Ricardo’s Distribution Theory

>Distribution theory explains how income is distributed in society. How to distribute the national income. >Functional Distribution of Income: There are three factors of production land, labor, and capital goods (such as shovels) and three classes of people landlords, workers, and capitalists. Landlords earn rent, workers earn wages, and capitalists earn profits. Ricardo wanted to show how the total output of society is distributed among wages, rent, and profits. >Personal distribution: held that the landlords would receive an increasing part of the national income while capitalists would get less and less and that this shift in distribution would lead to economic stagnation.