"What is it, my boy? Found a black swan?"

"Why a black swan?"

"That's the classic example of the fallaciousness of the deductive method. The syllogism ran 'All swans are white. This bird is a swan. Therefore this bird is white.' Along in the nineteenth century somebody found a black swan and the perfect syllogism was wrecked."

"No, I haven't found a black swan, but I do have a problem."

"I don't think you will find a black swan in the conclusions we have reached. You'll find many problems not covered by the Law of Capital Investment. But the law itself is simply a statement of the workings of an invented mathematical entity, money. Sometimes we get into dilemmas through a failure to distinguish between mathematical necessity and objective realism. Marx fell into that error and it vitiated his whole work. For example and in particular, his definition of value. Did you happen to notice that we spoke of cost in money and price in money and never once mentioned value?"

"Now that you speak of it, yes."

"Can you define value?"

"Well, perhaps not. I seem to know what it means."

"Marx defined it as a measure of the number of work-hours required to produce a given article. His definition was meaningless in the real world, and he ran into all sorts of difficulties, which he tried to avoid by patching the definition. But the definition was wrong and his beautiful, monumental, logical structure was invalid. He was important only as an agitator against social injustice and he contributed more error than truth to the art of economics. He made a similar mistake in assuming that a man lives in his belly rather than in his head. Animals do, but not men. They must serve their bellies, it is true, but aside from that, their motives may have nothing to do with economic considerations. Consequently Marx's Economic Determinism was not valid. But I've digressed again. Value in economics is a relationship between an individual and a thing or a service. It is a personal relationship which expresses how much a particular individual desires a thing or a service. Economic value of a thing or a service approximates the average of the summation of the personal values placed on the thing or service by the individuals who constitute the consuming public. Value plus purchasing power in the hands of the consuming public constitutes effective demand. Price is a function of supply and demand. Value may be expressed in dollars and cents through this complex functional relationship, but value is not price, and is not a measure of work-hours, it is a word used to express the desire of an individual to possess a thing or a service. I am not giving the word a new definition; I am simply stating explicitly the observed fact that such is what people mean when they speak of value. Sale takes place when the value to the prospective buyer is greater than the value to the owner. Note the difference between Marx's idea of value and that which I have expressed. Marx attempts to measure value by the amount of labor expended. Yet it is an obvious fact in the real world that an inefficient, careless, or unimaginative worker can slave for hours to produce an article practically worthless, that the public won't buy, valueless. An intelligent skillful inventive worker may turn out in a short time an article that the public will snap up at once at a high price. Which has the greater value?"

"The one made by the better workman, of course."

"Of course. There is an old maxim which states it neatly: 'The value of a thing is what that thing will bring.' Even in our present system in which the government ensures the maintenance of sufficient purchasing power, if an entrepreneur is so inefficient that he produces articles of value less than cost, he goes broke. However, I've digressed again. I'm a garrulous old man. What was it you wanted to talk about?"

"Oh no, I enjoyed your digression and it cleared up another point. As to what is bothering me, I believe I understand the present financial system and I see that it works more smoothly than the one in my day, but there are still things about it that I just can't see the justification for. Especially this dividend or inheritance check. Why in the world should everybody in the country be handed money to spend whether they work or not? I concede that it is all right for widows and orphans, the sick and the blind and crippled, but why support in idleness some big overgrown lunk who is too lazy to support himself ? Why put a premium on laziness? Here is my idea: let's increase the discount if necessary, and give a big dividend to those who need it but can't support themselves, but if a drone won't work, let him starve. Don't let him live off the rest of us."

"I see your point. It irks you to see anyone at all who is able to work permitted to live without working. But why do you consider work a virtue?"

"Well, these idle persons use up goods that the workers might otherwise enjoy."

"Do you know of anyone who doesn't have everything he wants of the good things of the world?"

"Well, no."

"Then how can you say that the idle are consuming things that rightfully belong to workers?"

"Well, it seems obvious."

"You mean that it seems logical to you. But if you can't find a case in the real world, can your logic be correct? I'm afraid you've encountered a black swan."

"Maybe so. But how can you justify able-bodied men living in idleness?"

Davis pursed his lips. "Ethics is more a matter of opinion than a science. Morals are customs rather than natural law. However if you want a moral argument to justify the situation, I'll give it to you. Did anyone live without working in your day?"

"Oh, those on relief did."

"I'm not speaking of them. They were presumed to be people who wanted to work but couldn't get work, and we have proved mathematically that they couldn't. I mean others who might have worked, but wouldn't, yet lived well."

"Why, no."

"Positive? How about coupon clippers, land owners, owners of capital who were not in management? Idle sons and daughters of the rich? Were there none of those?"

"Oh yes, of course. A few thousand perhaps. But they were entitled to be idle if they chose. Either they or their fathers had earned the money. A man is certainly entitled to provide for his children."

"All the idle today are the rich sons of hard working fathers."

"Are you trying to kid me?"

"I didn't jest, but I did use a figure of speech. Tell me, what are the factors that enter into production of real wealth?"

"Well, there is labor, of course—and raw materials and land."

"What were the factors when we set up our game of production and consumption?"

"Oh yes—and capital, and enterprise or management, and invention or technique, government came in there too, but I am not sure that it is a factor in production."

"It is, as you will see. Let's examine these factors and attempt to make a rough estimate of their importance. Work is basic, certainly. In any but the most Elysian of South Sea islands, man must work to live. Marx made the mistake of thinking that because it came first, it was the only factor worthy of consideration, even though his writings implied the existence of others. Enterprise is more important than work. Without enterprise, management, directive ability, and imagination, our present highly productive culture would be impossible. It is a form of creative work, more difficult than the imitative work of the laboring men, and absolutely necessary to a high rate of production. Capital or rather capitalization is essentially the willingness of the owner of accumulated wealth to risk it in the hope of acquiring more. Its return is interest. We don't think very highly of it anymore. Capital is plentiful and by direct competition through the Bank of the United States we have driven interest down to a point where the return is commensurate with the risk. Franklin Roosevelt taught us that lesson with the Reconstruction Finance Corporation and the Federal Housing Administration.