Marginal Productivity Theory

Neoclassical economic theory pays indirect homage to the imputation principle of jurisprudence by giving a metaphorical interpretation of the factor payments according to marginal productivity (MP) in competitive equilibrium so that “each factor gets what it produces.” This chapter does not make the usual criticism for MP theory being unrealistic, hard to measure, involving idealized informational assumptions, and the like. Again, the real problems lie largely at the level of jurisprudence. Instead of the employer, employees, and input suppliers being in some sort of metaphorical partnership, each getting a share of the product, the actual property rights are that the employer legally appropriates 100% of the assets and liabilities created in production (so the employees qua employees get 0% of that production vector like the other mere suppliers of inputs). The metaphorical MP theory also treats all causally efficacious (or ‘productive’) factors as if they were responsible agents like persons, but the actual juridical principle only imputes legal responsibility to persons as was repeatedly pointed out by the legally-trained Austrian Friedrich von Wieser in the late nineteenth century. And the usual scalar notion of marginal productivity suggests an immaculate or ‘virgin-birth’ notion of production where each unit of a factor produces its marginal product without the use of other factors.