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History of Political Economy 35.3 (2003) 521-558
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"A Certain Rude Honesty":
John Bates Clark as a Pioneering Neoclassical Economist
Thomas C. Leonard
John Bates Clark (1847–1938), the most eminent American economist of a century ago, was, in his own day, caricatured as an apologist for laissez-faire capitalism (Veblen 1908).1 The caricature has shown staying power, a measure, perhaps, of the relative paucity of scholarship on Clark and his work. Recent Clark research signals a welcome attempt at a more accurate portrait (Morgan 1994; Henry 1995; Persky 2000). But some revisionists would remake Clark the apologist for capital into Clark the Progressive exemplar. Robert Prasch (1998, 2000), for example, depicts Clark as a Progressive paragon, which groups him with the great reformers of Progressive-Era political economy—Social Gospelers such as Richard T. Ely and his protégé John R. Commons, labor legislation activists such as Clark's junior colleague Henry Rogers Seager [End Page 521] and Commons's student John B. Andrews, and Fabian socialists such as Sidney Webb.
This essay argues that John Bates Clark was neither a partisan of Capital, as the caricature had it, nor a partisan of Labor, as were the Progressives. Especially with respect to the leading issues of the day—labor relations and trust regulation—Clark is better regarded as a nascent American neoclassical, that is, as a partisan of what came to be called efficiency. In particular, Clark celebrates the competitive markets his Progressive peers regard as morally and economically destructive. Clark ultimately judges market structures, market organizations (e.g., labor unions), and regulation by their efficacy in promoting competitive prices and wages, which for Clark are what distributive justice requires.
First, a disclaimer. I consider only the mature Clark, defined as his work from the period when he consolidates his early marginal productivity statements into The Distribution of Wealth (1899) until the end of his published research in economics, an interval that spans the Progressive Era, from about 1890 to the outbreak of the First World War in the summer of 1914.2 This emphasis, by design, leaves untouched a central interest among Clark scholars: whether the younger Clark's New Englander papers (gathered in The Philosophy of Wealth ), with their organicist and Social Christian sentiments, can be made coherent with the mature Clark's work, especially his strong defense in his magnum opus (1899) of the marginal productivity theory of factor pricing and distribution, and his famously controversial view that a Clarkian distribution is necessarily just.3
We first present Clark's theory of wages and his view of legal minimum wages. Second, we take up Clark on labor arbitration and trade [End Page 522] unions. Clark on goods-market monopoly and trust regulation is third. Fourth, given the distance between the American economy and Clark's idealized competitive model, I consider Clark's policy positions in practice. Fifth is Progressive American political economy's commitment to social activism, as represented by the American Association for Labor Legislation, an American Economic Association (AEA) offshoot. We conclude with a summary appraisal of Clark's Progressive and neoclassical credentials.
1. "Footing in delusion": Clark's Wage Theory and His View of Legal Minimum Wages
Clark is best known for his marginal productivity theory of distribution, which famously says that "the distribution of the income of society is controlled by a natural law, and that this law, if it worked without friction, would give to every agent of production the amount of wealth which that agent creates" (1899, v). Labor's wage, which Clark interchangeably calls "standard," "normal," "natural," and "competitive," is thus determined by the value of its marginal product (what Clark ordinarily terms "specific product").4 Clark conceives of dynamic changes ("frictions") as perturbations to the equilibrating forces of the static model. Dynamic change brought on by technological innovation, for example, increases labor productivity, so that wages lag for a time before rising toward the new marginal product.
Clark's essential statement on minimum wages is a short essay in the...