Economists have developed alternative theories which deal explicitly with problems of macro distribution.

There are two alternative theories discussed below:

1. Macro-marginal productivity theories:

These theories are based on the postulated existence of a macro-production function for the whole economy of the following type:


Q = f (K, L, l)

where Q stands for GNP, K for society’s stock of capital, L for the aggregate supply of labour and l for the fixed supply of land. This production function shows the maximum amount of output that can be produced by making full use of the economy’s limited resources. So an efficiency relation is involved.

If we keep all other factors unchanged and go on varying the quantity of only one factor, say, labour, its magnitude produce will fall and will deter­mine the price of the factor. Total return going to a factor in real terms will be the quantity of the factor multiplied by its marginal product.

Therefore, the macro distribution of income is determined by two things:


(1) The nature of the aggregate production function which determines marginal products and

(2) The total availability of these three factors in the economy.

There is little empirical evidence regarding the existence of such a production function. However, the Cobb-Douglas production function was used to predict that labour’s share of the national product will be a constant in the long run.

2. The degree of monopoly theory:


M. Kalecki attempted to explain labour’s share in terms of the overall degree of monopoly in the economy. Many other macro theories have been developed on the basis of Keynesian ideas.


The Cambridge School led by Mrs. Joan Robinson has attacked the marginal productivity theory on various grounds. In view of Mrs. Joan Robinson the classical theories should be properly developed into satisfactory theories of macro distribution.