Criticism of marginal theory

Criticism of marginal theory:

Below are some of the points of criticism against the marginal productivity theory of distribution:

1) Each and every product is a joint product and its value can’t be separately attributed to either labor or capital. Again, it is rather hard to measure the “productivity” of some categories of labor such as lawyers, doctors, and teachers who render services.

2. The theory acquires into account only by the factors executing on the side of demand by avoiding the supply side. For illustration, whenever there is scarcity of a factor, it is paid much greater than the normal price.

3. The theory depends on the supposition of perfect competition and complete employment. However in the real world, we have merely imperfect competition; we do not encompass perfect competition.

4. In practice, it is quite hard to vary the utilization of the factors of production.

5. The theory does not hold with it any ethical justification. When we accept the theory, it means that factors acquire the value of what they generate. For illustration, workers in a firm might get low wages not since their productivity is low however since there might be exploitation of labor. Therefore we must not make utilization of this theory to justify the existing system of asymmetrical distribution.

We might note that despite of above points of criticism against the theory, it elucidates the role of productivity in the determination of factor prices. In terms of Marshall, “the doctrine throws in clear light one of the causes which govern wages”.

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