John Bates Clark


John Bates Clark

John Bates Clark (January 26, 1847 – March 21, 1938) was an American neoclassical economist, a pioneer of the marginalist revolution in the United States. He rejected classical economics, and was also an opponent of the Institutional school of economics. Together with Richard T. Ely, he founded the American Economic Association to encourage economic research, publication, and discussion of topics in economics.

Contents

Clark sought to discover economic relationships, such as the relationship between distribution of income and production, which he argued would occur naturally in a market based on perfect competition. He also argued that people were motivated not only by self-centered desire, but also considered the interests of society as a whole in their economic decision making. Clark concluded later in life that war was the greatest threat to humankind, and became an advocate for peace.

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 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 reforms to the American economic 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 the American Economic Association. The motivation with which he, along with cofounders Richard T. Ely and Henry Carter Adams, initiated the foundation of the association, was to bring fresh new ideas into economic theory in an attempt to break away from the traditional laissez-faire theory. He served as the third president of the American Economic Association in 1894–1895.

After teaching economics, history, and a whole variety of other subjects at Carleton (1875–1881), Smith (1881–1892), Amherst (1892–1895) and Johns Hopkins (1892–1895), Clark received a permanent position at Columbia University in 1895. He also served as 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

John Bates Clark brought a new approach to economics to the United States. Having studied in Germany, his ideas were different from those of the classical school and also the Institutional economics of Thorstein Veblen. Together with Richard T. Ely and Henry Carter Adams, Clark was cofounder of the organization that later became the American Economic Association. The purposes of their association were, and continue to be:

  1. The encouragement of economic research, especially the historical and statistical study of the actual conditions of industrial life.
  2. The issue of publications on economic subjects.
  3. The encouragement of perfect freedom of economic discussion.

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

In The Philosophy of Wealth (1886), Clark discussed the phenomenon 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 classical economics, which emphasized personal interest as the ultimate motivator behind any economic 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 an 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.

Marginal productivity

Clark was one of the early pioneers of the 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 the above-mentioned economists, especially in his theory of marginal utility-based demand, he is not credited with discovery of the concept of “marginal utility.”

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 (such as 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. In other words, it is unprofitable to hire a man-hour of labor if it adds less to its buyer's income (the value of additional goods produced) than it costs. 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:

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] 2005).

Static and dynamic laws

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 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 Hyneman Knight, who caused the capital controversy in the 1930s, and when neoclassicists incorporated similar views in their “growth theory” in the 1950s, it created the 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 potential sellers would enter the market. If the potential entrants existed, then 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.

Legacy

Clark is arguably the first American economist to achieve international distinction. He was a leader of the marginalist revolution in the United States, criticizing classical theories of value as formulated by Adam Smith, David Ricardo, John Stuart Mill, and others. His marginal productivity theory of distribution played a key role in the formulation of a 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 American Economic Association, of which Clark was co-founder, awards the John Bates Clark Medal, one of the most prestigious awards in the field of economics, biennially to an American economist under the age of forty. Many recipients of this award have 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. [1888] 2003. Capital and Its Earnings. University Press of the Pacific. ISBN 1410205789
  • Clark, John B. [1899] 2005. The Distribution of Wealth. Adamant Media Corporation. ISBN 1402170084
  • 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. [1907] 2005. Essentials of Economic Theory. Adamant Media Corporation. ISBN 1421204444
  • 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.
  • 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

References

  • Encyclopedia of World Biography on John Bates Clark. BookRags.com. Retrieved December 30, 2006.
  • 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
  • John Bates Clark. Encyclopedia Britannica Retrieved December 30, 2006.
  • 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

All links retrieved May 14, 2018.

Credits

New World Encyclopedia writers and editors rewrote and completed the Wikipedia article in accordance with New World Encyclopedia standards. This article abides by terms of the Creative Commons CC-by-sa 3.0 License (CC-by-sa), which may be used and disseminated with proper attribution. Credit is due under the terms of this license that can reference both the New World Encyclopedia contributors and the selfless volunteer contributors of the Wikimedia Foundation. To cite this article click here for a list of acceptable citing formats.The history of earlier contributions by wikipedians is accessible to researchers here:

The history of this article since it was imported to New World Encyclopedia:

Note: Some restrictions may apply to use of individual images which are separately licensed.