Clark's Theory of Specific Productivity
One of the theories referred to in the last paragraph is that which has been elaborated in great detail and with great ingenuity by Professor John Bates Clark. As stated by himself in the opening sentence of the preface to his "Distribution of Wealth," its main tenet is, "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." In a régime of perfect competition, therefore, the labourer would get, not the whole product of industry, but the whole product due to his own exertions.
It is impossible, and indeed unnecessary, to enter upon an extended examination of this contention. It will be sufficient to state in a summary way the most obvious and cogent objections. Without making any examination of Professor Clark's theory, we should expect to find it unconvincing. For the productive process is by analogy an organic process, in which every factor requires the co-operation of every other factor in order to turn out even the smallest portion of the product. Each factor is in its own order the cause of the whole product. Consequently no physical portion of the product can be set aside and designated as wholly due to any one factor. Can we not, however, distinguish the proportionate productive influence exerted by each factor, and the proportion of the product which represents such productive influence? This is the question to which Professor Clark addresses himself with much ingenuity, subtlety, and labour, and to which he returns an affirmative answer.[235]
He contends that the amount of product added by the presence of the least productive labourer in a group or establishment describes the productivity of that and every other labourer for whom the man in question can be substituted. Nevertheless this marginal labourer had the use of some capital, no matter how little or how poor; consequently the increment of product which follows his activity is partly due to capital. It represents something other than his own productive power. If his wage equals the value of this increment of product, he is receiving something more than his specific product.
In the second place, Professor Clark maintains that the difference between what a labourer produces when he uses the whole of a certain supply of capital and what he produces when he has shared that capital with another labourer, represents the specific productivity of the relinquished capital. Let us assume that in a given case the difference is ten units of product. When the first man had the whole capital to himself, the product was one hundred units; when he shares the use of it with another, the total product is one hundred and eighty units. As the two men are assumed to be equally productive, each has to his credit ninety units of product. Working with half the capital, the first man finds that the resulting product is ten units less than when he was using the whole capital. Hence these ten units represent the portion that the relinquished capital contributed to the product; and if the productivity of half the capital is ten units, that of the whole capital must be twenty units. Nevertheless, the ten units by which the product was enlarged when the man had the whole capital, did not come into being without his co-operation; hence they cannot be entirely attributed to the one-half share of the capital. In other words, the productivity of the relinquished capital seems to be less than ten units. It also seems to be more than ten units; for we may assume that if each man were to use one-half the capital independently of the other, the resulting total product would be less than one hundred and eighty units, or less than ninety units for each. Consequently the difference between the product resulting from the first man's use of the whole capital and that resulting from his use of half the capital would be more than ten units; and this difference is specifically attributable to half the capital. Who can say which of these calculations is correct, or whether either of them is correct?
The method of ascertaining specific productivity which has been described in the last paragraph is thought by Professor Clark to receive confirmation from the fact that it leads to the same conclusion as the first and more direct method; namely, that the specific productivity of labour is expressed in the product of the marginal labourer. As a matter of fact, this conclusion is yielded by both methods; for the specific productivity of the first labourer appeared as eighty units, which was also the specific productivity of the second labourer, who was the marginal labourer. As we saw in the second last paragraph, however, the marginal product is not due to labour alone; hence the verification provided by the second method is in reality a refutation.
Apparently the majority of economists do not accept Professor Clark's theory; for of the nine who discussed certain applications of it at the nineteenth annual meeting of the American Economic Association only one approved it, three were non-committal, and five expressed their dissent.[236]
Even if the theory were true its hypothetical character would deprive it of any practical value. It assumes a régime of perfect competition, but this assumption is so seldom realised that no rule based upon it can throw much light on the question of the productivity of present day labourers.
Even if it were exactly applicable to existing conditions, that is, if labourers were actually getting their specific products, the theory would not provide us with a doctrine of just wages. As we have seen in former chapters, productivity is neither the only nor the highest canon of justice, whether as regards the comparative claims of capital and labour, or as regards the claims of different labourers. The contention that capital ought to command interest because it aids in bringing forth the product, is neither self evident nor demonstrable by any process of reasoning. Even if we should concede that the capitalist has a right to interest by virtue of the productivity of his capital, we should not therefore conclude that this right is as cogent as the corresponding right of the labourer. In the former case the productive agency is not human nor active, but only material and passive; and the recipient of the product performs no labour as capitalist, but is left free to get a livelihood by personal activity. The productivity of labour differs in all these respects, and the difference is ethically sufficient to justify the claim that the labourer may sometimes have a right to a part of the specific product of capital. To sum up the matter in the words of Professor Wicker: "To have proved that the capitalist gets in interest what his capital produces is not to have proved that the capitalist gets what he has earned. To have proved that the landlord gets what his land produces is not to have proved that the landlord earns his distributive share.... Economics is not ethics; explanation is not justification."[237]
Indeed, Professor Clark nowhere explicitly asserts that productivity is an adequate rule of justice. "We might raise the question," he says, "whether a rule that gives to a man his product is in the highest sense just."[238] Scattered throughout his volume, however, are many expressions which might fairly be interpreted as answering this question in the affirmative. The statements that distribution according to product is a "natural law," and that if the labourer does not get his full specific product he is "despoiled," suggest if they do not imply that wages according to productivity is not merely the economic but the ethical norm. At any rate, the assumption of productivity as the adequate canon of wage justice, is very widely adopted, and is frequently brought forward to give sanction to insufficient rates of remuneration. Hence it has been thought well to show that the economic basis of the assumption, i.e., that the labourer gets what he produces, is unproved and unprovable.