Page 14 - Azerbaijan State University of Economics

THE JOURNAL OF ECONOMIC SCIENCES: THEORY AND PRACTICE, V.73, # 1, 2016, pp. 4-37

Thirdly, the novice of John B. Clark‘s theory is in his view on the notion of
labor production. It means that production margins are defined by the usage of the
two-dimensional method of analyses. This approach differed from that of Adam
Smith and of the advocates of the marginal approach.
Thus, according to John B. Clark‘s paradox, any paid labor is productive. The
national approach, under John B. Clark, represents the cumulative income of all
members of the society. John B. Clark is close to Karl Marx in assessing the annual
income by the gross product indicator instead of the national income indicator.
Using simple concrete examples, John B. Clark proved that the salary received
by a secretary of a business owner is part of the national income. Further in his
example, the business owner marries his secretary. She continues to do the same
work, but receives no reward in the form of money for work she does. Subsequently,
the national income reduces by the amount of the salary she used to receive.
Clark‘s paradox plays an important role amongst modern critics of GDP as an
aggregate macroeconomic indicator which is calculated by subtracting all material
costs expensed for its production. Clark‘s paradox does not find the solution in the
framework of Smith‘s capital profitability theory, expressed in monetary terms.
However, the solution to Clark‘s paradox is possible when using the two-
dimensional measurements of capital: in monetary and labor dimensions. In the end,
Clark’s paradox serves the key for using the principle of reversibility of currency and
labor unit, and based on that, for defining the contribution of smart factors to
economic growth rates.
This is the possibility of revealing the link between capital in the form of
capital (Y=V+M) and capital in the form of goods (X=C+V+M). The concept of
marginal production of John B. Clark is his major contribution to the economic
science. Thomas Picketty with the passage of time of over a century could take the
best use of the marginal capital profitability theory.
Thus, in order to assess the shift of production from wealthy to poor countries,
Thomas Piketty has already benefited from application of the criteria and made the
key conclusions relating to that ―poor countries catch up with the rich upon
obtaining the same level of technological progress, skills and knowledge, and not
when they fall under their possession.»[ Piketty Thomas, 2015] .
In order to explain the ―linkages between elementary utilities‖ John B. Clark
demonstrated a simple example of how the marginal utility of a yacht is created. It
starts with marginal utility of the tree which the yacht is made of. The yacht is an
on-water means of transportation. It helps a man to stay off-water.
In addition, the yeacht is speedy due wind and sail. Finally, for those who are
inside, it helps to sense the comfort level. The sum of all five elementary utilities of

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