3. SO-CALLED "VALUE"

"German gold money has full value, that is, its value as money is fully covered by its value as a substance. Fine silver has only half the value of the coined thaler, and it is the same with our silver money; it is undervalued, that is, its value as a substance is less than its value as money."
"Healthy States have always aimed at money with an intrinsic value and a constancy of value which no one could doubt."
(Helfferich, The Currency Question, p. 11 and 46.)

"Gold and silver have always had a universally recognised value. These metals were collected as a means of providing purchasing power and served therefore as a store of value. Coins soon became more than instruments of exchange; it became customary to measure the values of all products by the value of money. Money became a measure of value. We estimate all values by money. We become aware of all changes of value as changes in the relation to the value of money. The value of money seems to be the measuring-rod by which everything else is measured."
(Otto Arendt, Leading Principles of the Currency Question.)

In these controversial works by two upholders of the metallic standard, one of the gold standard and the other of bimetallism, the same fundamental importance is attached to "value." There is no discussion of the question "What is value ?" or of Gottl's critical inquiry "Does the term 'value' denote an object, a force or a material ? The two opponents agree in accepting without question the existence of a reality called value; in this fundamental matter they are completely at one. Both use the word "value" in its various connections without constraint, as if they had never beard of a "problem of value," an "investigation of value" or a "doctrine of value." Both consider the expressions "substance containing value" (Wertstoff), "value as a substance" (Stoffwert), "intrinsic value," "constancy of value", "measure of value", "preserver of value" (Wertbewahrer), "conserver of value" (Wertkonserve), "concrete value" (Wertpetrefakt), "store of value" (Wertspeicher), "medium for transfer of value" (Werttransportmittel), as unambiguous. (* "We must admit that gold is of great importance as a measure of value but of less importance as a store of value (Wertspeicher)." I. A. F. Engel in the Hamburger Fremdenblatt, February 1916. ) Both authors tacitly assume that their readers will understand these expressions as accurately as would appear to be necessary for the comprehension of their books.

Now what does science say of this expression "value" ?

Those who wish to know should read Gottl's work: "The Idea of 'Value,' a Veiled Dogma of Political Economy." Out of deference to his colleagues the professor does not openly express what his book so clearly proves, that "value" is a hallucination, a mere product of the imagination.

Marx, whose economic system is founded upon a theory of value, uses almost the same words: "Value is a phantom" - which does not, however, prevent him from attempting to conjure up this phantom in three bulky volumes. Abstract from the worked-up substances (* " Products of labour " in Marx's words, but the expression is misleading. What remains after this abstraction is not a property but simply the history of the object-the knowledge that a human being has worked upon it.) all material properties, says Marx, and only one property remains, namely value.

Anyone who has let these words, which occur at the very beginning of "Capital", pass without finding anything suspicious in them, may safely read on. He cannot be further perverted. But he who raises the above question: "What is a property separated from its substance ? - he who endeavours to grasp this fundamental statement in Marx's "Capital" and to clothe it in material terms, will either be perplexed, or pronounce it to be nonsense and its point of departure an illusion.

How can the human brain, which is substance, grasp, record, classify and develop such a complete abstraction ? What relations and transitions could we depend on in forming this idea ? To comprehend something means to hold fast somewhere to its substance (comprehend - prehendere), to have found already present in our mind objects (notions) of comparison with which the new idea may come into relation. But an abstraction divorced from every kind of substance and energy eludes the grasp of the understanding as the cup eluded the grasp of Tantalus.

Marx's abstraction cannot be demonstrated in any crucible. It disconnects itself from everything that is material just as completely as from our understanding. But, strangely enough, this complete abstraction has one "property" and this property is its origin, its origin in human work. (* "Sieht man vom Gebrauchswert der Warenkörper ab, so bleibt ihnen nur noch eine Eigenschaft, die von Arbeitsprodukten." Marx, Kapital, Vol.1, p.4.) It is indeed a peculiar property calculated to convert language into jargon ! By this theory German money would have different properties according to whether its material was treasure buried by the Huns, or the gains of an honest gold miner, or the bloodstained millions wrung from France. The origin of a product is part of its history, not one of its properties; otherwise the assertion (not infrequently heard) that rareness is one of the properties of gold, would also be correct. Yet this assertion is sheer nonsense.

But if things are as here explained, if Marx mistook the origin and history of products for their properties, it is not surprising that in the sequel he saw strange visions and began to fear the "phantom" he had raised.

I have quoted Marx, but the other investigators of value are no whit better. None of them has succeeded in separating out the "material of value", or in connecting the "property of value" with any substance and so bringing it before our eyes. "Value" soars above substance, intangible, unapproachable, like Erlkönig in Schubert's song.

These investigators are unanimously of Knies' opinion that "the theory of value is of fundamental importance in economic science". But a theory so important in economic science should be still more important in economic practice. How, then, can it be explained that, in the economic life of the community or of the individual, the theory of value is unknown? If this theory were really of such fundamental importance, one would expect to find on the first page of every German ledger, after the words "Mit Gott", the theory of value recognised by the firm and intended to guide its business policy.

Should it not further be assumed that every business failure is due to a defective foundation, that is, to an incomplete or erroneous theory of value ?

If the theory of value is of "fundamental importance" in economic science is it not an astonishing fact that this so-called value is unknown in business life ? In every other sphere of human activity science and life go hand in hand; in commerce alone nothing is known of the principal theory of the science with which it is connected. In commerce we find only prices, prices determined by demand and supply. A business man speaking of the value of a thing means the price that its owner would probably obtain under the given circumstances of time and place. Value is therefore an transaction is converted into estimate which upon completion of a measured quantity of exchange products, that is, a price. Price can be measured to a nicety, value can only be estimated, that is the sole difference. A theory of price must therefore apply equally to price and to value. A separate theory of value is superfluous.

The expressions employed without definition by the two writers upon monetary standard whom we quoted at the beginning of the chapter have, in the current use of language, somewhat the following meaning: Gold has a "property", its so-called value. This "property", like the weight of gold, is inherent in its substance: "value as a substance" (Stoffwert). This "property" is, like the weight and chemical affinities of gold, inseparable from gold: "intrinsic value", unchangeable, indestructible: "constancy of value". Just as gold cannot be conceived without weight, neither can it be conceived without value, weight and value are simply marks of substance. One kilogram of gold is one kilogram of value: the value of the substance equals the substance containing the value.

The presence of value can be demonstrated on the weighing-machine: "fully-valued". Whether there are any other processes for detecting value has not yet been established. Litmus paper seems to be insensitive to value, the magnetic needle is not deflected by it; it withstands the highest known temperatures. Indeed our whole knowledge of value is still somewhat meagre, we only know that it exists. This is unfortunate, considering the "fundamental importance" of value in science and in life. New possibilities are, however, opened up by Dr. Helfferich's discovery that with some "substances containing value" (Wertstoffe) the value is not always proportionate to the Substance. The substance containing the value is greater or smaller than the value of the substance. He has discovered that the value of silver money is twice the value of the silver used in its manufacture. Silver money thus contains value in double concentration, and we have therefore an extract of value. This important discovery gives a quite new insight into the nature of value. It shows that value can be extracted, concentrated and, as it were, separated from its substance. We may therefore hope that science will at some future date be able to produce chemically pure value. But here again we have a contradiction. In a roundabout way we have reached the theory of a paper-money standard. But this theory is based solely on price and leaves the theory of value severely alone.

Value is, then, a fantasy (* In trade the word value means an estimate of the price that can be obtained for a product. The value of a product is its probable price, allowing for the state of the market. Stocktaking is dependent on " value " in this sense. Whether the estimate was correct appears later in the selling price.), and this explains the pronouncement of Zuckerkandl: "In the theory of value almost everything is still in the stage of controversy, beginning with the terminology employed" (* Since the matter is of " fundamental importance," it would have been well if Zuckerkandl had informed us what the word " almost " is meant to exclude. Is the only non-controversial matter in the theory of value the alphabet used to write it down). And, of Boehm-Bawerk: "In spite of numberless efforts, the theory of value was and is one of the darkest, most confused and controversial parts of our science."

Fantasies are cheap. Examined by themselves they may form a closed system and so appear acceptable to our understanding. Like miracles they are above nature, they grow and thrive in the brains of men. Translated into reality, however, they at once come into collision with facts. Fantasies have no place in the world of reality; they vanish into thin air. And nothing is more real than economic life, whether of the community or of the individual. Matter and energy - anything unconnected with these can be nothing more than a cheap product of the imagination. Such is value. A science sprung from the illusion of value can only engender illusion and is doomed to sterility. Elsewhere science fructifies practice, elsewhere science is the pole-star of practice; but practical economic life is even today left to its own devices. Science is here inarticulate, since beginning with the terminology employed, almost everything is still in the stage of controversy". The science based upon doctrines of value possesses as yet no theory of interest, no theory of wages, no theory of economic rent, no theory of crises and no theory of money, although attempts to construct them have not been lacking. It is incapable of giving the scientific explanation of the simplest daily occurrences, it can foresee no economic event, nor can it predict the economic effect of any legal measure (such as for instance, the possibility of shifting the burden of the wheat-duty or land-tax).

Neither merchant, nor speculator, nor banker, nor employer, nor journalist, nor deputy, nor statesman, can avail himself of this science as weapon or shield; no single German commercial undertaking, not even the Reichsbank, is guided by theoretical considerations. In parliament the science that has taken value as its foundation is passed by unnoticed, not even one of its theories can boast of having influenced legislation. The characteristic of this science is its complete sterility.

Only among those whom fate has excluded from commercial life so that they know of commerce, speculation, profit, merely by hearsay - only amongst wage-earners has the theory of value found disciples. The wage-earners allow themselves to be guided in practical affairs, particularly in their political activities and their wage-policy, by a theory of value. This phantom haunts the brains of our socialists. In the rayless depths of the coal-mine, in the roar and dust of the factory, in the smoke and vapour of the furnaces, the naive belief that something called value really exists and is of practical importance has gained a hold on men's minds.

If this sterility were the only drawback of the matter, we might put up with it. Thousands of our best intellects have wasted their time in futile theological speculation, so if their number is swollen by a few dozen men who cannot extricate themselves from speculation upon the idea of value we may lament the waste, but the loss, in a nation of many millions, hardly amounts to much. The belief in value costs us, however, more than the profitable co-operation of these men. For though the doctrine of value is completely sterile, something is still hoped from it by many who but for this hope would themselves devote their labours to more fruitful endeavours in this sphere. The doctrine is thus pernicious by its mere existence.

There are in Germany many business men of judgement and intelligence, men alert for theoretical knowledge in every branch of human activity. But these men anxiously avoid theoretical explanations connected with their calling (for such are economic questions in relation to the business man). Business men are the first to feel the effects of mistaken legislation; they have to pay for its consequences, or at least temporarily advance the money to meet the costs; they are buffers between legislation and the economic life of the community, and always in danger of being crushed in some crisis; yet they anxiously shrink from taking part in discussion of the theoretical problems of their pursuit. For what reasons ? For two: first, these men, educated in the approved German mental discipline, cannot shake off their belief in authority; they think that science is well cared-for in the hands of our professors.

(* Whether this opinion is well-founded may be judged from the following quotation (Bund der Landwirte, 7-8-1915): "Ruhland, from the start, entertained the idea of furnishing the scientific theories necessary for putting agriculture, industry and commerce permanently upon a sound practical basis. He therefore rejected from the beginning the interpretation of the task of economic science laid down by Roscher and Schmoller: 'Economic science is concerned with what exists or has existed, but not with what should exist' (Roscher). 'Science is not concerned with influencing directly the settlement of the questions of the day. That is the task of the statesman' (Schmoller)."
Schmoller and Roscher had quite rightly recognised that we have as yet no true economic science but only the economics of a class-State and that the study of the anatomy of this State is no task for a university. But unfortunately they refused to draw the final conclusion from this recognition; that the study of the economics of a class-State is no business for a university either. What a mischievous germ of corruption such a science is for the universities is expressed by Professor Brentano (Der Unternehmer, p. 6): "In the teaching of economics a truth is recognised only as long as it coincides with the interests of a powerful party, and then only as long as this party remains powerful; if another party becomes more powerful, the most erroneous doctrines are rehabilitated if they appear to serve its interests.")

Secondly, with their clear and sober understanding they cannot comprehend the theory of value expounded by the professors, or even gasp the subject-matter of this theory, and they are ashamed to confess in public this intellectual incapacity.

These sceptical observers, among them many Jewish stockbrokers with the keen intellects of their race, are not to be put off with empty phrases of almost manifest absurdity. Only the fear of making themselves ridiculous prevents them from declaring publicly that the subject-matter of the theory of value is invisible to them, like the king's shirt to the child in the fairy-tale.

Incalculable mischief has been done to both the practice and the science of economics by this flimsy product of illusion. A science sprung from a phantom of the brain has caused the whole nation to mistrust its own power of understanding and prevented the investigation of the laws of the people's well-being from becoming the people's science.

A currency administration guided by a theory - any theory - of value is doomed to sterility and inactivity. For what can be administered in the "intrinsic value" of gold ? The illusion of value precludes progress in matters of monetary administration. No other explanation is needed of why the monetary system of today is the monetary system of 4000 years ago. It is the same, at least in theory; in practice we have gone over to a paper-standard, noiselessly and stealthily, it is true, since the fact must be concealed. For if our professors hear about it, their cries of alarm might cause immense damage - paper-money, money without "intrinsic value", being, in their opinion, fundamentally impossible and therefore certain to collapse.