Income from Independent Professional Practice

Income from Independent Professional Practice

Income from Independent Professional Practice

Income from Independent Professional Practice

Excerpt

This study of incomes from independent professional practice can be viewed as a detailed description of the income structure of five professions, as an empirical case study of the factors determining the incomes individuals receive for their work, and as an attempt to arrive at conclusions relevant to public policy. From the first point of view, the substantive results for the individual professions are of major interest. These are presented in detail in the separate chapters and are summarized in Chapter 9; they call for no further comment here.

The comments that follow are addressed to readers interested in the broader implications of the study and the general approach adopted. This approach treats professional activity as taking place in an economy best described as a free enterprise system in which the production of goods and distribution of incomes are regulated primarily by the impersonal mechanism of the market. The efficient functioning of such a system depends greatly on the freedom with which resources flow from one use to another in response to changes in economic conditions. The incentive to the flow of resources is provided by changes in the prices paid for them and hence in the incomes individuals receive.

The incomes that individuals receive thus play a dual role: they help to regulate the allocation of resources among different uses and they are the means whereby the social product is distributed. To evaluate their effectiveness in regulating the allocation of resources, it is essential to separate differences in income that are consistent with the free flow of resources from those that are not. If every individual were entirely free to choose his occupation, the "whole of the advantages and disadvantages" of different occupations would continually tend toward equality for persons with similar ability. Persistent differences in pecuniary returns would compensate for differ-

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