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18 Clark: apostle of two-factor economics - Part III: nineteenth-century Americas critics
American Journal of Economics and Sociology, The, Nov, 2003 by Kris Feder
Henry George came to believe that economists, motivated by professional and pecuniary interests, had rejected the classical ("scholastic") political economy of Smith, Ricardo, Senior, and Mill expressly to neutralize his arguments for the single tax, which were based on classical principles. Despite its intellectual and popular success, his magnum opus, Progress and Poverty, had been maligned or ignored by most professional economists. A few had "resorted to misrepresentation," but "the majority preferred to rely upon their official positions in which they were secure by the interest of the dominant class, and to treat as beneath contempt a book circulating by thousands in three great English-speaking countries and translated into all the important modern languages." (1) In 1894 George wrote:
"Progress and Poverty" has been, in short, the most successful economic work ever published. Its reasoning has never been successfully assailed, and on three continents it has given birth to movements whose practical success is only a question of time. Yet though the scholastic political economy has been broken, it has not been, as I at the time anticipated, by some one of its professors taking up what I had pointed out; but a new and utterly incoherent political economy has taken its place in the schools. (2)
George noticed "the first evidence of a change" in a widely distributed 1886 article announcing that the old political economy, based on Smith's "system of natural liberty," was dead, having been displaced by the German Historical School. (3)
Economics as a discipline was rapidly professionalized during the last two decades of the nineteenth century. The American Economics Association was formed, professional journals were founded, and colleges hired professors with advanced degrees to teach economics. American universities did not yet have graduate programs in economics, however, so many Americans earned their Ph.D.s in Germany. Here they were exposed to the Historical School, which held that generalizations in economics could not be developed until all the facts are assembled, and that in any case theory is inherently conditional and historical; there are no universal truths. Here, too, graduate students were exposed to an "entirely different philosophical and political heritage from that of England," one which "was more oriented toward group behavior and the social uses of property than toward political and economic individualism." (4)
George rejected both the nationalistic philosophy and the antitheoretical, inductive methodology of the German tradition. His vision of good government--"the administration of a great co-operative society ... merely the agency by which the common property was administered for the common benefit"--was wholly at odds with the German state-centered ideal. George refers to the "protectionism" espoused by American economists, first at the University of Pennsylvania and "rapidly and generally followed," which he attributes to "an acquiescence in the views or whims of the wealthy class, dominant in all the colleges." (5)
The Historical School was indeed the most visible new development in economics during the 1870s and 1880s. It never, though, conquered mainstream economic thought. Economists soon came round to the view that both deduction and induction are useful in economic science. As it turned out, it was the "Marginal Revolution" that routed the old paradigm--and it was a leading American marginalist, John Bates Clark, who became George's most prominent, determined, and influential opponent. Clark (1847-1938) has been called "the first major American economist." (6) A co-founder and president of the American Economics Association, he received his graduate training in Heidelberg and Zurich. After teaching at Carleton College, Smith, and Amherst, he was recruited in 1895 by Columbia University, where he remained to the end of his career.
In his first book, The Philosophy of Wealth (1886), Clark intended to refute "strange teaching concerning the rights of property." (7) He criticized the fundamental methodology of economics, questioning on moral grounds the classical arguments for the social benefits of competition. He rejected the assumption that economic behavior is motivated by self-interest and "introduced into economics the Spencerian conception that society is an organic whole." (8) He never directly confronted the "strange teachings" to which he alluded, but he eventually revealed them to be the teachings of Henry George, who, according to Clark, failed to understand "the productive action of capital." (9)
Soon afterward, Clark experienced a "methodological conversion" and changed his mind about the social value of competition. (10) He came to believe that free markets tend to yield an efficient allocation of resources and a just distribution of wealth. He now exalted the virtues of private property and argued that absolute, perpetual private property in land was essential to the functioning of the market system. Armed with this conviction, Clark took a determined stand against the single tax. From the late 1880s to 1914, Clark devoted his professional career to discrediting the single-tax proposal on grounds of both ethics and economics,n He debated Henry George at Saratoga in 1890 and debated single taxer Louis F. Post at Cooper Union in 1903. (12) Directly or indirectly, he attacked George's analysis of land and rent in four books and dozens of articles. His articles include, to name a few, "The Ethics of Land Tenure," "The Moral Basis of Property in Land," "The Law of Wages and Interest," "Concerning Wealth That Resides in Land," and "Shall We Tax the Unearned Increment?" No economist ever worked more diligently to refute Henry George than did John Bates Clark.
