ABSTRACT
Before we turn to an examination of the production system in our one-product perfect-competition capitalist economy there is one more set of institutional arrangements which must be discussed. We have already considered in The Stationary Economy (pp. 189–91) the importance of the distinction between the effects of price changes upon the distribution of income and their effects upon the efficiency of the economic system. Thus to give employment to a large amount of labour in a competitive economy endowed with little land and capital may involve a very low real wage rate, particularly if the elasticity of substitution between labour on the one hand and land-cum-capital on the other hand is very low. This will result in a very small proportion of the national output accruing in wages to the workers and in a very large proportion of the national income accruing to the owners of property in the form of rents, interest, and dividends on land and capital.
