constantly widened. The idea that the boards were to operate only in the sweated trades has long been abandoned. No longer is the board plan of wage regulation limited to manufacturing industries. Asphalters, bill posters, bread carters, carpenters, coal miners, commercial clerks, dressmakers, electroplaters, factory engine drivers, gold miners, furniture dealers, gardeners, grocers, hotel employees, livery-stable employees, milliners, night-watchmen, office-cleaners, quarrymen, shop assistants (retail clerks), sorters and packers, tea packers, timber-fellers, tuck-pointers and many other classes of employees have their minimum wages and maximum hours fixed by such boards.1

In some industries and occupations two boards are appointed, one for the metropolitan area (Melbourne and suburbs) and the other for the country districts. Thus there are the flour board and the country flour board, the printers' board and the country printers' board, the country shop assistants' board, etc.2 No effort has as yet been made in Victoria to provide wages boards for distinctly agricultural callings. callings. Doubtless the country prejudice against such legislation still survives. Nor has there been any effort to regulate the wages or hours of domestic servants by means of such legislation. But practically every other field of industry has been invaded and Mr. Alfred Deakin's prediction, made in 1895, that "one day or other these boards will be established in every trade" comes wellnigh realization within the life of that gentleman.



The full list of boards is given in the Annual Report of the Chief Inspector of Factories.

2 Report of Chief Inspector for 1913, p. 6.



The argument for productivity as the determinant of distributive shares, 149. Preliminary criticism, 151. The main argument for specific productivity rests upon a truism, 152. - The impossibility of isolating specific productivity, 155. — The mathematical error in the method of isolating specific productivity, 158. The two schools of value theorists, 162. The psychological theory of value; a safeguard against the dangers in productivity reasoning, 163. — The surrender of the social implications of the productivity thesis, 166. — The element of truth in the specific productivity concept, 168. - Conclusion, 174.

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ECONOMICS is no longer the dismal science. the days when the wage fund and the principle of population were combined to deprive the wage earners of hope, enormous strides have been taken in the formulation of an economic theory which is both more hopeful and more correct. The revolution which has taken place within the field of economics is comparable to that effected by Darwin in the hypotheses of biology. In accomplishing this revolution in economic thought few men, if any, have rendered greater service than Professor J. B. Clark. Yet one important part of his work has tended to enslave us by a belief only less dismal than those which have been discarded. This is his doctrine of "specific productivity." 1

Professor Clark's thesis 2 is that even among the complexities of modern industry a laborer creates a

1 The Distribution of Wealth, 1899. The doctrine has been reaffirmed in The Essentials of Economic Theory, 1908.


2 " The specific productivity of labor fixes wages — this is the thesis that is to be supported in this volume. Ascertain how large a product is to be attributed to a single unit of labor that is employed in raising wheat, making shoes, smelting iron, spinning cotton, etc., and you have the standard to which the pay of all labor tends to conform.

product which is specific and distinguishable; that in static conditions he secures exactly this product as his reward; and that in dynamic (actual) conditions a fundamental law is at work, its effects modified to be sure by dynamic change, but tending constantly

to secure for the laborer his full product as his reward. In the working of this law Professor Clark descries a great principle of justice. He holds that except as dynamic change sets interfering forces at work our modern industrial society is rewarding every man according to his deserts. It is a new doctrine of economic harmonies, and it aims to establish the justice and honesty of society.

Professor Carver has shown in conclusive fashion that Clark's views as to the justice of society do not follow from his thesis of specific productivity. Mr. J. A. Hobson 2 has questioned the "dosing" method of determining specific productivity; and Professor Davenport in his recent book, The Economics of Enterprise, has directed a vigorous attack against the concept of specific productivity itself. But the belief that specific productivity acts in the determination of wages and interest is today widely held. It will be the endeavor of the present writer to exhibit somewhat more completely what he regards as the fallacy of this thesis.

The reasoning employed in the attempt to establish the productivity theory may be summarized in the following propositions:

1. A considerable amount of labor is employed in connection with "no-rent" (valueless ?) agents.

In like manner does the specific productivity of capital fix the rate of interest. Ascertain how large a product is due to the presence of the single unit of capital in each industry, and you have the standard to which all interest tends to adjust itself." The Distribution of Wealth, p. 47.

Quarterly Journal of Economics, vol. xv (Aug., 1901), p. 578. Cf. also Davenport's comment, -"Carver has made this clear in his review of the work under consideration; nothing remains to be said." Value and Distribution, p. 440.

2 The Industrial System, 1910, pp. 112-120.

2. A larger quantity finds employment in connection with the no-rent uses of superior agents and of agents which are on the point of being discarded.

3. The whole product which results from the employment of such labor is attributable to the labor.

4. Such (marginal) labor receives this whole product as its reward.

5. Other units of labor will necessarily have the same productivity as the marginal units if they are interchangeable.

6. These other units will be paid at the same rate as the marginal units.

The conclusion is that throughout the whole field of industry the criterion for the payment of a unit of labor is the distinguishable or "specific " productivity of that unit.

The last of these propositions it will be unnecessary to discuss at any length. One might pause for some time on the first and second. It might be pointed out that in a static or frictionless condition neither of these will be true.1 Laborers may be employed in connection with agents which yield small rents, but if the rent is absolutely zero the agent will be discarded. The use of a no-rent or non-use-bearing agent is a contradiction in terms. Nor will an employer hire laborers to work in connection with superior agents if they add to his income only what he has in turn to pay over to them as wages. He may employ men when there is a very

1 It is worth noticing that in order to show that labor is employed in connection with no-rent agents Professor Clark appeals to an illustration drawn from dynamic conditions. "There are mills and furnaces so antiquated, so nearly worn out, or so badly located that their owners get nothing from them: and yet they run." (Distribution of Wealth, p. 96.) But such conditions have no place in the ideal static state. There is plainly nothing to be gained by the employment of such agents. In the static state they would clearly not be used. Even in the actual conditions of production business men are constantly on the qui vive to send to the scrap heap anything which it does not pay to use. There are, to be sure, cases (and plenty of them) where agents are continued in use when they not only do not yield a profit, but occasion an actual loss. But once this loss is detected the agent is discarded.

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.

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