create commodities, but merely changes their forms, and in so doing creates utilities.
The progress of economic thought since the days of Ricardo and Mill has been along two distinct lines. Socialists, led by Karl Marx, have accepted the proposition that value tends to be in proportion to quantity of labor, and have deduced from it their 'exploitation theory'—that is, the theory that labor, which creates all value, is deprived of the larger part of its products through the agency of the legalized but unjust institution of private property in land and capital. The other line of development has been away from the view that labor alone regulates value, and toward the conception that value is determined primarily by marginal utility, which measures the intensity of the demand for goods. Economists accepting the latter view recognize that value tends under certain conditions to correspond to the cost of production, as Ricardo argued, but find in the latter remuneration not merely for the sacrifice involved in labor, but also for that involved in saving and investing income in preference to spending it. Value, even under conditions of free competition, does not tend, therefore, to be in proportion to quantity of labor, but to quantities of labor and capital.
John Stuart Mill's observation that labor creates utilities, not matter, exposed the artificial character of Adam Smith's distinction between productive and unproductive labor. It is now recognized on all sides that the labor of physicians, lawyers, actors, etc., is just as productive as the labor of farmers and mechanics. All add to society's fund of consumable utilities, and this is the essence of production. To be sure, the utilities created by the actor are consumed as they are produced by his listening audience; but in this they differ only in degree from the utilities created by the fishman or the green-grocer, whose products must also be consumed promptly to be enjoyed at all. If permanence of results is the test of productiveness, the labor of all three must be considered unproductive in comparison with the labor of the pyramid-builder. In short, the distinction which Adam Smith had in mind is more happily and accurately represented as pertaining not to the relation between labor and its products, but to that between the products themselves and further production. Whether products are destined to become capital (i.e. direct aids to further production), the means of maintaining the economic efficiency of workmen (i.e. indirect aids to further production), or the means of mere idle gratification, is still a matter of considerable importance in economics, but one not pertaining to labor.
With the broadening of the conception of productive labor, more attention has been given to the interdependence of different groups of workers. It is recognized that unskilled manual laborers owe much to skilled or mechanical laborers, and that both would be worse off but for the guidance and direction of the business men or entrepreneurs who perform the 'labor of management.' At the same time there is still a tendency to draw a distinction between workers who work for wages and independent business or professional men who work for profits. When such phrases as 'the laboring class,' 'the labor problem,' 'the labor movement,' 'labor laws,' etc., are used, reference is made to the wage-earning class, whose rise to its present prominence dates from the industrial revolution at the end of the eighteenth and the beginning of the nineteenth centuries. The most significant phases of this development have been the growth of labor organizations intended to promote the interests of the wage-earning class (see Trade Unions), and the enactment of laws regulating the hours and other conditions of employment of certain members of this class, particularly women and children. See Labor Legislation.
Other aspects of labor to which increasing attention is given by economists are the circumstances which determine the worker's industrial efficiency. It is now recognized that the food, clothing, housing, etc., of the working classes are important, not merely because they affect the happiness of those classes, but because upon them depends the amount and quality of the work that can be performed. The standard of living influences wages not merely through the control which it may exercise over the rate at which population increases, but also because it determines the standard of efficiency. It is this consideration that has done most to transform economics from the 'dismal science' that was taught by the classical economists to the hopeful study that is pursued to-day. If rising wages bring with them increased efficiency, which becomes in turn a cause of still higher wages, there is no assignable limit in a progressive country to the possible progress of the working classes.
The progress of economic thought is shown also in the greater attention that is now paid to the psychological side of labor. Adam Smith asserted that in a day's labor the laborer "must always lay down the same portion of his ease, his liberty, and his happiness." Later writers assumed also that labor was disagreeable, if not painful, and would only be undertaken in the hope of reward. Professor Jevons first stated clearly that different kinds of labor and different hours of labor involve different degrees of sacrifice. He emphasized the thought that some labor is a source of positive pleasure to the laborer, and that it is usually only because labor is carried to excess that it becomes painful. Following this lead, later writers have begun to speculate in regard to the relations that would prevail in an industrial society in which excessive hours were cut off and labor-saving devices were utilized for the performance of all tasks that are inherently disagreeable. Under such ideal conditions it is obvious that all labor would be pleasurable, and that the only ground for distinguishing different kinds of labor or different hours of labor would be that some would afford more pleasure to the laborer than others. Men would be paid in such a society, not because they did disagreeable things, but because they produced want-satisfying goods, and to do so refrained from other lines of activity or relaxation that promised even more pleasure than the work in hand. Production, instead of figuring in the economic calculus as a sum of pains to be weighed against the pleasures of consumption, would appear in such a society as a sum of pleasures to be added in determining the full joy of living. It is hardly necessary to point out that such a condition is far in advance of the real situation even in the most progressive communities; but the world has certainly advanced to a stage in which economists and other thoughtful people have definitely discarded the idea that labor is a 'curse,' and in
