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332 Economics
eliminated the criteria of rationally distributing income from the point of view
of the effect of this distribution on global output.
Drawing to some extent, via Marshall, on classical economics, the old welfare
economics of Pigou strove to restore their autonomy to distribution problems by
relating the global effect (degree to which aims are achieved) to the system of
distribution: the redistribution of income in favour of the poor increases the
sum total of satisfaction because of the higher marginal income utility among
those with lower incomes than among those with higher incomes. But the au-
tonomy of distribution in the definition of welfare disappears in Pareto’s
celebrated formulation of the concept of optimum which, by refusing to recog-
nize the validity of comparisons of relative economic utility as between persons,
removes distribution from economics to ethics in so far as welfare is concerned.
The optimum is attained when the allocation of resources is in accordance with
the equilibrium state of perfect competition, it being assumed that the structure
of income distribution is given from outside. Thus, there can be a plurality of
optimal situations, corresponding to the plurality of income distribution struc-
tures. According to this view, economics provides no means of comparing these
structures, or of rating them hierarchically. Whether this view is correct or not
is still an essential question in economics. Furthermore, the development of
different forms of economic planning that involve stating aims for economic
policy on a macro-economic scale renders the question of whether the structure
of distribution be an independent factor of general welfare or not even more
urgent, especially as it is scarcely possible to exclude incompatibilities of aims as
between e.g. the volume of planned income and the planned distribution struc-
ture (cf. 0. Lange’s book Optymalne decyzje (Optimal Decisions), Ch. VI:
‘Planning in Conditions of Plurality of Goals’; cf. also J. Tinbergen’s article
‘The Significance of Welfare Economics for Socialism’). Little progress has been
made towards solving this problem; nothing more definite was contributed by
the formulation of Bergson’s social welfare function, intended as one of the
distinctive features of what is known as new welfare economics.
The position of distribution theory in the early post-war years was thus des-
cribed by Bernard Haley (‘Value and Distribution’ in: A Survey of Contemporary
Economics, Vol. I): ‘Distribution theory continued to be limited in the main to
analysis of the determinants of theper unit rate of remuneration of the factors of
production. Although such analysis should contribute to an understanding of
the determinants of the corresponding functional shares of the national income,
little progress is to be reported with respect to this higher stage of distribution
analysis. The impact of the work of Keynes and his followers, however, may in
time have the effect of directing more attention to this latter problem.’ Haley is
right; as the work of Keynes became known, dynamic, macro-economic prob-
lems were brought into focus, and distribution theory, in the broad sense,
regained significance.
Once the dynamic approach is accepted, there is no doubt whatsoever that the
distribution of income has a preponderant influence on the general accumulation
potential and on the way the accumulation is allocated, and hence, on the rate
of growth. It is equally obvious that the macro-economic structure of income