The Quarterly Journal of Economics, November 1907, 22.1, pp. 28-47.

SUMMARY: The identity of capital and capital goods: is it admitted by Professor Clark? A difference as to knowing the existence and finding the explanation of the return on capital, A question of method: shall a theory of distribution confine itself to the present, or must it reach back to the past? The synchronizing effect of "capital" considered once more.

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In his reply to the criticisms which I have presented in recent numbers of this Journal, Professor Clark has pre­sented his views on the theory of capital with his wonted literary skill, and yet, I believe, without materially changing the scientific situation. He surpasses himself—if such a thing can be—in new and even more effective phrases, in order to secure the reader's assent to propositions as to which my convictions remain, and will remain, unchanged, that they belong to the realm of phrase, and not to that of fact. I will not enter the field of repetitions. Never­theless, certain new terms and differences on the part of my honored opponent, even tho they contain no new views, are such that some discussion of them may, at least, serve to bring into clearer light the differences between the rival views, and so may facilitate the choice for the competent reader, to whom my opponent refers for judg­ment, as I gladly do myself. With this in mind, I will say something as to the remarks of my distinguished opponent.

Under the above title Mr. Bostedo has criticised, in the January number of the ANNALS,⁽¹⁾ some views which I expressed in my work, "The Positive Theory of Capital," in regard to the influence of saving on the formation of capital. While I advanced and illustrated by means of vari- ous examples the opinion, that an increase in the capital of a community can only take place in consequence of a balance of saving over spending on the part of its members, Mr. Bostedo arrives at an exactly opposite conclusion, namely, that "saving, as the term is commonly understood, has no influence whatever on the formation of capital."

My surest vindication would consist, I have no doubt, in asking the reader to study point by point, the detailed exposition of this subject in my "Positive Theory."[2] The solution of a problem of this nature can only be presented by creating in the reader's imagination, in place of a superficial view of the surface money phenomena which present themselves to every-day observation, a complete and at the same time plastic picture of the actual relations of modem industrial society. Such a complete picture I have tried to sketch in my Positive Theory," and I cannot, for obvious reasons, repeat the undertaking in these pages. I must rather content myself with commenting upon the particular points and difficalties which Mr. Bostedo raises in his criticism.