SOME RECENT CONTRIBUTIONS TO A MACRO‐ECONOMIC THEORY OF INCOME DISTRIBUTION1
| DOI | http://doi.org/10.1111/j.1467-9485.1961.tb00164.x |
| Published date | 01 November 1961 |
| Date | 01 November 1961 |
| Author | K. W. Rothschild |
SCOTTISH
JOURNAL
OF
POLITICAL
ECONOMY
OCTOBER
1961
SOME RECENT CONTRIBUTIONS TO A MACRO-ECONOMIC
THEORY
OF
INCOME DISTRIBUTION1
I
IN
the days before Keynes, distribution theory had its recognised place
side by side with price theory. The marginal productivity theory
provided an explanation of (unit) factor incomes and also,
so
it was
believed, of factor demand and factor employment. This should
also have provided the basis for total factor incomes-nothing but
unit incomes times units employed-and factor shares.
The Keynesian employment theory shattered the belief that total
employment could be deduced from an addition of all sectional mar-
ginal productivity schedules. In
aggregate
analysis these schedules are
no
longer independent of the prices paid to factors and can, therefore,
not be treated as independent variables. Aggregate effective demand
was introduced as the main determinant for the volume of employment.
By concentrating
on
aggregate
demand the question of income
distri-
bution
had faded into the background.
To
be sure, distribution pro-
blems loomed large
in
the economic policy debates that were
stimulated by Keynes and his school. The influence of distribution
on
consumption and total demand was duly noted. But what really causes
the main income shares to
be
what they are was a question which
Keynes did not attack.
On
the whole he seems to have accepted the
traditional marginal productivity approach without realising that with
his new theory about the determinants
of
employment he had under-
mined the foundations of the old micro-economic distribution theory.
For aggregate demand determines factor employment and incomes
lBased on a paper read before members
of
the Economics Departments
at
Glasgow
and Manchester University in
1960.
1
173
174
K.
W.
ROTHSCHILD
and the distribution
of
these incomes in turn influences the level and
structure of aggregate demand.
The Keynesian theury thus provided a challenge for a reconsidera-
tion of the distribution problem. In this respect the situation was
not unlike the one in the field
of
economic
growth.
Here, too, Keynes
with his stress on the need for net investment had laid the foundation
for a problem which he himself did not follow up but which awaited
treatment.
It
took less than three years after the publication
of
the
General
Theory
for important contributions to appear in both these fields:
Kalecki’s article
on
the share of wages in the national income’ and
Harrod’s essay
in
dynamic the~ry.~ Both these contributions suffered
from the date of their appearance; the ensuing war left little time
for
basic discussions
on
economic theory. A flicker of interest was
shown here and there, but it was not until after the war that these
post-Keynesian developments could expand more organically.
Growth theory quickly conquered the centre of the stage. In
distribution theory the search for a new approach has been less
forceful and less systematic. But here, too, the literature has grown
in recent years. Its place
in
the body of ‘recognised’ theory
is,
however, far less established than that of growth theory. At the
American Economic Association meeting
of
1952, where Boulding
made a heroic attempt to
‘
sell
’
his
new macro-economic distribution
theory, Fellner had the participants in the discussion pretty much
on his side when he said
:
‘
By contemporary distribution theory we presumably mean a
qualified marginal productivity theory; that is to say, a combina-
tion of the marginal productivity theory with other analytical
elements.’+
Since then quite
a
number of new macro-economic distribution
models have been put forward. Although-as we shall see later-
they all still suffer from serious shortcomings, they can no longer be
overlooked, and they tend to become
part
of
contemporary distribution
theory.
In
the following pages the characteristics of some of these
models will be exhibited. There
is
no
attempt at completeness and
the choice
of
theories is rather random. It is hoped that the chosen
models
will
give a fair indication in what directions the winds are
M.
Kalecki,
‘
The Determinants
of
Distribution
of
,the National Income
’,
Econornetrica,
April
1938.
R.
Harrod,
‘An
Essay in Dynamic Theory’,
Economic
Journal,
April
1939.
William
J.,
Fellner,
‘
Significance and Limitations
of
Contemporary Distri-
bution
Theory
,
American Economic Review,
Papers and Proceedings (May
1953).
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