Productivity, Theories of

bourgeois theories that examine the interaction between the production of value and its distribution among the agents of capitalist commodity production, or the factors of production.

Unlike Marxist political economy, which regards productivity as the capacity of concrete labor to produce use-value, bourgeois political economy considers the productivity of the factors of production to be the source of value. The first theory of productivity was the theory of the factors of production, which grew out of the remains of classical economics in the first half of the 19th century. The principal authors of the theory of the factors of production, J. B. Say and F. Bastiat of France, ascribed the capacity to produce value to the three factors of production—labor, land (as a means of production), and capital. Accordingly, the income from each factor (wages, land rent, and interest) was declared equal to the productive contribution of the factor. Moreover, the income from each factor was said to correspond to the factor’s share in the total value of the product.

The theory of the factors of production was the foundation for the apologetic conclusions that under capitalism, social distribution is just and class interests are in harmony. However, the insubstantial, tautological character of the theory was obvious. The earnings of the various factors of production were explained by their contributions to production, and the size of their contributions were, in turn, explained by their earnings.

The theory of marginal productivity, which was developed in the late 19th century, was intended to resolve the logical contradictions in the theory of the factors of production. The most complete elaboration of the tenets of the theory of marginal productivity is associated with J. B. Clark (USA). Like the theory of the factors of production, the theory of marginal productivity proposes that the value of a product is created by the three basic factors of production (labor, capital, and land). All of the factors participate in the process of production. Therefore, all of them are equally productive and create equal amounts of value.

The share of any factor of production in the creation of the value of a product is determined by its marginal productivity—that is, the amount of marginal product it can create. The concept of “marginal product” is based on the assumption that if technological conditions remain constant, each increase in one of the factors of production, with the others remaining the same, will result in the diminished growth in output. In this instance, the term “marginal product” refers to the growth in output as a result of an increase of one unit in a particular factor of production, with all the other factors remaining constant.

According to the theory of marginal productivity, the marginal product is precisely the level that determines the “just” or “natural” level of income payable to each of the factors. A number of conditions are necessary if wages, profits, and rents are to represent the prices of the factors of production corresponding to the factors’ marginal productivity. There must be no restraints on free competition, the relative “prices” of the factors of production must change in conformity with changes in the productivity of the factors, and there must be no government intervention or monopolistic reallocation of income. In the theory of marginal productivity, the processes of production and distribution have a single basis—the marginal product of the factors of production. The value of output is defined as the sum of the inputs from each factor of production at its marginal productivity, and these sums functionally define each factor’s share in the distribution of the social product. The theory of marginal productivity was also expressed in specific mathematical terms in the productivity function: y = f(K, L, N).

Far-reaching conclusions were drawn from the theory of marginal productivity. The first of these conclusions asserted that a system of “perfect competition” in the factors-of-production market ensures the minimum outlay per unit of output, or, in other words, the most efficient utilization of productive resources. The second conclusion, which deals with the distribution of created value, claimed that the income earned by each factor is proportional to the quantity and value of its marginal product.

Thus, the naively apologetic theory of the factors of production gave way to a more sophisticated picture of the interaction of the factors of production, based on a system of mathematical analysis. Nonetheless, despite these refinements, the ideological content of the theory of marginal productivity did not change. It examined not real classes (capitalists and workers) but the operation of the nonsocial factors of production. The impersonal relations of “factors” are substituted for class relations, concealing the fact that the income from the various factors (for example, profits, dividends, interest on capital, and land rent) becomes the property of the capitalist and the landowner and that this happens not as a result of the abstract interaction of the factors of production but as a consequence of the laws of property, which govern production relations under capitalism. Marxist literature also includes critiques of certain contemporary varieties of theories of productivity, such as the theory of the firm and the theory of the production function.