Markets and exploitation

occasional links & commentary

money-trick

Do markets determine the unequal distribution of income under capitalism?* Well, yes and no.

The answer depends, of course, on the theory of income distribution one uses. Neoclassical economists focus exclusively on market exchanges and the idea that each factor of production (labor, capital, and land) receives a portion of total output in the form of income (wages, profits, or rent) according to its marginal contributions to production. In this sense, neoclassical economics represents a confirmation and celebration of capitalism’s “just deserts,” that is, everyone gets what they deserve.

Many other economists criticize this aspect of neoclassical theory and use an alternative approach. Stiglitz, for example, focuses on “rent-seeking” behavior—and therefore on the ways economic agents (such as those in the financial sector or CEOs) often rely on forms of power (political and/or economic) to secure more than their “just deserts.” Thus, for Stiglitz and others, the distribution of income is more unequal than…

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