Generating Inequality - Mechanisms of Distribution in the U.S. Economy

Abstract

For much of past century mainstream of economic theory has concentrated on efficiency questions, carefully avoiding judgments on distribution of economic rewards in society. A measure of modern neglect of subject is fact that of more than 1500 articles published in American Economic Review and Economic journal over last ten years only some ioo dealt with distributional questions of any kind. Indeed, economic theory has bypassed equality issue so thoroughly that Joan Robinson has compared lack of a convincing theory of income distribution to situation in early 1930S when discipline had no theoretical apparatus to deal with unemployment. In her address to American Economic Association in 1972 she described the evident bankruptcy of economic theory which for second time has nothing to say on question, that to everyone except economists, appears most in need of an answer. However, mid-9g7os has seen a welcome upsurge of interest in distributional issues. Amartya Sen, Hollis Chenery, A. B. Atkinson, and now Arthur M. Okun and Lester C. Thurow have all produced important theoretical works on subject. In early nineteenth century Ricardo defined laws which regulate income distribution as principle problem in political economy, not only because of significance of distributional shares per se but because theory of income distribution held key to an understanding of productive system. It is heartening to see discipline turning its attention once again to this all important question. Thurow presents a clear picture of actual distribution of income and wealth in United States economy and then moves on to evolve a conceptual framework that will square with observed facts. His demolition of neoclassical marginal productivity theory is neat, elegant, and devastating. The only question mark is how anyone ever believed in such tautological nonsense. Thurow's own theory of income distribution revolves around notion that in advanced market economies people compete over jobs rather than over wages and that income differentials have something to do with education and training but much more to do with economic

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