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History of Political Economy 32.3 (2000) 585-606

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Unions and the Natural Standard of Wages:
Another Look at “the J. B. Clark Problem”

Donald R. Stabile

A century after he wrote his most important book, John Bates Clark remains a puzzle to his interpreters. The standard view among economists is that in his formulation of the marginal productivity analysis of distribution, Clark, as James Tobin (1985, 29) remarks, “completely reversed his earlier position.” To specialists in the history of economic thought, however, the form and extent of that reversal remain arguable. According to Joel Jalladeau (1975, 213), Clark changed his emphasis from an ethical, Christian socialist criticism of capitalism in his youth to an analysis by which he “came to insist on the most technical aspects of an economics very narrowly constrained.” The result has been what Toshihiro Tanaka (1990, 147) has called “the J. B. Clark problem,” meaning that there was a “transformation from the early Clark who had repudiated the competitive system to the support and defence of it in his later period.”

For John F. Henry, however, Clark’s transformation was not that significant. In a major study of Clark, he argues, “Clark’s development can be seen as a continuum in which, while modifications occurred and emphases change, ideas first formulated in the early period are developed and carried over into the modern, neoclassical culmination of his work” (Henry 1995, 71; see 14, 44, and 141 for similar statements). In Henry’s view, Clark was always a conservative antisocialist who defended the [End Page 585] property rights of capitalism as fair to workers. Instead of being critical of competition, Clark aimed to show how it resulted in a just distribution of income (Henry 1995, 19–21).

Through a review of Clark’s analysis of labor unions, this article offers an interpretation of his transformation as a continuum that extended beyond his neoclassical work. At each stage of his career, Clark believed that the individual ownership of property and the market competition of capitalism were a more effective economic organization than the collective control of socialism. He maintained, however, that workers needed to be given a stake in that economic system through a claim to a wage consistent with their abilities. Before and after his formulation of marginal product theory, I argue, he accepted unions as a means for workers to gain that claim.

Development of this interpretation of Clark’s work highlights a neglected point regarding his formulation of marginal product theory: The static version of marginal product theory on which his reputation in the history of thought now rests was not the culmination of his thinking about wages and competition. Clark’s classic statement of his marginal product theory did depict a world where competition established wages that were fair to workers. He made it clear, however, that this competitive standard of wages existed only in a static world and that he planned to extend his approach to wages with a dynamic analysis. In that dynamic analysis, Clark postulated a productivity-wage gap under which wages lagged behind labor’s marginal product. He regarded unions as pivotal for keeping the gap within reasonable limits and ensuring that wages approached the standard marginal productivity theory set.

Clark’s interest in unions and fair wages reflected his perception of their usefulness in attaining social cohesion, the holding together of society by having its members feel they were part of a community. This consideration for social cohesion had a basis in his Christian values, as John Rutherford Everett describes ([1946] 1982, chap. 2, especially 34–36). Due to his stress on values, Clark has been criticized for applying ethics to economics. As with all his thinking, Clark’s approach to ethics evolved during his life. In his early years he took a principled approach, insisting that moral behavior in accord with ethical principles was crucial to social cohesion. Later he stressed the importance of having competition lead to consequences that were consistent with social cohesion. [End Page 586]

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