The marginal productivity theory of income proposes that
the factors of production (like labour inputs) that are used to produce goods are in
equilibrium to the value of the output of the production (the finished product). The
theory primarily deals with how workers are compensated for their labour and presumes
that their labour is compensated on the basis of the marginal value of the products they
make. Parts of the theory also propose
that:
- There should be a tax on land because it
is the collective property of the community and rent seeking is generally unproductive
to the economy. - There should be minimal restrictions on
free trade.
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