John Bates Clark

John Bates Clark

John Bates Clark (born January 26, 1847 – died March 21, 1938) was an American neoclassical economist, one of the pioneers of the marginalist revolution and an opponent to the Institutional school of economics.

Life

John Bates Clark was born and raised in Providence, Rhode Island. He attended Brown University and graduated from Amherst College in Massachusetts at the age of 25. He initially wanted to continue with the graduate studies in theology, but eventually turned to economics. From 1872 to 1875 he attended the University of Zurich and the University of Heidelberg where he studied under Karl Knies (1821-1898), a leader of the German Historical School.

Upon his return from Europe, Clark actively engaged in bringing the reforms to the American economical system. His early writings reflected his German Socialist background and showed him as a critic of capitalism. He published his first major work The Philosophy of Wealth in 1885, and was one of the founders of American Economic Association. The motivation with which he, along with cofounders Richard Ely and Henry Carter Adams, initiated the foundation of the Association, was to bring the new fresh ideas into the economical theory in the attempt to break away from the traditional laissez-faire theory. He served as the third president of American Economic Association in 1894-95.

After teaching economics, history and a whole variety of other subjects at Carleton (1875-81), Smith (1881-92), Amherst (1892-95) and Johns Hopkins (1892-95) colleges, Clark received a permanent position at the Columbia University in 1895. He also started to serve as an editor of the Political Science Quarterly (1895-1911). During his time at Columbia Clark gradually shifted his views, becoming one of the leading supporters of the capitalist system.

After 1911 Clark devoted himself to pacifist causes. He served as the first director of the division of economics and history of the Carnegie Endowment for International Peace, from 1911 to 1923.

Clark retired from Columbia as professor emeritus in 1923, and died in New York City on March 21, 1938.

Work

Clark was one of the early pioneers of marginalist revolution in the United States. In one of his first major works, The Philosophy of Wealth (1886), Clark presented an original version of marginal utility theory, a decade and a half after the simultaneous discovery of this principle by William Stanley Jevons, Carl Menger, and Leon Walras. Although Clark came independently to the similar conclusion as above mentioned economists, especially in his theory of marginal utility-based demand, he is not credited with discovery of the concept of “marginal productivity”.

In The Philosophy of Wealth Clark discusses the phenomena of anomalous distribution of wealth, as the consequence of rapid industrial development in America at the turn of the century. He attacked the hedonistic assumptions of the classical economics, which emphasized personal interest as the ultimate motivator behind any economical theory. He claimed that people were as much motivated by their social interest as by their self-centered interest. He thus criticized classical theory that pure economic competition can be effective means through which products could be equitably distributed. He believed that his marginal productivity theory of income distribution scientifically proved that market systems could generate a just distribution of income. Clark could thus be regarded as an economist who attempted to provide an ethical foundation for the establishment of socialism.

Clark is well known for his use of marginal productivity to help explain the distribution of income (Distribution of Wealth, 1899). In his 1848 Principles of Political Economy, John Stuart Mill had asserted that production and distribution were two distinct spheres. While production was determined by physical principles, such as the Law of Diminishing Returns, distribution was the result of social and political choice. Once things were produced they could be divided up however people saw fit. Clark theorized that with homogeneous labor, perfectly competitive firms, and diminishing marginal products of any input working with another fixed input (e.g., labor working with a fixed amount of capital), firms would hire labor up to the point where the real wage was equal to the marginal product of labor; thus production and distribution are intimately connected. This idea is enshrined in virtually all modern microeconomics texts as the explanation for the demand for labor.

In the Distribution of Wealth he also developed his utility theory, according to which all commodities contain within them “bundles of utilities” - different qualitative degrees of utility. It is this utility that determines the value of a commodity. He said:

”If we were here undertaking to present at length the theory of value, we should lay great stress on the fact that value is a social phenomenon. Things sell, indeed, according to their final utilities; but it is their final utilities to society”. (Distribution of Wealth, 1899)

Clark analyzed economics with two sets of models - "static" and "dynamic". "Static" laws apply to an unchanging society, where perfect competition leads to economic equilibrium. On the other side, social change requires a new set of laws, so called “dynamic” laws, which apply to the everlasting mechanism of change. Clark only tentatively formulated those dynamic laws in his 1907 Essentials of Economic Theory, and later generations of economists further developed them. From his conclusions about capital, Clark proposed the existence of a social capital as a permanent, fixed fund, which entered into a production function like any other factor. With this claim he created one of the early "capital controversies" and came under criticism of Eugen von Böhm-Bawerk. This controversy was later rediscovered by Frank H. Knight (1885-1972), who caused capital controversy in 1930s, and when Neoclassicists incorporated similar views in their “growth theory” in the 1950s, it created a famous "Cambridge Capital Controversy".

Clark also discussed the antitrust policy, claiming that trusts were not contrary to the public interest per se, but only when they behave monopolistically. Clark suggested that it was not only the lack of competition that makes monopolists price their products high, but also the lack of threat that the potential sellers would enter the market. If the potential entrants existed than the monopolists would lower their prices, and the market laws would again take over. With this Clark can be regarded as the predecessor of the Chicago-school antitrust theory.

Clark was one of few American economists who supported the Marginalist school, opposing the Institutional economics, which dominated American economy at the time. Clark was thus one of Thorstein Veblen's favorite targets, the two engaging in numerous debates. His own son, John Maurice Clark who became famous economist himself, did not follow his father’s steps and instead had become one of the leaders of Institutional school.

In his later career Clark became a fierce opponent of war, claiming that war was the greatest threat to humanity. He led a group of economists from the Carnegie foundation to assess the costs of World War I. In his 1935 A Tender of Peace he proposed a strong League of Nations that would promulgate world peace. He served as the director of the division of economics and history at Carnegie Endowment for International Peace.

Legacy

Clark is arguably the first American economist to achieve international distinction. He was a leader of the Marginalist revolution in United States, criticizing Classical theories of value as formulated by Adam Smith, David Ricardo, John Stuart Mill, Karl Marx and others. His marginal productivity theory of distribution played key role in formulation of Neoclassical approach to economics. He took his marginal productivity theory further than others, and applied it to the business firm and the maximization of profits.

The John Bates Clark Medal, one of the most prestigious awards in the field of economics, that is awarded biannually, is named after him. Around 50% of recipients of this award later received the Nobel Prize in economics.

Publications

• Clark, John B. 1886. The Philosophy of Wealth. Ginn and Company

• Clark, John B. 1887. The Limits of Competition. American Academy of Political and Social Science

• Clark, John B. 1890. The Law of Wages and Interest. American Academy of Political and Social Science

• Clark, John B. 1893. Patten's Dynamic Economics. American Academy of Political and Social Science

• Clark, John B. 1904. The Problem of Monopoly. Columbia University Press

• Clark, John B. 1910. An Economic View of War and Arbitration. American Association for International Conciliation

• Clark, John B. 1914. Social Justice without Socialism. Houghton Mifflin company

• Clark, John B. 1914. The Control of Trusts. A. M. Kelley. ISBN 0678006067

• Clark, John B. 1915. Existing Alliances And A League Of Peace: An Address Before The Twenty-first Annual Lake Mohonk Conference. New York: American Association for International Conciliation

• Clark, John B. 1935. A Tender of Peace: The Terms on Which Civilized Nations Can, If They Will, Avoid Warfare. Columbia University Press

• Clark, John B. 2003 (original published in 1888). Capital and Its Earnings. University Press of the Pacific. ISBN 1410205789

• Clark, John B. 2005 (original published in 1907). Essentials of Economic Theory. Adamant Media Corporation. ISBN 1421204444

• Clark, John B. 2005 (original published in 1899). The Distribution of Wealth. Adamant Media Corporation. ISBN 1402170084

References

ISBN links support NWE through referral fees

• BookRags.com. Encyclopedia of World Biography on John Bates Clark. Retrieved on December 30, 2006. <http://www.bookrags.com/John_Bates_Clark>

• Encyclopedia Britannica. John Bates Clark. Retrieved on December 30, 2006. <http://www.britannica.com/ebc/article-9024208>

• Everett, Rutherford. 1982. Religion in Economics: A Study of John Bates Clark, Richard T. Ely, Simon N. Patten. Porcupine Press. ISBN 0879918667

• Henry, John F. 1995. John Bates Clark: The Making of a Neoclassical Economist. Palgrave Macmillan. ISBN 0312126093

• Stabile, Donald R. 1997. The intellectual antecedents of Thorstein Veblen: a case for John Bates Clark. Journal of Economic Issues. 31(3), 817-826

• Toyer, Frances A. 1956. The economic thought of John Bates Clark. New York University Press

External links

• New School: John Bates Clark, 1847-1938 – Biography and major works

• “A Certain Rude Honesty”: John Bates Clark as a Pioneering Neoclassical Economist – An article by Thomas C. Leonard from Princeton University

• Clark’s biography and work – An article by Reuel R. Reis and Hoang Nguyen from Middle Tennessee State University

• John Bates Clark on Trusts: New Light from the Columbia Archives – An article by Luca Fiorito and John F. Henry from Università degli Studi di Siena, Italy

• Henry George's influence on John Bates Clark: the concept of rent was pivotal to equating wages with the marginal product of labor – An article by Donald R. Stabile from St Mary's College. Maryland

• Publications – Some full-text works of Clark

• The Control of Trusts – Full-text essay by John Bates Clark and John Maurice Clark

• Quotes by Clark – Some Clark’s quotations

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