2. The law of supply and demand and the law of entrepreneur’s cost are proximate empirical principles which, although possibly of much more practical importance than a philosophy of value, do not give an ultimate explanation of the riddle of this phenomenon. Adam Smith’s theory of labor as “potential commodity” is an attempt to give an ultimate explanation, but as such it should be judged a failure, for it really avoids the question of ultimate explanation. It begins: “Every man is rich or poor according to the degree in which he can afford to enjoy the necessaries, conveniences, and amusements of human life.” Air is a necessity to human life, but a man is not rich in proportion to the quantity of air he can command. The object of this statement is not to make a carping criticism of Smith, but only to point out that by “necessaries, conveniences and amusements” he means here solely such of these things as have economic value. Since he has already passed judgment that the _economic quantity_ of these things is completely independent of the _quantity_ of their utility, he sees no way of measuring these things, as economic quantities, except by looking to their origin in a measurable and, as he believes, homogeneous something called labor. In criticism of this we have but to note that if the only means, or the first means, of determining the _economic quantity_ of a physical complex of goods were by measurement of the labor turned to its making, the economic system of things would be turned upside down. If the value of the articles produced for me by that part of the labor of society over which I have command, can be determined solely by reference to the quantity of this labor, I am left without the slightest guidance for the application of this labor under my direction. The truth is, the command or direction of labor necessarily implies the ability to estimate _values_ independently of the quantity of labor employed in the production of them, previously to its employment. Value is the guiding-star to labor. How can the point of attack of labor against the physical environment be selected unless the results to be expected in different cases can be compared in value, independently of the quantity of the labor? If the quantity of labor determined the value, it would make no difference where the labor was turned; the value of the result would always be the same. Turned in an indefinite number of directions, labor will produce no value whatsoever; turned in certain directions it will bring forth the maximum value of which it is capable. It is one of the main functions of the entrepreneur in modern economic society to turn labor-power in the directions of maximum value return. All these things are perfectly obvious, yet value theorists uncounted have ignored them. Quantity of labor-cost, even when conceived of as being an entity of superior homogeneity to quantity of satisfaction, cannot be the first or fundamental means of measuring value.