3: The Place of Distribution within the Natural Divisions of Economics

Clark mentions the origin of economics, which was the management of the household at a time in history where every home was a self-sustaining concern. The members of a household or a tribe created for their own consumption and trade between households was unusual. In producing for oneself, there was no squabbling over sharing the profits of production nor any sense that a house was entitled to have things that it was unable to produce. If the house needed more food, it would simply have to spend more time hunting or gathering or planting. This made the relationship between labor and reward obvious and straightforward.

Even in the early stages of trading, there was an obvious relationship between work and reward. The cottage weaver got as much cloth as she was able to weave by her own effort, and her rewards was determined as a consequence. In this situation there are no arguments over the distribution of profit - or if there are, the disagreements are settled during the process of negotiation with her suppliers (who sell her thread) and her customers (who fashion items from her cloth). If she desired to have more things, she would need to produce more cloth to sell so that she might buy them.

It is only in the present age that it has become more common for a person to create goods for others to consume and for trade to be commonplace than producing for oneself, and only in this age that man can scapegoat someone else rather than accept that it is his own non-productivity that deprives him of the things he desires. It is likewise a problem of a present age that man does not see the connection between his effort and his reward - and feels that he is being cheated, or sees the opportunity to cheat others, by demanding more for himself without contributing greater effort.

For the individual producer/consumer, the efficiencies of the division and specialization of labor would seem to mean that more can be had for less effort - but this is not always so. If a weavers can produce triple the quantity of cloth, it would seem to him that he should have triple the income. But this fails to account for the impact on the marketplace: because cloth is plentiful, its price decreases. Hence the "surplus" created by more efficient production is split between the laborer who creates more cloth and the customer who pays a lower price for it. (EN: And a point made in other sources is that there are other stakeholders as well who must be compensated - the investors, the factory owner, the management, the support staff, the inventor of the loom, etc.)

An in terms of evolution, production processes are ever-changing. It is inconceivable that men will produce the same kinds of goods, in the same quantities, by the same processes, buying and selling in the same markets, until the end of time. For this reason, the compensation of participants, like the price of goods to the consumer, is an ongoing negotiation that cannot be fixed to a universal sum or formula. Society will simply not sit still, but is in a condition of constant movement and disturbance. In the author's time, there as a great deal of upheaval. People were moving to the cities, factories were springing up, machines were replacing handwork and more efficient machines were replacing other machines, supplies were being purchased and goods sold on world markets, and so on.

But even so, it is suggested that the natural/normal wage has remained constant: if a machine doubles the output of a worker, its price falls in the marketplace and some share of the compensation goes to pay those who created and maintain the machine. And over time, the wages of workers return to what they were before in terms of their purchasing power, hence their lifestyle is changed little. In aggregate, it must balance out because the amount of labor is fixed (based on population) and to improve the condition of one requires diminishing that of another.

(EN: my sense is there's something quite wrong with this, as the welfare of people today is much better than in times past. That is, the 21st century bricklayer has greater wealth than the 19th century one in terms of the quantity and quality of things he possesses. Even the day-laborer in modern times owns more things of finer quality than the kings and emperors of old. So I think the author may be getting lost in the math and forgetting, for the time, that real wealth is the consumption of things rather than in the money one has or earns.)