"After all, in an idealized market economy each worker would be paid exactly what he or she contributes to the economy by choosing to work, no more and no less. And this would be equally true for workers making $30,000 a year and executives making $30 million a year." -- Paul KrugmanElsewhere, Rod Hill and Tony Myatt quote Joan Robinson:
"There is the problem of the relative levels of different types of earned income. Here we have the famous marginal productivity theory... The real wage of each type of labour is supposed to measure its marginal product to society. The salary of a professor of economics measures his contribution to society and the wage of a garbage collector measures his contribution. Of course this is a very comforting doctrine for professors of economics but I fear that once more the argument is circular. There is not any measure of marginal products except the wages themselves. In short, we have not got a theory of distribution. We have nothing to say on the subject which above all others occupies the minds of the people whom economics is supposed to enlighten." -- Joan RobinsonI like to refute the existence of the so-called marginal productivity theory of distribution with reswitching examples. In such examples, at least two vastly different distributions of income between wages and profits are associated with a single technique. Presumably in Krugman's morality play, the owner of each factor of production would be making the same "contribution" to the economy, whichever income distribution happened to prevail. Furthermore, it can be the case that a higher wage results in more labor being hired by cost-minimizing competitive firms. A similar point can be made with models with heterogeous labor.
I welcome Krugman's support for (some) good policies - including in the referenced newspaper column, despite his archaic knowledge of economics.