What are the limits of Marx's ideal construction, and in what do his hypotheses consist? I have said that the concept of labour-value is true for an ideal society, whose only goods consist in the products of labour, and in which there are no class distinctions. Sorel does not think it necessary to eliminate as I have done, the divisions of classes. But, since he writes: 'Marx, like Ricardo, conceived a mechanical society, perfectly automatic, in which competition is always at its maximum efficiency, and exchanges are effected by means of universal information; and he supposed that the various sociological conditions are measurable in intensity, and that the numbers resulting can be connected by mathematical formulæ; hence in such a society, utility, demand, and commerce in commodities _are results of the divisions of classes_; _value will not in consequence be a function of this condition_, although it is truly a function of the conditions of production; utility, demand, can only appear in the forms of the function, _in the parameters referring to the social divisions_.' Since he, I repeat, does not in his hypothesis, make labour-value dependent on the division of classes, it seems to me that this is practically to _leave out_ the fact of the division. And it is perhaps clearer to omit it explicitly. We should have then: (1) a working economic society without differences of classes, law of labour-value; (2) Social divisions of classes, origin of profit, which, _but only in comparison with the preceding type and in so far as the concepts of the former are carried over into the latter_, may be defined as surplus-value; (3) Technical distinction between the different industries requiring different combinations of capital (different proportions of fixed and floating capital). Origin of the average rate of profits, which in relation to the preceding type, may be regarded as a change in, and equalisation of, surplus-values; (4) Appropriation of the land by part of a social class. Pure rent; (5) Qualitative differences in land. Differential rent. Which rents, pure and differential, present themselves, but only in comparison with the preceding types, as cut off from the amounts of surplus-value and of profits. Sorel agrees with me that the concept of labour-value, obtained in the manner described, is not only not a law in the same sense as a physical law, but is also not a law in the ethical sense, _i.e._ one that could be understood as a rule of what ought to exist. It is a law, he says, _in an entirely Marxian sense_. This I too tried to express when I wrote in my essay: 'It is a _law_ in Marx's _conception_, but not _in economic reality_. It is clear that we may conceive the divergencies in relation to a standard as the rebellion of reality in opposition to that standard, to which we have given the dignity of law.'