| Abstract: | This article aims to assess the debate between John Bates Clark and the “old” institutionalist scholars — Thorstein Veblen, above all — with particular reference to the nature of capital and the functioning of the labor market. Although studies on both authors are numerous, relatively little attention has been paid to finding the crucial elements at the heart of their radical disagreement. A.J. Cohen (2014 Cohen, A.J. “Veblen Contra Clark and Fisher: Veblen-Robinson-Harcourt Lineages in Capital Controversy and Beyond.” Cambridge Journal of Economics 38, 6 (2014): 1493-1515.[Crossref], [Web of Science ®] , [Google Scholar]) convincingly argues that Veblen’s attack on Clark is in the center of the capital controversy of the 1960s and 1970s. We propose an extension of this argument, based on the idea that Veblen’s attack on Clark follows three steps. First, Veblen defined capital in money terms and, at the same time, he saw it as the accumulated technological and institutional experience of a community. Second, insofar as capital cannot be reduced to a stock of physical goods, it is logically impossible to derive a function of the marginal labor productivity from the existing stock of capital. Third, insofar as the marginal productivity of labor cannot be measured, it follows that the equality between real wage and marginal labor productivity cannot logically hold. It also follows that, since it does not exist, this equality cannot be used as a basis for establishing that the equilibrium wage is a just wage. |
