The Limitations of Marginal Utility by Thorstein Veblen

The Limitations of Marginal Utility
Thorstein Veblen1909
Journal of Political Economy, volume 17.

The limitations of the marginal-utility economics are sharpand characteristic. It is from first to last a doctrine of value,and in point of form and method it is a theory of valuation. Thewhole system, therefore, lies within the theoretical field ofdistribution, and it has but a secondary bearing on any othereconomic phenomena than those of distribution -- the term beingtaken in its accepted sense of pecuniary distribution, ordistribution in point of ownership. Now and again an attempt ismade to extend the use of the principle of marginal utilitybeyond this range, so as to apply it to questions of production,but hitherto without sensible effect, and necessarily so. Themost ingenious and the most promising of such attempts have beenthose of Mr Clark, whose work marks the extreme range of endeavorand the extreme degree of success in so seeking to turn apostulate of distribution to account for a theory of production.But the outcome has been a doctrine of the production of values,and value, in Mr Clark's as in other utility systems, is a matterof valuation; which throws the whole excursion back into thefield of distribution. Similarly, as regards attempts to make useof this principle in an analysis of the phenomena of consumption,the best results arrived at are some formulation of the pecuniarydistribution of consumption goods. Within this limited range marginal utility theory is of awholly statical character. It offers no theory of a movement ofany kind, being occupied with the adjustment of values to a givensituation. Of this, again, no more convincing illustration needbe had than is afforded by the work of Mr. Clark, which is notexcelled in point of earnestness, perseverance, or insight. Forall their use of the term "dynamic", neither Mr. Clark nor any ofhis associates in this line of research have yet contributedanything at all appreciable to a theory of genesis, growth,sequence, change, process, or the like, in economic life. Theyhave had something to say as to the bearing which given economicchanges, accepted as premises, may have on economic valuation,and so on distribution; but as to the causes of change or theunfolding sequence of the phenomena of economic life they havehad nothing to say hitherto; nor can they, since their theory isnot drawn in causal terms but in terms of teleology. In all this the marginal utility school is substantially atone with the classical economics of the nineteenth century, thedifference between the two being that the former is confinedwithin narrower limits and sticks more consistently to itsteleological premises. Both are teleological, and neither canconsistently admit arguments from cause to effect in theformulation of their main articles of theory. Neither can dealtheoretically with phenomena of change, but at the most only withrational adjustment to change which may be supposed to havesupervened. To the modern scientist the phenomena of growth and changeare the most obtrusive and most consequential facts observable ineconomic life. For an understanding of modern economic life thetechnological advance of the past two centuries -- e.g., thegrowth of the industrial arts -- is of the first importance; butmarginal utility theory does not bear on this matter, nor doesthis matter bear on marginal utility theory. As a means oftheoretically accounting for this technological movement in thepast or in the present, or even as a means of formally,technically stating it as an element in the current economicsituation, that doctrine and all its works are altogether idle.The like is true for the sequence of change that is going forwardin the pecuniary relations of modern life; the hedonisticpostulate and its propositions of differential utility neitherhave served nor can serve an inquiry into these phenomena ofgrowth, although the whole body of marginal utility economicslies within the range of these pecuniary phenomena. It hasnothing to say to the growth of business usages and expedients orto the concomitant changes in the principles of conduct whichgovern the pecuniary relations of men, which condition and areconditioned by these altered relations of business life or whichbring them to pass. It is characteristic of the school that whatever an elementof the cultural fabric, an institution or any institutionalphenomenon, is involved in the facts with which the theory isoccupied, such institutional facts are taken for granted, denied,or explained away. If it is a question of price, there is offeredan explanation of how exchanges may take place with such effectas to leave money and price out of the account. If it is aquestion of credit, the effect of credit extension on businesstraffic is left on one side and there is an explanation of howthe borrower and lender cooperate to smooth out their respectiveincome streams of consumable goods or sensations of consumption.The failure of the school in this respect is consistent andcomprehensive. And yet these economists are lacking neither inintelligence nor in information. They are, indeed, to becredited, commonly, with a wide range of information and an exactcontrol of materials, as well as with a very alert interest inwhat is going on; and apart from their theoretical pronouncementsthe members of the school habitually profess the sanest and mostintelligent views of current practical questions, even when thesequestions touch matters of institutional growth and decay. The infirmity of this theoretical scheme lies in itspostulates which confine the inquiry to generalisations of theteleological or "deductive" order. These postulates, togetherwith the point of view and logical method that follow from them,the marginal utility school shares with other economists of theclassical line -- for this school is but a branch or derivativeof the English classical economists of the nineteenth century.The substantial difference between this school and the generalityof classical economists lies mainly in the fact that in themarginal utility economics the common postulates are moreconsistently adhered to at the same time that they are moreneatly defined and their limitations are more adequatelyrealized. Both the classical school is general and itsspecialized variant, the marginal utility school, in particular,take as their common point of departure the traditionalpsychology of the early nineteenth century hedonists, which isaccepted as a matter of course or of common notoriety and is heldquite uncritically. The central and well defined tenet so held isthat of the hedonistic calculus. Under the guidance of this tenetand of the other psychological conceptions associated andconsonant with it, human conduct is conceived of and interpretedas a rational response to the exigencies of the situation inwhich mankind is placed; as regards economic conduct it is such arational and unprejudiced response to the stimulus of anticipatedpleasure and pain -- being, typically and in the main, a responseto the promptings of anticipated pleasure, for the hedonists ofthe nineteenth century and of the marginal utility school are inthe main of an optimistic temper.1 Mankind is, on the whole andnormally, (conceived to be) clearsighted and farsighted in itsappreciation of future sensuous gains and losses, although theremay be some (inconsiderable) difference between men in thisrespect. Men's activities differ, therefore, (inconsiderably) inrespect of the alertness of the response and the nicety ofadjustment of irksome pain cost to apprehended future sensuousgain; but, on the whole, no other ground or line or guidance ofconduct than this rationalistic calculus falls properly withinthe cognizance of the economic hedonists. Such a theory can takeaccount of conduct only in so far as it is rational conduct,guided by deliberate and exhaustively intelligent choice -- wiseadaption to the demands of the main chance. The external circumstances which condition conduct arevariable, of course, and so they will have a varying effect uponconduct; but their variation is, in effect, construed to be ofsuch a character only as to vary the degree of strain to whichthe human agent is subject by contact with these externalcircumstances. The cultural elements involved in the theoreticalscheme, elements that are of the nature of institutions, humanrelations governed by use and wont in whatever kind andconnection, are not subject to inquiry but are taken from grantedas preexisting in a finished, typical form and as making up anormal and definite economic situation, under which and in termsof which human intercourse is necessarily carried on. Thiscultural situation comprises a few large and simple articles ofinstitutional furniture, together with their logical implicationsor corollaries; but it includes nothing of the consequences oreffects caused by these institutional elements. The culturalelements so tacitly postulated as immutable conditions precedentto economic life are ownership and free contract, together withsuch other features of the scheme of natural rights as areimplied in the exercise of these. These cultural products are,for the purpose of the theory, conceived to be given a priori inunmitigated force. They are part of the nature of things; so thatthere is no need of accounting for them or inquiring into them,as to how they have come to be such as they are, or how and whythey have changed and are changing, or what effect all this mayhave on the relations of men who live by or under this culturalsituation. Evidently the acceptance of these immutable premises,tacitly, because uncritically and as a matter of course, byhedonistic economics gives the science a distinctive characterand places it in contrast with other sciences whose premises areof a different order. As has already been indicated, the premisesin question, so far as they are peculiar to the hedonisticeconomics, are (a) a certain institutional situation, thesubstantial feature of which is the natural right of ownership,and (b) the hedonistic calculus. The distinctive character givento this system of theory by these postulates and by the point ofview resulting from their acceptance may be summed up broadly andconcisely in saying that the theory is confined to the ground ofsufficient reason instead of proceeding on the ground ofefficient cause. The contrary is true of modern science,generally (except mathematics), particularly of such sciences ashave to do with the phenomena of life and growth. The differencemay seem trivial. It is serious only in its consequences. The twomethods of inference -- from sufficient reason and from efficientcause -- are out of touch with one another and there is notransition from one to the other; no method of converting theprocedure or the results of the one into those of the other. Theimmediate consequence is that the resulting economic theory is ofa teleological character -- "deductive" or "a priori" as it isoften called -- instead of being drawn in terms of cause andeffect. The relation sought by this theory among the facts withwhich it is occupied is the control exercised by future(apprehended) events over present conduct. Current phenomena aredealt with as conditioned by their future consequences; and instrict marginal-utility theory they can be dealt with only inrespect of their control of the present by consideration of thefuture. Such a (logical) relation of control or guidance betweenthe future and the present of course involves an exercise ofintelligence, a taking thought, and hence an intelligent agentthrough whose discriminating forethought the apprehended futuremay affect the current course of events; unless, indeed, one wereto admit something in the way of a providential elements, therelation of sufficient reason runs by way of the interesteddiscrimination, the forethought, of an agent who takes thought ofthe future and guides his present activity by regard for thisfuture. The relation of sufficient reason runs only from the(apprehended) future into the present, and it is solely of anintellectual, subjective, personal, teleological character andforce; while the relation of cause and effect runs only in thecontrary direction, and it is solely of an objective, impersonalmaterialistic character and force. The modern scheme ofknowledge, on the whole, rests for its definitive ground, on therelation of cause and effect; the relation of sufficient reasonbeing admitted only provisionally and as a proximate factor inthe analysis, always with the unambiguous reservation that theanalysis must ultimately come to rest in terms of cause andeffect. The merits of this scientific animus, of course, do notconcern the present argument. Now, it happens that the relation of sufficient reasonenters very substantially into human conduct. It is this elementof discriminating forethought that distinguishes human conductfrom brute behavior. And since the economist's subject of inquiryis this human conduct, that relation necessarily comes in for alarge share of his attention in any theoretical formulation ofeconomic phenomena, whether hedonistic or otherwise. But whilemodern science at large has made the causal relation the soleultimate ground of theoretical formulation; and while the othersciences that deal with human life admit the relation ofsufficient reason as a proximate, supplementary, or intermediateground, subsidiary, and subservient to the argument from causeand effect; economics has had the misfortune -- as seen from thescientific point of view -- to let the former supplant thelatter. It is, of course, true that human conduct isdistinguished from other natural phenomena by the human facultyfor taking thought, and any science that has to do with humanconduct must face the patent fact that the details of suchconduct consequently fall into the teleological form; but it isthe peculiarity of the hedonistic economics that by force of itspostulated its attention is confined to this teleological bearingof conduct alone. It deals with this conduct only in so far as itmay be construed in rationalistic, teleological terms ofcalculation and choice. But it is at the same time no less truethat human conduct, economic or otherwise, is subject to thesequence of cause and effect, by force of such elements ashabituation and conventional requirements. But facts of thisorder, which are to modern science of graver interest than theteleological details of conduct, necessarily fall outside theattention of the hedonistic economist, because they cannot beconstrued in terms of sufficient reason, such as his postulatesdemand, or be fitted into a scheme of teleological doctrines. There is, therefore, no call to impugn these premises ofthe marginal-utility economics within their field. They commendthemselves to all serious and uncritical persons at first glance.They are principles of action which underlie the current,business-like scheme of economic life, and as such, as practicalgrounds of conduct, they are not to be called in question withoutquestioning the existing law and order. As a matter of course,men order their lives by these principles and, practically,entertain no question of their stability and finality. That iswhat is meant by calling them institutions; they are settledhabits of thought common to the generality of men. But it wouldbe mere absentmindedness in any student of civilization thereforeto admit that these or any other human institutions have thisstability which is currently imputed to them or that they are inthis way intrinsic to the nature of things. The acceptance by theeconomists of these or other institutional elements as given andimmutable limits their inquiry in a particular and decisive way.It shuts off the inquiry at the point where the modern scientificinterest sets in. The institutions in question are no doubt goodfor their purpose as institutions, but they are not good aspremises for a scientific inquiry into the nature, origin,growth, and effects of these institutions and of the mutationswhich they undergo and which they bring to pass in thecommunity's scheme of life. To any modern scientist interested in economic phenomena,the chain of cause and effect in which any given phase of humanculture is involved, as well as the cumulative changes wrought inthe fabric of human conduct itself by the habitual activity ofmankind, are matters of more engrossing and more abiding interestthan the method of inference by which an individual is presumedinvariably to balance pleasure and pain under given conditionsthat are presumed to be normal and invariable. The former arequestions of the life-history of the race or the community,questions of cultural growth and of the fortunes of generations;while the latter is a question of individual casuistry in theface of a given situation that may arise in the course of thiscultural growth. The former bear on the continuity and mutationsof that scheme of conduct whereby mankind deals with its materialmeans of life; the latter, if it is conceived in hedonisticterms, concerns a disconnected episode in the sensuous experienceof an individual member of such a community. In so far as modern science inquires into the phenomena oflife, whether inanimate, brute, or human, it is occupied aboutquestions of genesis and cumulative change, and it converges upona theoretical formulation in the shape of a life-history drawn incausal terms. In so far as it is a science in the current senseof the term, any science, such as economics, which has to do withhuman conduct, becomes a genetic inquiry into the human scheme oflife; and where, as in economics, the subject of inquiry is theconduct of man in his dealings with the material means of life,the science is necessarily an inquiry into the life-history ofmaterial civilization, on a more or less extended or restrictedplan. Not that the economist's inquiry isolates materialcivilization from all other phases and bearings of human culture,and so studies the motions of an abstractly conceived "economicman." On the contrary, no theoretical inquiry into this materialcivilization in its causal, that is to say, its genetic,relations to other phases and bearings of the cultural complex;without studying it as it is wrought upon by other lines ofcultural growth and as working its effects in these other lines.But in so far as the inquiry is economic science, specifically,the attention will converge upon the scheme of material life andwill take in other phases of civilization only in theircorrelation with the scheme of material civilization. Like all human culture this material civilization is ascheme of institutions -- institutional fabric and institutionalgrowth. But institutions are an outgrowth of habit. The growth ofculture is a cumulative sequence of habituation, and the ways andmeans of it are the habitual response of human nature toexigencies that vary incontinently, cumulatively, but withsomething of a consistent sequence in the cumulative variationsthat so go forward, -- incontinently, because each new movecreates a new situation which induces a further new variation inthe habitual manner of response; cumulatively, because each newsituation is a variation of what has gone before it and embodiesas causal factors all that has been effected by what went before;consistently, because the underlying traits of human nature(propensities, aptitudes, and what not) by force of which theresponse takes place, and on the ground of which the habituationtakes effect, remain substantially unchanged. Evidently an economic inquiry which occupies itselfexclusively with the movements of this consistent, elementalhuman nature under given, stable institutional conditions -- suchas is the case with the current hedonistic economics -- can reachstatical results alone; since it makes abstraction from thoseelements that make for anything but a statical result. On theother hand an adequate theory of economic conduct, even forstatical purposes, cannot be drawn in terms of the individualsimply -- as is the case in the marginal-utility economics --because it cannot be drawn in terms of the underlying traits ofhuman nature simply; since the response that goes to make uphuman conduct takes place under institutional norms and onlyunder stimuli that have an institutional bearing; for thesituation that provokes and inhibits action in any given case isitself in great part of institutional, cultural derivation. Then,too, the phenomena of human life occur only as phenomena of thelife of a group or community; only under stimuli due to contactwith the group and only under the (habitual) control exercised bycanons of conduct imposed by the group's scheme of life. Not onlyis the individual's conduct hedged about and directed by hishabitual relations to his fellows in the group, but theserelations, being of an institutional character, vary as theinstitutional scheme varies. The wants and desires, the end andaim, the ways and means, the amplitude and drift of theindividual's conduct are functions of an institutional variablethat is of a highly complex and wholly unstable character. The growth and mutations of the institutional fabric are anoutcome of the conduct of the individual members of the group,since it is out of the experience of the individuals, through thehabituation of individuals, that institutions arise; and it is inthis same experience that these institutions act to direct anddefine the aims and end of conduct. It is, of course, onindividuals that the system of institutions imposes thoseconventional standards, ideals, and canons of conduct that makeup the community's scheme of life. Scientific inquiry in thisfield, therefore, must deal with individual conduct and mustformulate its theoretical results in terms of individual conduct.But such an inquiry can serve the purposes of a genetic theoryonly if and in so far as this individual conduct is attended toin those respects in which it counts toward habituation, and sotoward change (or stability) of the institutional fabric, on theone hand, and in those respects in which it is prompted andguided by the received institutional conceptions and ideals onthe other hand. The postulates of marginal utility, and thehedonistic preconceptions generally, fail at this point in thatthey confine the attention to such bearings of economic conductas are conceived not to be conditioned by habitual standards andideals and to have no effect in the way of habituation. Theydisregard or abstract from the causal sequence of propensity andhabituation in economic life and exclude from theoretical inquiryall such interest in the facts of cultural growth, in order toattend to those features of the case that are conceived to beidle in this respect. All such facts of institutional force andgrowth are put on one side as not being germane to pure theory;they are to be taken account of, if at all, by afterthought, by amore or less vague and general allowance for inconsequentialdisturbances due to occasional human infirmity. Certaininstitutional phenomena, it is true, are comprised among thepremises of the hedonists, as has been noted above; but they areincluded as postulates a priori. So the institution of ownershipis taken into the inquiry not as a factor of growth or an elementsubject to change, but as one of the primordial and immutablefacts of the order of nature, underlying the hedonistic calculus.Property, ownership, is presumed as the basis of hedonisticdiscrimination and it is conceived to be given in its finished(nineteenth-century) scope and force. There is not thought eitherof a conceivable growth of this definitive nineteenth-centuryinstitution out of a cruder past or of any conceivable cumulativechange in the scope and force of ownership in the present orfuture. Nor is it conceived that the presence of thisinstitutional element in men's economic relations in any degreeaffects or disguises the hedonistic calculus, or that itspecuniary conceptions and standards in any degree standardize,color, mitigate, or divert the hedonistic calculator from thedirect and unhampered quest of the net sensuous gain. While theinstitution of property is included in this way among thepostulates of the theory, and is even presumed to be ever-presentin the economic situation, it is allowed to have no force inshaping economic conduct, which is conceived to run its course toits hedonistic outcome as if no such institutional factorintervened between the impulse and its realization. Theinstitution of property, together with all the range of pecuniaryconceptions that belong under it and that cluster about it, arepresumed to give rise to no habitual or conventional canons ofconduct or standards of valuation, no proximate ends, ideals, oraspirations. All pecuniary notions arising from ownership aretreated simply as expedients of computation which mediate betweenthe pain-cost and the pleasure-gain of hedonistic choice, withoutlag, leak, or friction; they are conceived simply as theimmutably correct, God-given notation of the hedonistic calculus. The modern economic situation is a business situation, inthat economic activity of all kinds is commonly controlled bybusiness considerations. The exigencies of modern life arecommonly pecuniary exigencies. That is to say they are exigenciesof the ownership of property. Productive efficiency anddistributive gain are both rated in terms of price. Businessconsiderations are considerations of price, and pecuniaryexigencies of whatever kind in the modern communities areexigencies of price. The current economic situation is a pricesystem. Economic institutions in the modern civilized scheme oflife are (prevailing) institutions of the price system. Theaccountancy to which all phenomena of modern economic life areamenable is an accountancy in terms of price; and by the currentconvention there is no other recognized scheme of accountancy, noother rating, either in law or in fact, to which the facts ofmodern life are held amenable. Indeed, so great and pervading aforce has this habit (institution) of pecuniary accountancybecome that it extends, often as a matter of course, to manyfacts which properly have no pecuniary bearing and no pecuniarymagnitude, as, e.g., works of art, science, scholarship, andreligion. More or less freely and fully, the price systemdominates the current common sense in its appreciation and ratingof these non-pecuniary ramifications of modern culture; and thisin spite of the fact that, on reflection, all men of normalintelligence will freely admit that these matters lie outside thescope of pecuniary valuation. Current popular taste and the popular sense of merit anddemerit are notoriously affected in some degree by pecuniaryconsiderations. It is a matter of common notoriety, not to bedenied or explained away, that pecuniary ("commercial") tests andstandards are habitually made use of outside of commercialinterests proper. Precious stones, it is admitted, even byhedonistic economists, are more esteemed than they would be ifthey were more plentiful and cheaper. A wealthy person meets withmore consideration and enjoys a larger measure of good reputethan would fall to the share of the same person with the samehabit of mind and body and the same record of good and evil deedsif he were poorer. It may well be that this current"commercialization" of taste and appreciation has been overstatedby superficial and hasty critics of contemporary life, but itwill not be denied that there is a modicum of truth in theallegation. Whatever substance it has, much or little, is due tocarrying over into other fields of interest the habitualconceptions induced by dealing with and thinking of pecuniarymatters. These "commercial" conceptions of merit and demerit arederived from business experience. The pecuniary tests andstandards so applied outside of business transactions andrelations are not reducible to sensuous terms of pleasure andpain. Indeed, it may, e.g., be true, as is commonly believed,that the contemplation of a wealthy neighbor's pecuniarysuperiority yields painful rather than pleasurable sensations asan immediate result; but it is equally true that such a wealthyneighbor is, on the whole, more highly regarded and moreconsiderately treated than another neighbor who differs from theformer only in being less enviable in respect of wealth. It is the institution of property that gives rise to thesehabitual grounds of discrimination, and in modern times, whenwealth is counted in terms of money, it is in terms of moneyvalue that these tests and standards of pecuniary excellence areapplied. This much will be admitted. Pecuniary institutionsinduce pecuniary habits of thought which affect men'sdiscrimination outside of pecuniary matters; but the hedonisticinterpretation alleges that such pecuniary habits of thought donot affect men's discrimination in pecuniary matters. Althoughthe institutional scheme of the price system visibly dominatesthe modern community's thinking in matters that lie outside theeconomic interest, the hedonistic economists insist, in effect,that this institutional scheme must be accounted of no effectwithin that range of activity to which it owes its genesis,growth, and persistence. The phenomena of business, which arepeculiarly and uniformly phenomena of price, are in the scheme ofthe hedonistic theory reduced to non-pecuniary hedonistic termsand the theoretical formulation is carried out as if pecuniaryconceptions had no force within the traffic in which suchconceptions originate. It is admitted that preoccupation withcommercial interests has "commercialised" the rest of modernlife, but the "commercialization" of commerce is not admitted.Business transactions and computations in pecuniary terms, suchas loans, discounts, and capitalisation, are without hesitationor abatement converted into terms of hedonistic utility, andconversely. It may be needless to take exception to such conversionfrom pecuniary into sensuous terms, for the theoretical purposefor which it is habitually make; although, if need were, it mightnot be excessively difficult to show that the whole hedonisticbasis of such a conversion is a psychological misconception. Butit is to the remoter theoretical consequences of such aconversion that exception is to be taken. In making theconversion abstraction is made from whatever elements do not lendthemselves to its terms; which amounts to abstracting fromprecisely those elements of business that have an institutionalforce and that therefore would lend themselves to scientificinquiry of the modern kind -- those (institutional) elementswhose analysis might contribute to an understanding of modernbusiness and of the life of the modern business community ascontrasted with the assumed primordial hedonistic calculus. The point may perhaps be made clearer. Money and thehabitual resort to its use are conceived to be simply the waysand means by which consumable goods are acquired, and thereforesimply a convenient method by which to procure the pleasurablesensations of consumption; these latter being in hedonistictheory the sole and overt end of all economic endeavor. Moneyvalues have therefore no other significance than that ofpurchasing power over consumable goods, and money is simply anexpedient of computation. Investment, credit extensions, loans ofall kinds and degrees, with payment of interest and the rest, arelikewise taken simply as intermediate steps between thepleasurable sensations of consumption and the efforts induced bythe anticipation of these sensations, other bearings of the casebeing disregarded. The balance being kept in terms of thehedonistic consumption, no disturbance arises in this pecuniarytraffic so long as the extreme terms of this extended hedonisticequation -- pain-cost and pleasure-gain -- are not altered, whatlies between these extreme terms being merely algebraic notationemployed for convenience of accountancy. But such is not the runof the facts in modern business. Variation of capitalization,e.g., occur without its being practicable to refer them tovisibly equivalent variations either in the state of theindustrial arts or in the sensations of consumption. Creditextensions tend to inflation of credit, rising prices,overstocking of markets, etc., likewise without a visible orsecurely traceable correlation in the state of the industrialarts or in the pleasures of consumption; that is to say, withouta visible basis in those material elements to which thehedonistic theory reduces all economic phenomena. Hence the runof the facts, in so far, must be thrown out of the theoreticalformulation. The hedonistically presumed final purchase ofconsumable goods is habitually not contemplated in the pursuit ofbusiness enterprise. Business men habitually aspire to accumulatewealth in excess of the limits of practicable consumption, andthe wealth so accumulated is not intended to be converted by afinal transaction of purchase into consumable goods or sensationsof consumption. Such commonplace facts as these, together withthe endless web of business detail of a like pecuniary character,do not in hedonistic theory raise a question as to how theseconventional aims, ideals, aspirations, and standards have comeinto force or how they affect the scheme of life in business oroutside of it; they do not raise the questions because suchquestions cannot be answered in the terms which the hedonisticeconomists are content to use, or, indeed, which their premisespermit them to use. The question which arises is how to explainthe facts away; how theoretically to neutralize them so that theywill not have to appear in the theory, which can then be drawnindirect and unambiguous terms of rational hedonisticcalculation. They are explained away as being aberrations due tooversight or lapse of memory on the part of business men, or tosome failure of logic or insight. Or they are construed andinterpreted into the rationalistic terms of the hedonisticcalculus by resort to an ambiguous use of the hedonisticconcepts. So that the whole "money economy", with all themachinery of credit and the rest, disappears in a tissue ofmetaphors to reappear theoretically expurgated, sterilized, andsimplified into a "refined system of barter", culminating in anet aggregate maximum of pleasurable sensations of consumption. But since it is in just this unhedonistic, unrationalisticpecuniary traffic that the tissue of business life consists,since it is this peculiar conventionalism of aims and standardsthat differentiates the life of the modern business communityfrom any conceivable earlier or cruder phase of economic life;since it is in this tissue of pecuniary intercourse and pecuniaryconcepts, ideals, expedients, and aspirations that theconjunctures of business life arise and run their course offelicity and devastation; since it is here that thoseinstitutional changes take place which distinguish one phase orera of the business community's life from any other; since thegrowth and change of these habitual, conventional elements makethe growth and character of any business era or businesscommunity; any theory of business which sets these elements asideor explains them away misses the main facts which it has gone outto seek. Life and its conjunctures and institutions being of thiscomplexion, however much that state of the case may bedepreciated, a theoretical account of the phenomena of this lifemust be drawn in these terms in which the phenomena occur. It isnot simply that the hedonistic interpretation of modern economicphenomena is inadequate or misleading; if the phenomena aresubjected to the hedonistic interpretation in the theoreticalanalysis they disappear from the theory; and if they would bearthe interpretation in fact they would disappear in fact. If, infact, all the conventional relations and principles of pecuniaryintercourse were subject to such a perpetual rationalized,calculating revision, so that each article of usage,appreciation, or procedure must approve itself de novo onhedonistic grounds of sensuous expediency to all concerned atevery move, it is not conceivable that the institutional fabricwould last over night.