ABSTRACT
This chapter attempts to reconcile the relevant principles from economic sociology and economic geography with theories on supply and demand to create an analytical framework that, it seems, is not as elegant as economic theory, but is more realistic and therefore better able to explain what we know about income distribution patterns and trends. Knowledge and action are the two basic elements of human existence, and how individuals earn incomes has to be understood from the firmament of our understanding of how knowledge is acquired and informs action. Let us begin the construction of the framework for understanding income distribution realities by examining the fundamentals of neoclassical economic theory. The strength and weakness of neoclassical economic theory come from its simple principles on knowledge and action: everyone has perfect information and is perfectly rational in evaluating that information; everyone acts solely to further his or her self-interest, which is to maximize utility over the long run.
