F.H.Giddings' letter of Feb.7,1888 to J.B.Clark, Springfeild. [hologragh and typescript, 8vo ms,3 pp. 4to typescript.]

    F. H. Giddings' letter of Feb. 7, 1888 to J. B. Clark,
    Springfield. [holograph and typescript, 8vo ms, 3 pp.
    4to typescript.]

Dear Professor Clark:
 Have you read Sidney
Webb's remarkable article on
the Rate of Interest and the
Laws of Distribution in the
January Harvard Quarterly?
 Webb's Economic in-
terest is plainly market
interest plus your pure
profit, and some of his
points are so nearly identi-
cal with yours as to afford
a striking confirmation
of the accuracy of your
analysis. But Webb fails to
see that the surplus in
his economic interest over
market interest is a
sum that competition
is constantly distributing.
I wish I had seen this
essay before our book
went to press. I could
have added a sentence
to my article that would
have brought the point
of my argument out
in strong relief: to wit,
Ricardo showed that wages tend
to a minimum and that
minimum he called natural
wages. Webb shows that this
minimum is the produce of
labor possessing the minimum
capital and skill and employed
on the margin of cultivation.
If this were all - if the tenden-
cy of wages to this minimum
exhausted the economic process
- Marx would be right and
there would be no remedy for
the operation of the iron law
of wages save socialism. But
you and I have shown that,
through persisting competition,
economic interest or pure profit
tends to dispersion. This dispersion,
with the cooperation of social and
moral forces, tends to increase the
absolute amount of the minimum
skill and capital employed on
the margin of cultivation. Hence the
minimum wage is an advancing
minimum. The rate toward which
it tends is that which I have des-
cribed as the ideal rate, and as
this is also, as I have tried to show,
the economical rate it is the rate to
which employers ulti-
mately would be moved by
self interest, taking form
in profit sharing, to try to
bring the minimum rate. In
a word: wages tend to a
minimum under natural
law, but under this same
natural law the minimum
itself is not absolute but
relative; its absolute value
is constantly advancing, and
it tends to equal the ideal
or economic rate. Conse-
quently the latter, being the
rate toward which wages irre-
sistibly tend, by a natural
process, is, as I have called
it, the true natural rate
of wages.
 So the ultimate outcome
of our joint discussion I
take it is this: That great
and increasing stream of wealth
which Marx calls surplus
values, tends ever, like the
tide, to return upon itself,
thereby raising, at each
return flow, the value
of common labor, at the margin of
cultivation.
 Now if this is so, is it
not strikingly and beautifully
parallel to the historical
progress of rent, which I
briefly outlined to you
some months ago? Within
a given environment for
a period, the margin of
cultivation is pushed back
into less and less fertile land,
and rents increase according
to the Ricardian formula. Then
comes a time when the accumulated
wealth finds investment in
opening a new environment
and by this return of rent
upon itself the margin of
cultivation returns to fertile
land according to Carey's formu-
la.
 I am tempted to make a
short article offering these
two daring generalizations
as the outcome of our thought,
yours and mine and tum it over to
you for additions, elaboration
and correction. Then, when
we were both satisfied with
it we could offer it for
publication, claiming for it
that it was, in our belief,
the first formulation
of the great economic law
of human society, a law that
absolutely and forever dis-
credits every scheme of so-
cialism, and that as a theory
it was our joint work each
having contributed something
essential to it.
 How does the idea strike
you?
 Perhaps it would be better
to wait till you have written
out your capital and I have
written out my notes on the
genesis of the concrete forms
of capital in their relation
to interest. Both may add
something to the larger theory
that does not now occur to
mind.
 A very important part of Webb's
article, involving momentous conse-
quences, is his demonstration that
all industries (manufactures no
less than agriculture) are subject to
the law of diminishing returns.

                 Yours very truly,
                   F. H. Giddings