Chapter 1

The Principal Problem in Political Economy

Income Distribution in the History of Economic Thought

Agnar Sandmo    Department of Economics, Norwegian School of Economics (NHH), Bergen, Norway


This chapter considers the history of theories of income distribution, from the time of Adam Smith until the 1970s. It is divided into two main parts. Part I considers the positive theory of income distribution, beginning with the classical economists’ analysis of the functional distribution of income between wages, profits, and rent. It goes on to present the new theories that emerged with the marginalist revolution and which were based on maximizing behavior and market equilibrium. The main focus during the early stages of the new ...

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