ABSTRACT
There are many teachers who present what they call the marginal productivity theory as a theory of wages. There are some attempts to expand general equilibrium theory enough to permit imperfection of competition among the assumptions but this is controversial among the theorists. The marginal productivity principle alone can never explain the wage rate, because a demand curve alone can never explain a price. A supply curve must furnish the other blade of the theoretical scissors. Surely “marginal utility” will not in the cases explain the prices, but it will explain the quantities demanded at the prices fixed by monopoly or state power. What the marginal utility principle does in the theory of demand for consumers goods, the marginal productivity principle does in the theory of demand for productive factors.
