Adam Smith was not of prime concern about the distribution of income but he presented several different and sometimes contradictory theories of wages, profits, and rents. The distribution of income depends on the price and quantity of factors of production sold by individuals. Labor is the only factor of production owned by most households; Therefore, the income of a household usually depends on the wage rate and the number of working hours.
Determine the distribution of income,
Wages > Quantities of labor
Profits > Capital
Rents > Land that individuals bring to the market
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Written by: Tharushi Kanishka Herath
References:
Harry Landreth, D. C. (2002). History of Economic Thought (4th ed.). Boston, Toronto: Houghton Mifflin Company.
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