us; how could it be? But all the social inferences drawn
from it are absolute, complete and malicious fallacies.

Any socialist who says this, is quite right. Where he goes wrong is when
he tries to build up as truth a set of inferences more fallacious and
more malicious still.

But the central economic doctrine of cost can not be shaken by mere
denunciation. Let us examine it and see what is the matter with it. We
restate the equation.

_Under perfectly free competition the value or selling price of
everything equals, or is perpetually tending to equal, the cost of its
production._ This is the proposition itself, and the inferences derived
from it are that there is a "natural price" of everything, and that all
"natural prices" are proportionate to cost and to one another; that all
wages, apart from temporary fluctuations, are derived from, and limited
by, the natural prices paid for the things made: that all payments for
the use of capital (interest) are similarly derived and similarly
limited; and that consequently the whole economic arrangement, by giving
to each person exactly and precisely the fruit of his own labor,
conforms exactly to social justice.

Now the trouble with the main proposition just quoted is that each side
of the equation is used as the measure of the other. In order to show
what natural price is, we add up all the wages that have been paid, and
declare that to be the cost and then say that the cost governs the
price. Then if we are asked why are wages what they are, we turn the
argument backward and say that since the selling price is so and so the
wages that can be paid out of it only amount to such and such. This
explains nothing. It is a mere argument in a circle. It is as if one
tried to explain why one blade of a pair of scissors is four inches long
by saying that it has to be the same length as the other. This is quite
true of either blade if one takes the length of the other for granted,
but as applied to the explanation of the length of the scissors it is
worse than meaningless.

This reasoning may seem to many persons mere casuistry, mere sophistical
juggling with words. After all, they say, there is such a thing as
relative cost, relative difficulty of making things, a difference which
rests upon a physical basis. To make one thing requires a lot of labor
and trouble and much skill: to make another thing requires very little
labor and no skill out of the common. Here then is your b