Front Page Titles (by Subject) IV. The Natural Law of Value. - The Society of Tomorrow
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IV. The Natural Law of Value. - Gustave de Molinari, The Society of Tomorrow 
The Society of Tomorrow: A Forecast of its Political and Economic Organization, ed. Hodgson Pratt and Frederic Passy, trans. P.H. Lee Warner (New York: G.P. Putnam’s Sons, 1904).
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IV. The Natural Law of Value.
Value is a power whose source resides in man himself. Its seat is the sum of those forces, vital, physical, and moral, with which man is endowed, and which he applies to the purposes of production or destruction. Applied to destruction, it constitutes military or war value, and while war was the sole sanction of security in the world this (aspect of) value was of most use to the species, and thus the most esteemed.5 It does not, however, appear in the guise of an agency which regulates competition, until viewed from the standpoint of production.
Production acts through labour, and labour is an outlay of vital force, consequently of suffering. Also, the motive of this outlay is the expectation of profit. Profit is thus seen as a product of labour, which enables a man to purchase enjoyment, or to obviate a sum of suffering which is greater than the similar factor in his original outlay. Vital power expended in this manner is not lost, but re-embodied. It reappears, plus profit earned, in the product, and it constitutes the value of that product.
An isolated man consumes this value so soon as he has produced it. But to-day is the day of division of labour and of exchange—systems under which the producer offers commodities, in which value has been invested, for other commodities which he does not possess, or for that which will enable him to obtain those commodities—for money.
The ultimate motive of all exchange is identical, being the hope of obtaining a greater amount of vital power than was expended in producing the commodity offered by the seller. In economical language, it is the hope of recovering the costs of production plus a profit. The product offered by the seller must also furnish the consumer, the purchaser, with sufficient vital power—certainly with a sufficient restorative of his vitality, to induce him to purchase it with an equivalent sufficient to replace the vital power expended in production plus a profit. The degree of this profit varies with the relative value of the products in question. The producer seeks to raise it to the highest possible point, and the purchaser struggles to limit it to a minimum. The rate of profit is, however, determined by the point at which the comparative intensity of the needs, or desires, of the two parties to a bargain meet—the intensity of the seller's desire to sell and the intensity of the purchaser's desire to buy. These measures of desire translate themselves into terms of exchange as the quantity of his product which either party offers—the amount of wares offered by the seller, and the amount of money offered by the purchaser. At this point we may conceive several variations in the position of seller and buyer. One producer may meet one consumer.
In every one of these hypothetical markets, prices, or the rate of exchange, will be determined by the comparative urgency of opposing desires. We shall, at the present moment, confine our attention to the third alternative. Then, if there are several sellers, and each carries a more or less full stock, the fear of being undersold by a rival will compel the merchants to successively increase the amounts which they offer at a given price. But the purchasers, having no fear of a failure in supply, will continually reduce the price which they are willing to pay. Prices will fall since there is no approximation of demand to supply. In a seller's market, where the sum of the desire to purchase outruns that of the desire to sell—of supply, a buyer's refusal to increase his bids may result in his failure to complete a purchase, and the tendency of price is upwards.
It is most essential to note that market prices do not solely follow the quantities offered, but develop according to a geometrical progression. A short supply not only reduces market offers, but it also increases the effectiveness of demand; a glut in supply produces the opposite result, since the urgency of the seller increases while demand slackens. In one case the value of the product offered rises to a point which yields more than the required profit, over and above the actual costs of production; in the other, prices fall until profits may vanish and an actual loss set in.6 It is now easy to understand the regulative action of competition. It is continually tending to "fix" exchange-value—in other words, to maintain prices at a point which is equal to the cost of production plus the amount of profit necessary to induce the producer to create the product, or service, which he seeks to sell. Adam Smith characteristically termed this the natural price. Over-supply and over-production cause a fall in the price-current, and as this fall results from an impulse which develops according to a geometrical progression, it very soon drops below the natural price. As soon as this point is reached production naturally tends to diminish, and the consequent gradual rise in the price-current frequently repasses the natural price and erects a surplus profit. But the movements of capital and labour invariably follow profits. As soon as a particular industry promises to return more than the normal rate of profit, capital and labour flow in; production is forced up by leaps and bounds, and the markets are once more filled to repletion. The socialistic cry for regulation, whether by the State or any other artificial authority, is therefore entirely absurd. Regulation is essential, but the two natural laws of Production and Value have long since joined to secure it. We need only refrain from throwing obstacles in the way of their regulative operation; or, if an artificial obstruction opposes that action, to guarantee their freedom in removing the obstruction, according to their own methods. Their action must be secured, but it is to be secured only by refraining from all interference.
Such is the motive, and such the laws, which govern human activity. The motive is Interest, and the laws are those of Least Expenditure, or Economy of Power, of Competition in its several forms, and of Value. Under the spur of this motive, and guided by these laws, man has achieved that progress which has raised him from the level of the brutes to civilisation, and has advanced through the State of War to the State of Peace.
As long as the State of War was an integral condition of existence, and of progress, this motive, and these laws, worked for the adaptation of political and social economies to that state. When civilisation became the guarantee of security, and the State of War yielded to the State of Peace, the motive and the laws remained, but they worked to another end. And from the point at which to-day stands on the long high-road of evolution, we may already look forward and prophecy concerning the political and economical organisation of the Society of To-morrow. Earlier volumes from my pen have foreshadowed that future. The arbitrary conceptions of the Socialist will have no part in it, for it will not be founded on laws which issue from the brain of man, but upon laws which are of one origin with those that govern the physical world. Of them Quesnay, one of the fathers of Political Economy, has said, "These Laws of the Physical World were ordained for good alone, and these must be no attribution to them of ills which are the just and inevitable penalty for their violation."