From an economic point of view an economy faces both internal and external challenges regarding the growth of income and its distribution. Challenges that result in inequality of some kind or other have been the subject matter of economics since the classical economists.
Adam Smith, known as the father of Economics, was not an economist but a philosopher who enquired about the nature and causes of wealth of nations different from Keynes who enquired about the nature and causes of wealth of individuals. Smith’s main contribution was the “labor theory of value” which has been the central theme of the classical and neoclassical economics. Ricardo was important in explaining the distribution of income on an international level.
The labor theory of value as being read and taught in the context of modern economics explains the distribution of income between factors of production, mainly, labor and capital. Ricardo in international trade tried to enquire about the distribution of income between countries engaged in international trade and the inequality that result from the same. Therefore, both Smith and Ricardo tried to explain the distribution of income resulting form trade, national and international. Their purpose was to determine the subject matter of economics, “the distribution of income” which affects the level of inequality with an economy.
The classical economists while explaining distribution of income assumed “constant returns to scale” for both labor and capital that considers them equally important during the production process. On a national-level constant returns to scale implies that the distribution of national income between factors of production would be according to their marginal products and would be equal.
However, Keynes largely concentrated his attention on the scarcity of factors of production and admitted that labor is scarcer than capital, and, moreover, it has no reason to be scarce. Keynes was more interested in micro economic analysis of income distribution between factors of production contrary to the classical economist like Ricardo who mainly concentrated on the international distribution of income between countries.
Adam Smith, known as the father of Economics, was not an economist but a philosopher who enquired about the nature and causes of wealth of nations different from Keynes who enquired about the nature and causes of wealth of individuals. Smith’s main contribution was the “labor theory of value” which has been the central theme of the classical and neoclassical economics. Ricardo was important in explaining the distribution of income on an international level.
The labor theory of value as being read and taught in the context of modern economics explains the distribution of income between factors of production, mainly, labor and capital. Ricardo in international trade tried to enquire about the distribution of income between countries engaged in international trade and the inequality that result from the same. Therefore, both Smith and Ricardo tried to explain the distribution of income resulting form trade, national and international. Their purpose was to determine the subject matter of economics, “the distribution of income” which affects the level of inequality with an economy.
The classical economists while explaining distribution of income assumed “constant returns to scale” for both labor and capital that considers them equally important during the production process. On a national-level constant returns to scale implies that the distribution of national income between factors of production would be according to their marginal products and would be equal.
However, Keynes largely concentrated his attention on the scarcity of factors of production and admitted that labor is scarcer than capital, and, moreover, it has no reason to be scarce. Keynes was more interested in micro economic analysis of income distribution between factors of production contrary to the classical economist like Ricardo who mainly concentrated on the international distribution of income between countries.
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