Capital and Interest: A Critical History of Economical Theory
Book III, Chapter XI
Final Insufficiency of the Use Theory
In Chapter III, I indicated that I proposed to maintain two theses. The first of these I think I may regard as proved, viz. that the use assumed by the Use theory as having an independent existence has really no existence at all. But even if it had, the actual phenomena of interest would not be sufficiently explained thereby. The proof of this second thesis will not require many words.
The Use theory, in virtue of its special line of explanation, is led to make a distinction between a value which goods have in themselves, and a value which the use of goods has. In this it starts with the tacit assumption that the usual estimated value, or selling value of real capital, represents the value of the goods themselves, exclusive of the value of their use; the explanation of surplus value being based on this very circumstance, that the value of the use joins itself, as a quite new element, to the value of the substance of capital, and that the two together make up the value of the product.
But this assumption contradicts the actual phenomena of the economical world.
It is well known that a bond only obtains a price equivalent to its full course value if it is provided with all the coupons belonging to it; in other words, if the disposal over all its future "uses"—to adopt the language of a Use theorist—is transferred to the buyer at the same time with the bond. But if one of the coupons is missing, the buyer will always make a corresponding reduction in the price that he pays for the bond. An analogous experience occurs with all other goods. If, in selling an estate that otherwise would have fetched £10,000, I retain the use of the estate for one or more years, or, if I sell another such estate which is burdened, perhaps in virtue of a legacy, with so many years' claim by a third party to its produce, there is no doubt that the price obtainable for the estate will fall below the amount of £10,000 by a sum that corresponds to the "uses" retained, or claimed by the third party.
These facts, which may be multiplied at will, in my opinion admit of being interpreted in only one way,—that the usual estimated value or selling value of goods embraces not only the value of the "goods in themselves," but also that of their future "uses," supposing there are any such.
But if this is so, then the "use" fails to explain the very thing which it was intended by the Use theory to explain. That theory would explain the fact that the value of a capital of £100 expands in its product to £105, by saying that a new and independent element of the value of £5 had been added to it. This explanation falls to the ground, as the Use theory must recognise, the moment it is seen that, in the capital value of £100, the future use itself has been considered and is contained. However unreservedly one may admit the existence of such uses, the riddle of surplus value is not read by them; the form of the question is only a little changed. It will now run: How comes it that the value of the elements of a product of capital, viz. substance of capital and uses of capital, which before were worth together £100, expands in the course of the production to £105? The fact is, that instead of one riddle we have now two. The first, that given by the nature of the phenomena of every interest theory, runs: Why does the value of the elements expand by the amount of the surplus value? To this the Use theory has added a second riddle of its own, In what way do the future "uses" of a good and the value of the "good in itself" together make up the present capital value of the good?—and no Use theorist has faced the difficulties of such a problem.
Thus the Use theory ends by putting more problems than it started with.
But if it has not had the good fortune to solve the interest problem, the Use theory has contributed more than any other to prepare the way towards it. While many other theories went wandering in ways that were quite unfruitful, the Use theory managed to gather together many an important piece of knowledge. I might compare it with some of the older theories of natural science; with that combustion theory of ancient times that worked with the mystical element Phlogiston; or with that older theory of heat that worked with a Warm Fluid. Phlogiston and warm fluid turned out to be fabulous essences, just as the "net use" turns out to be. But the symbol which in the meantime our theorists put in the place of the unknown something, helped in the same way as the x of our equations to discover a number of valuable relations and laws revolving about that unknown something. It did not point out the truth, but it helped to bring about its discovery.
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