which is fixing a rate of pay by its own conscious act. How
can the judges directly ascertain how much a final increment of social
labor produces?

Employers, indeed, do make such tests. An estimate of how much a few
additional laborers would add to the product of a business often has,
in some way, to be made, and employers manage to make it; but
subsequent experience is necessary for verifying their judgment. A
rule of pay, governed by marginal productivity, results from the
action spontaneously taken by a myriad of employers, who enlarge their
working forces when they find that they gain thereby, and reduce them
when they lose. Of course no court could do anything of this kind. No
department of industry will turn itself into a laboratory for testing
the productive power of labor. It is clear that the procedure must be
much simpler and cruder; and a vital question is whether a board of
arbitration, proceeding as it must do, is under any influence that
impels it to render decisions which, in any degree, conform to the
theoretical standard of pay. Does the economic law of wages operate at
all when civil law steps in to the extent of creating any tribunal of
arbitration? We shall see.

_The Necessity for Some Standard on which Arbitrators may base
Awards._--When a board of arbitration tries to do anything more than
to end a quarrel, it must seek for some principle of justice. If it is
dealing with a favored class of laborers, it finds two extreme limits
between which its awards must fall, namely (1) the product which the
business yields in excess of simple interest on the capital, and (2)
the wages that unorganized laborers may offer to accept. It is
possible that the workmen may demand the former amount and the
employers may offer the latter; and if so, compromising is a
rule-of-thumb mode of doing justice. In the case of a strong union and
a highly profitable business the employers may offer more than the
minimum amount, and the award that is a compromise between the terms
of the contending parties will then be well above that which is a fair
mean between the possible extremes; yet it does not appear that it
really conforms to any ethical principle.

_Average Wages as a Standard._--Another possible basis of an award is
the average rate of wages prevailing; but it has no claim as a
standard of exact justice and is very far from being workable. Wages
vary from a very high rate to a very low one; and the highest rate i