Income Distribution
For Say, there are three kinds of income: the remuneration of labour, interest and rent. No category is homogeneous: for example, there is no reason that the earnings of a scientist are the same as that of a worker.
This classification is partly due to Say’s analysis of the role of the entrepreneur. For Smith, in the typical situation the entrepreneur is the capitalist, who invested the capital. He deals with profits as a whole and stresses that they are not the remuneration of a labour of inspection and direction - such tasks can be performed “by some principal clerk” (Smith 1776 [1976]: 66). For Say, it is of no importance whether or not the entrepreneur owns a fraction of the capital of the firm: what is important is that he manages it. In his income, the remuneration of his work and the interest of his capital must be distinguished. Smith disregarded this and “ran into difficulties” (Say 1803 [2006]: 730n).The prices of the productive services are, like those of the products, determined by supply and demand. The demand for services is indirect: “when a product is in demand, all the services, which concur to its production, are also in demand” (Say 1828-29 [2010], II: 705) and their demand rises with that of the goods. Thus, when wealth increases, the amount of capital increases, interest declines and wages rise.
The rent of land is determined in the same way as wages and profits. Land differs in location and fertility: each kind of land is the object of a specific demand, which determines its remuneration. Say consequently criticizes the Ricardian theory of rent and particularly the principle that rent is not a constituent part of the price of commodities. Increasing human needs certainly lead to high prices, which induce the cultivation of land of poorer quality and allow the payment of a rent on more fertile land. However, this proposition applies to all productive services. It does not permit either to exclude rent from costs, or to state that the existence of poorer land is the cause of the rents made on the more fertile land.
One difficulty remains however. Land is not the only natural agent that is productive; why is it the only one that generates an income? This is because it is the soil, which can be appropriated by men. This ownership must thus be justified. Say (1819 [2006]: 793) advances an utilitarian argument: “Land is cultivated, and we obtain its products in some abundance, thanks to its appropriation.”