ABSTRACT

The three fundamental tenets of neoclassical utilitarian ideology are: the faith that the invisible hand of the competitive market harmonizes all interests through free exchange, creates rational prices, and leads to an efficient allocation of resources; the faith that the free market will automatically create a full-employment equilibrium; and the belief that the wage rate is equal to the value of the marginal product of labor and that the profit rate (or interest rate) is equal to the value of the marginal product of capital; hence, by implication, each social class gets the value created by the factors it happens to own. In Chapters 14 and 15 we discussed the first two of these tenets. In this chapter we will discuss the last-the marginal productivity theory of distribution.