John Bates Clark

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John Bates Clark was an American economist who lived from 1847-1938. He played an important role in the development of marginal productivity, and had a great influence on the development of economic thought in the United States. Clark was educated at Amherst College and at the University of Heidelberg in Germany. He taught at Carlton College in Northfield, Minnesota from 1875 to 1881. He then moved on to teach at Smith College, Amherst, Johns Hopkins and Columbia from which he retired in 1923.

In formulating the Neoclassical theory of the firm, John Bates Clark took over the classical categories of land, labor, and capital and simplified them in two ways, this simplification was the theory of marginal productivity. First, he assumed that all labor is homogenous, which meant that one labor hour is a perfect substitute for any other labor hour, but when marginal productivity was decreasing, the industry found it more profitable to replace labor with machinery.

Clark believed that to make a sound economy wages had to be equal to the marginal productivity of labor. This was also beneficial to both the industry and the labor.

Secondly, Clark ignored the distinction between land and capital, grouping together both kinds of non-human inputs under the general term 'capital,' which he then assumed that the broadened 'capital' is homogenous.

John took this Neoclassical approach one step further than others in applying it to the business firm and the maximization of profits. One of the results was a theory of the distribution which demonstrated that market outcomes were just.

Clark also believed that technological change would lead to an increase in the standard of living which he felt was one of the chief goals of any economic system. He felt that with this technological change, labor would be more productive and...