John Bates Clark

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John Bates Clark
John Bates Clark.jpg
Born(1847-01-26)January 26, 1847
DiedMarch 21, 1938(1938-03-21) (aged 91)
Nationality American
Institution Carleton College
Johns Hopkins University
Columbia University
School or
tradition
Neoclassical economics
Alma mater Amherst College
Doctoral
advisor
Karl Knies
Doctoral
students
Henry Moore
Alvin Saunders Johnson
Influences Karl Knies

John Bates Clark (January 26, 1847 – March 21, 1938) was an American neoclassical economist. He was one of the pioneers of the marginalist revolution and opponent to the Institutionalist school of economics, and spent most of his career as professor at Columbia University.

Neoclassical economics is an approach to economics focusing on the determination of goods, outputs, and income distributions in markets through supply and demand. This determination is often mediated through a hypothesized maximization of utility by income-constrained individuals and of profits by firms facing production costs and employing available information and factors of production, in accordance with rational choice theory, a theory that has come under considerable question in recent years.

Economist professional in the social science discipline of economics

An economist is a practitioner in the social science discipline of economics.

Institutional economics focuses on understanding the role of the evolutionary process and the role of institutions in shaping economic behaviour. Its original focus lay in Thorstein Veblen's instinct-oriented dichotomy between technology on the one side and the "ceremonial" sphere of society on the other. Its name and core elements trace back to a 1919 American Economic Review article by Walton H. Hamilton. Institutional economics emphasizes a broader study of institutions and views markets as a result of the complex interaction of these various institutions. The earlier tradition continues today as a leading heterodox approach to economics.

Contents

Biography

Clark was born and raised in Providence, Rhode Island, and graduated from Amherst College, in Massachusetts, at the age of 25. From 1872 to 1875, he attended the University of Zurich and the University of Heidelberg where he studied under Karl Knies (a leader of the German Historical School). [1] Early in his career Clark's writings reflected his German Socialist background and showed him as a critic of capitalism. During his time as a professor at Columbia University however, his views gradually shifted to support of capitalism and he later became known as a leading advocate of the capitalist system.

Providence, Rhode Island Capital of Rhode Island

Providence is the capital and most populous city of the U.S. state of Rhode Island and is one of the oldest cities in the United States. It was founded in 1636 by Roger Williams, a Reformed Baptist theologian and religious exile from the Massachusetts Bay Colony. He named the area in honor of "God's merciful Providence" which he believed was responsible for revealing such a haven for him and his followers. The city is situated at the mouth of the Providence River at the head of Narragansett Bay.

Amherst College liberal arts college in Massachusetts

Amherst College is a private liberal arts college in Amherst, Massachusetts. Founded in 1821 as an attempt to relocate Williams College by its then-president Zephaniah Swift Moore, Amherst is the third oldest institution of higher education in Massachusetts. The institution was named after the town, which in turn had been named after Jeffery, Lord Amherst. Originally established as a men's college, Amherst became coeducational in 1975.

University of Zurich university in Switzerland

The University of Zurich, located in the city of Zürich, is the largest university in Switzerland, with over 25,000 students. It was founded in 1833 from the existing colleges of theology, law, medicine and a new faculty of philosophy.

Theoretical work

After his return from 1877 onward Clark published several articles most of them edited later in The Philosophy of Wealth (1886). There he formulated an original version of marginal utility theory, principle already published by Jevons (1871), Menger (1871), and Walras (1878).

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Carl Menger founder of the Austrian School of economics

Carl Menger was an Austrian economist and the founder of the Austrian School of economics. Menger contributed to the development of the theory of marginalism, which rejected the cost-of-production theories of value, such as were developed by the classical economists such as Adam Smith and David Ricardo. As a departure from such, he would go on to call his resultant perspective, the “Subjective Theory of Value”.

Léon Walras French mathematical economist

Marie-Esprit-Léon Walras was a French mathematical economist and Georgist. He formulated the marginal theory of value and pioneered the development of general equilibrium theory.

Until 1886 Clark was a Christian socialist reflecting the view of his German teachers that competition is no universal remedy – especially not for fixing wages. Clark writes:

It is a dangerous mistake to extol competition, as such too highly, and regard all attacks upon it as revolutionary. … We do not eat men … but we do it by such indirect and refined methods that it does not generally occur to us that we are cannibals. [2]

He hoped that communism could be combatted by suppression and reform:

Among the adherents of Communism there is a large element that is simply murderous, and this deserves only the murderer's fate. ... It is possible that an indefinitely large proportion of declared communists in this country may be of worthless or criminal character. [3]

According to Clark only if "...the union of capital necessitates the union of labour" just wages will come about and may be fixed by arbitration. [4]

This view on fair wages changed in 1886: "Clark himself, it will be remembered has song down the doom of competition in The Philosophy of Wealth. But now … he has reversed his position and build[s] up a body of economic laws based on competition" [5] writes Homan (1928) and Everett (1946) finds: "Soon after writing The Philosophy of Wealth, however, Clark started to make defences for the competitive system. What caused the change is unknown. This much we can say. By the time he wrote The Distribution of Wealth he was convinced that pure competition was the natural and normal law by which the economic order obtained justice." [6] One cause that prompted this reorientation could be the Haymarket Riot (1886) in Chicago when some strikers were shot and others hanged. In the US it resulted in a cleansing of higher education from socialist reformers and the ruin of the Knights of Labor.

In 1888 Clark wrote Capital and Its Earnings. Frank A. Fetter later reflected on Bates' motivation for writing this work:

The probable source from which immediate stimulation came to Clark was the contemporary single tax discussion. ... Events were just at that time crowding each other fast in the single tax propaganda. [ Henry George's ] Progress and Poverty ... had a larger sale than any other book ever written by an American. ... No other economic subject at the time was comparable in importance in the public eye with the doctrine of Progress and Poverty. Capital and its Earnings "... wears the mien of pure theory .... But ... one can hardly fail to see on almost every page the reflections of the contemporary single-tax discussion. In the brief preface is expressed the hope that 'it may be found that these principles settle questions of agrarian socialism.' Repeatedly the discussion turns to 'the capital that vests itself in land,'... [7]

The foundation of Clark's further work was competition: "If nothing suppresses competition, progress will continue forever". [8] Clark: "The science adapted … is economic Darwinism. … Though the process was savage, the outlook which it afforded was not wholly evil. The survival of crude strength was, in the long run, desirable". [9] This was the fundament to develop the theory which made him famous: Given competition and homogeneous factors of production labor and capital, the repartition of the social product will be according to the productivity of the last physical input of units of labor and capital. This theorem is a cornerstone of neoclassical micro-economics. Clark stated it in 1891 [10] and more elaborated 1899 in The Distribution of Wealth. [11] The same theorem was formulated later independently by John Atkinson Hobson (1891) and Philip Wicksteed (1894). The political message of this theorem is: "[W]hat a social class gets is, under natural law, what it contributes to the general output of industry." [12]

Clark's conclusion rests upon the productive contribution of the last unit of physical labour – one hour unqualified labour – and the last unit of physical capital. To him heterogeneous capital goods have a second, a social form as homogeneous capital [13] (called jelly as a street can be moulded into an engine) and the productivity of the last unit of jelly determines profit. This retakes Karl Marx's view that commodities have a heterogeneous natural form (Naturalform) and also opposed to it a homogenous value-form (Wertform), [14] jelly. Clark might have known this Marxian construction from his German time and was reproached for this similarity. [15]

Clark's capital are not produced means of production each with a different production structure. It is an abstract, always existing and never perishing one great tool in the hand of working humanity [16] similar to a field or a waterfall, also considered capital by Clark.

The arguable sides of Clark's notion of capital helped to give rise to the Cambridge capital controversy from 1954 to 1965 between the departments of economics at Cambridge University, England, and at MIT in Cambridge, Massachusetts.

Paul A. Samuelson's classic 1947 textbook, Economics, disseminated Clark's concept of capital worldwide.

Clark was the father of economist John Maurice Clark.

Major works

See also

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References

  1. Henry, John F. (2016). John Bates Clark: The Making of a Neoclassical Economist. p. 2.
  2. Clark, J.B. (1878). "How to Deal with Communism," The New Englander, Vol. XXXVII, No. 4, pp. 537–8, 540.
  3. Clark (1878), p. 534.
  4. Clark, J.B. (1887). "Christianity and Modern Economics," The New Englander, Vol. XLVII, No. 1, p. 56.
  5. Homan, P.T. (1928). "John B. Clark." In: Contemporary Economic Thought. New York: Harpers, p. 91.
  6. Everett, J.R. (1946). Religion in Economics. New York: King's Crown Press, p. 73.
  7. Fetter, Frank A. (1927). "Clark's Reformulation of the Capital Concept." In: Jacob Hollander (ed.), Economic Essays Contributed in Honor of John Bates Clark. New York: The Macmillan Company.
  8. Clark, J.B. (1907). Essentials of Economic Theory. New York: The Macmillan Company, p. 374.
  9. Clark, J.B. (1888). "The Limits of Competition." In: Clark, J.B. & Giddings, F.H., The Modern Distributive Process. Boston: Ginn & Co, p. 2.
  10. Clark, J.B. (1891). "Distribution as Determined by a Law of Rent," The Quarterly Journal of Economics, Vol. V, No. 3, pp. 289–318.
  11. Clark, J.B. (1908). The Distribution of Wealth. New York: The Macmillan Company; 1st. ed. 1899.
  12. Clark (1891), p. 313.
  13. Clark (1908), pp. 59–60.
  14. Appendix The Value-Form (Die Wertform) to the 1st German edition of Capital, Volume 1, 1867; in the second edition this was worked into chap. 1
  15. Fetter, Frank A. (1900). "Recent Discussions of the Capital Concept," The Quarterly Journal of Economics, Vol. XV, No. 1, pp. 1–45.
  16. Clark (1908), pp. 59–60.

Further reading