The Functional Distribution of Income

Abstract

The analysis of the functional distribution of income entails the acceptance of a rather traditional view of the factors of production. The Ricardian definition of land is unsatisfactory, since land is neither ‘original’ (since it incorporates capital investment) nor indestructible. The difficulties of defining and measuring capital are many and well known. Recently it has been realised — or rather rediscovered — that labour inputs also involve investment; the concept of human capital is still far from fully digested in distribution theory. Independent proprietors, including farmers, clearly use all three of the traditional productive factors, giving rise to imputation problems. They also represent a source of a fourth, very troublesome, factor — entrepreneurship. Convenience and common sense suggest, as they have done to most modern statisticians, a simple distinction between labour and property incomes.