can make those who wear them happy through all eternity. Giving you one of these images is rendering you an immense service; give us, therefore, services in return.”
This is a created value. It is based on an erroneous appraisal, you will say; that is true. The same can be said of many material things whose value is indisputable, for they would find purchasers if they were put up for auction. The science of economics would be impossible if it recognized as values only those values that are judiciously appraised. At every step it would be necessary to repeat a course in physics or the moral sciences. In the state of isolation, a man may, by reason of depraved desires or poor judgment, pursue with great effort an unreal satisfaction, a delusion. Similarly, in society, it happens, as a philosopher said, that sometimes we purchase our regrets at a very high price. If it is in the nature of human intelligence to be more disposed to truth than to error, all these frauds are destined to disappear, these false services to be refused, to lose their value. Civilization in the long run will put all things and all men in their proper place.
I must, however, terminate this overlengthy analysis. The wants of breathing, drinking, eating; the wants of vanity, of the mind, of the heart, of public opinion, of well-founded or groundless hopes—we have sought value in all of them, and we have discovered it wherever services are exchanged. We have found it to be everywhere of identical nature, based on a clear, simple, absolute principle, although affected by a multitude of varying circumstances. If we had passed all our other wants in review—if we had summoned the cabinetmaker, the mason, the manufacturer, the tailor, the doctor, the doorman, the lawyer, the businessman, the painter, the judge, the President of the Republic—we should have discovered nothing more: sometimes material things, sometimes forces furnished gratis by Nature, but always human services exchanged for other human services, being measured, estimated, appraised, evaluatedby comparison with one another, and alone evidencing the result of this evaluation, that is, value.
There is, nevertheless, one of our wants of a very special nature, which binds our society together, which is both the cause and the effect of all our transactions and the perennial problem of political economy. I wish to say a few words about it. I mean the want of exchanging.
In the preceding chapter we described the marvelous effects of exchange. They are such that men are naturally disposed to facilitate exchange even at the price of great sacrifice. For that reason there are highways, canals, railroads, wagons, ships, businessmen, merchants, bankers; and it is impossible to believe that humanity, in order to facilitate exchange, would have subjected itself to such a tremendous levy on its energies if it had not found a large measure of compensation in the act of exchange.
We have also seen that simple barter could make possible nothing more than very inconvenient and limited transactions.
For this reason men thought of the idea of breaking up barter into two factors, buying and selling, through the medium of an intermediate commodity, easily divisible and, above all, possessing value, so that it would in its own right commend itself to the public's confidence. This commodity is money.
What I wish to note here is that what we call, by ellipsis or metonymy, the value of gold and silver, rests on the same principle as the value of air, water, the diamond, the sermons of our old missionary, or the trills of Mme. Malibran; that is, on services rendered or received.
Gold, which is widely distributed along the favored banks of the Sacramento, does indeed derive from Nature many of its desirable qualities: malleability, weight, beauty, brilliance, even utility, if you wish. But one thing Nature did not give gold, because Nature is not concerned with it, and that is value. A man knows that gold corresponds to a much felt want, that it is greatly desired. He goes to California to look for gold, just as my neighbor a little while ago went to the well to get water. He exerts strenuous efforts, he digs, he shovels, he washes away gravel, he melts the ore, and then comes to me and says, “I will do you the service of turning this gold over to you; what service will you render me in return?”
We discuss the matter; each one ponders over the factors that enter into the decision; at last we come to an agreement; and there we have value made manifest and definite. Deceived by the abbreviated expression, “Gold has value,” we might well believe that gold contains value just as it does weight or malleability, and that Nature took the pains to place it there. I trust that the reader is now convinced that this is a misapprehension. He will become convinced later that it is a deplorable misapprehension.
There is also another error involving gold, or rather money. Since it is customarily the intermediate agent in all transactions, the mean term between the two extremes in roundabout or indirect barter, since its value is always the standard of comparison when two services are to be exchanged, it has become the measure of value. Practically, it cannot be otherwise. But our science should never lose sight of the fact that money, as far as value is concerned, is subject to the same fluctuations as any other product or service. Science does lose sight of this fact frequently, and it is not surprising. Everything seems to conspire to cause money to be considered the measure of value in the same sense that the litre is a measure of capacity. It plays an analogous role in transactions. We are not conscious of its fluctuations because the franc, along with its larger and smaller components, always retains the same denomination. And even arithmetical tables conspire to encourage the confusion by listing the franc, like a measure, alongside the metre, the litre, the are, the stere, the gramme, etc.
I have defined value, at least as I conceive it. I have subjected my definition to the test of various and sundry cases; no one of them, it seems to me, has disproved it. Finally, the scientific sense that I have given the word is in accord with common usage, a fact that constitutes no negligible advantage or trifling guarantee; for what is science except experience viewed in the light of reason? What is theory except the methodical presentation of universal practice?
The reader must permit me now to glance rapidly at the systems that have been accepted up to the present time. It is not in a spirit of controversy, and even less of criticism, that I undertake this survey, and I should gladly abandon it if I were not convinced that it can cast new light on the central thought of this book.
We have seen that writers on the subject have sought to locate the principle of value in one or more of the accidental phenomena that influence it greatly—physical composition (materiality), durability, utility, scarcity, labor, etc.—as a physiologist might seek to locate the principle of life in one or more of the external phenomena that encourage its development: air, water, sunlight, electricity, etc.

Physical Composition (Materiality) of Value

“Man,” says M. de Bonald, “is an intellect served by bodily organs.” If the economists of the materialistic school had merely tried to say that men can render one another services only through a physical medium, in order to conclude that there is always a material element in these services, and consequently in value, I should carry the matter no further, since I have always had a horror of those quibblings and subtleties in which our minds are only too prone to delight.
But this is not what they meant. They believed that value was communicated to matter, either by men's labor or by the action of Nature. In a word, deceived by the elliptical expressions, “Gold is worth so much,” “wheat is worth so much,” etc., they were led to see in matter a quality called value, as the physicist finds in it density and weight—and even these attributes have been questioned.
However that may be, I most positively question the attribution of value to it.
At the outset we must admit that matter and value are rarely separated. When we say to a man, “Deliver this letter,” “Fetch me some water,” “Teach me this science or that technique,” “Give me advice on my illness or my lawsuit,” “Guard my safety while I work or sleep,” what we ask for is a service, and in this service we recognize, before the whole world, that there is value, since we willingly pay for it with an equivalent service. It would be strange if we should refuse to admit in theory what universal assent admits in practice.
It is true that our transactions often involve material objects; but what does this prove? It proves that men, by exercising foresight, often get ready to render services that they know will be asked of them. Whether I buy a suit ready-made or bring in a tailor to work at my house by the day, in what respect does this change the principle of value, particularly to the extent of making it reside at one time in the suit and at another time in the service?
Here we could ask a subtle question: Must we see the principle of value in the material object, and therefore, by analogy, attribute it to the service? I maintain that it is just the contrary; we must recognize that it is in the services, and then attribute it, if you will, by metonymy, to the material object.
Besides, the numerous examples that I have presented to the reader relieve me of the necessity of carrying this discussion further. But I cannot refrain from trying to justify myself for having brought it up, by showing to what dangerous conclusions we can be led by an error, or, if you prefer, by a half-truth, that we encounter at the beginning of our scientific study.
The least of the drawbacks to the definition that I am assailing is that it has mutilated and stunted political economy. If value is attributed to matter, then, where there is no matter there is no value. Thus, the physiocrats used the term “sterile” classes to designate three-fourths of the population, while Adam Smith softened it to “unproductive” classes.
And yet, since in the last analysis facts are stronger than definitions, these classes simply had to be brought back, by some route or other, into the orbit of economic study. The materialists did it by way of analogy; but their scientific language, created for other data, was already so materialistic in tone that the analogies they used resulted in a shocking extension of the meaning of their terms. What do such phrases as these mean: To consume an immaterial product? Man is accumulated capital? Security is a commodity?
They not only made their language a materialistic jargon, but they were also reduced to overloading it with subtle distinctions in their attempt to reconcile ideas that they had erroneously separated. They invented value in use in contrast to value in exchange.
Finally, and this is a serious error indeed, the concepts of the two great social phenomena, private property and the communal domain, were so confused that the former could not be justified, and the latter could not be discerned.
In point of fact, if value resides in matter, then it is mixed with those other physical qualities of an object that constitute its usefulness to man. Now, these qualities are often placed in the object by Nature. Therefore, Nature helps to create value, and hence we must attribute value to those things that in essence are free of charge and common to all. Where, then, is the basis of property to be found? When the payment that I make to acquire a material product, wheat, for example, is distributed to all the workers who, in its production, have rendered me services, who should receive the share corresponding to the amount of value that is due to Nature and that man had nothing to do with? Should it be paid to God? Nobody supports this idea, and God has never been known to claim His wages. Should it be paid to a man? On what grounds, since, according to the hypothesis that value resides in matter, he has done nothing to earn it?
Let no one think that I am exaggerating, that in the interest of my own definition I am trying to force the economists' definition to its rigorously logical conclusions. On the contrary: they themselves very explicitly have drawn these conclusions under the pressure of logic.
Thus, Senior has gone so far as to say: “Those who have appropriated the resources of Nature receive compensation in the form of rent without having made any sacrifices. Their role consists merely of holding out their hands for contributions from the rest of the community.” Scrope asserts: “Ownership of land is an artificial restriction placed on the enjoyment of the gifts that God had intended to be used for the satisfaction of the wants of all men.” Say affirms: “It would seem that arable land should be counted as natural wealth, since it is not of human creation but is given gratis to man by Nature. But as this wealth is not fugitive like air or water, since a field is a fixed and circumscribed area that certain men have managed to appropriate to themselves, excluding all other men who have given assent to the appropriation, land, which was a gratuitous asset of Nature, has become social wealth, whichmust be paid for if used.”
Certainly, if this is true, Proudhon was right in asking this terrible question, to which he gives an answer more terrible yet:
“To whom should the rent of the land be paid? To the one who produced the land, of course. Who made the land? God. In that case, landowner, withdraw.”
Yes, through a faulty definition, political economy has put logic on the side of the socialists. It is a terrible weapon, but I shall break it in their hands, or rather, they shall gladly surrender it to me. Nothing will remain of their conclusions after I have destroyed their original principle. And I propose to prove that, while Nature combines with man's acts to produce wealth, yet what Nature does remains free of charge and common to all by its very essence, and only what man does represents services, value; it alone requires payment; it alone is the foundation, the explanation, and the justification of private property. In a word, I maintain that, in their relation to one another, men are owners only of the value of things; and that, as they pass products from hand to hand, what they bargain for is only value, that is, reciprocal services, adding as a gratuitous gift, into the bargain, all the qualities, properties, and utilities imparted to these products by Nature.
If political economists, by misunderstanding this fundamental consideration, have weakened the theoretical basis of the defense of the right to private property, representing it as an unnatural institution, necessary, but unjust, they have at the same time neglected and left completely unnoticed another admirable phenomenon, the most moving evidence of God's bountiful Providence toward His creature, man, namely, the phenomenon of the progressive trend toward more and more gratuitous and common utility.
Wealth (taking this word in its generally accepted sense) stems from the combination of two kinds of operations, those of Nature and those of man. The former are free of charge and common to all, by divine gift, and never cease to be so. The latter alone possess value, and consequently they alone can be claimed as private property. But in the course of the development of human intelligence and the progress of civilization, the action of Nature plays a larger and larger role in the creation of any given utility, and the action of man, a proportionately smaller one. Hence, it follows that the area of gratuitous and common utility constantly increases among men at the expense of the area of value and private property—a fruitful and reassuring observation that is entirely lost sight of as long as political economists attribute any value to the action of Nature.
In all religions God is thanked for His bounty. The father blesses the bread that he breaks and gives to his children—a moving tradition that would not be justified if the blessings of Providence were not given gratis.

Durability of Value

Durability, that so-called sine qua non of value, is connected with what I have just discussed. For value to exist, Adam Smith believed, it must be fixed in some object that can be exchanged, accumulated, preserved—consequently in something material.
“There is one kind of labor,” he says, “that increases1 the value of the object on which it is expended. There is another kind that does not have this effect.”
“The labor that goes into manufactured goods,” Smith adds, “is fixed and takes concrete form in some salable article of merchandise, which lasts at least for some time after the work is completed. The work of servants, on the contrary [and the author lists soldiers, magistrates, musicians, teachers, etc., under this heading] is not fixed in any salable merchandise. The services disappear as rapidly as they are performed and leave no trace of value behind them.”
We see that it is implied here that value refers to the modification of things rather than to men's satisfactions. This is a colossal error; for if it is good that the form of things be modified, it is solely in order to attain the satisfaction that is the goal, the end, theconsummation of all effort. If, then, we achieve the satisfaction by immediate and direct effort, the result is the same; if, moreover, the effort can be transferred, exchanged, evaluated, it contains the principle of value.
As for the time interval between the effort and the satisfaction, Smith gives it too much importance when he says that the existence or nonexistence of value depends on it. “The value of an article of salable merchandise,” he says, “lasts at least for some time.”
Yes, indubitably, it lasts until the article has fulfilled its function, i.e., to satisfy a want, which is exactly the case with a service. As long as this dish of strawberries stays on the side table, it will retain its value. But why? Because it is the result of a service I decided to render myself or that others rendered me in consideration of payment, and a service of which I have not yet availed myself. As soon as I avail myself of it, by eating the strawberries, the value will disappear. The service will have vanished, leaving no trace of value behind it. Exactly the same thing holds true of a personal service. The consumer causes the value to vanish, because it was created for this end. It makes little difference to the notion of value whether the pains taken today satisfy a want immediately or tomorrow or next year.
Suppose I am afflicted with a cataract. I call an oculist. The instrument he uses has value, because it is durable, but not the operation, although I pay for it, argue about the fee, and even compare it with the fees of other oculists! But such an assumption is contrary to the most ordinary facts, the most widely accepted notions; and what kind of theory is it that, when it cannot explain universal practice, dismisses it as of no account?
I beg the reader to believe that I am not allowing myself to be carried away by undue love of controversy. If I dwell on certain elementary ideas, I do so in order to prepare the way for most important conclusions that will be evident later. I do not know whether or not I am violating the laws of method by anticipating these conclusions, but in any case I permit myself this minor infraction for fear of trying the reader's patience. For this reason at an earlier point in my book I referred in an anticipatory way to private propertyand common utility. For the same reason I shall now say a word about capital.
Adam Smith, who made wealth an attribute of matter, could conceive of capital only as an accumulation of material objects. How, then, can value be assigned to services that cannot be accumulated or turned into capital?
Among those things called capital goods we place tools, machines, industrial equipment, at the head of the list. They serve to apply the forces of Nature to the work of production, and since the power of creating value was attributed to these forces, economists were led to believe that these tools of production, in themselves, possessed the same faculty, independently of any human service. Thus, the spade, the plow, the steam engine, were supposed to work together simultaneously with natural resources and human forces in creating not only utility, but value as well. But all value is paid for in exchange. Who, then, was to be paid for that part of value which is independent of human service?
It is for this reason that Proudhon's school, after questioning the legitimacy of land rent, is led to question interest on capital as well—a broader concept, since it embraces the first. I maintain that the Proudhon fallacy, from the scientific point of view, has its origins in Smith's. I shall show that capital, like natural resources, taken by itself and in reference to its own action, creates utility, but never value. Value, in its essence, is the product of a legitimate service. I shall show also that, in the social order, capital is not an accumulation of material objects, dependent on the durability of matter, but an accumulation of values, that is, of services. Hence, this recent attack on the idea of the productivity of capital will be repulsed—virtually at least, by destroying its foundation—and, moreover, in a way that should fully satisfy the very people who instigated it; for if I prove that the phenomenon of exchange is nothing but a system of mutual services, M. Proudhon must own himself beaten by the very triumph of his own principle.


Adam Smith and his disciples have ascribed value to labor under the condition of materiality. This is contradictory to their other theory that the forces of Nature have some share in the production of value. I have no need here to refute the contradictions that are evident in all their unfortunate conclusions when these authors speak of land rent or of interest on capital.
However this may be, in finding the principle of value in labor, they would be coming quite close to the truth if they did not make reference to manual labor. I said, in fact, at the beginning of this chapter that value must be related to effort, an expression that I preferred to “labor,” since it is more general and includes the whole area of human activity. But I hastened to add that it could have its source only in efforts that were exchanged, or reciprocal services, because it is not something existing by itself, but solely as an expression of a relationship.
There are, then, strictly speaking, two flaws in Smith's definition. The first is that it does not take exchange into account, without which value can neither be created nor conceived of; the second, that it uses a word, “labor,” which is too narrow in its meaning, unless that meaning is extended beyond its normal limits to include not only the degree of intensity and the length of time expended, but also the skill and sagacity of the worker, and even the good or bad fortune he happens to encounter.
Note that the word “service,” which I substitute in the definition, eliminates these two flaws. It necessarily implies the idea of transmission, since a service cannot be rendered unless it is received; and it also implies the idea of an effort without assuming a corresponding amount of value.
Here is where the English economists' definition fails most seriously. To say that value resides in labor is to suggest that the two are in a reciprocal relation, that there is a direct proportion between them. In this respect, the definition is contrary to the facts, and a definition contrary to the facts is a faulty one.
Very frequently a piece of work that is considered insignificant in itself is accepted by the world as having tremendous value(examples: the diamond, a prima donna's singing, a few strokes of a banker's pen, a shipper's lucky speculation, the lines of a Raphael's brush, a papal bull of indulgence, the easy duties of a queen of England, etc.); even more frequently a slow, exhausting task ends in disappointment, in a nonvalue. If such is the case, how can we establish a correlation, a fixed ratio, between value andlabor?
My definition eliminates the difficulty. It is obvious that there are circumstances under which one may render a great service that does not require great pains; others under which, after taking great pains, one finds that no service has been rendered to anyone, and therefore it is more exact, from this point of view also, to say that value resides in service rather than in labor, since it exists in direct proportion to the former and not to the latter.
I go further. I maintain that value is appraised at least as much in consideration of the labor it can spare the user as of the labor it has cost the producer. I ask the reader to be good enough to recall the dialogue between the two contracting parties in the negotiations over the diamond. It was not prompted by exceptional circumstances, and I venture to say that in substance it is at the heart of all transactions. It must not be forgotten that we are assuming that the two contracting parties have complete freedom to exercise their will and judgment. Each of them is induced to agree to the exchange for various reasons, first among them, certainly, being the difficulty that the recipient of the diamond would experience in obtaining directly the satisfaction that the other offers him. This difficulty is taken into account by both parties, making the one more or less conciliatory and the other more or less exacting. The pains that the one offering the diamond went to also influence the negotiation; it is one of the elements, but not the only one. Therefore, it is not exactly correct to say that value is determined by labor. Value is determined by a great many considerations, all included in the word “service.”
It is very true that, under the influence of competition, values tend to be related efforts, or the rewards to the deserts. This is one of the beautiful harmonies of the social order. But, as far as value is concerned, this leveling tendency exerted by competition is entirely extraneous; and sound logic does not permit us to confuse the influence exerted on a phenomenon by an extraneous element with the phenomenon itself.2

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