CLARK'S THE DISTRIBUTION OF WEALTH.1

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HIS work fully meets the high expectations that were formed concerning it. Its merit and importance were clearly foreshadowed by the author's brilliant series of articles and monographs in which the different parts of his theory of distribution were, from time to time, formulated and given to the public. To one, therefore, who has kept in touch with Professor Clark's contributions to economic literature, during the past twenty years, there is nothing new or startling in this volume. However, in bringing into an orderly arrangement and extensively supplementing widely scattered and partial statements of his theories, the author has performed a service for which the student of economics can but be profoundly grateful.

For this notable book, as, in fact, for a large part of recent theory, we are indebted to socialism. It may be of interest to note that it was the claim advanced by Mr. Henry George that wages are fixed by the product which a man can create by tilling rentless land that first led the author "to seek a method by which the product of labor everywhere may be disentangled from the product of coöperating agents and separately identified."2 The author's general aim is avowedly to show the fallacy of the indictment that "society is inherently dishonest," that "workmen are regularly robbed of what they produce," that "this is done. within the forms of law and by the natural working of competition"3—a charge, which, if it were proved, would make "every right-minded man a socialist." 3 In his preface he says: "It is the purpose of this work to show 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." The successful accomplishment of this task would leave the author without a peer as an economist.

1 The Distribution of Wealth. A Theory of Wages, Interest and Profits. By John Bates Clark, Professor of Political Economy in Columbia University. London and New York, The Macmillan Company, 1899-455 pages.

Professor Clark's book is, and professes to be, "uncompromisingly theoretical." It deals not with the changing world of reality, but with an imaginary static society-a perfectly organized society, in which, under the influence of a perfectly unobstructed competition, the same kinds of goods are produced by the same processes, by the same kinds of tools and out of the same kinds of materials, to the end of the time. The reader is reminded that this static society is "the theoretical world that figures in Ricardo's studies," in which "natural" or normal standards are realized and that "the terms natural, normal and static are synonymous." The author "tries completely to isolate the static forces that act in distribution from the dynamic forces."2 His chief claim to distinction, so far as method is concerned, consists in drawing the line more sharply, than his predecessors of the classical school had done, between a static society and a dynamic state. "Static forces set the standards and dynamic forces produce the variations.”3 "Static study explains the laws of industrial life, exclusive of the laws of industrial growth."4 Static forces not only operate in the actual world of change, but are even the dominant forces in it. They keep values fluctuating about natural standards, and actual wages and interest comparatively near to the natural rates. This book presents the "natural" or static standards of wages, interest and profits-a pure theory of natural wages, interest and profits. It is the author's opinion that a knowledge of static law, in economics, is as indispensable to a knowledge of dynamic law as is a knowledge of the forces of rest to an understanding of those of movement in mechanics.

Professor Clark's theory of distribution is based upon the principle of "final productivity," but the application of the principle and the resulting law of distribution are the author's own distinctive contribution to economic science. Whether his law of distribution should ultimately meet with general acceptance or not, his brilliant analyses will unquestionably secure for his book a permanent place in economic literature.

Perhaps the most fruitful and significant of all the author's analyses is that in which he draws the distinction between 1 Page 29. ? Preface, vi. 3 Page 32. 4 Preface, page xv.

"capital" and "capital-goods," and between "labor force" and the "concrete laborers." The distinction is simple; yet the attainment of a general law of economic interest and a general law of economic wages is impossible without it. If the author had made no other contribution to economic literature, this alone would entitle him to permanent recognition.

"Capital-goods" are described as the concrete instruments of production. They are the tools, machines, buildings, seeds, merchants' stocks, land and other aids to production. With the exception of land, "capital-goods" perish with the using. In the author's words, "they not only may go to destruction, but must be destroyed, if industry is to be successful." 1 Each concerte "capital-good" has its career, that may be described like that of an individual. It comes into existence, does its work in furthering production and passes out of existence. The "perishability" of "capital-goods" as compared with the "permanence" of capital is emphasized as the point of sharpest contrast between them. Capital is characterized as a permanent fund of value expressible in terms of money. We may think of it, as the business man does, as an abiding fund, "invested in material things which are perpetually shifting. It "lives, as it were, by transmigration, taking itself out of one set of forms, and putting itself into another, again and again."

"It is a striking fact," says Professor Clark, "that labor also is a permanent fund—a fund of human energy that never ceases to exist and to act. Men are as perishable as "capital-goods," but labor is as permanent as is capital. Men come and men go, but work continues forever."4

It is unfortunate, from the point of view of sound analysis, that Professor Clark did not prepare the way for his distinction between "capital" and "capital-goods" by drawing the distinction between the broader and more fundamental conceptions of wealth and economic goods (wealth-goods). Such a distinction should be made in the interest of sound theory. The use 1 Page 117. Pages 157 and 158. For a fuller analysis of the Wealth concept with critique on Professor Clark's use of the term, see Annals of the American Academy of Political and Social Science, vol. i, pp. 615-634, also Quarterly Journal of Economics, vol. xv, PP. 218-253.

* Page 119.

3 Page 120.

of a single term to express two important conceptions leads, at best, to confusion. Professor Clark has clearly pointed this out in the case of capital. But in the use of the term, wealth, he has fallen into the very error, which his brilliant analysis has warned us to avoid in the use of the term, capital. This is especially to be regretted, as the term wealth appears in the title of his book, and is defined in a foot-note, on the first page of the text, as "those sources of human welfare which are material, transferable and limited in quantity." Such concrete things are, rather, the embodiment of wealth, but are not themselves wealth. They should preferably be called wealth-goods, or, better still, economic goods. The term wealth should be used to express the quantum of social value invested in economic goods. Wealth is, so to speak, the content, and is always expressible in terms of money. A has wealth, not because he owns lands, buildings and implements. He may own such things and, yet, have no wealth, as the quantum of social value invested in them may belong to some other person. A has wealth, rather, because he owns a quantum of social value. He may, or may not, be the owner of the specific concrete goods, which embody his wealth. The conceptions of wealth and wealth-goods are parallel with those of "capital" and "capital-goods," but are broader and more fundamental than the latter. To illustrate: a person's wealth consists of the quantum of social value, expressible in terms of money, which belongs to him, it being a matter of indifference who may own the economic goods containing it; while, on the other hand, a person's capital is only that portion of his wealth which is devoted to further production. Again, economic goods (wealth-goods) comprise all those material, useful and appropriable things which are limited in quantity and, in general, cannot be obtained, in the quantity desired, without labor or sacrifice; while "capital goods," on the other hand, comprise only those economic goods, which are devoted to further production. Throughout Professor Clark's book, the application of the term wealth shifts from the one conception to the other. The author ignores his own definition and makes the term do double duty. He uses it to signify, now, a quantum of social value, expressible in terms of money, and, later, concrete

material goods, transferable and limited in quantity-economic goods.

Professor Clark rightly conceives of production and distribution as parallel processes mutually determining each other, and seeks the law of distribution in the conditions of production. According to him, the theory of social production embraces the whole field of economics, except consumption, and the study of distribution is the study of specific production. The application of the principle of final productivity to the study of distribution is made possible by the author's distinction between capital and capital-goods and between labor force and the concrete laborers. He affirms the general applicability of the law of diminishing returns and the Ricardian rent formula.

Thus equipped, he applies himself to the demonstration of his main proposition that, in a static society, labor and capital receive as their rewards what they specifically produce, and that the total product of industry is divided between them. Competition is the levelling force, which tends to eliminate profits and bring wages and interest to uniform rates. A uniform rate of wages exists when workmen are rewarded in proportion to the amount of labor force respectively put forth; when the only difference between the reward of one workman and that of another is traceable to the difference in the amount of labor force actually put forth.

Henry George's application of the principle of final productivity to the determination of wages the author rightly condemns on the ground that it implies the exploitation of all laborers except those working on free land. He further points out, as a vital defect in Henry George's theory, the apparent assumption that the marginal field for labor is purely an agricultural one. He shows clearly that it is much wider, that "it may be traced throughout the industrial system." It is made to embrace all no-rent labor opportunities, wherever found. These opportunities are, largely, found at the intensive margin of production of every industry. There is a "a line that it does not. pay to pass in adding to the number of workers, who are utilizing the really productive appliances of industry." This is the no1 Page 100.