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

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   Where there is anything like an equal distribution of wealth... the
   more
   democratic the government the better it will be; but where there is
   gross
   inequality in the distribution of wealth, the more democratic the
   government
   the worse it will be; for, while rotten democracy may not in itself
   be worse than rotten autocracy, its effects upon national character
   will be
   worse.... To put political power into the hands of men embittered
   and
   degraded by poverty is to tie firebrands to foxes and turn them loose
   amid
   the standing corn; it is to put out the eyes of a Samson and to twine
   his
   arms around the pillars of national life. (77)

The Legacy of John Bates Clark

This chapter has argued that George's identification of land and labor as the original factors of production is coherent and defensible. At the analytical starting point, every productive process employs the primary inputs of labor and land as Henry George defined them. Land is indispensable to production and to all earthly life. George's three-factor taxonomy is consistent with the fundamental methodology of economics. It underlies a coherent philosophy of natural justice and provides an elegant theoretical framework for addressing social, political and ecological as well as economic issues.

Clark's theory of capital confuses value from production with value from obligation, and social wealth with private wealth. This leads him to conclude that land is capital because it can be exchanged for capital, that saving can increase the supply of land, that capital "transmigrates" into land, and that an increase in land prices constitutes an increase in wealth. Clark's perfect foresight model of static equilibrium defines unearned gains and losses out of existence, slamming the analytical door on George's entire dynamic analysis of distribution and social development. By reinterpreting the theory of differential rent in terms of marginal analysis with homogeneous land/capital, Clark overlooks George's location theory of urban land rent. Neither his marginal productivity analysis nor his static equilibrium model explicitly incorporates the productive contribution of time in the theory of capital and interest.

John Bates Clark put out of view the fundamental economic condition of humankind--the fact that all production requires the purposeful application of human effort to the materials and forces of nature. By including land with capital in his marginal productivity theory of distribution, he assumed that land and produced capital goods are perfect substitutes in production, implying that production could proceed without land by substituting machines for land. This is of course impossible, because capital goods are composed of materials drawn from land. Let the whole surface of the earth be modified by the touch of the human hand; marginal productivity is the principle that distinguishes the value added by labor from the underlying value of land.

In short, Clark's favored strategy against the single tax is simply to ignore most of George's theory and evidence, the gaps in his own argument, and the obvious counterarguments. His favored device for doing so is to choose analytical models that assume away the economic conditions on which his opponent's argument is based.