Introduction

The type of distribution analysis considered in this book is conventionally called ‘functional distribution’ theory. This seeks to explain the prices which are paid to factors of production, i.e. the various kinds of labour, natural resources and produced means of production. It also covers the problem of accounting for the shares which these factors have in national income. It is not directly concerned with the distribution of income between persons. However, the link between ‘functional’ distribution and ‘personal’ distribution problems is a close one. Once factor prices are determined then knowledge of the distribution of ownership of these factors suffices to account for the personal distribution of income and wealth. And if certain types of factors are predominantly owned by certain groups, knowledge of factor shares explains in great part the shares of these groups.