John Bates Clark was the leading American economic theorist at the beginning of the twentieth century. His position in American economics was similar to that of Alfred Marshall in British economics. In some ways, Clark’s achievements are even more remarkable because he was an important innovator in economic theory even though he lacked the vigorous intellectual stimulation Marshall received at Cambridge.
Clark's complete writings were intended to restructure classical
theories of value and distribution, but his most enduring contribution is
found in the marginal productivity theory of income distribution set
forth in The Distribution of Wealth (1899).
Labor and capital are each interchangeable, according to
Firms operate in a region of their production functions where diminishing marginal returns cause each worker added to a work force to raise total output by a smaller amount than did the previous worker. The employer will hire more workers as long as the last one hired contributes at least as much to total revenue as the cost of employing that worker. Because every worker is the marginal worker, and because the last worker hired adds to the employer's gross income an amount equaling the wage rate in a competitive labor market, all workers are paid the values of their marginal products.
Early economists were even more prone to take positions on normative
issues than are economists today, many of whom pride themselves on their
scientific objectivity (if such a thing is possible).
Author: Ralph Byrns
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