To understand how the sort of thing we discussed last time can be maintained, we must now turn our attention to certain features in the economic process which also take a part in the determination of economic values and which at the same time show how very difficult it is to value in the economic sense that which comes into the process through the human mind and Spirit. I will give you an example, not exactly fictitious, but put in such a way that its value as an example does not depend on the specific facts on which it is based.

The following may happen. At a given time there lives a great poet, recognised as such during his lifetime and increasingly so after his death. Now one of those who concern themselves with this poet, being perhaps particularly fond of his poetry, may hit upon the following idea. “In the near future,” he says to himself, “they will make more and more of him. I know for certain — at any rate I can afford to take the risk — that in the near future, say within 20 years, they will make still more fuss about him than now. Nay more, following the habits of our time, within 20 years they are sure to set up an institution to collect his manuscripts.” From various things which he has picked up and turned over in his astute head, this man says to himself: “These things are quite sure to happen. Very well, I will begin at once to purchase autograph MSS. of this poet. For they are still very cheap.” And then one day, when he is sitting in the company of others, one of them says: “Personally I am not very keen on speculation: all I desire is to have a reasonable interest on my savings.” Another says: “That is not good enough for me. I am buying shares in such-and-such a mining concern.” He is more of a speculator; he is buying “paper” (industrial shares). But the third, namely our man, says: “I am buying up the best paper on the market. It is very cheap indeed. But I shall not tell you fellows what it is” (for it is part of the venture that he does not give his game away). “The paper I am buying will rise in value more than any other in the near future.” So he buys nothing but autographs of the said poet. And after 20 years he sells them to the archives, or to others who will sell them to the archives in their turn. He sells them for many times the amount he gave. So that he was the biggest speculator of the three!

It is a perfectly real case, only I will not give any further details now. It occurred in fact. And, you perceive, it brought about a very significant reshuffling of economic values. Now what were the factors that contributed to this reshuffling of values? In the first place, simply the prudent exploitation of the fact that the poet's reputation was growing — a growth which in the end found expression in the establishment of archives. But you must add — at any rate as to the reshuffling of values, the bringing of it all into the hands of a single man — the fact that he kept his own counsel about it, did not draw the attention of others to it; nor did they hit on the idea themselves. So he was able to make an enormous profit.

I mention this case only to illustrate how complicated the question can become, how many factors converge in the nature of value and how difficult it is to grasp them all. Thus the question arises: Is it quite impossible to grasp them in one way or another? You may say that for a considerable part of life it will be perfectly possible for men and women of sound intelligence, in the right associations, to estimate the factors, even to the extent of giving them numerical expression. But there will still be many things — things of decisive importance for a true estimate of values — which it will not be possible to grasp with ordinary common sense, unless we look for some fresh aids to understanding.

We saw how Nature, to acquire an economic value, must be transformed by human Labour — must, as it were, be combined with human Labour. There is the Nature-product. In an economic organisation based on division of Labour, the Nature-product has, properly speaking, no value to begin with. Now let us try to find our way into this picture. Values arise by the joining together of the material of Nature, if we may call it so, with human Labour. Thus, if only in a kind of algebraic formula, we may begin to approach the real “function” of value-formation. For instance, we can see at once that it cannot be a question of simply superimposing Labour upon the Nature-element. For the Labour changes the Nature-element. It cannot be a merely additive function. It will be more complicated than this. But we can hold to what we have already said; we see the economic value arise where the Nature-product is first taken over by human Labour.

Obviously the first stage in the process — in the taking-over of the Nature-product by human Labour — is direct work on the land. Therefore, when all is said, we must always look upon the cultivation of the land — in the widest sense of the term — as the starting-point of economic life. This is the condition precedent to the whole of economic life. But how is it when we go over to the other side of the economic process? I need not enlarge on it any more at this stage; it is quite evident from the preceding lectures that even such a thing as the redistribution of values plays a considerable part in the movement of economic values. How shall we find anything comparable in all these different factors? If we regard “Nature times Labour” as the value which comes up from the one side (or, as I said, whatever the right function is); then we must look for something comparable on the other side. We cannot simply compare Nature with the Spirit, for we shall find no point of comparison — least of all by way of purely economic considerations — if only for the reason that a highly subjective element here enters in.

Think of a simple village economy — a self-contained one, if you will. There have actually been such economies — to some extent at any rate — within the experience of man. It will consist, to begin with, in the things produced — we will imagine even the market and the town out of the picture. It will consist in the peasants, the workers on the land, the workers in the different trades (those who clothe the people, for instance, and a few others) but no special proletarians; such a thing will not yet exist, nor need we, on our present lines of thought, turn our attention in that direction. Whatever is relevant to the proletariat will appear in due course. But our village economy will also include the schoolmaster and the parson, or one or two schoolmasters and parsons. They — if it is purely a village economy — will have to live on what the others give them. Whatever develops there, of the free spiritual life, will in the main have to develop among the teachers and the parsons — or possibly a parish clerk will be added. Now we must ask ourselves: How does a proper valuation come about in this simple economic circuit?

There will be very little else of “free spiritual life.” We can scarcely imagine the schoolmaster or the parson blossoming out into a novelist, for if the village economy is a closed one he would not be able to sell very much. A novelist would only be able to earn, in this community, if he were able to instil into the peasants, tailors and cobblers a passion for his novels. In that case no doubt he might be able to call into being quite a little industry. But it would cost a great deal to do that. At any rate we cannot, in the ordinary way, imagine such a thing existing in our little village community. In fact, the “free spiritual life” must await certain conditions. But from the simple fact that there are the parson and the teacher and a parish clerk, we can at any rate conceive how the achievements of these spiritual workers — for they are such, in the economic sense — will come to be valued economically.

What is the requisite condition for these spiritual workers to be able to live in the village at all? It is that the people send their children to school and that they have religious needs. Spiritual needs, therefore, are the fundamental premiss. Failing such needs, even these few spiritual workers could not be there. And we shall have to ask ourselves: How will these spiritual workers economically endue their products — their sermons, for example (even these must be conceived in an economic sense), and their school lessons — with value? How will these things be valued in the whole economic circulation?

This is a fundamental question. We shall only gain an answer to this question, if we begin by imagining quite vividly what the others must be doing. They must be doing physical work. By bodily Labour they call forth economic values. If there were no need for sermons and school lessons, the parsons and teachers would have to do physical work. Everyone would be working with his hands and the spiritual life would drop out of the picture. We should no longer be concerned with the economic valuation of spiritual products. Thus we arrive at the required valuation precisely by observing that parsons and teachers are spared physical Labour. If they are to do their spiritual work, which is desired, they must be relieved from the bodily work. Here you can introduce into the line of thought something capable, at least, of a more general treatment. Suppose for example that there is only need for half as many sermons and school lessons. What will then have to happen? You cannot appoint half a parson and half a teacher. Therefore the parson and the teacher will have to spend part of their time in physical Labour. Therefore the valuation on their side will depend on the amount of physical Labour of which they are relieved. This is the measure for the valuation of their work. One man contributes physical Labour, another saves it and his spiritual achievement has a value corresponding to the amount of physical Labour which he saves himself by virtue of it. Take these two economic fields and think the thing through economically, and you will see that even a sermon must have an economic value, and moreover how it acquires this economic value. It acquires it inasmuch as Labour is saved or spared, whereas on the other side Labour has to be applied.

And now the same thing runs through the entire spiritual life. What does it signify, in the economic sense, if a man paints a picture — paints at it, shall we say, for ten whole years? It signifies that the picture acquires a value for him inasmuch as it will enable him once more to spend ten years painting another picture. He can only do so if he can save himself physical Labour for a period of ten years. Therefore the picture will have to become worth as much as would be made out of other products by physical Labour during ten years. Even if you take such a complex case as I explained at the beginning of this lecture, the same result will emerge. In all cases of spiritual production, if you try to find the concept of value you will arrive at this other concept — the concept of Labour that is saved or spared.

It was the cardinal error of the Marxists that they looked at it all exclusively from the physical side. They said that Capital is to be looked upon as crystallised Labour — as a product with which Labour has been combined. Now if an artist paints a picture, the Spirit he has painted into it during ten years is certainly combined with it, but this could at most be computed by those who believe that Spirit is the inner “work” of the human organism transmuted; which is sheer nonsense. The spiritual cannot be assimilated to the natural in that facile way. If I complete a spiritual product, it is not the point that in some way Labour is stored up in the product. The work stored up in it is economically irrelevant. Qua bodily work it may be very little. Moreover what little there was falls, in any case, under the other heading — that of physical work. What gives value to the product is in truth the Labour which it will save me. Thus on the one side of the economic process the actual doing of work, the bringing of Labour to the product, is the value-creating factor; the product absorbs Labour — as it were, attracts it, While on the other side the product rays out Labour, begets Labour; the value is the original thing which calls the Labour into being.

It is a remarkable thing. Study the history of Economics, and you will always find that what is said is right, but only in a limited sphere. There are economists who believe that it is Labour which gives things value — the school of Adam Smith, the school of Marx, for example. But other schools give another definition, which again is right in a certain sphere. According to them, a thing becomes Capital — i.e., a source of value — inasmuch as it saves Labour. Both points of view are true. Only, the one is true of all that is in any way related to Nature, to the soil, the land; while the other is related to the Spirit. Between these two there is a third. For, in effect, neither of the two extremes is ever there in its pure form; they are only there in an approximately absolute sense. After all, even in picking blackberries (which acquires economic value only inasmuch as the workers actually go there and do it) — even here there is some spiritual work. If of two blackberry-pickers one is stupid and makes extra work for himself by picking where they are scarce, while the other finds a place where there are plenty and obtains a better yield for his Labour, the blackberries of the former worker are of less value, relatively speaking; he will not get more money for the same amount of berries. Thus, in effect, neither extreme is ever realised absolutely. Even the gathering of blackberries entails spiritual work (although we might not call it so). The work of using one's wits creates values, just as it did with the collector of autographs; at least it creates values by placing them.

Once more, then, we have Labour in the one direction and in the other, and this alone enables us to compare the economic values. But this comparing is done by the economic process of its own accord. We can at most raise it, in a certain way, into the sphere of conscious intelligence. Indeed, all that I have given in these lectures amounts to this: that we lift certain instinctive processes into consciousness.

As I said just now, we have neither of the two extremes in any absolute sense. For on the other side (V=S-L), however much a painter uses his intelligence he must still do some bodily work if he wishes to create anything of economic value. Even if he exercises clairvoyant power (a thing which you cannot grasp at all in terms of economics), even then he must still do some bodily work. Relying on his genius, it may be, he can afford to be dreadfully lazy; still, now and then he must take up the brush. Some bodily work has to be done even in this case, just as some little force of thought must go even into the picking of blackberries. (Things that take place in real life cannot be grasped merely quantitatively. They have to be grasped while they are actually happening. Therefore we can only grasp them with our concepts, if we realise that the concepts themselves need to be kept in constant movement).

It is between these two extremes that we can perceive more clearly how in the real economic life bodily and spiritual work play into one another, moving to and fro. Just as in some machine, there is a regulated backward and forward movement, so in industry bodily work from the one side and Spiritual work from the other are passing to and fro. It is in this mutual interplay from two directions that we have, as a third, that which plays into the economic process between the other two. We have the case where a man has to do physical Labour, yet by his spiritual power (using his wits) he is saved some of it. This is always actually the case, only it sometimes approximates more to the formula I wrote above (V = N,L) and sometimes more to the formula I wrote below (V = S-L). The latter, in effect, would only be fulfilled in its entirety if there could be among the consumers someone who did nothing but save himself Labour by means of his spiritual faculties. It could only be someone who was born grown-up.

In this way we can look into the economic process from this aspect of valuation, valuing what comes from Nature on the one hand and from the Spirit on the other. And at this point we can say: Where positive and negative work into one another, somehow an intermediate condition will emerge. The positive may predominate. Let us assume this for a moment. In the little village economy it certainly will do so, for in such a community there will be no widespread interest in spiritual work, beyond what is absolutely necessary. But the more life grows complicated (or, as we are apt to say sentimentally, the more “civilisation advances”) the more highly, as may be seen even empirically, spiritual work is valued. That is to say, the more is Labour saved; a negative element comes in as against the positive. I beg you to consider well: by characterising it in this way we are taking hold of a real process. It is not that physical Labour is done on the one side and annulled again on the other; that would be no real progress in the economic sense; it would at most be a process of Nature. All that is done of physical Labour helps to create values. None of it is destroyed. That which counteracts it — the saving of Labour from the other side — counteracts it only in a numerical sense. In a purely numerical sense, it affects the value of physical Labour. For this very reason, we are enabled to express in a real way what actually happens. Physical workers are active, spiritual workers are active, but the achievement in the one case is work which is positively done, while in the other it is a work which in reality signifies a saving of work. Only by this means is an effectual valuation brought about.

If I may put it so, the things are divested of their particularity and it becomes possible to grasp the process in terms of numbers, inasmuch as it is the same thing which emerges on either side and only the valuation is altered. With the advance of civilisation, then, spiritual work increases in importance, and this implies that the bodily work has a less powerful effect on the valuing process. Physical strength is of course applied, and it must be so more and more as we go forward. Even the cultivation of the soil must be made more fruitful as civilisation advances. More work must be done, in a positive sense. The point is that the physical Labour is divested, to some extent, of its value-creating power. Yet this again can only be so if those who perform the physical Labour evince a growing need for that which has to be achieved from the spiritual side. Here, once again, a human factor comes into the economic process. You cannot get round it; indeed, with the advance of spiritual life, this particular human factor makes itself felt as an objective necessity.

It is quite true that, to begin with, when there are only the parson and the teacher, there is not much of spiritual life in our village. But suppose there are two villages. In one village the parson and the teacher are mediocre people: things will go on as they are. In the other village the parson or the teacher, or both of them, are first-rate people. They will be able to stimulate all manner of spiritual interests in the next generation and, in all probability, by the time the next generation arises, some other spiritual worker is brought into the village. Now there are three of them. In this regard the spiritual has a very fertile power, which in its turn works back into economic life.

What, in the last resort, does the process signify? It signifies that precisely Labour, or rather the value-creating power of Labour, which in the purely material phase of economic life has an infinitely great value, is more and more reduced in course of time by that which comes to meet it from the other side. I cannot exactly say it is “devalued”; it is reduced numerically. In the working-together, as between all that is represented by land-work — the tilling of the soil, etc. — and that which is done from the spiritual side, we have a kind of mutual compensation. And a certain compensation is the only right thing.

Now here, again, complex conditions arise. For it may well turn out that in a given place there are too many spiritual producers; i.e., the counteracting Labour-saving power may be too strong. Then the resultant value is negative, and the people cannot all live together except by consuming one another. Thus there is a limit somewhere to this compensation process. For every economic realm there is a certain balance, in the very nature of the case, as between the production from the land on the one side and the spiritual production on the other.

The first thing necessary is that we should begin working on definite data, from which we may convince ourselves in an atmosphere unclouded by prejudice and agitation, how some particular area gets into an unhealthy economic condition, because it contains too many spiritual workers — and again what power of further development of culture and civilisation an area has, where that limit, of which I have just spoken, has not been reached. Progress is only possible within a given area so long as this limit, determined by the necessary compensation, of which I spoke, has not yet been reached. The task then will be to investigate those elements which still survive today from closed economies — such survivals are to be found everywhere, because we are only passing slowly into a world-economy — we must investigate those elements as to which the economy of some area is still closed; we must study the aggregate welfare of those areas in which there are comparatively few poets and painters and sophisticated industrialists, etc., and where there is still much agriculture or other activity connected immediately with the land; and then we shall have to study other areas where the opposite is the case.

From the available data, we must work out empirically such general laws as will emerge for a true theory of balance as between agriculture, or the working of the land in the widest sense, upon the one hand and spiritual work upon the other. This will be necessary. For certain regions, take what we may call the average spiritual workers (do not choose such as would falsify the whole balance) and on the other hand the average physical workers. Balance the one against the other; you will perceive how the one works compensatingly upon the other.

This is a point of cardinal importance for anyone who wishes to contribute to the further progress of Economic Science today. The fact is that this problem, which should really underlie our thinking about price and value, is scarcely anywhere correctly seen as yet. As I said yesterday to a few of those present: In Economics people are always allowing themselves to be misled into a partial instead of a comprehensive way of thinking. There is no doubt that Spengler makes some very shrewd economic observations at the close of the second volume of his Decline of the West. But he ruins these brilliant observations because he does not succeed in translating into terms of present-day economic realities what he perceives historically. He points out very justly how, in the ancient economies, the economic life which comes directly from the soil was predominant; whereas today that economic life predominates which thinks in money — and consists, therefore, properly speaking, in spiritual work. But he fails to see that these two stages of economic life, which he records historically, continue side by side to this day. The one has not replaced the other in history; they stand side by side to this day, as the most primitive abides within the most advanced. Do we not find the amoebae crawling about free in external Nature and do we not find the same thing in our own blood, in the white blood corpuscles? The different historical stages even in Nature live side by side to this day. And so it is in economic life; the most varied conditions co-exist. Sometimes indeed, in the most highly cultivated economic life — if we may call it so — it is precisely the most highly cultivated elements which return to the most primitive. Values created by our living in a most elaborated culture hark back, in a certain sense, to the state of primitive barter. Those who create their savings-of-Labour, as it were, will sometimes barter one of these for another, to satisfy certain needs among themselves. Such things occur. We often find the most primitive functions applied once again to the most highly elaborated products.