J. M. Clark and the economics of responsibility.

Author:Champlin Dell P.
Position:John Maurice Clark

In his 1930 essay, "The Socializing of Theoretical Economics," John Maurice Clark criticized orthodox economics, or, as he termed it, "Euclidean economics" (Clark 1921, 132 ff.). He believed that the treatment of business under orthodox economics--which asserted the primacy of individualism, free contract, and laissez-faire--produced an "economics of irresponsibility." By this he meant excessive individualism and a denial of any responsibility for the public interest. In its place, he proposed an "economics of responsibility" in which business recognized and accepted its responsibility for the public interest and in which the rest of society worked toward that same end (29).

In the first part of this paper, we sketch out Clark's critique of Euclidean economics and his economics of responsibility. The second part is devoted to a brief discussion of the various options for social control of business which Clark believed to be necessary for an economics of responsibility. In the third part, we consider the role of public opinion in potentially bringing about corporate responsibility.

Euclidean versus Non-Euclidean Economics

Clark argued that economics was founded on broader social underpinnings than the individualistic premises of orthodox economics. In his words, the focus of orthodox economics on efficiency was "from a broader social point of view, ... limited or warped, either by excluding certain values ... or by accepting certain partial or imperfect judgments of value" (1936, 4). In other words, the individualistic and private interest orientation of orthodox economics and its focus on private measures of economic efficiency were but a "half truth."

Clark applied the term "Euclidean economics" to the orthodox approach to indicate that its axioms were as far from the economics of Veblen as "the geometry of Euclid" was from non-Euclidean geometry (1936, 22). He took several well-known propositions of orthodox economics and "inverted" them to show just how different non-Euclidian economics was. For example, the familiar orthodox premise that consumption is the end of all economic activity, with production simply a means to that end, considers only individual sensation and ignores "society's interest" (133). Instead of these "hedonistic ethics," Clark posited an ethical standard that considers "the well-rounded development and use of human faculties" (134). He concluded that "the quality of the activity involved in work is more important as a positive social value than the quantity or quality of consumption." Instead of humans working merely to consume, Clark believed that work was important in its own right.

Clark also criticized the orthodox premise that all economic transactions were undertaken between freely contracting individuals in the private sector and thus were "only incidentally, under special conditions, ... 'affected with a public interest'" (1936, 29). Instead, he asserted that "All industry and trade is primarily affected with a public interest" (italics in original). The orthodox view was based on the belief that individuals will only exert effort for their individual ends. However, Clark observed that, in modern corporations and other large organizations, employees have to act in the interest of the collective whole: "this loyalty has, indeed, become a dominant quality of the modern economic man, vitally necessary to the continued truth of 'individualistic' economics" (31).

Clark's major concern was that reliance on the precepts of "individualistic," or orthodox, economics permitted business enterprise to eschew its responsibility to the public interest:

[W]ith this dangerously inadequate idea of bargaining and contract, and with the equally inadequate idea of business competition as a sort of Darwinian struggle for survival, constantly tending toward the natural selection of the fit, it is small wonder if the business man is willingly convinced that in the struggle for financial success he is fulfilling the whole duty that society can reasonably impose upon his business hours. In other words, theory and practice combine to further an irresponsible attitude among leaders of industry and laborers alike. (1916, 219) In short, Clark termed the business system of free contract and laissez-faire a "system of irresponsibility" (Clark 1916, 218). He derided the notion that private enterprise can be governed solely by private interests:

[W]e are coming to see that our everyday business dealings have more far-reaching effects than we have ever realized, and that the system of free contract is by itself quite inadequate to bring home the responsibility for these effects. We have begun to realize the many inappropriate values that are created and the many unpaid damages that are inflicted in the course of business exchanges. (Clark 1916, 218) Clark's alternate vision of an economics of responsibility was one in which business recognized...

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