The Impact of Transfer Payments

This is a somewhat mechanistic (and simplistic) exegesis of the production-distribution linkage. However, it is one with profound implications for public policy. What it suggests, particularly where collective action is concerned, is the possibility of a social “taking” of wealth (or income) from some to be then disbursed to others considered to be more deserving. According to Mill, such a redistribution process would be a zero-sum game, having no impact on the overall production of wealth (national income). There are obvious reasons to be suspicious of Mill’s premise. Written in the era that it was, it suffers from the lack of perspective that would later be provided by the marginalist interpretation of the conditions surrounding the employment of factors of production, especially labor. In the case of labor inputs, Mill performs the obligatory obeisance to demand and supply forces, but lurking in the background is some form of deus ex machina that attenuates any link between labor productivity and the level of wage rates. Sometimes, it is a wages-fund notion. Sometimes, it is Malthusian pressures. Whatever, these