History of Economic Thought. J. Clark's marginal productivity theory (most important)

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History of Economic Thought. J. Clark's marginal productivity theory (most important)

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51. THE THEORY OF LIMITED PRODUCTIVITY J. CLARK

The Austrian school considers the value of productive goods to be equal to the value of the goods sacrificed to them. (opportunity cost concept) - the theory of three factors of production J. B. Seya. A variant answer to the question of how the share of this factor in the cost of created products is determined was given John Bates Clark (1847-1938) in "Distribution of Wealth" (1899).

Taking as a basis the theory of Say's three factors of production, the works Ricardo и Malthus, Clark circulated his formulation law of diminishing soil fertility on all other factors of production, formulating in general terms the law "diminishing marginal utility". The law states that in conditions when at least one factor of production remains unchanged, an additional increase in other factors gives a smaller and smaller increase in production. In other words, the marginal product of a variable factor is constantly decreasing.

In determining the size of the contribution of production factors to the creation of a product and, accordingly, the share of remuneration of each factor Clark borrowed Ricardo principle (in the theory of land rent Ricardo used the principle of marginal increments to illustrate that the share of a fixed factor (land) achieves a residual profit determined by the difference between the average and marginal product of a variable factor).

By using these provisions, Clark tried to pinpoint the proportions that can be attributed to the specific productivity of labor and capital.

В capital theory each factor of production is characterized by a specific productivity and generates income. Moreover, each owner receives his share of income, which is created by the factor belonging to him.

Based on the law of diminishing marginal productivity Clark concluded that with a constant amount of capital, each additional worker produces less output than the previously accepted one. Labor productivity last employee called marginal productivity of labor. According to Clark, only the product that is created by the marginal worker can be attributed to labor and considered a product of labor, while the rest of the product, i.e., the difference between “products of industry and products of labor,” is a product of capital.

marginal product in monetary terms determines the fair, natural rate of return paid to each factor.

Salary is determined by the marginal productivity of labor (the marginal productivity of the last worker), so it is easy to explain the low wages in developing countries, since in conditions of an excess supply of labor in relation to the total capital of society, the marginal product of the last unit of social labor will tend to a minimum.

Assertion that a factor is rewarded according to its marginal product Clark extends to other factors of production. In particular, in his theory percentage value as a product of capital is determined by the unit of capital that yields the smallest increase in product.

Author: Tatarnikov E.A.

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