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Economic Terms.

Introductory Note
Apprenticeship Austrian School
Capital Competition Contract Debt
Deficit Demand Economics Economic Growth
Evolution Elasticity Employment Envy
Equality of Men Externalities Government Guild System
Income Interest Manchester School
Marginal Utility Theory Mathematical Economics History, Economic Inflation
Interest Labour Laissey Faire Land
Macroeconomics Market, The Mercantilism Monopoly
Microeconomics Money Natural Economy Physiocrats
Price Profit Property
Rent Risk Study of Economics Supply
Surplus Surplus Value Utilitarianism Value
Labour Theory of ...
Wages Wealth


Introductory Note:-

Let us consider Malthus and his four rules for formulating definitions. The first of these rules is that when people use words they should expect others to interpret them in their ordinary sense, or dictionary meaning. The second rule -- given that some distinction is required -- is to adopt the meaning as used by the "most celebrated writers." It would be helpful, I think, to set these rules out in full.

"Under these circumstances, it may be desirable to consider what seem to be the most obvious and natural rules for our guidance in defining and applying the terms used in the science of political economy. The object to be kept in view should evidently be such a definition and application of these terms, as will enable us most clearly and conveniently to explain the nature and causes of the wealth of nations; and the rules chiefly to be attended to may, perhaps, be nearly included in the four following:-
First. When we employ terms which are of daily occurrence in the common conversation of educated persons, we should define and apply them, so as to agree with the sense in which they are understood in this ordinary use of them. This is the best and more desirable authority for the meaning of words.
Secondly. When the sanction of this authority is not attainable, on account of further distinctions being required, the next best authority is that of some of the most celebrated writers in the science, particularly if any one of them has, by common consent, been considered as the principal founder of it. In this case, whether the term be a new one, born with the science, or an old one used in a new sense, it will not be strange to the generality of readers, nor liable to be often misunderstood.
But it may be observed, that we shall not be able to improve the science if we are thus to be bound down by past authority. This is unquestionably true and I [Malthus] should be by no means inclined to propose to political economists jurare in verba magistri, whenever it can be clearly made out that a change would be beneficial, and decidedly contribute to the advancement of the science. But it must be allowed, that in the less strict sciences there are few definitions to which some plausible, nay, even real, objections are not to be made; and, if we determine to have a new one in every case where the old one is not quite complete, the chances are, that we shall subject the science to all the very serious disadvantages of a frequent change of terms, without finally accomplishing our object.
It is, acknowledged, however, that a change may sometimes be necessary; and when it is, the natural rules to be attended to seem to be. Thirdly. That the alteration proposed should not only remove the immediate objections which may have been made to the terms as before applied, but should be shown to be free from other equal or greater objections, and on the whole be obviously more useful in facilitating the explanation and improvement of the science. A change which is a1ways itself an evil, can alone be warranted by superior utility taken in the most enlarged sense.
Fourthly. That any new definitions adopted should be consistent, with those which are allowed to remain, and that the same terms should always be applied in the same sense, except where inveterate custom has established different meanings of the same word; in which case the sense in which the word is used, if not marked by the context, which it generally is, should be particularly specified.
I [Malthus] cannot help thinking that these rules for the definitions in political economy must be allowed to be obviously natural and proper, and that if changes are made without attention to them, we must necessarily run a great risk of impeding, instead of promoting, the progress of the science.
Yet, although these rules appear to be so obvious and natural, as to make one think it almost impossible that they should escape attention, it must be acknowledged that they have been too often overlooked by political economists; and it may tend to illustrate their use and importance, and possibly excite a little more attention to them in future, to notice some of the most striking deviations from them in the works of writers of the highest reputation."1
These rules for the definitions in political economy are as good today as they were two hundred years ago when set by Malthus; indeed, they are timeless and are applicable to other areas of study such as the interpretation of statutes and other legal documents.

With these rules firmly in mind let us consider, a few economic terms.

  • See Guild System.
    Austrian School:
  • See Carl Menger. Unlike the teachings of John Stuart Mill and Alfred Marshall, the Austrian School, by "its stress on what is called the 'subjective' nature of economic values" produced "a new paradigm for explaining structures arising without design from human interaction."2
  • Capital pertains to the original funds of a trader, company, or corporation. It is one's principal; hence, serving as a basis for financial and other operations. Or, more simply, "Wealth used in the production of more wealth."3
  • Competition is the action of endeavouring to gain what another endeavours to gain at the same time; it is the striving of two or more for the same object. The impact of competition on prices is described by Bentham: "From high profits in trade comes influx of traders -- from influx of traders, competition among traders -- from competition among traders, reduction of prices."4 Competition, incidentally, is more likely than co-operation to induce prudence and foresight.
    Adam Smith described how the market delivers that which people want, in an amazing variety and in the right quantities, - without the "cost" of a command and control centre. Further, Smith described what it was that held the "greedy" in check, whether they be producers, distributors, or consumers; - it was competition. Some,5 assert that the world of Adam Smith, unlike the world of today, was competitive; it was a world of "atomistic competition." The question then comes to be posed, - Does the market mechanism, as described by Adam Smith, work in the modern world of today? And the answer, is: that it can and it does, - though not as well as it might. And the market mechanism does not work as well as it might, not because of the complexity of modern life,6 but more likely because of government intervention in legitimate businesses (taxes and regulation), its monopolistic running of certain businesses (e.g., schools and hospitals), and its lack of intervention in illegitimate businesses (monopolistic unions of all type, including big business and big labour).
    [See Commentary, "On Competition & The Market"; and see, Commentary, "The Competitive Nature of Man".]
  • A contract is more of a concept than a thing -- though thought, by a good number of people, to be but a written document which lists that which is to be done. The word contract, however, in its true sense, means an agreement, whether written or not, which is enforceable by law, viz., the coercive power of the state can be brought to bear so to force one to live up to his or her bargain. Blackstone defined it as "an agreement, upon sufficient consideration, to do or not to do a particular thing." It is important to understand that a contract is not a "mere promise" made because of charitable or familial reasons. An enforceable promise, a contract, comes into being only when there is something given in exchange. There is a strict "distinction between a promise and a contract; for the latter involves the idea of mutuality, which the former does not." (Sir James Stephen.)
    Subject to the conditions where charity applies, all people proceed in their dealings with others in life on the basis of contract; it is the metabolic process of society. It is the very nature of business, usually continually, to be making agreements for the supply of certain articles or the performance of specified work at a certain price, rate, or commission. Indeed, the "society of our day is mainly distinguished by the largeness of the sphere which is occupied by contract."7
  • "That which is owed or due; anything (as money, goods, or service) which one person is under obligation to pay or render to another ..." A National Debt is one owing by the government to private individuals who have advanced money to it to cover past expenditures for which, at the time, it had no money, viz. an accumulation of the past deficits of government. Governments have been content to let national debts rise and to simply pay the periodic interest that becomes due on it. The servicing of government debt is a real cost which currently runs upwards to 25% of its yearly budget (read collected taxes). This great sum of money which otherwise would be paid by governments on interest, if the national debt did not exist, could be left to the people for their own use (uses that suit them), or, might be used for other more laudable purposes of government. It must be remembered that the running of the financial affairs of the government is an additional burden on the people; and, so too, to be remembered is that when governments take from the limited capital markets to finance their spending habits, it drives the cost of capital up and decrease its availability for private purposes. (See the effect of the law of supply and demand on money.)
  • "A falling short, a deficiency; the amount by which a sum of money, or the like, falls short of what is due or required; the excess of expenditure or liabilities over income or assets." Thus the Government's Annual Deficit is that amount of money by which the collected taxes in that year fall short of the governmental expenditures made in that year.
  • The manifestation of a desire on the part of consumers to purchase some commodity or service, combined with the power to purchase. "The average produce of every sort of industry is always suited, more or less exactly, to the average consumption; the average supply to the average demand." (Adam Smith.) "Demand and supply govern the value of all things which cannot be indefinitely increased." (John Stuart Mill.) "The Laws of Supply and Demand may be thus stated: a rise of price tends to produce a greater supply and a less demand; a fall of price tends to produce a less supply and a greater demand." (Jevons.)
  • While economics can apply to the management of private income and expenditure, we mostly think of it as relating to the development and regulation of the material resources of a community or nation, sometimes known as the political economy. It is the "science" relating to the production and distribution of material wealth; it is the sum of the economic institutions and arrangements of a society. It is a system of production and distribution of all the goods and services in the larger community of persons or social order, which is characterized by one or more prominent economic principles. Henry Hazlitt, in his very popular book Economics in One Lesson (1946), says this about the "art" of economics, in that, it "consists in looking not merely at the immediate but at the larger effects of any act or policy; it consists in tracing the consequences of that policy not merely for one group but for all groups." Later we see where Hazlitt writes that economists "overlook the woods in their precise and minute examination of particular trees."8
    Economic Growth:
  • Economic growth is the growth per head of the population in the production of goods and services over a stated period of time; the rate of expansion of the National Income.
    Economic Man:
  • The expression, economic man is a convenient abstraction used by some economists for one who manages his private income and expenditure strictly and consistently in accordance with his own material interests. George Bernard Shaw, in his Fabian Essays in Socialism (1889) asserted that there "is no such person as the celebrated economic man." Alfred Marshall in his Principles of Economics9 was of the view that when "economists spoke of the 'economic man' as governed by selfish, or self-regarding motives, they did not express their meaning exactly." It is, as if, Shaw and Marshall, like so many idealogues through time, would like to deny the undeniable; they do not appreciate the Nature of Man; they deny that man's only constant motive is to do things that he perceives, overtime, will best advance the welfare of himself and his family.
  • Adam Smith was one of those 18th century Scottish moral philosophers whose impulses led to our modern day theories relating to "cybernetics, general systems theory, synergenics," and, further gave insight into how language, morals, law, and the market system evolved. "Smith was the last of the moralists and the first of the economists, so Darwin was the last of the economists and the first of the biologists. ... Smith's work marks the breakthrough of an evolutionary approach which has progressively displaced the stationary Aristotelian view." (Friedrich A. Hayek, the 1974 Nobel prize in Economics.)
  • In its literal sense, the expression elasticity applies to a substance, which, after stretching, being then devoid of that elasticity, would, on account of its elasticity, return or restore itself to its original form. The expression elasticity is an expression which economists toss around on a regular basis, as in: elasticity of demand, elasticity of supply, elasticity of employment, elasticity of wages, elasticity of money, elasticity of output, elasticity of production, elasticity of substitution, etc., etc.10. The use of the expression first started with Marshall,11 entrenched by Keynes and perpetuated since by the use of the expression by every student who wishes to sound like an economist. The word that "expresses more clearly and directly what is meant" is responsiveness.12
  • "Society has subdivided itself enough to have a place for every form of talent. Thus, if a man show the least sign of ability as a sculptor or a painter, for instance, he finds the means of education and demand for his services. Even a man who knows nothing but science will be provided for, if he does not think it necessary to hang about his birth-place all his days, - which is a most un-American weakness." (Oliver Wendell Holmes, The Professor at the Breakfast Table.)
  • "He who ascends to mountain tops shall find
    The loftiest peaks most wrapp'd in clouds and snow;
    He who surpasses or subdues mankind,
    Must look down on the hate of those below."
    Byron: "Childe Harold."
    Equality of Men:
  • It was Maine who observed that the proposition that men are by nature equal, is an "anarchical sophism."13 Then there is the Paradox of Equality as was stated by Stephen: "If all equally are forbidden to commit crime, and are bound to keep their contracts, the sober, the far-seeing, and the judicious win, and the flighty, the self-indulgent, and the foolish lose."14
  • There are certain things that a person or a group of persons do, which has an effect (good and bad) external to the person or the group, whether intended or not. If, to the extent that such an external effect bestows a benefit to those who have not worked for it, then it is thought that they should be made to pay for a part of the benefit; if, to the extent that a certain activity, while it might bring a benefit to those undertaking the activity, has a harmful external effect, then those undertaking the activity should be made to pay for it. It is important that we come to grips with this problem of "externalities" as the collectivists among us use it as a principal argument for a greater and greater role for government intervention. Is government able to deal with the problem of "externalities"? Well, maybe so; maybe not: what is for sure is that governments, as economic players, have proven to be the worst environmental polluters around. Internationally this is so; just look at the records of the collectivist governments in Russia (Chernoble) and Poland (Nova Huta Steel Mill). One needs not go so far as Russia and Poland: in my native province of Nova Scotia successive governments stretching back decades, have financed a huge environmental mess which we know as the "Sydney tar ponds," again, the toxic outpourings of a government operated steel mill.
  • Justice Brandeis in Olmstead v. United States (77 U.S. 438, 485) defined the principal role of government: "Our Government is the potent, the omnipresent teacher. For good or for ill, it teaches the whole people by its example." Adam Smith outlined the limits which we should confine governments: to defend the people from "violence and invasion of other independent societies;" to protect every member of society from the "injustice or oppression of every other member of it;" and to provide "certain public works and certain public institutions, which it can never be for the interest of any individual, or small number of individuals, to erect and maintain." [The subject of government is dealt with in blupete's essay, "On Government".]
    Guild System:
  • "Apprenticeship, which has grown up locally under the medieval guild system, had been imposed on the whole country as the precondition of employment in any given trade by the Statute of Artificers of 1562, by which the Elizabethan statesmen strove with some success to make seven years' apprenticeship national and uniform. This system, at the beginning of the eighteenth century, still supplied a country sadly lacking in educational facilities with a vast machinery of personal training, discipline and technical instruction, moulding the character of English boys and youths, whom it turned out as skilled workmen. Its method being the personal relation of master and apprentice ..."15
    History, Economic:
  • "Economic History is not so much the study of a special class of facts, as the study of all the facts of a nation's history from a special point of view." [The Scottish economist, Wm. Cunningham (1849-1919) Growth of the English Industry and Commerce (1882).]
  • Income is that which comes in (usually money) as the periodical produce of one's work, business, lands, or investments; it is receipts, emoluments, and profits. National Income is that income of a nation as a whole, viz. the aggregate amount available for distribution among the agents of production.
  • Here is a quote from the OED: "Inflation is used to describe the situation in any country where there is an excess of currency and credit in relation to the work to be done, an excess of purchasing power and effective demand in relation to its goods available, with prices and wages, and prices again, rising in consequence." I recollect an old economics professor of mine saying that inflation was a case of too many dollars chasing too few goods. That run-a-way inflation has such a dreadful impact on society can be readily seen from H. G Wells' description of it.
    "For hundreds of years our ancestors had prescribed the most cruel penalties for "debasing the currency", but the use of paper money and the invention of credit now enabled governments to debase currency without crudely clipping the rims of gold and silver coins. ... The effect of this inflation, momentarily, was often a feverish activity. All property which was not solid was swiftly wiped out - mortgages became valueless, loans could now be repaid in worthless currency, old people on pensions or living off fixed-rate investments starved, and universities and such establishments with endowments closed down." (A Short History of the World.)
    With such dreadful consequences it is easy to see why governments down through the ages have attempted to get a hold of inflation, usually through price controls. Such attempts go back a long time. A price control regime was introduced by the Roman Emperor, Diocletian. His edict of 301 A.D. represented the most comprehensive system of wage and price controls adopted in the ancient period. Despite the fact that the penalty for violating this price control law was often summary execution, - it did not work. Such attempts can never work: it's like trying to get at a disease by treating the symptoms. Though, it should be noted -- inflation is something that is totally controllable by government action, by the actions of the central bank, viz. to limit currency and credit. If ever there is runaway inflation in a country, it is, every time, because the leaders of that country have brought it on through an inept monetary policy.
    [See blupete's essay, "Shooting The Central Banker."]
  • That which is paid for the right to use another's capital, one of the ways in which wealth is distributed. If a person owns a store of wealth, he is under a constant temptation to consume it, to gratify himself in the present: interest is the reward that leads him to refrain. The spending of money, metaphorically speaking, can be such an addiction that certain persons will pay anything to get it; thus, there has arisen, Usury Laws; usury being the practice of charging, taking, or contracting to receive, excessive or illegal rates of interest for money on loan.
  • "Money paid for the use of money lent (the principal), or for forbearance of a debt, according to a fixed ratio (rate per cent.)." (OED.) "When money is lent on a contract to receive an increase by way of compensation for the use; which is generally called interest by those who think it lawful, and usury by those who do not so." (Blackstone.) Interest is the reward a man expects to receive for allowing another to use his property, or for delaying his use of the property in favour of another. "When the rate is above five or six per cent., it will be to some extent not true interest, but compensation for the risk of losing the capital altogether." (I suppose by this statement, Jevons discounted the impact of inflation.)
    Manchester School:
  • The Manchester School is a label for a group of 19th century English economists, led by Richard Cobden and John Bright, who advocated free trade and held that the state should interfere as little as possible in economic matters.
    Marginal Utility Theory:
  • For a definition of utility we turn to Joan Robinson, Professor of Economics, Cambridge: "Utility is a metaphysical concept of impregnable circularity; utility is the quality in commodities that makes individuals want to buy them, and the fact that individuals want to buy commodities shows that they have utility."16 If people do not want to buy a commodity, then it has no utility. It is to be recognized, that such an essential commodity as air, has little or no utility, as it is, usually, readily available. Any given commodity has a decreasing utility to a particular individual, as that individual progressively satiates himself. Alfred Marshall:
    "There is an endless variety of wants, but there is a limit to each separate want. This familiar and fundamental tendency of human nature may be stated in the law of satiable wants or of diminishing utility thus: The total utility of a thing to anyone (that is, the total pleasure or other benefit it yields him) increases with every increase in his stock of it, but not as fast as his stock increases. If his stock of it increases at a uniform rate the benefit derived from it increases at a diminishing rate. In other words, the additional benefit which a person derives from a given increase of his stock of a thing, diminishes with every increase in the stock that he already has ..."
    Mathematical Economics:
  • Keynes himself was of the view that a mathematical approach to economics leads to but a "maze of pretentions and unhelpful symbols." Keynes wrote in his General Theory ...: "Too large a proportion of recent mathematical economics are mere concoctions, as imprecise as the initial assumptions they rest on, which allow the author to lose sight of the complexities and interdependencies and unhelpful symbols." Notwithstanding this statement Keynes did liberally sprinkle his work with mathematic equations giving his work an air of it being a precise science, which, as Hayek was to observe, "must always impress politicians lacking any mathematical education, and which is really the nearest thing to the practice of magic that occurs among professional economists."17
  • All human exertion directed toward the production of wealth. "The annual labour of every nation is the fund which originally supplies it with all the necessaries and conveniences of life, which it annually consumes." (Adam Smith.)
    Laissey Faire:
  • See Commentary, "Laissez-faire".
  • Its classic definition is that as was set out by Coke: "Land, in its legal significance, is any ground, soil or earth whatsoever, as meadows, pastures, woods, marsh, etc. It legally includes also all which is fixed to the land such as houses and other buildings. Henry George defined land simply as "all the material universe outside of man and his products."18
  • Economists have broken their study down into these two broad categories: microeconomics and macroeconomics. Macroeconomics is the study of the larger picture. In macroeconomics, one will find such expressions as the gross national product, national income, and inflation and employment levels. Microeconomics, on the other hand, looks at economic activity in the individual case, whether it be a single corporation, commodity, or consuming unit, and attempts, for example, to determine how productive resources are allocated among competing producers and how incomes are distributed among the various sectors of an economy. Microeconomics is especially concerned with the price levels of particular goods and services.
    Market, The:
  • The market is an egocentric mechanism which drives a complex of interacting individuals or groups of individuals, all working consciously to advance themselves, and by so working advance society, albeit unconsciously, as a whole. The market is a natural system bringing forward what men want, whether these wants, subjectively speaking, be "good" or "bad." As to how to proceed in the market, we turn to Santayana: "There is no categorical imperative but only the operation of instincts and interests more or less subject to discipline and mutual adjustment."
    [See Commentary, "On Competition & The Market".]
  • Mercantilism was an economic doctrine and legislative policy based on the principle that money alone constituted wealth. The mercantilists thought that a nation should have an excess of exports over imports (i.e., a favorable balance). This concept, mercantilism, first became important in the 16th and 17th century. The mercantile doctrine, stated in its most extreme form, makes wealth and money identical. This concept was first challenged by Adam Smith.
  • Microeconomics is one of two main branches of modern economic analysis, the other is macroeconomics. Microeconomics is the study of particular firms, particular households, individual prices, wages, incomes; individual industries, particular commodities.
  • A monopoly exists when there is an exclusive possession of the trade in some article of merchandise; it is the condition of having no competitor in the sale of some commodity, or in the exercise of some trade or business. It might have been that there was a tendency in the early development of industrial society that certain of the capital intensive activities were prone to assume a monopolistic position in the market. It is likely, however, that the new technology and consumerism have cured that.19
  • Money, we might picture, is metal stamped in pieces of portable form. In relatively recent times it includes pieces of paper which are printed up in a fancy fashion, viz. promissory documents especially bank notes (both private banks and the government bank). Money is a medium of exchange and measure of value; it has no intrinsic value (see mercantilism). Money and its institutions, however, is the subject that bewilders specialists and offends moralists. Human life for most of us depends on a complex market of interpersonal processes and indirect exchange: money is its currency. Because money is a call on real assets (property), Wealth and money are, in common language, considered, in every respect, synonymous. The value of money must be judged, like everything else, from it's rate at market; and the value of money means the interest charged for the use of loanable capital. Thus, when the market rate of interest is high, money is said to be dear, when it is low, money is regarded as cheap.
    Natural Economy:
  • "... the wiser a man is, the more stupendous he finds the natural and moral economy, and lifts himself to a more absolute reliance."20 (Ralph Waldo Emerson.)
  • Physiocrats belonged to an 18th century French school of thinkers who evolved the first complete system of Economics. Physiocracy's founder was Francois Quesnay, whose system greatly influenced the thought of Adam Smith. Quesnay and his followers stressed that absolute freedom of trade was essential to guarantee the most beneficial operation of economic law, which the Physiocrats considered immutable.
  • The Price is that amount of money which a buyer is prepared to pay, or a seller is prepared to take, in exchange for the ownership of any particular piece of property. "Prices are governed by the conditions of supply and demand." (Keynes.) The concept of elasticity plays a role in the determination of price, viz. an increase in effective demand meeting an inelastic supply of goods, raises the price of those goods. "The market price of every particular commodity is regulated by the proportion between the quantity which is actually brought to market, and the demand of those who are willing to pay the natural price of the commodity or the whole value of the rent, labor and profit which must be paid in order to bring it thither."21
  • Profit is the excess over production costs; it is a signal to continue or enter into the business, versus, a loss, a signal to get out of the business. The OED defines it, as: "The pecuniary gain in any transaction; the amount by which value acquired exceeds value expended; the excess of returns over the outlay of capital ... The surplus product of industry after deducting wages, cost of raw materials, rent, and charges. In early use also including interest." Adam Smith: "The revenue derived from labour is called wages. That derived from stock [capital], by the person who manages or employs it, is called profit." A profit margin is the margin that remains in a business operation when the costs involved are deducted from revenue, usually considered as a percentage of the capital employed. It is the chance of making profit, notwithstanding the risk of losing it, in whole or in part, that may induce one to invest his capital. The distinction between profit and interest, is this: the owner may loan his capital for a fixed return (interest) in addition to the return of his capital regardless as to whether the borrower has earned a profit, or not; whereas the owner may invest his capital in a business venture for the profit, or a share of the profit it is hoped will come from the venture. In both situations the owner of the capital may lose part or all of his capital if the business fails. The loan, however, may be secured by way of a guarantee (hopefully by a person who might survive the business failure and still have assets) or by way of a fixed charge on assets, avenues not much used by the small investor, but always used by a banker.
  • Property is the legal claim, subject to contractual rights, for exclusive use and possession of things of value, viz. movable goods (personal property) and land (real property). Marx, in his Manifesto, summed up the theory of the Communists in this single sentence: "Abolition of private property."
    [See blupete's essay, "Property Rights."]
  • Rent is the return that an owner receives for leasing his land to another. Ricardo's classic definition, is, "rent is that portion of the produce of the earth, which is paid to the landlord for the use of the original and indestructible powers of the soil." It is to be kept in mind, in agricultural parlance, that rent of the land does not determine the price of its produce, but it is the price of that produce (the larger market) which determines the rent of the land.
  • Hazard, danger; exposure to mischance or peril. The ordinary rate of profit always rises more or less with the risk.
    Study of Economics:
  • "The intellectual is really of two minds about the general economic process. On the one side, he takes pride in the achievement of technique and rejoices that men get more of the things which they want. On other hand, he feels that the conquering army of industry destroys values and that the discipline reigning there is a harsh one."22
  • The amount of any commodity actually produced and available for purchase: correlative to demand.
  • Its normal definition: "What remains over and above what has been taken or used; an amount remaining in excess."
    Surplus Value:
  • Marx, not liking the notion of profit, came up with the concept of "surplus value"; it was to be a fundamental principle of Marxism. It is, according to Marx, that part of the value of the results of human labour which accrues beyond the amount needed to reproduce the initial labour power, which is appropriated by the capitalist who exploits it.
  • See Utilitarianism in my treatment of philosophy.
  • Value has two different meanings: "value in use" and "value in exchange." Diamonds have little value in use, great value in exchange. It is a legal maxim, Tantum bona valent, quantum vendi possunt - "Things are worth what they will sell for."
    Value, Labour Theory of:
  • The Labour Theory of Value is that, when determining relative prices, it is only labour, somehow, which should get the credit for creating the value, so, therefore, if labour created anything of value, then labour should have the whole of it. It is a theory that is wholly false, for: Things are worth what they will sell for. Mr. Justice, Oliver Wendell Holmes:
    "I think it pure phantasy to suppose that there is a body of capital of which labor as a whole secures a larger share by that means [a strike]. The annual product, subject to an infinitesimal deduction for the luxuries of a few, is directed to consumption by the multitude, and is consumed by the multitude, always."23
  • That which is paid to another person to induce that person to exert his or her labour.
  • All material things produced by human labour and having an exchange value. We might consider the concept of money when considering wealth. Mill was of the view that money, though useless in itself, enables a person to claim from others a part of their stock of things. "Wealth, then, may be defined, all useful or agreeable things which possess exchangeable value; or in other words, all useful or agreeable things except those which can be obtained, in the quantity desired, without labour or sacrifice."24


    1 Definitions in Political Economy (1827), p. 4.

    2 Friedrich A. Hayek, The Fatal Conceit (University of Chicago Press, 1989) p. 98.

    3 Henry George, Progress and Poverty (1879), p. 42. George, incidentally, was of the view that the "fundamental remedy for poverty was a 'single tax' levied on the value of land exclusive of improvements, and the abolition of all taxes which fall upon industry and thrift." (Chambers Biographical Dictionary.)

    4 The OED gives as a source, "Emanc. Colonies Wks. 1843 IV. 412."

    5 Heilbroner is one, see The Worldly Philosophers (New York: Simon & Schuster, 1953) p. 50.

    6 Even if complexity could some how defeat market forces, advances in communications and in computers have brought us closer to free market conditions, I suggest, than has ever existed before.

    7 Maine, Ancient Law.

    8 Economics in One Lesson (New York: Arlington House Publishers, 1979) pp. 17,18.

    9 I. vi. 78.

    10 Just check the index in Keynes' General Theory ...

    11 Marshall describes it: "We may say that the elasticity of demand is 1, if a small fall in price will cause an equal proportionate increase in the amount demanded: or as we may say roughly, if a fall of 1 per cent in price will increase the sales by 1 per cent; that is 2 or ½, if a fall of 1 per cent in prices makes an increase of 2 per cent or ½ per cent respectively in the amount demanded; and so on."

    12 Henry Hazlitt, The Failure of the New Economics (D. Van Nostrand, 1959) p. 304. In this work, Hazlitt enumerates the "serious drawbacks to the term elasticity," including: "The mechanical analogy on which it rests is some what forced and far fetched ..." and that it "has led to a literature of mock precision ..." (see pp. 304-5.)

    13 The OED cites "Hist. Inst., xiii, 399."

    14 Liberty, Equality, Fraternity (1873); (University of Chicago Press, 1991) at p. 220.

    15 Trevelyan, British History in the Nineteenth Century p. 12.

    16 Economic Philosophy (1962) (Pelican, 1966) p. 48.

    17 The Fatal Conceit, pp. 98-99.

    18 Progress and Poverty (1879), p. 38.

    19 The only lasting monopolies that anyone has seen in the last, say, thirty years, in the market place, have come about not on account of a free market, but rather because of interventionist governments. It is, indeed, government measures that "have promoted the concentration of industry and the growth of large enterprises." [Friedman, "On Curing the British Disease" (Vancouver: The Fraser Institute, 1977) p. 39.] When government, by their actions, grant monopolist control to particular groups, it causes much harm to the economy, invariably, too, in the very areas of the economy which are the most important to us, as for example, in the areas of education and medicine.

    20 "Montaigne," Representative Men at p. 136.

    21 Adam Smith. See Seldon's Capitalism (Oxford: Blackwell, 1991) at pp. 139-42 where he lists eight political advantages of pricing things: how pricing teaches; how it brings goods into being without compulsion; how it distributes theses goods in a fair and thus peaceful way; how it preserves our scarce resources and best preserves our environment.

    22 Bertrand de Jouvenel in his essay contained the book edited by Hayek, Capitalism and the Historians (University of Chicago Press, 1963) p. 113.

    23 The Judicial Opinions of Oliver Wendell Holmes (Buffalo: Dennis & Co., 1940) as quoted by Biddle in his forward at p. viii.

    24 Principles of Political Economy.

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    [Essays, First Series]
    [Essays, Second Series]
    [Essays, Third Series]
    [Essays, Fourth Series]
    [Subject Index]

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    Peter Landry