The Limitations of Marginal Utility
Thorstein Veblen
1909
Journal of Political Economy, volume 17.

     The limitations of the marginal-utility economics are  sharp
and characteristic. It is from first to last a doctrine of value,
and in point of form and method it is a theory of valuation. The
whole system, therefore, lies within the theoretical field of
distribution, and it has but a secondary bearing on any other
economic phenomena than those of distribution -- the term being
taken in its accepted sense of pecuniary distribution, or
distribution in point of ownership. Now and again an attempt is
made to extend the use of the principle of marginal utility
beyond this range, so as to apply it to questions of production,
but hitherto without sensible effect, and necessarily so. The
most ingenious and the most promising of such attempts have been
those of Mr Clark, whose work marks the extreme range of endeavor
and the extreme degree of success in so seeking to turn a
postulate 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 matter
of valuation; which throws the whole excursion back into the
field of distribution. Similarly, as regards attempts to make use
of this principle in an analysis of the phenomena of consumption,
the best results arrived at are some formulation of the pecuniary
distribution of consumption goods.
     Within this limited range marginal utility theory is of a
wholly statical character. It offers no theory of a movement of
any kind, being occupied with the adjustment of values to a given
situation. Of this, again, no more convincing illustration need
be had than is afforded by the work of Mr. Clark, which is not
excelled in point of earnestness, perseverance, or insight. For
all their use of the term "dynamic", neither Mr. Clark nor any of
his associates in this line of research have yet contributed
anything at all appreciable to a theory of genesis, growth,
sequence, change, process, or the like, in economic life. They
have had something to say as to the bearing which given economic
changes, accepted as premises, may have on economic valuation,
and so on distribution; but as to the causes of change or the
unfolding sequence of the phenomena of economic life they have
had nothing to say hitherto; nor can they, since their theory is
not drawn in causal terms but in terms of teleology.
     In all this the marginal utility school is substantially at
one with the classical economics of the nineteenth century, the
difference between the two being that  the former is confined
within narrower limits and sticks more consistently to its
teleological premises. Both are teleological, and neither can
consistently admit arguments from cause to effect in the
formulation of their main articles of theory. Neither can deal
theoretically with phenomena of change, but at the most only with
rational adjustment to change which may be supposed to have
supervened.
     To the modern scientist the phenomena of growth and change
are the most obtrusive and most consequential facts observable in
economic life. For an understanding of modern economic life the
technological advance of the past two centuries -- e.g., the
growth of the industrial arts -- is of the first importance; but
marginal utility theory does not bear on this matter, nor does
this matter bear on marginal utility theory. As a means of
theoretically accounting for this technological movement in the
past or in the present, or even as a means of formally,
technically stating it as an element in the current economic
situation, that doctrine and all its works are altogether idle.
The like is true for the sequence of change that is going forward
in the pecuniary relations of modern life; the hedonistic
postulate and its propositions of differential utility neither
have served nor can serve an inquiry into these phenomena of
growth, although the whole body of marginal utility economics
lies within the range of these pecuniary phenomena. It has
nothing to say to the growth of business usages and expedients or
to the concomitant changes in the principles of conduct which
govern the pecuniary relations of men, which condition and are
conditioned by these altered relations of business life or which
bring them to pass.
     It is characteristic of the school that whatever an element
of the cultural fabric, an institution or any institutional
phenomenon, is involved in the facts with which the theory is
occupied, such institutional facts are taken for granted, denied,
or explained away. If it is a question of price, there is offered
an explanation of how exchanges may take place with such effect
as to leave money and price out of the account. If it is a
question of credit, the effect of credit extension on business
traffic is left on one side and there is an explanation of how
the borrower and lender cooperate to smooth out their respective
income streams of consumable goods or sensations of consumption.
The failure of the school in this respect is consistent and
comprehensive. And yet these economists are lacking neither in
intelligence nor in information. They are, indeed, to be
credited, commonly, with a wide range of information and an exact
control of materials, as well as with a very alert interest in
what is going on; and apart from their theoretical pronouncements
the members of the school habitually profess the sanest and most
intelligent views of current practical questions, even when these
questions touch matters of institutional growth and decay.
     The infirmity of this theoretical scheme lies in its
postulates which confine the inquiry to generalisations of the
teleological or "deductive" order. These postulates, together
with the point of view and logical method that follow from them,
the marginal utility school shares with other economists of the
classical line -- for this school is but a branch or derivative
of the English classical economists of the nineteenth century.
The substantial difference between this school and the generality
of classical economists lies mainly in the fact that in the
marginal utility economics the common postulates are more
consistently adhered to at the same time that they are more
neatly defined and their limitations are more adequately
realized. Both the classical school is general and its
specialized variant, the marginal utility school, in particular,
take as their common point of departure the traditional
psychology of the early nineteenth century hedonists, which is
accepted as a matter of course or of common notoriety and is held
quite uncritically. The central and well defined tenet so held is
that of the hedonistic calculus. Under the guidance of this tenet
and of the other psychological conceptions associated and
consonant with it, human conduct is conceived of and interpreted
as a rational response to the exigencies of the situation in
which mankind is placed; as regards economic conduct it is such a
rational and unprejudiced response to the stimulus of anticipated
pleasure and pain -- being, typically and in the main, a response
to the promptings of anticipated pleasure, for the hedonists of
the nineteenth century and of the marginal utility school are in
the main of an optimistic temper.1 Mankind is, on the whole and
normally, (conceived to be) clearsighted and farsighted in its
appreciation of future sensuous gains and losses, although there
may be some (inconsiderable) difference between men in this
respect. Men's activities differ, therefore, (inconsiderably) in
respect of the alertness of the response and the nicety of
adjustment of irksome pain cost to apprehended future sensuous
gain; but, on the whole, no other ground or line or guidance of
conduct than this rationalistic calculus falls properly within
the cognizance of the economic hedonists. Such a theory can take
account of conduct only in so far as it is rational conduct,
guided by deliberate and exhaustively intelligent choice -- wise
adaption to the demands of the main chance.
     The external circumstances which condition conduct are
variable, of course, and so they will have a varying effect upon
conduct; but their variation is, in effect, construed to be of
such a character only as to vary the degree of strain to which
the human agent is subject by contact with these external
circumstances. The cultural elements involved in the theoretical
scheme, elements that are of the nature of institutions, human
relations governed by use and wont in whatever kind and
connection, are not subject to inquiry but are taken from granted
as preexisting in a finished, typical form and as making up a
normal and definite economic situation, under which and in terms
of which human intercourse is necessarily carried on. This
cultural situation comprises a few large and simple articles of
institutional furniture, together with their logical implications
or corollaries; but it includes nothing of the consequences or
effects caused by these institutional elements. The cultural
elements so tacitly postulated as immutable conditions precedent
to economic life are ownership and free contract, together with
such other features of the scheme of natural rights as are
implied in the exercise of these. These cultural products are,
for the purpose of the theory, conceived to be given a priori in
unmitigated force. They are part of the nature of things; so that
there 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 why
they have changed and are changing, or what effect all this may
have on the relations of men who live by or under this cultural
situation.
      Evidently the acceptance of these immutable premises,
tacitly, because uncritically and as a matter of course, by
hedonistic economics gives the science a distinctive character
and places it in contrast with other sciences whose premises are
of a different order. As has already been indicated, the premises
in question, so far as they are peculiar to the hedonistic
economics, are (a) a certain institutional situation, the
substantial feature of which is the natural right of ownership,
and (b) the hedonistic calculus. The distinctive character given
to this system of theory by these postulates and by the point of
view resulting from their acceptance may be summed up broadly and
concisely in saying that the theory is confined to the ground of
sufficient reason instead of proceeding on the ground of
efficient cause. The contrary is true of modern science,
generally (except mathematics), particularly of such sciences as
have to do with the phenomena of life and growth. The difference
may seem trivial. It is serious only in its consequences. The two
methods of inference -- from sufficient reason and from efficient
cause -- are out of touch with one another and there is no
transition from one to the other; no method of converting the
procedure or the results of the one into those of the other. The
immediate consequence is that the resulting economic theory is of
a teleological character -- "deductive" or "a priori" as it is
often called -- instead of being drawn in terms of cause and
effect. The relation sought by this theory among the facts with
which it is occupied is the control exercised by future
(apprehended) events over present conduct. Current phenomena are
dealt with as conditioned by their future consequences; and in
strict marginal-utility theory they can be dealt with only in
respect of their control of the present by consideration of the
future. Such a (logical) relation of control or guidance between
the future and the present of course involves an exercise of
intelligence, a taking thought, and hence an intelligent agent
through whose discriminating forethought the apprehended future
may affect the current course of events; unless, indeed, one were
to admit something in the way of a providential elements, the
relation of sufficient reason runs by way of the interested
discrimination, the forethought, of an agent who takes thought of
the future and guides his present activity by regard for this
future. The relation of sufficient reason runs only from the
(apprehended) future into the present, and it is solely of an
intellectual, subjective, personal, teleological character and
force; while the relation of cause and effect runs only in the
contrary direction, and it is solely of an objective, impersonal
materialistic character and force. The modern scheme of
knowledge, on the whole, rests for its definitive ground, on the
relation of cause and effect; the relation of sufficient reason
being admitted only provisionally and as a proximate factor in
the analysis, always with the unambiguous reservation that the
analysis must ultimately come to rest in terms of cause and
effect. The merits of this scientific animus, of course, do not
concern the present argument.
     Now, it happens that the relation of sufficient reason
enters very substantially into human conduct. It is this element
of discriminating forethought that distinguishes human conduct
from brute behavior. And since the economist's subject of inquiry
is this human conduct, that relation necessarily comes in for a
large share of his attention in any theoretical formulation of
economic phenomena, whether hedonistic or otherwise. But while
modern science at large has made the causal relation the sole
ultimate ground of theoretical formulation; and while the other
sciences that deal with human life admit the relation of
sufficient reason as a proximate, supplementary, or intermediate
ground, subsidiary, and subservient to the argument from cause
and effect; economics has had the misfortune -- as seen from the
scientific point of view -- to let the former supplant the
latter. It is, of course, true that human conduct is
distinguished from other natural phenomena by the human faculty
for taking thought, and any science that has to do with human
conduct must face the patent fact that the details of such
conduct consequently fall into the teleological form; but it is
the peculiarity of the hedonistic economics that by force of its
postulated its attention is confined to this teleological bearing
of conduct alone. It deals with this conduct only in so far as it
may be construed in rationalistic, teleological terms of
calculation and choice. But it is at the same time no less true
that human conduct, economic or otherwise, is subject to the
sequence of cause and effect, by force of such elements as
habituation and conventional requirements. But facts of this
order, which are to modern science of graver interest than the
teleological details of conduct, necessarily fall outside the
attention of the hedonistic economist, because they cannot be
construed in terms of sufficient reason, such as his postulates
demand, or be fitted into a scheme of teleological doctrines.
      There is, therefore, no call to impugn these premises of
the marginal-utility economics within their field. They commend
themselves 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 practical
grounds of conduct, they are not to be called in question without
questioning 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 is
what is meant by calling them institutions; they are settled
habits of thought common to the generality of men. But it would
be mere absentmindedness in any student of civilization therefore
to admit that these or any other human institutions have this
stability which is currently imputed to them or that they are in
this way intrinsic to the nature of things. The acceptance by the
economists of these or other institutional elements as given and
immutable limits their inquiry in a particular and decisive way.
It shuts off the inquiry at the point where the modern scientific
interest sets in. The institutions in question are no doubt good
for their purpose as institutions, but they are not good as
premises for a scientific inquiry into the nature, origin,
growth, and effects of these institutions and of the mutations
which they undergo and which they bring to pass in the
community's scheme of life.
     To any modern scientist interested in economic phenomena,
the chain of cause and effect in which any given phase of human
culture is involved, as well as the cumulative changes wrought in
the fabric of human conduct itself by the habitual activity of
mankind, are matters of more engrossing and more abiding interest
than the method of inference by which an individual is presumed
invariably to balance pleasure and pain under given conditions
that are presumed to be normal and invariable. The former are
questions 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 the
face of a given situation that may arise in the course of this
cultural growth. The former bear on the continuity and mutations
of that scheme of conduct whereby mankind deals with its material
means of life; the latter, if it is conceived in hedonistic
terms, concerns a disconnected episode in the sensuous experience
of an individual member of such a community.
      In so far as modern science inquires into the phenomena of
life, whether inanimate, brute, or human, it is occupied about
questions of genesis and cumulative change, and it converges upon
a theoretical formulation in the shape of a life-history drawn in
causal terms. In so far as it is a science in the current sense
of the term, any science, such as economics, which has to do with
human conduct, becomes a genetic inquiry into the human scheme of
life; and where, as in economics, the subject of inquiry is the
conduct of man in his dealings with the material means of life,
the science is necessarily an inquiry into the life-history of
material civilization, on a more or less extended or restricted
plan. Not that the economist's inquiry isolates material
civilization from all other phases and bearings of human culture,
and so studies the motions of an abstractly conceived "economic
man." On the contrary, no theoretical inquiry into this material
civilization 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 of
cultural 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 and
will take in other phases of civilization only in their
correlation with the scheme of material civilization.
      Like all human culture this material civilization is a
scheme of institutions -- institutional fabric and institutional
growth. But institutions are an outgrowth of habit. The growth of
culture is a cumulative sequence of habituation, and the ways and
means of it are the habitual response of human nature to
exigencies that vary incontinently, cumulatively, but with
something of a consistent sequence in the cumulative variations
that so go forward, -- incontinently, because each new move
creates a new situation which induces a further new variation in
the habitual manner of response; cumulatively, because each new
situation is a variation of what has gone before it and embodies
as 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 the
response takes place, and on the ground of which the habituation
takes effect, remain substantially unchanged.
     Evidently an economic inquiry which occupies itself
exclusively with the movements of this consistent, elemental
human nature under given, stable institutional conditions -- such
as is the case with the current hedonistic economics -- can reach
statical results alone; since it makes abstraction from those
elements that make for anything but a statical result. On the
other hand an adequate theory of economic conduct, even for
statical purposes, cannot be drawn in terms of the individual
simply -- as is the case in the marginal-utility economics --
because it cannot be drawn in terms of the underlying traits of
human nature simply; since the response that goes to make up
human conduct takes place under institutional norms and only
under stimuli that have an institutional bearing; for the
situation that provokes and inhibits action in any given case is
itself in great part of institutional, cultural derivation. Then,
too, the phenomena of human life occur only as phenomena of the
life of a group or community; only under stimuli due to contact
with the group and only under the (habitual) control exercised by
canons of conduct imposed by the group's scheme of life. Not only
is the individual's conduct hedged about and directed by his
habitual relations to his fellows in the group, but these
relations, being of an institutional character, vary as the
institutional scheme varies. The wants and desires, the end and
aim, the ways and means, the amplitude and drift of the
individual's conduct are functions of an institutional variable
that is of a highly complex and wholly unstable character.
     The growth and mutations of the institutional fabric are an
outcome of the conduct of the individual members of the group,
since it is out of the experience of the individuals, through the
habituation of individuals, that institutions arise; and it is in
this same experience that these institutions act to direct and
define the aims and end of conduct. It is, of course, on
individuals that the system of institutions imposes those
conventional standards, ideals, and canons of conduct that make
up the community's scheme of life. Scientific inquiry in this
field, therefore, must deal with individual conduct and must
formulate its theoretical results in terms of individual conduct.
But such an inquiry can serve the purposes of a genetic theory
only if and in so far as this individual conduct is attended to
in those respects in which it counts toward habituation, and so
toward change (or stability) of the institutional fabric, on the
one hand, and in those respects in which it is prompted and
guided by the received institutional conceptions and ideals on
the other hand. The postulates of marginal utility, and the
hedonistic preconceptions generally, fail at this point in that
they confine the attention to such bearings of economic conduct
as are conceived not to be conditioned by habitual standards and
ideals and to have no effect in the way of habituation. They
disregard or abstract from the causal sequence of propensity and
habituation in economic life and exclude from theoretical inquiry
all such interest in the facts of cultural growth, in order to
attend to those features of the case that are conceived to be
idle in this respect. All such facts of institutional force and
growth 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 a
more or less vague and general allowance for inconsequential
disturbances due to occasional human infirmity. Certain
institutional phenomena, it is true, are comprised among the
premises of the hedonists, as has been noted above; but they are
included as postulates a priori. So the institution of ownership
is taken into the inquiry not as a factor of growth or an element
subject to change, but as one of the primordial and immutable
facts of the order of nature, underlying the hedonistic calculus.
Property, ownership, is presumed as the basis of hedonistic
discrimination and it is conceived to be given in its finished
(nineteenth-century) scope and force. There is not thought either
of a conceivable growth of this definitive nineteenth-century
institution out of a cruder past or of any conceivable cumulative
change in the scope and force of ownership in the present or
future. Nor is it conceived that the presence of this
institutional element in men's economic relations in any degree
affects or disguises the hedonistic calculus, or that its
pecuniary conceptions and standards in any degree standardize,
color, mitigate, or divert the hedonistic calculator from the
direct and unhampered quest of the net sensuous gain. While the
institution of property is included in this way among the
postulates of the theory, and is even presumed to be ever-present
in the economic situation, it is allowed to have no force in
shaping economic conduct, which is conceived to run its course to
its hedonistic outcome as if no such institutional factor
intervened between the impulse and its realization. The
institution of property, together with all the range of pecuniary
conceptions that belong under it and that cluster about it, are
presumed to give rise to no habitual or conventional canons of
conduct or standards of valuation, no proximate ends, ideals, or
aspirations. All pecuniary notions arising from ownership are
treated simply as expedients of computation which mediate between
the pain-cost and the pleasure-gain of hedonistic choice, without
lag, leak, or friction; they are conceived simply as the
immutably correct, God-given notation of the hedonistic calculus.
     The modern economic situation is a business situation, in
that economic activity of all kinds is commonly controlled by
business considerations. The exigencies of modern life are
commonly pecuniary exigencies. That is to say they are exigencies
of the ownership of property. Productive efficiency and
distributive gain are both rated in terms of price. Business
considerations are considerations of price, and pecuniary
exigencies of whatever kind in the modern communities are
exigencies of price. The current economic situation is a price
system. Economic institutions in the modern civilized scheme of
life are (prevailing) institutions of the price system. The
accountancy to which all phenomena of modern economic life are
amenable is an accountancy in terms of price; and by the current
convention there is no other recognized scheme of accountancy, no
other rating, either in law or in fact, to which the facts of
modern life are held amenable. Indeed, so great and pervading a
force has this habit (institution) of pecuniary accountancy
become that it extends, often as a matter of course, to many
facts which properly have no pecuniary bearing and no pecuniary
magnitude, as, e.g., works of art, science, scholarship, and
religion. More or less freely and fully, the price system
dominates the current common sense in its appreciation and rating
of these non-pecuniary ramifications of modern culture; and this
in spite of the fact that, on reflection, all men of normal
intelligence will freely admit that these matters lie outside the
scope of pecuniary valuation.
     Current popular taste and the popular sense of merit and
demerit are notoriously affected in some degree by pecuniary
considerations. It is a matter of common notoriety, not to be
denied or explained away, that pecuniary ("commercial") tests and
standards are habitually made use of outside of commercial
interests proper. Precious stones, it is admitted, even by
hedonistic economists, are more esteemed than they would be if
they were more plentiful and cheaper. A wealthy person meets with
more consideration and enjoys a larger measure of good repute
than would fall to the share of the same person with the same
habit of mind and body and the same record of good and evil deeds
if he were poorer. It may well be that this current
"commercialization" of taste and appreciation has been overstated
by superficial and hasty critics of contemporary life, but it
will not be denied that there is a modicum of truth in the
allegation. Whatever substance it has, much or little, is due to
carrying over into other fields of interest the habitual
conceptions induced by dealing with and thinking of pecuniary
matters. These "commercial" conceptions of merit and demerit are
derived from business experience. The pecuniary tests and
standards so applied outside of business transactions and
relations are not reducible to sensuous terms of pleasure and
pain. Indeed, it may, e.g., be true, as is commonly believed,
that the contemplation of a wealthy neighbor's pecuniary
superiority yields painful rather than pleasurable sensations as
an immediate result; but it is equally true that such a wealthy
neighbor is, on the whole, more highly regarded and more
considerately treated than another neighbor who differs from the
former only in being less enviable in respect of wealth.
     It is the institution of property that gives rise to these
habitual grounds of discrimination, and in modern times, when
wealth is counted in terms of money, it is in terms of money
value that these tests and standards of pecuniary excellence are
applied. This much will be admitted. Pecuniary institutions
induce pecuniary habits of thought which affect men's
discrimination outside of pecuniary matters; but the hedonistic
interpretation alleges that such pecuniary habits of thought do
not affect men's discrimination in pecuniary matters. Although
the institutional scheme of the price system visibly dominates
the modern community's thinking in matters that lie outside the
economic interest, the hedonistic economists insist, in effect,
that this institutional scheme must be accounted of no effect
within that range of activity to which it owes its genesis,
growth, and persistence. The phenomena of business, which are
peculiarly and uniformly phenomena of price, are in the scheme of
the hedonistic theory reduced to non-pecuniary hedonistic terms
and the theoretical formulation is carried out as if pecuniary
conceptions had no force within the traffic in which such
conceptions originate. It is admitted that preoccupation with
commercial interests has "commercialised" the rest of modern
life, but the "commercialization" of commerce is not admitted.
Business transactions and computations in pecuniary terms, such
as loans, discounts, and capitalisation, are without hesitation
or abatement converted into terms of hedonistic utility, and
conversely.
      It may be needless to take exception to such conversion
from pecuniary into sensuous terms, for the theoretical purpose
for which it is habitually make; although, if need were, it might
not be excessively difficult to show that the whole hedonistic
basis of such a conversion is a psychological misconception. But
it is to the remoter theoretical consequences of such a
conversion that exception is to be taken. In making the
conversion abstraction is made from whatever elements do not lend
themselves to its terms; which amounts to abstracting from
precisely those elements of business that have an institutional
force and that therefore would lend themselves to scientific
inquiry of the modern kind -- those (institutional) elements
whose analysis might contribute to an understanding of modern
business and of the life of the modern business community as
contrasted with the assumed primordial hedonistic calculus.
     The point may perhaps be made clearer. Money and the
habitual resort to its use are conceived to be simply the ways
and means by which consumable goods are acquired, and therefore
simply a convenient method by which to procure the pleasurable
sensations of consumption; these latter being in hedonistic
theory the sole and overt end of all economic endeavor. Money
values have therefore no other significance than that of
purchasing power over consumable goods, and money is simply an
expedient of computation. Investment, credit extensions, loans of
all kinds and degrees, with payment of interest and the rest, are
likewise taken simply as intermediate steps between the
pleasurable sensations of consumption and the efforts induced by
the anticipation of these sensations, other bearings of the case
being disregarded. The balance being kept in terms of the
hedonistic consumption, no disturbance arises in this pecuniary
traffic so long as the extreme terms of this extended hedonistic
equation -- pain-cost and pleasure-gain -- are not altered, what
lies between these extreme terms being merely algebraic notation
employed for convenience of accountancy. But such is not the run
of the facts in modern business. Variation of capitalization,
e.g., occur without its being practicable to refer them to
visibly equivalent variations either in the state of the
industrial arts or in the sensations of consumption. Credit
extensions tend to inflation of credit, rising prices,
overstocking of markets, etc., likewise without a visible or
securely traceable correlation in the state of the industrial
arts or in the pleasures of consumption; that is to say, without
a visible basis in those material elements to which the
hedonistic theory reduces all economic phenomena. Hence the run
of the facts, in so far, must be thrown out of the theoretical
formulation. The hedonistically presumed final purchase of
consumable goods is habitually not contemplated in the pursuit of
business enterprise. Business men habitually aspire to accumulate
wealth in excess of the limits of practicable consumption, and
the wealth so accumulated is not intended to be converted by a
final transaction of purchase into consumable goods or sensations
of consumption. Such commonplace facts as these, together with
the endless web of business detail of a like pecuniary character,
do not in hedonistic theory raise a question as to how these
conventional aims, ideals, aspirations, and standards have come
into force or how they affect the scheme of life in business or
outside of it; they do not raise the questions because such
questions cannot be answered in the terms which the hedonistic
economists are content to use, or, indeed, which their premises
permit them to use. The question which arises is how to explain
the facts away; how theoretically to neutralize them so that they
will not have to appear in the theory, which can then be drawn
indirect and unambiguous terms of rational hedonistic
calculation. They are explained away as being aberrations due to
oversight or lapse of memory on the part of business men, or to
some failure of logic or insight. Or they are construed and
interpreted into the rationalistic terms of the hedonistic
calculus by resort to an ambiguous use of the hedonistic
concepts. So that the whole "money economy", with all the
machinery of credit and the rest, disappears in a tissue of
metaphors to reappear theoretically expurgated, sterilized, and
simplified into a "refined system of barter", culminating in a
net aggregate maximum of pleasurable sensations of consumption.
     But since it is in just this unhedonistic, unrationalistic
pecuniary traffic that the tissue of business life consists,
since it is this peculiar conventionalism of aims and standards
that differentiates the life of the modern business community
from any conceivable earlier or cruder phase of economic life;
since it is in this tissue of pecuniary intercourse and pecuniary
concepts, ideals, expedients, and aspirations that the
conjunctures of business life arise and run their course of
felicity and devastation; since it is here that those
institutional changes take place which distinguish one phase or
era of the business community's life from any other; since the
growth and change of these habitual, conventional elements make
the growth and character of any business era or business
community; any theory of business which sets these elements aside
or explains them away misses the main facts which it has gone out
to seek. Life and its conjunctures and institutions being of this
complexion, however much that state of the case may be
depreciated, a theoretical account of the phenomena of this life
must be drawn in these terms in which the phenomena occur. It is
not simply that the hedonistic interpretation of modern economic
phenomena is inadequate or misleading; if the phenomena are
subjected to the hedonistic interpretation in the theoretical
analysis they disappear from the theory; and if they would bear
the interpretation in fact they would disappear in fact. If, in
fact, all the conventional relations and principles of pecuniary
intercourse were subject to such a perpetual rationalized,
calculating revision, so that each article of usage,
appreciation, or procedure must approve itself de novo on
hedonistic grounds of sensuous expediency to all concerned at
every move, it is not conceivable that the institutional fabric
would last over night.