ABSTRACT
Money does not grow on trees. (I bet you’ve heard that before.) Ultimately a society’s sustenance is obtained by it putting its factors of production (land, labor, capital, and entrepreneurship is one commonly used comprehensive listing) to work to produce goods and services. Compensation (rent, wages, interest, and profit) is paid for the work performed. This compensation, of course, does not just go to inanimate factors. Rather it goes to real people because, in a capitalistic society, most of these factors of production are privately owned by persons, families, or households.1 The amount of money that goes to (the owners of) land, labor, capital, and entrepreneurship is what constitutes the functional distribution of income.
