CONCEPTIONS AND METHODS OF ECONOMICS 13 



are to be distinguished over a series of years, and whose present 

 exchange value is the capitalized sum of all the uses they contain. 



Therefore " marginal utility " is not the theory of value; it is but 

 the alphabet of the theory of value. Building upon the conception 

 of immediate gratifications the conception of usufructs, and upon the 

 conception of usufructs the conception of capitalization and time- 

 value, the framework of a theory of value may be reared, unified, 

 consistent, and complete. 



The conception of proportionality is not mentioned, but is implied 

 throughout the foregoing. In the progress of economic theory it 

 was under the aspect of "the law of diminishing returns " that men 

 first grasped a ragged corner of this broad principle. An historical 

 view helps us to understand how it was possible for the keenest 

 minds to believe at first that " diminishing returns " were peculiar 

 to land used in agriculture, and were due to the peculiar chemical 

 qualities of soil used for food production. Such a view mistook a 

 logical economic principle for a physical fact. Then the same 

 " law " was seen to be true of land in other uses; and of late by some 

 able thinkers has been seen to be true of all indirect agents. We 

 have now but to relate the " law of diminishing returns " in the 

 use of durable agents to the principle of marginal utility in the use 

 of immediately consumable goods for gratification, to arrive at 

 a broad conception of "the diminishing utility of goods" in all con- 

 ceivable applications, immediate or remote. This is the very heart 

 and essence of the economic problem. It is the proportioning of lim- 

 ited means to useful ends; it is the wise choice and union of limited 

 agents; it is the rule of economy. And this is but a special aspect 

 of a law as broad as life the law of proportionality. In mechanics 

 it is the adjustment giving the maximum of efficiency; in chemistry it 

 is the union of elements in effective proportions; in politics it is the 

 rule of justice and expediency; in ethics it is the Socratic golden mean 

 between the opposing vices; in economics it is the wise adjustment of 

 goods to wants. 



II. Methods 



Controversy over the deductive and the inductive methods. In 

 turning to the subject of the methods of economic inquiry I do not 

 purpose reviving and continuing the well-worn controversy over the 

 rival merits of induction and of deduction. That controversy may 

 have had its uses; in any case it seems to have been inevitable; and 

 yet to the eyes of to-day the issue appears to have arisen out of 

 false analogies with other sciences. 



Induction and deduction are different modes of thought, or 

 processes of logic, to arrive at truth. The methods of inductive 

 thought and of deductive thought cannot validly be contrasted 



