ELASTICITY OF SUPPLY AS A DETERMINANT OF DISTRIBUTION 75 
The Place of Supply Curves of the Factors in a Complete 
Theory of Distribution 
Perhaps the most serious inadequacy in the marginal theory of 
distribution is however in its treatment of the supply of the fac- 
tors. Professor Clark assumes given supplies of labor and capital 
and then measures the addition to the total product which accom- 
panies the last unit of each. But he does not go into the question 
as to how the factors happen to be combined in the proportions 
which they are. Instead, he assumes that there is a certain supply 
of capital which for the purpose of illustration he takes ® as “a 
hundred million dollars worth.” Then he adds successive incre- 
ments of labor, each amounting to one thousand workers and 
points out that the total product will not increase in proportion 
to the increase in the quantity of labor.” A similar process is 
applied in the case of capital, the supply of labor being held 
constant and the supply of capital increased. In this analysis, 
capital and labor are purely passive factors. They may be 
expanded or contracted at the will of the manipulator, who, like a 
prestidigitator, can produce more of a factor out of his hat. 
Béhm-Bawerk, in one of his replies to Professor Clark, com- 
plained that the latter had treated capital as though it had 
dropped from heaven. The supply of labor is certainly treated 
with equal freedom. But clearly the marginal productivities of 
labor and capital will be different under different conditions of 
supply. If 42 million laborers are set to work with 100 billion of 
dollars worth of capital, then the marginal productivity of labor 
would be higher and that of capital would be lower than if it 
were 84 million workers who were at work with 50 billions of 
capital. Is then the relative supply of each factor which is 
offered purely a matter of caprice which is unaffected by economic 
conditions or by the price which is paid for it? If the marginal 
productivity per unit of labor were to be so high that labor 
received three times as much as its present return, might this not 
alter the supply of labor which would be forthcoming and hence 
effect a change in its marginal productivity? Similarly, if the 
J. B. Clark, The Distribution of Wealth, pp. 165-66. 
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