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Clark, John Maurice

Clark, John Maurice

WORKS BY CLARK

SUPPLEMENTARY BIBLIOGRAPHY

John Maurice Clark (1884–1963), thirty-seventh president of the American Economic Association, was born in Northampton, Massachusetts. After graduating from Amherst College with an a.b. degree in 1905, he pursued graduate studies in economics at Columbia University, where he received his m.a. in 1906 and his ph.d. in 1910. From the time he left Columbia in 1908 to accept an instructorship in economics and sociology at Colorado College until his retirement from Columbia in 1957, Clark devoted an uninterrupted half century to teaching and productive scholarship. In 1910 he returned as associate professor of economics to Amherst and stayed there until he joined the faculty of political economy of the University of Chicago in 1915. In 1926 he left Chicago to become professor of economics at Columbia University.

Clark has often been singled out as one of the few economists (John Maynard Keynes was another) born into the profession. He was the son of the famous American economist John Bates Clark, one of the founders and the third president of the American Economic Association. The father’s influence on the son was pronounced in the latter’s personal and professional life. The younger Clark’s close colleagues at the University of Chicago and Columbia often felt that his esteem for his father and his economic works was so high that he was inclined to deprecate his own great contributions to economics. There is no doubt, of course, that his contributions to economics did owe much to his father. Clark wrote his PH.D. thesis, Standards of Reasonableness in Local Freight Discriminations, under his father’s guidance; he stated in his preface: “The author cannot express sufficiently his indebtedness to his father… not only for his direct and invaluable assistance in preparing this monograph; but for the stimulus, guidance and instruction which have made possible whatever the author has achieved or may achieve” (1910, p. 5). He and his father coauthored a revision of The Control of Trusts (1914a). He dedicated his highly praised Studies in the Economics of Overhead Costs to his father and acknowledged in the preface that “[my] greatest debt of all is to my father, who started me in this field of inquiry as a graduate student…” (1923, pp. xi–xii). In his presidential address to the American Economic Association (1936a), he frequently referred to his father’s publications, especially his two articles setting forth the marginal productivity theory of distribution, and two of his books, The Philosophy of Wealth and The Distribution of Wealth. And in the preface to his last major work published before his death, Competition as a Dynamic Process, he described his inquiry as one that “…goes back to my father’s basic conception that the analysis of static equilibrium, for which he is chiefly known, is properly not an end, but an introduction to the study of dynamics, in which it should find its fulfilment” (1961, p. ix).

John Maurice Clark’s major contribution to economics was, indeed, his grasp of the relationship between the study of static systems and of dynamics. Probably more than any of his contemporaries, and certainly more than anyone in the succeeding generation of economists, he concerned himself explicitly with bridging the enormous gap between the models of static theory and the dynamic realities of a market economy. Since the complexities of these dynamic realities could not be compressed into conventional geometric or algebraic models or clarified through modifications and adaptions of them, it is not surprising that Clark from the beginning of his career eschewed formal models as a means of presenting even his most rigorous theoretical concepts. In the Handbook of the American Economic Association he consistently listed micro-economic theory and industrial organization, in that order, as his areas of interest; yet his major works do not contain a single abstraction presented in a diagram or set of equations. (His thesis contained one such abstraction, an attempt to apply the doctrine of average value to the problem of local discrimination.) Clark digested and skillfully built upon the logic underlying the formal models of others, first of the marginalists and later of Edward H. Chamberlin and Joan Robinson, but he fashioned his own methodology from the written word. This feature of his work was in striking contrast with the heavy reliance his contemporary younger theorists placed on the mathematical formulation of theoretical problems. The contrast, however, was not attributable to Clark’s lack of familiarity with mathematics: he often cited Cournot’s Researches Into the Mathematical Principles of the Theory of Wealth and the works of other mathematical economists; he was a charter member of the Econometric Society and in 1947 was elected a fellow of the society. Rather, his abstinence from the use of abstract models followed from his having committed his intellectual energies to those economic complexities that did not lend themselves to such formulations. Referring in his above-mentioned presidential address to the recent founding of the Econometric Society, he said, “[The society] faces great and inherent difficulties in the framing of assumptions simple enough to lend themselves to mathematical formulas yet flexible enough to grapple effectively with the problems of dynamic economics” (1936a, p. 7).

Clark’s concern with the dynamics of a complex market economy led him to explore many areas. His PH.D. thesis, Standards of Reasonableness in Local Freight Discriminations, anticipated a long list of his later publications concerned with the economics of costs and the logical relationships between costs and prices. By far the most important of his earlier publications was his Studies in the Economics of Overhead Costs, which was destined to be the standard reference on the subject throughout the remaining forty years of Clark’s life. In this work Clark anticipated the distinctions between social and private costs so carefully drawn by wel-fare economists later on, elaborated the differences between genuine economies of scale and the private advantages of size (“bargaining power pure and simple” 1923, p. 127), and, most important, further developed the acceleration principle and its impact on business cycles that he had introduced in an earlier article, “Business Acceleration and the Law of Demand” (1917). This principle was later incorporated into post-Keynesian national income models as an important explanation of business cycles. Clark also worked out the differences between the accountants’ and the economists’ conceptions of costs, a line of inquiry he helped develop more fully in such later articles as “Valuation for the Balance-sheet and Profit” (1926a) and “Some Central Problems of Overhead Cost” (1927).

It was almost inevitable that Clark’s concern with the dynamic aspects of a market economy would lead him to assess critically the implications of the postulates of perfect competition for welfare theory and public policy. While virtually all his works were in varying degrees concerned with this assessment, his article “Toward a Concept of Workable Competition” (1940) clearly had more influence on the subsequent development of the field of economics known as industrial organization than any other single publication, with the exception of Edward H. Chamberlin’s Theory of Monopolistic Competition. Chamberlin’s book transformed indus-trial organization from a descriptive study of institutions into a study in applied theory; Clark’s article provided the framework and impetus for the search for more dynamic and more realistic theories and definitions of competition to apply to the market economy.

Clark’s article on the concept of workable com-petition was a systematic elaboration of a central theme running through much of his work, the beginnings of which went back to his “Soundings in Non-Euclidean Economics” (1921) and Studies in the Economies of Overhead Costs (1923, especially chapter 21). The theory of perfect competition, argued Clark, applies to market conditions that are both theoretically and practically unattainable: theoretically unattainable because the theory is static, relating to an economy that in all its details constantly repeats itself, whereas the characteristic feature of the market economy is its dynamism and constant change; and practically unattainable simply because all the conditions prerequisite to such a state could not possibly exist simultaneously in a significant portion of the economy.

Since the theory of perfect competition, for these reasons, does not provide meaningful standards for assessing either the performance of the economy or the effectiveness of our public policies designed to maintain competition (the antitrust laws), there is a great need for new definitions of competition that can be applied to the dynamic realities of the marketplace. These new definitions should therefore focus on “workable,” in contrast with “perfect,” competition.

Clark did not attempt to set forth a complete and universally applicable definition of workable competition but proposed that such definitions reflect the following considerations:

Competition is rivalry in selling goods, in which each selling unit normally seeks maximum net revenue, under conditions such that the price or prices each seller can charge are effectively limited by the free option of the buyer to buy from a rival seller or sellers of what we think of as “the same” product, necessitating an effort by each seller to equal or exceed the attractiveness of the others’ offerings to a sufficient number of buyers to accomplish the end in view. (1940, p. 243)

Characteristically, Clark provided price theory and industrial organization with a relevant framework for definitions and theories of competition rather than with formalized definitions and theories themselves. As he stated later in his article “Competition: Static Models and Dynamic Aspects” (1955a, p. 457), “A theory of competition as a dynamic process must be not a model but a frame-work within which many models may find their places, including equilibrium models as limiting hypothetical cases.”

His concept of workable competition stimulated many graduate students to devote their theses to developing definitions and models of workable competition, an effort which significantly increased the number and enhanced the quality of case studies of industries and markets. For example, the Harvard University series on Competition in American Industry was a direct descendant of Clark’s article.

Another and generally unrecognized contribution to economics contained in Clark’s article on workable competition is the logic and form of the theory of “second best,” expounded 16 years later by Kelvin Lancaster and Richard G. Lipsey (1956). In establishing the guideposts to definitions of workable competition, Clark argued that the conditions of competition were not additive but were rather interrelated in such a way that if one condition of a state of workable competition were absent, even the presence of all the other essential conditions might not make competition workable. The Lancaster and Lipsey article develops precisely the same argument with respect to conditions for a welfare optimum.

In his Alternative to Serfdom (1948), The Ethical Basis of Economic Freedom (1955Z?), and Competition as a Dynamic Process (1961), Clark disclosed the essential conclusions he had reached after nearly a half century of diligent research into the problems and prospects of competition within capitalism. The capitalistic system, he believed, would survive the communist threat because it was flexible and dynamic enough to provide economic abundance as well as individual freedom. This flexibility and dynamism derives from the presence in the system of a greater degree of beneficial com-petition than most students of industrial organization would attribute to it.

Clark’s writings include treatises on virtually every economic problem that loomed large in his lifetime. Although he is chiefly recognized for his contributions designed to close the gap between the abstractions of statics and the realities of dynamics, he published works concerned with the business cycle, the economic costs of war, wartime controls and demobilization, public works, the labor market, education, and a host of other problems. He was a prolific writer, and his scholarly contributions earned the high praise of his peers and virtually every distinguished award conferred by his profession. John Kenneth Galbraith, in reviewing Clark’s Economic Institutions and Human Welfare (1957), spoke for his fellow economists when he wrote: More than any other economist of his generation… he has transcended controversy … he has dealt regularly with the most difficult and disputed questions of social policy. But his conclusions have been cast in a framework of patient and meticulous and reasonable argument which not only dissipates hostility but goes far to preclude argument. (Galbraith 1957)

And Kenneth E. Boulding, reviewing the same volume, was equally eloquent in his praise:

There is something peculiarly American in the thought of J. M. Clark: it stems from the sweet reasonableness of Penn and of Emerson, from the pragmatism of William James, from what might be called the Gentle Tradition in American life. It stands over against the harshness and cruelty both of Manchester and of Marx, with their confident solutions and roughshod ideologies. To some extent too it stands over against the bright young world of the econometricians and operations researchers.… (Boulding 1957, p. 1004)

Clark was awarded honorary degrees by Amherst College, Columbia University, the University of Paris, the New School for Social Research, and Yale University. In 1951 Columbia appointed him to the John Bates Clark chair, established in his father’s honor. In 1952 the American Economic Association bestowed on him its highest honor by awarding him the Francis A. Walker medal for distinguished service to the field of economics.

It is true that Clark founded no special school of economic thought—there is no identifiable “Clarkian school”—but it is equally true that the appeal of his wisdom went far beyond the classroom.

Jesse W. Markham

[See also, in approximate order of relevance,Competition; Oligopoly; Markets and industries; Cost; and the biography ofClark, John Bates.]

WORKS BY CLARK

1910 Standards of Reasonableness in Local Freight Discriminations. New York: Columbia Univ. Press.

1914a Clark, John Bates; and Clark, John Maurice. The Control of Trusts. Rev. & enl. ed. New York: Macmillan. → John Bates Clark was sole author of the first edition, published in 1901.

1914b A Contribution to the Theory of Competitive Price.Quarterly Journal of Economics 28:747–771.

1917 Business Acceleration and the Law of Demand: A Technical Factor in Economic Cycles. Journal of Political Economy 25:217–235.

1921 Soundings in Non-Euclidean Economics. American Economic Review 11, no. 1:132–143.

(1923) 1962 Studies in the Economics of Overhead Costs. Univ. of Chicago Press.

1926a Valuation for the Balance-sheet and Profit. Pages 369–377 in International Congress of Accountants, Second, Amsterdam, 1926, Proceedings. Purmerend (Netherlands): Muusses.

(1926b) 1939 Social Control of Business. 2d ed. New York: McGraw-Hill; London: Whittlesey House.

1927 Some Central Problems of Overhead Cost. Taylor Society, New York, Bulletin 12:287–292.

1931 The Costs of the World War to the American People. New Haven: Yale Univ. Press.

1932 Business Cycles: The Problem of Diagnosis. Journal of the American Statistical Association 27 (Supplement): 212–217.

1934 Strategic Factors in Business Cycles. Publication No. 24. New York: National Bureau of Economic Research.

1936a Past Accomplishments and Present Prospects of American Economics. American Economic Review 26:1–11.

1936b Preface to Social Economics: Essays on Economic Theory and Social Problems. New York: Farrar & Rinehart.

1940 Toward a Concept of Workable Competition. American Economic Review 30:241–256.

1942 How to Check Inflation. New York: Public Affairs Committee.

1943 Imperfect Competition Theory and Basing-point Problems. American Economic Review 33:283–300.

1944 Demobilization of Wartime Economic Controls. New York: McGraw-Hill.

1946 Realism and Relevance in the Theory of Demand. Journal of Political Economy 54:347–353.

(1948) 1960 Alternative to Serfdom. 2d ed., rev. New York: Vintage.

1949a Guideposts in Time of Change: Some Essentials for a Sound American Economy. New York: Harper.

1949b Law and Economics of Basing Points. American Economic Review 39:430–447.

1950 The Orientation of Antitrust Policy. American Economic Review 40, no. 2:93–104. → Contains four pages of discussion.

1955a Competition: Static Models and Dynamic Aspects. American Economic Review 45, no. 2:450–462.

1955b The Ethical Basis of Economic Freedom. Westport, Conn.: Kazanjian Economics Foundation.

1957 Economic Institutions and Human Welfare. New York: Knopf.

1958 The Uses of Diversity: Competitive Bearings of Diversities in Cost and Demand Functions. American Economic Review 48, no. 2:474–482.

1960 The Wage-Price Problem. New York: American Bankers Association, Committee for Economic Growth Without Inflation.

1961 Competition as a Dynamic Process. Washington: Brookings Institution.

SUPPLEMENTARY BIBLIOGRAPHY

[The Bibliography of] John Maurice Clark. 1931 Pages 301–304 in Columbia University, Faculty of Political Science, A Bibliography… 1880–1930. New York: Columbia Univ. Press.

Boulding, Kenneth E. 1957 [A Book Review of] Economic Institutions and Human Welfare, by John Maurice Clark. American Economic Review 47:1004–1005.

Galbraith, John Kenneth 1957 [A Book Review of] Economic Institutions and Human Welfare, by John Maurice Clark. New York Times May 12, p. 3, col. 4.

Lancaster, Kelvin; and Lipsey, Richard G. 1956 The General Theory of Second Best. Review of Economic Studies 24:11–32.

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John Maurice Clark

John Maurice Clark

The American economist John Maurice Clark (1884-1963) is perhaps the best-known forerunner of the American economists who are sometimes referred to as the pragmatic school.

John Maurice Clark was born in Northampton, Mass. He graduated from nearby Amherst College in 1905 and did his graduate study in economics at Columbia University, where he received his doctorate in 1910. He instructed at Colorado College (1908-1910) and at Amherst College (1910-1915) until he joined the faculty of political economy at the University of Chicago, where his colleagues included Jacob Viner and Frank Knight. In 1926 he left Chicago to accept a professorship at Columbia, where he remained until he retired in 1957, completing a half century of uninterrupted teaching and productive scholarship.

Clark's works, while primarily theoretical in content, were almost always directed toward clarifying and solving practical economic issues. He skillfully built his own analytical treatises upon the logic underlying the rigorously formulated models of others, first the marginalists and later Edward H. Chamberlin and Joan Robinson. In contrast with the methodology of these scholars, and of the younger mathematical economists who rose to prominence during the latter part of his professional life, Clark's methodology relied on the written word rather than geometric and algebraic formulations.

Dynamics of a Market Economy

Clark has been singled out as one of the few economists (John Maynard Keynes was another) born into the profession. He was the son of the distinguished John Bates Clark, a founder and the third president of the American Economic Association. John Maurice Clark, following in his father's footsteps, was the association's thirty-seventh president. The senior Clark had a pronounced influence on Clark's professional and personal life. The father directed the son's doctoral dissertation at Columbia (Standards of Reasonableness in Local Freight Discriminations), and in turn the younger Clark was the coauthor of the revised edition of his father's The Control of Trusts (1914). Clark dedicated his highly praised Studies in the Economics of Overhead Costs to his father, and in his last major work published before his death, Competition as a Dynamic Process (1961), he attributed his concern with the dynamics of economics to his father's basic conception that static equilibrium analysis was properly an introduction to the study of dynamics rather than an end in itself.

Virtually all of Clark's works were concerned with the dynamics of a market economy. His article "Towards a Concept of Workable Competition" (1940) greatly influenced the later writings of others concerned with the policy standards applicable to the functioning of a dynamic market economy.

Clark received honorary degrees from Amherst College, Columbia University, the University of Paris, the New School of Social Research, and Yale University. In 1951 Columbia appointed him to the John Bates Clark chair, established in his father's honor. A year later the American Economic Association bestowed on him its highest honor by awarding him the Francis A. Walker Medal for distinguished service in the field of economics.

Further Reading

Detailed biographies of Clark are in Joseph Dorfman, The Economic Mind in American Civilization (5 vols., 1946-1959), and Ben B. Seligman, Main Currents in Modern Economics: Economic Thought since 1870 (1962). See also T.W. Hutchison, A Review of Economic Doctrines, 1870-1929 (1953).

Additional Sources

Hickman, Charles Addison, J. M. Clark, New York: Columbia University Press, 1975. □

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