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EH.NET BOOK REVIEW 
 
Published by EH.NET  (November 1997) 
 
Laurence Shute. _John Maurice Clark: A Social Economics for the 
Twenty-First Century_.  London: Macmillan Press, Ltd. & New York: St. 
Martin's, 1997.  ix + 201 pp. $65.00 (cloth), ISBN: 0-312-16525-0. 
 
Reviewed for EH.Net by Anne Mayhew, Department of History, University 
of Tennessee. <[log in to unmask]> 
 
Laurence Shute's excellent introduction to the work of John Maurice 
Clark is one of a series on twentieth century economists being 
published by Macmillan and St. Martin's under the general editorship 
of John Pheby.  Clark was born in 1884 and died in 1963.  From an 
unpublished M.A. thesis written at Columbia in 1906 to his final 
testimony to Congress in 1963,  Clark's career spanned a period of 
American economics that is today poorly understood and little 
appreciated by most economists.  Shute, by making extensive use of 
Clark's major published works and of archival material, describes how 
Clark moved from thesis and dissertation on "reasonable" railway rates 
to what are arguably the best analyses of the U.S. economy of the 
mid-twentieth century. 
 
 What Clark came to understand in working on the railroads was that 
"cost" could not be a simple construct,  nor simply measured. 
Building on the work of John Stuart Mill, Alfred Marshall, Frank 
Taussig, and E.R.A. Seligman, Clark argued that the pervasiveness of 
joint costs defied not only simple measurement, but also simple 
categorization of costs as fixed or variable.  As Shute describes it, 
Clark, in his study of railroads, came to realize that the old problem 
 
     . . . of allocating total cost into the categories of fixed and 
     variable was relatively unimportant in an era of small-scale 
     enterprise . . . . With the appearance of larger-scale production . . 
     . this was no longer the case. . . . and the allocation of total cost 
     between fixed and variable became largely a 
     legal-institutional-historical question (p. 40). In _Studies in the 
     Economics of Overhead Costs_, Clark used his understanding of costs 
     as basis for a wide variety of analyses and recommendations.  These 
     ran from his conclusion that price discrimination, cutthroat 
     competition, or monopolistic arrangements were an inevitable part of 
     modern capitalism,  to causes of and solutions for business cycles. 
 
As Clark analyzed them. overhead costs became variable costs as 
products passed through stages of production and through different 
firms.  In Clark's words, 
 
     Every producer has an incentive to avoid idleness, but the strength 
     of his incentive is measured by the amount of his own constant 
     expenses, not by the total amount of constant costs involved in the 
     whole process, from beginning to end of the chain of operations and 
     exchanges (p. 55). 
 
Or, and again in Clark's words, "whenever constant costs are converted 
into variable or variable into constant, there is stimulus either to 
wasteful overuse or wasteful disuse of our productive facilities" (p. 
55).  Clark used his analysis to propose remedies for such waste based 
upon the proposition that from the standpoint of society as a whole, 
the bulk of costs are overhead costs.  Though he did not think 
salaried (and thus more secure) employment for all workers feasible, 
Clark did argue that treatment of labor as an overhead cost should 
follow recognition that "The overhead cost of labor is a collective 
burden upon industry in general, but the market does not allocate to 
each employer the share for which his own enterprise is responsible" 
(p. 58).   Fundamental to all of Clark's work on cycles and 
stabilization was the proposition that reclassification of costs 
affected stability, and that such reclassification could be used as a 
tool of public policy. 
 
Shute emphasizes the importance of ethical and policy issues in all of 
Clark's work and attributes this in part to the influence of his 
famous father, John Bates Clark.  Though his father is most often 
thought of as founder of American neoclassical analysis, concern with 
social control of industry for the general benefit also marked his 
work.  It was on this topic that he and his son worked jointly (in a 
1912 revision of John Bates Clark's _The Control of Trusts_), work 
continued by John Maurice in _Social Control of Business_ (1926, 
revised in 1939). 
 
However, as Shute rightly emphasizes throughout, John Maurice took a 
decidedly non-neoclassical path in his own work, and in his hopes for 
economics as a discipline.  He understood and appreciated his father's 
work, but he thought "a different type of economic thinking" was 
required to deal with the economy of the 20th century.  Shute, in his 
chapter on "An `Examination of Premises'," recounts Clark's growing 
conviction that concepts of modern psychology and social science 
should replace the decidedly non-modern postulates about human 
behavior upon which his father and others had based neoclassicism. 
 
 Shute provides considerable evidence to show that, from Clark's 
 earliest work through his post-World War II comments on the 
 formalization of Keynes' work that was then underway, he sought a 
 "non-euclidean" economics that would be more "scientific" than most 
 economic analysis in fact was.  In a 1924, essay on "The Socializing 
 of Theoretical Economics," Clark argued that it was "unscientific" to 
 exclude relevant evidence.  He wrote: ". . . comprehensiveness is 
 scientific, even if it involves some sacrifice of other qualities for 
 which science likes to strive" (p. 34).   In a critique of a 1949 
 essay by Paul Samuelson, Clark repeats the theme by complaining of . 
 . . what happens to the Keynesian theory when it is simplified by 
 isolating the central mathematical formula and its corollaries from 
 the context of factors that do not lend themselves to this treatment, 
 and which Keynes handled in `literary' fashion . . . . (p. 104). 
 
Though he was profoundly critical of the inadequate grounding in 
social science of much of economic analysis, and critical of excessive 
formalism, Clark (and his fellow Institutionalists) made major 
contributions to what was then the "mainstream" of American economics 
during a period of lively innovation.  During the early 1930s (_The 
Costs of the World War to the American People_, 1931; _Economics of 
Planning Public Works_,. 1935) Clark had already developed both 
multiplier and accelerator concepts and he welcomed Keynes' 
"income-flow analysis."  However, in the early 1940s he was 
worrying--in print and in exchanges with Keynes--that this analysis 
would be undiscriminatingly applied, and that there were problems 
associated with sole reliance on deficit spending for stabilization 
(pp. 104-5).  Clark's concern was a wider variety of stabilization 
tools--including attention to the legal arrangement of costs--would be 
required. 
 
In his last major work, _Competition as A Dynamic Process_ (1961), 
Clark returned to some of the issues with which he began his career. 
Shute stresses that this work was not the "major general treatise" 
that Clark had once hoped to write, but rather an attempt to develop a 
practical notion of "workable competition" appropriate for analysis 
and policy guidance in a dynamic economy.  Clark was realist enough to 
worry that this work would not be well received because his readers 
would have a "conception of theory . . . identified with models of 
determinate equilibrium" and would therefore think that "no theory has 
been produced."  Sad, but true. 
 
I hope that it is not unrealistic to hope that Shute's work will serve 
to remind economists and historians of economic thought of the 
importance of Clark's lifetime of work.  Though his treatment is 
necessarily brief, Shute has done a good job of laying out the major 
themes that unified this large body of work and provides a thorough 
bibliography of published and unpublished works by Clark.   As the 
subtitle, "A Social Economics for the Twenty-First Century," makes 
clear, Shute finds Clark's work to be of continuing relevance, and he 
does a fine  and scholarly job of explaining why. 
 
(Shute is Professor of Economics at the California State Polytechnic 
University in Pomona.) 
 
Anne Mayhew 
Department of History 
University of Tennessee 
 
Anne Mayhew is author of "How American Economists Came to Love the 
Sherman Antitrust Act," in the forthcoming, _The Transformation of 
American Economics : From Interwar Pluralism to Postwar 
Neoclassicism_ (Duke University Press)), edited by Mary S. Morgan and 
Malcolm Rutherford.   She is currently Associate Dean of the College 
of Arts & Sciences and Professor of History at the University of 
Tennessee, and was for many years Professor of Economics at UTK. 
She is also editor of the _Journal of Economic Issues_. 
 
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