However, we shall never be free from the need to use constructive scientific imagination. We may describe existing institutions, but we cannot know their effects on man without knowing what alternative institutions would be like. Since the experimental method has such limited possibilities in the field of large-scale human organization, creative conjecture will always play a most important part. Even Veblen has descended to it in his book The Engineers and the Price System, taking up the burden of visualizing a possible change in the existing order.

As for final valuations, in which we shall decide which human values are most important and which are not worth what they cost, these cannot be set up in advance, for they will evolve endlessly, as more and more light is thrown on the effects of industrialism; showing us what values it furthers and what values it defeats. We used to have a quantitative economics of social efficiency in purely abstract terms. We can still have a quantitative economics which describes objective phenomena, but the economics of efficiency cannot be quantitative in the sense of having a pre-existing measure of quantities. It must form its measure as it goes along.

COMMUNITIES OF ECONOMIC INTEREST

AND THE PRICE SYSTEM1

1. PRICE AND WELFARE

Professor Fisher tells us that compensating the dollar "would directly and indirectly accomplish more social justice and go farther in the solution of our industrial, commercial, and financial problems than almost any other reform proposed in the world today." This seems a far-reaching, almost an extravagant claim. And yet in a society where a pecuniary standard is employed to make the measurements by which the resources and agents of production are apportioned among the several industries and trades and by which the distribution of products and services is determined, any imperfections in that standard would necessarily have very serious consequences for economic welfare and justice. And admittedly our dollar yardstick works quite imperfectly:-there are many wide discrepancies between the price measures that the market puts on things and the costs in human effort and suffering that have been required to make them, or their significance for consumers' welfare; there are many wide discrepancies between the net value in exchange received by a "producer" and his net addition to the serviceability of the product. If somehow we could eliminate these discrepancies, if in this broader sense we could "compensate the dollar," we should indeed work a mighty reform for economic welfare and justice.

Although our present concern is not directly with the problems of social reform, it does have to do with the introduction of corrections into our pecuniary measure which will make it a more satisfactory standard. There are clearly two questions, more or less capable

1 The writer wishes to acknowledge the helpful criticism of Professor H. J. Davenport and Dr. Woolf Cohen of Cornell University. He is also indebted to Professor J. M. Clark, under whose guidance an earlier form of this paper was worked out.

It may be noted that in order to avoid too great a complication of the issues raised, certain concessions of phraseology have been made to the many economists who adhere to a "marginal desirability" psychology. The writer does not subscribe to this theory.

2 Irving Fisher, Stabilizing the Dollar, 1920, 112.

of separate consideration:-(1) What are economic justice and common welfare? By what standard shall we measure or otherwise determine the welfare or justice of a given situation? (2) When and insofar as the situation falls short of this standard, how can it be brought to agreement with it? We shall attempt to confine our attention to the first question, and to formulate in pecuniary terms a tentative statement of the direction in which the common economic interest lies.

Impressed by the numerous and far-reaching imperfections of the price measure, many economists have given it up and sought some other standard by which to appraise the current situation. Certain writers have even gone so far as to abandon the problem to other fields of thought. It will be a part of our task in this preliminary sketch (for it makes no claim to finality) to consider some of these views. But in the end we shall return again to pecuniary value, believing that it is worth preserving and improving upon as a standard of welfare and justice, in spite of its many short comings, and that, even if we cannot rely on it exclusively, its advantages are such that where it is applicable we cannot afford to do without it. First of all, however, it will be desirable to make an analysis of the discrepancies in our pecuniary standard, in the hope of tracing these discrepancies to some phase or phases of the present institutional situation, for a knowledge of causes may be of assistance in making accurately-even if only hypothetically-the requisite corrections. What then is the relation between price and welfare in our present society?

L 2. SOME DISCREPANCIES IN THE PECUNIARY STANDARD

Economists have often looked on the world and seen that it was good. Here was a vast, complicated society composed of highly specialized workers, a net-work of interdependent families and communities without any general manager. There are many functional foremen, of course, managers of particular organizations devoted to some specialized line of production, but no one coördinates all these independent enterprises. "Every individual . . . intends only his own gain." Yet somehow, "the study of his own advantage, naturally, or rather necessarily, leads him to prefer that employment which is most advantageous to the society"; somehow there is coördination of specialists. To Adam Smith it seemed, indeed, that "he is in this, as in many other cases, led by an invisible hand to promote an end which was no part of his intention." If we may make a substitution for the "unseen hand," we may say that certain economic institų