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small amount to be gained by doing so, but when it is clear that the whole advantage which he gains must forthwith be surrendered to the laborer as a wage, he is likely to decline to enter into the contract. There is, therefore, no such large "zone of indifference as Professor Clark would create; - no considerable area within which labor works in connection with the norent uses of capital. And if this area does not exist, Professor Clark's method of disentangling the product of labor from the product of capital has in consequence no reality either.1

These criticisms, if valid, would seem to dispose of the productivity theory. Not yet, however, have we really reached the heart of the matter. The third, fourth, and fifth propositions are the ones which call for our most careful attention. And it will be proper to discuss them under the assumption that the first two are correct. On the surface of things the argument adduced to prove the fourth proposition seems beyond all cavil. If a given employer offers to our marginal laborer less than what the employment of the latter will add to the product of industry, he will be overbid by others who stand ready to pay the full amount. It is the perfect competition of employers 2 in the static state which is regarded as bringing the wage of the marginal laborer up to an exact equivalence with the product of his labor.

Nor is any exception to be taken to the sixth proposition that interchangeable units (marginal and non

1 This point may deserve fuller elaboration than it has received. In reality, as will be seen further on, it contains one of the fundamental fallacies of the argument. If labor were employed in large amount in connection with the no-rent uses of agents, and if it could be said of such agents that they contribute nothing to the product, then that product would plainly be the "specific" creation of the labor. Such marginal labor would then receive its "product as a wage.


"It is by assuming perfectly free competition among employers that we are able to say that the man on the intensive margin of an agricultural force of laborers will get, as pay, the value of his product." Distribution of Wealth, p. 99.

marginal) will all be paid at the same rate. A careful examination of proposition number five, however, will throw it into a new light, and will show up proposition number four as something quite different from what it


The essence of the fifth proposition is that an employer regards interchangeable units of labor as equal in importance. He evidences his estimate by the pay which he offers, which is uniform for all. If a given laborer, doing an indispensable part of the work, should ask more that the current rate, he would be discharged and one of the others put in his place. The process is simple and logical. Now let us ask what in actuality the employer has done. He has not taken the physical product and separated it into parts produced by and ascribable to the respective laborers, - learning in this way the specific product of each. What has he done then? He has tendered and paid wages. And in so doing he has set a valuation upon the services of the different laborers. (And this valuation has been accepted by them.) Seemingly this is all there is to the supposedly equal "productivity" of marginal and non-marginal laborers. They are thought to have equal productivity because the employer sets the same value upon their services in paying them the same wage. They are not doing the same work. There is no physical identity or equality between the products of the various laborers. The respect in which there is an equality between them is in the equal valuations which attach to their labor in the payment of the wage. This

1 The Distribution of Wealth, p. 107.


"If the men are quite interchangeable, the effective productivity of any one of them is equal to the absolute productivity of the final or marginal one, whose work can best be dispensed with. . . . In so far as men can be freely substituted for each other, any man in a series of men is actually worth to his employer only as much as the last one in the series produces." Distribution of Wealth, pp. 104-105. (The italics are the present writer's.)

payment of the wage is the overt act. And in the performance of the act an evaluation has been made.

Clearly then, we have here essentially one thing, not two. Throughout the whole world of industry it is by the actual payment of wages and prices that the process of evaluation takes on the form of actuality. And when we say that an employer pays a man " what he is worth" to him,' we are asserting, if not an absolute identity, at the most a truism. And a truism tells us not one thing about the relation between wages and social deserving.2

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It should be clear, then, that if we take the expression "what a man produces" and use it in the sense of "what a man is worth to his employer" we have not advanced a single step through our conclusion that a man is "paid what he produces." We have still the same identity or truism, clothed to be sure in a new form of words, and unfortunately a form of words likely to lead us seriously astray in our reasoning. Professor Clark's "productivity" is a will-o'-the-wisp. He pursues it, but never catches up with it and subjects it to examination. In the course of the pursuit he crosses the path of the employer's "valuation," and he takes this to be the "productivity" which he has been following. It is through this misadventure that the thesis he is supporting becomes a truism.3

We are now in a position to see the real significance of our fourth proposition. If by the "whole product

1 See note 2, p. 153.

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? Davenport seems to have the same criticism in mind when he says: the theory does not determine what the labor accomplishes by finding out what it gets, as the basis for the conclusion that what it gets it accomplishes, is a question which must for the moment be postponed." The Economics of Enterprise, p. 152.

The present writer is unable to find, however, any place where the point is taken up again.

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The repeated use of the phrase "effective productivity" (cf. pp. 103–107) shows the course of the author's thought. By effective he seems to mean having an effect on the employer's valuation (wage payment).”

of marginal labor is meant merely the value ascribed to the services of the laborer as evidenced by the wage payment, we have here clearly the same identity or truism which we have been discussing above. And that the words are used in this sense is made abundantly evident in Professor Clark's book. This fourth proposition can now be expressed as follows:- Such (marginal) labor receives the sum at which its services are evaluated. And, as the payment is but the concrete aspect of the evaluation, this is about the same as to say that a man is paid what he is paid. The thesis of specific productivity as the determinant of wages remains unproved, and the laws of distribution are still to seek.

This negative result, however, must not satisfy us. We want to know whether the concept of specific productivity has any reality. Professor Clark has recognized the difficulty of separating a joint product into the parts created by the respective factors in production. Of a primitive economy, he says:

It is nearly impossible for a man to say how much of his product is due to labor only. The distinction between the whole product of labor and the whole product of industry is, however, all-important; for industry involves the coöperation of labor and capital. Let a man fish from a dugout, with the simplest line and hook that he can make. The fish that he will bring to the shore are the product of labor and capital. Effort aided by instruments has secured them. How much of the catch is due to the man, and how much to the canoe and the fishing tackle? Not for his life can the man himself tell. Can he put the fish into two piles, and say, "This pile is due to my effort only, and that pile to my equipment?" Every single fish is a joint product — indeed every fin or scale of a fish is so; and the difficulty is that it is impossible to divide a single one of them into fractions due to the producing agencies. Hopelessly merged with the product of capital is the product of the labor of an

1 Why not omit this word " nearly"? Cf. "hopelessly merged," and "it is impossible to say what the produce of labor itself is."


independent producer. Instead of presenting the condition in which the wages of labor are readily distinguished from other incomes, and identified as the produce of labor," such a primitive economy as actually exists is one in which it is impossible to say what the produce of labor itself is.1

We are confronted, of course, by exactly the same difficulty in an exchange economy. The point is made so crystal clear in the paragraph quoted that our suspicions should be instantly aroused by the ease with which, a little further on, the specific product of labor in an exchange economy is disentangled. For strange tho it may seem, this thing which is "impossible" under simple conditions, -the disentangling of the shares in the productive process, - Professor Clark regards as possible under the conditions of an exchange economy. The way in which it is supposed to be done has already been indicated. Labor is conceived as being employed in connection with the "no-rent uses " of capital. As these uses are thought to be worthless, the capital is regarded as not contributing anything to the joint product. This joint product is therefore attributed to the labor as its exclusive "specific" creation. absurdity of such a view is plain, and Professor Clark himself uses language which exhibits this absurdity in the clearest way.


There are machines which have outlived their usefulness to their owners, but still do their work, and give the entire product that they help to create to the men who operate them. There are railroads and steamship lines that pay operating expenses only. There are stocks of merchandise so full of remnants and unstylish goods that it barely pays salesmen to handle them. Everywhere, in indefinite variety and extent, are no-rent instruments; and, if labor uses them, it gets the entire product of the operation.2

1 Distribution of Wealth, p. 83.

2 Distribution of Wealth, p. 96. The italics are mine. The meaning is plainly that labor "gets" the "entire product" which the machines, etc., "help to create." Is it not clear that the thing which is " specific" is the reward, not the product?

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