A Capital Controversy in Early Twentieth Century: Veblen vs. Clark. Issue 1 (2nd January 2017)

• Record Type: Journal Article
• Authors: Davanzati, Guglielmo Forges; Pacella, Andrea
• Is Part Of: Journal of economic issues. Volume 51:Issue 1(2017)
• Page Start: 118
• Page End: 136
• Publication Date: 2017-01-02
• Subjects: John Bates Clark -- nature of capital -- Thorstein Veblen; B13 -- D3 -- J01; Economics -- Periodicals; Economics; Économie politique -- Périodiques; Economie; ECONOMICS; ECONOMIC POLICY; Periodicals; 330.05
• DOI: 10.1080/00213624.2017.1287499
• Languages: English
• ISSNs: 0021-3624

Abstract

Abstract: This article aims to assess the debate between John Bates Clark and the "old" institutionalist scholars — Thorstein Veblen, above all — with particular reference to the nature of capital and the functioning of the labor market. Although studies on both authors are numerous, relatively little attention has been paid to finding the crucial elements at the heart of their radical disagreement. A.J. Cohen (2014 ) convincingly argues that Veblen's attack on Clark is in the center of the capital controversy of the 1960s and 1970s. We propose an extension of this argument, based on the idea that Veblen's attack on Clark follows three steps. First, Veblen defined capital in money terms and, at the same time, he saw it as the accumulated technological and institutional experience of a community. Second, insofar as capital cannot be reduced to a stock of physical goods, it is logically impossible to derive a function of the marginal labor productivity from the existing stock of capital. Third, insofar as the marginal productivity of labor cannot be measured, it follows that the equality between real wage and marginal labor productivity cannot logically hold. It also follows that, since it does not exist, this equality cannot be used as a basis for establishing that the equilibrium wage is a just wage.