Excerpt from The Industrial System: An Inquiry Into Earned and Unearned Income

If we were justified in holding that the whole of the product of industry was thus regularly and automatically absorbed in the payments necessary to evoke from the owners of the factors the output of this productive energy, no problem of distribution would arise. Such has in effect been the assumption underlying the main body of authoritative economic theory in this and other countries. Competitive industry, it was held, actually apportions the product among the various classes of producers according to the respective importance of the services they render, and. Such portions are nor mally the minimum payments required to secure these services. To this 'law there has been one exception and one qualification. The economic rent of land, the payment made to land-owners as such, though usually justified on other grounds, political or eco nomic, was never regarded as a payment necessary to evoke the use of land. This was the exception. The qualification consisted in recognising some friction or failure in the complete fluidity of competition in the other factors of production, causing a certain quantity of waste in the application of the stimuli to production. But normally, it was held, distribution took place by means of a number of minimum payments necessary to evoke the continued use of labour, capital, and ability, while the rent paid to land owners was not a deduction from the proper and economically necessary share of any class of producers, but a surplus.' So long as no serious attempt was made to regard industry as a single living system, some plausibility attached to this view, which was enforced by the statement of separate laws regulating the payment of labour, capital, ability, and enterprise.

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