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John Bates Clark, 1847-1938
American Neoclassical economist, professor of economics at Columbia and one of the leading figures of the Marginalist Revolution.
Born in Providence, Rhode Island, the son of John Clark and Martha Bates, John Bates Clark, with some interruptions, was educated at Brown University and then later Amherst College (where he was taken under the wing by the arch-conservative Amherst president Julius Seelye). Clark obtained his B.A. at Amherst in 1872. Like so many bright Americans of his generation, John Bates Clark proceeded to Germany, where he studied for three years under Karl Knies at the University of Heidelberg. There Clark imbibed the spirit of the German Historical School, and he brought that back with him to the United States. Clark formed part of the "new generation" of German-trained American economists -- which included R.T. Ely, E.R.A. Seligman, S.N. Patten and others -- that confronted the more conservative American economists of the age. Although Clark was never a doctrinaire practitioner of the "historical" approach, he gave it his due respect and embraced the Statist policies and "Christian Socialism" that went along with it.
After returning to the United States from his German training, Clark worked as a college teacher (in an assortment of different disciplines) at Carleton College (Thorstein Veblen was among his students there). In 1881, through Seelye's good offices, Clark got an appointment at Smith College and, in 1893, followed Seelye to Amherst College. Clark came into contact with graduate students via a lectureship at Johns Hopkins from 1892 (Thomas Nixon Carver came under his influence there). In 1895, John Bates Clark joined the faculty of Columbia University in New York City, where he would remain for the rest of his career. Under Clark, Columbia became the home of his "Social Value" school of marginalist economics.
John Bates Clark helped found the American Economic Association in 1885, serving as its first vice-president and went on to become its third president in 1894-95. The AEA instituted the "John Bates Clark medal" in 1947, awarded every second year (annually since 2009) to the most promising young economist under forty years of age.
Clark's first book, The Philosophy of Wealth (1885), was an attempt to reform the American theory of property, bringing it closer in line with his Christian Socialist ethics. He sees "wealth" not as a natural phenomenon but rather a political creation. Without laws protecting private property, there would be no "value" to property and thus no "wealth". Consequently, the foundations of a wealth are not in any God-given right due to the "productive" labor expended by the individual, but rather in the legal "appropriability" of property, which is a socio-political phenomenon. Clark denounced economists for adhering to the idea of an "economic man" solely motivated by self-interest and for naively believing that "competition" was a panacea for any ill-effects selfish behavior might bring about. Clark emphasized the importance of eschewing "methodological individualism" and placing the individual in an "organic" context, as an integral part of a social body.
However, Clark shied away from political socialism, arguing that immediate schemes of redistribution would destroy private incentives entirely. Furthermore, they would be unethical as effort would not be rewarded. Foreshadowing his later theory of distribution, Clark argued that the "ethical" case in an ideal "socialist" society, is that everyone receives what he produces. In his view, progress towards such a just society is "natural" -- in a Darwinian-Spencerian evolutionist sense. He hailed the trade union movement in mixed terms. On the one hand, he believed that they were merely demanding the workers' "fair share", which he argued had been appropriated by the illegal practices of business owners in the past. On the other hand, he deplored the destructive consequences of this monopolistic business vs. monopolistic labor competition on society and its moral values. Echoing his German education, Clark argued that the State needs to step in to arbitrate an end this destructive conflict, but this was only a second-best solution. The first-best would be for all the participants themselves to undergo a "spiritual" awakening and "realize" that cooperation in wage-setting, rather than conflict, was the best avenue. At times, he would get more enthusiastic about State interference. If, through its laws, the State is the "creator" of wealth, consequently the State has the ethical right to say how it is allocated and distributed. As he would write later, "The State and no other may say into what form pure capital may go. It has said that it may go into land. For ends of its own it has so decided; and the ends are good." (Clark, 1890).
However, the most stunning contribution made in his 1885 Philosophy was discovery of the marginal utility theory of value -- without knowing about the earlier contributions of Jevons, Menger and Walras! John Bates Clark can thus justly be considered the "fourth" independent creator of the Marginalist Revolution. Although this may seem at odds with his methodological attacks, we should note that Clark sought to ground his theory of value in his "organic" theory of society and even gave it an early "characteristics" form. However, a one wit was to note later, "To learn for yourself a new theory ten years or more after it has been widely published is to invite from the jury an indictment of negligence rather than an award for brilliance." (Samuelson, 1967).
Clark perceptively changed his tune after the capital-labor confrontations of the mid-1880s. Repudiating his Christian Socialist past, Clark gradually embraced a decidedly Capitalist Apologist position. The impetus for the change was partly the growing popularity of agrarian socialists like Henry George. Drawing on older American theories of property based on labor, George attacked the "unearned increment" of rent on land as patently unjust and thus subject to expropriation. But Clark's own theory of property rested on denying that ownership is "legitimized" only by productive labor. To respond to George, Clark needed to show that the earnings on land are no different than the earnings on other factors of production. Clark (1888) introduced the idea of an abstract capital fund, or "social capital", which "transmigrates" between different concrete forms, from specific capital goods to land. In a sense, Clark seems to suggest that all factors are "capital" and earnings on capital, whatever form it is in, are all "legitimate".
It was no surprise, then, in the next step, John Bates Clark, would be eager to show that the Ricardian rent principle applied to all scarce factors. It had been well-known, at least since Francis A. Walker (1876) made it clear, that there was nothing quite "special" about land. If you hold any factor constant (whether land or capital or labor or whatever), the other remaining factors will exhibit diminishing marginal productivity and thus "rents". Clark's great contribution in 1889-91 however, was to show that if all factors were paid their marginal products, the sum of factor income would exhaust the total output. This "product-exhaustion" theorem is better known as the "Marginal Productivity Theory of Distribution." Although independently discovered by Philip H. Wicksteed (1894) Knut Wicksell (1893) and others soon after, John Bates Clark's main claim to fame rests on having been the first to propose and demonstrate it. In his later 1899 Distribution of Wealth, Clark extrapolated enormous ethical conclusions from the marginal productivity theory. .
Clark was Eugen von Böhm-Bawerk's great opponent in an early "capital controversy", pitting the Austrian theory of capital against Clark's own theory, where he proposed that there was a "permanent" fund of capital which entered into a production function like any other factor. This theory was given firmer grounding in his later 1907 Essentials, where he developed his dynamic "coordination" story further. Clark's "parable" was taken up in the 1930s by Frank Knight in yet another capital controversy with the Austrian School. It was incorporated into Neoclassical growth theory in the 1950s, it generated yet another battle, the Cambridge Capital Controversy.
As one of few American economists of the Marginalist school and a prominent apologist for the capitalist system, John Bates Clark was skewered by the rising the Institutionalist School -- he became one of Thorstein Veblen's favorite targets. Ironically, John Bates Clark's son, John Maurice Clark, would go on to become a leading Institutionalist.
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