The fundamental equation of the economist, then, is that the value of everything is proportionate to its cost. It requires no little hardihood to say that this proposition is a fallacy. It lays one open at once, most illogically, to the charge of being a socialist. In sober truth it might as well lay one open to the charge of being an ornithologist. I will not, therefore, say that the proposition that the value of everything equals the cost of production is false. I will say that it is _true_; in fact, that is just as true as that two and two make four: exactly as true as that, but let it be noted most profoundly, _only as true as that_. In other words, it is a truism, mere equation in terms, telling nothing whatever. When I say that two and two make four I find, after deep thought, that I have really said _nothing_, or nothing that was not already said at the moment I defined two and defined four. The new statement that two and two make four adds nothing. So with the majestic equation of the cost of production. It means, as far as social application goes, as far as any moral significance or bearing on social reform and the social outlook goes, _absolutely nothing_. It is not in itself fallacious; how could it be? But all the social inferences drawn from it are absolute, complete and malicious fallacies. Any socialist who says this, is quite right. Where he goes wrong is when he tries to build up as truth a set of inferences more fallacious and more malicious still. But the central economic doctrine of cost can not be shaken by mere denunciation. Let us examine it and see what is the matter with it. We restate the equation. _Under perfectly free competition the value or selling price of everything equals, or is perpetually tending to equal, the cost of its production._ This is the proposition itself, and the inferences derived from it are that there is a "natural price" of everything, and that all "natural prices" are proportionate to cost and to one another; that all wages, apart from temporary fluctuations, are derived from, and limited by, the natural prices paid for the things made: that all payments for the use of capital (interest) are similarly derived and similarly limited; and that consequently the whole economic arrangement, by giving to each person exactly and precisely the fruit of his own labor, conforms exactly to social justice.