The distribution of output among the members of society is one of the oldest and most important topics of economics.
The technical use of the term “distribution” dates back to the Physiocrats and appears in the very title of Anne-Robert-Jacques Turgot’s Reflexions (1766). The first book of the Wealth of Nations (Smith 1776 [1976], hereafter WN) concerns “the Order, according to which [the] Produce is naturally distributed among the different Ranks of the People” (WN, see title of book I); David Ricardo regarded this distribution as “the principal problem in Political Economy” (Ricardo 1951-73, hereafter Works, I: 5).
Even though distribution has not always been on top of the agenda of economic theory, the measure and explanation of the shares of profits and wages, their international differences and their evolution through time are still a lively object of investigation, both by academics and by international organizations (a recent survey is in Atkinson 2009). Likewise, household inequality and wage differentials are widely investigated in current literature (for example, Atkinson 2007; Checchi and Garcia-Penalosa 2008). The distribution among different kinds of labour, capital owners and rent seekers, on one side, and the distribution among individuals (households), on the other, are usually referred to as “functional” and “personal” distribution, respectively.In a long span of time, quite naturally, a series of different (and sometimes contrasting) approaches have evolved. It is hardly possible to fit them along a line of cumulative scientific progress and, at any rate, this is not the aim of the present brief historical account. If there is a clear element that embraces such an evolution, it is variety.
A broad distinction must be made from the outset between analyses of the general problem of income distribution, which are deeply integrated into an overall theory of production and prices, and analyses which are designed to clarify specific aspects. The early theories of rent were perhaps of the second kind, like certainly most of the contemporary studies: the Lorenz curve, the 80/20 Pareto distribution, wage differentials, the return to human capital, intergenerational distribution, the role of imperfect information or trade unions in wage setting, and so on are all topics which need a specialized analysis.
An excellent survey of the main current fields of research can be found in Atkinson and Bourguignon, who admit - and complain - that “no unified theory of income distribution actually exists” (Atkinson and Bourguignon 2000: 5).We concentrate, therefore, on the theories of the first kind. They are themselves characterized by a good deal of variety. The distribution of output according to Adam Smith, Thomas Robert Malthus, David Ricardo or Karl Marx followed principles which are completely different from those of William Stanley Jevons, Philip Henry Wicksteed or Knut Wicksell. Interest theory in Carl Menger or Eugen von Bohm-Bawerk has few points of contact with that of John von Neumann or with the post-Keynesian theory of Nicholas Kaldor, Joan V. Robinson and Luigi L. Pasinetti. The distribution theory based on the works of Piero Sraffa is normally considered a radical alternative to that embedded in supply and demand theories. Yet, at the cost of sacrificing historical detail, we shall present a description of these theories which reduces contrast to a minimum, with the aim of underlying both their most fundamental differences and what is still alive and agreeable in all of them.