Distribution of Wealth

John Bates Clark, American economist noted for his theory of marginal productivity, in which he sought to account for the distribution of income from the national output among the owners of the factors of production (labor and capital, including land).

Clark was educated at Brown University and Amherst College. He then studied in Heidelberg, Germany, and Zürich, Switzerland. Returning to the United States, he taught at Carleton, Smith, and Amherst colleges and at Columbia University.

The publication of Clark’s Philosophy of Wealth marked his “revolt against the spirit of the old political economy.” He argued that people were motivated as much by their social interests as by their self-centered personal interests. He therefore rejected pure economic competition as a means by which products could be equitably distributed. In The Distribution of Wealth Clark developed his distinctive utility theory. He held that commodities contain within them “bundles of utilities”; i.e., they represent varying qualitative degrees of utility. In this work he also developed his marginal productivity theory by first setting up a theoretical model of perfect, “static” competitive equilibrium undisturbed by any dynamic change. From this theoretical model he reached his conclusions on the distribution of the total national product. Here he also advanced the concept of social capital as being a permanent, ongoing stream of future incomes out of which all productive inputs, including capital goods, are temporarily taken for a charge (interest).

Clark was one of the founders of the American Economic Association (AEA), of which he was president from 1893 to 1895. His purpose, along with co founders Richard Ely and Henry Carter Adams, was to encourage a shift in thinking away from laissez-faire policies. He was editor of the Political Science Quarterly (1895–1911) and served as director of the division of economics and history of the Carnegie Endowment for International Peace (1911–23). In 1947 the AEA established the John Bates Clark Medal, which is awarded annually (biennially until 2009) to a U.S.-based economist under the age of 40 for outstanding contributions to economic thought.