Both Sides Now

Eric Schoenberg, of Columbia Business School, has a very confused response to the usual idiocy from Greg Mankiw. Schoenberg quotes Mankiw as saying

"under a standard set of assumptions... the factors of production [i.e., workers] are paid the value of their marginal product... One might easily conclude that, under these idealized conditions, each person receives his just deserts."

Schoenberg thinks the above is coherent. He merely questions whether the standard assumptions apply in our economy.

But marginal productivity is not a theory of the distribution of income, as I have demonstrated. It is a theory of the choice of technique. Income distribution can be anywhere on the factor price frontier and all agents will be receiving the value of the marginal product of the factors of production that they own. (I don't know if anybody in the comments at the Huffington Post points out that Mankiw does not know what he is talking about, even given all of his assumptions.)

By the way, Bill Mitchell has a recent post that wanders into my theme.