Front Page Titles (by Subject) CHAPTER X: the cost theories ( continued ). capital as an element in cost - Natural Value
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CHAPTER X: the cost theories ( continued ). capital as an element in cost - Friedrich von Wieser, Natural Value 
Natural Value, edited with a Preface and Analysis by William Smart (London: Macmillan, 1893).
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the cost theories (continued). capital as an element in cost
In any complete estimate of costs there can be no doubt that the figures representing the necessary consumption of capital must be added to the costs of labour. Of two products costing equal amounts of labour, that one must be dearer for which the greater consumption of capital is required. Thus it has been calculated ever since capital was possessed by man, and thus it will continue to be calculated, even in the communistic state. The necessity for it is so obvious that even the adherents of the labour theory bow before it. Even they admit that the costs of capital co-operate in determining the value of products. There is nothing for it but to try and reconcile their theory with this incontestable fact. To do this there is only one resource, but one so singular that only a kind of theoretical infatuation could avail itself of it. If all costs go back in the last resort to labour, and if the existence of capital-costs cannot be denied, capital-costs must ultimately go back to labour-costs—capital must be labour.
The attempt to reduce capital to labour has been made in two ways, both of them following out the same fundamental idea. Labour must be shown to be the primary economic element, and capital represented as a secondary or derivative form of it. Labour value appears as the primitive economic value from which capital value is derived.
The first of the two efforts made to prove this proposition is deduced from the manner in which capital works. The effect of all capital is either to save labour or to increase the result of labour. Does not a machine save human labour ? Does it not bring it to greater productiveness ? As a matter of fact, there are forms of capital which are able to render services as human labour renders them, and which can, to that extent, be substituted for labour. But can this be maintained of all capital ? What labour power, for example, does a raw material replace ? And, on the other hand, it may undoubtedly be said of many kinds of labour, with equal right, that their effects are either to save capital or to increase capital. Capital frequently supplants labour, but frequently also labour supplants capital. Where wages are low every undertaker will save his capital and employ more labourers.
The second attempt is much more important. It points to the origin of capital. Here we go back to the first beginnings of the acquisition of capital All capital has, in the last resort—says this theory—been obtained by labour, and on this ground all capital ultimately represents labour. In the most varied forms, and illustrated by a perfect wealth of examples, this thought finds itself in many writers. It is found in Adam Smith and Ricardo, and it is triumphantly adopted by the socialists in order to make good their contention that all costs are labour-costs, and that capital is simply “materialised labour.”
It is not easy to imagine greater contradictions than the labour theory presents when it takes up this line—more particularly in the extreme socialistic conception of it. Let the reader judge! First, the economic valuation of labour is explained by the peculiar nature of labour—that its employment necessitates personal sacrifice. Then capital, after being recognised as materialised labour, and so labour that has become impersonal, is subjected to the same valuation;—a proceeding for which there is no possible justification. First, it is asserted that labour is the only productive power; that it alone produces, creates goods, creates value; that capital is merely its dead instrument: and then capital emerges from its shell and becomes labour, which contributes its part in determining the cost value of goods. At first it is asserted that capital and labour stand in the strongest opposition to one another, and then every distinction disappears save the one, that capital, like labour, may indeed give value, but may not, like it, receive value. Materialised labour is labour, but no share in the return shall be imputed to it.
It would not be right to entirely reject a theory on account of its contradictions. There might be a kernel of truth in it, and that kernel might be rejected along with the rest. We shall, therefore, submit the contention we are discussing to a further test, though, truth to tell, it will only be to find that seldom, if ever, has so small a truth been clothed in so much error.
As we have seen, products are valued by their costs only when they can be reproduced for the amount of the same. Capital, as a rule, consists of products, and this proposition applies to capital as to other products. Capital may be valued according to its costs in so far as it can be reproduced for the amount of the costs. The costs actually expended since the beginning of history in gradually forming our present capital—and it may be noted in passing that no one knows the amount of these costs, and that there has never been offered a less accurate standard for any measurement whatever —are taken as little into consideration as any costs which, though actually expended, would never again be so expended. If all that was wanted economically to replace the capital consumed was to regain it by labour, then capital might be economically measured by labour alone, and would represent economically nothing but labour. If, for instance, coal consumed could be replaced simply by the labourers bringing new coal to the surface, without any assistance whatever beyond the labour of their hands, the coal would be worth just so much labour as was needed to bring it to the surface. If a machine could be made by labourers, without any other assistance than that afforded by other labourers collecting for them valueless materials, and simply using their bodily strength to shape and combine them, the value of this machine would be measured by the quantity of labour that had been expended upon it. So long, however, as capital is consumed in order to produce capital, the factor of capital cannot be dismissed from among the costs of capital, and, therefore, from the costs of all the products of capital; and, so long as it is credited with the use value which experience assures us may be received from it, this factor will continue to be counted alongside of labour in the estimates of costs.
The idea that capital represents labour and nothing more, may be held so long as economists draw their examples, as they usually do, from the circumstances of a Crusoe or a savage, where the chief features are the slaying of wild animals, primitive bows and arrows, bark canoes, rude axes, and the like—where capital, so to speak, is always conceived of in a state of nature. In face of the complicated economical phenomena of a wealthy and developed society the idea loses all weight. The labour theory, with its assumptions which take no count of historical development, was well enough in a science belonging to the time when men spoke of Natural Rights and the Philosophy of Nature. At that period of history this theory was worth being taken up by any gifted genius who could make it throw a first ray of light into the dark mass of economic phenomena. Even at a later period it might have tempted some thoughtful mind to give a thorough systematic examination to its illusive ideas. But for men who have gone through the school of the founders of our science, and have had the benefit of all the experience and elaboration of these founders, and of their successors, it is only worthy of a schoolboy to hold for ever by the opinions of the first teachers. A great thought may in the long run turn into a childish error.
To the manufacturer who owns it, as to the labourers whom it aids, and as indeed to every one, a machine is an instrument, capable of certain useful work, whose production necessitates a certain consumption of labour, of other machines, of tools, and so forth. What must people think of a science which casts aside this simple definition, and informs the manufacturer that, in his machine, he possesses merely the “materialised” labour, the “previous” labour, of all those who have ever contributed anything towards the complete machine since the making of the first rough tool onward? It is an ingenious way of looking at things, no doubt, but one that lends extraordinarily little aid towards advancing the practical purposes of economic life. What buyer has ever paid a price, or seller demanded one, what producer ever expended costs, or what chancellor ever laid a tax upon value, based upon such a consideration as this? Is it conceivable that any one will ever allow his economic conclusions to be guided by such a consideration? After all, in economic theory we must make up our minds whether we intend to explain economic life, or to pursue after useless and fanciful ideas.