OF LABORERS AND CAPITALISTS—
THE ISSUE OF FACTOR SHARES
The produce of the earth—all that is derived from its surface by the
united application of labour, machinery and capital is divided among
three classes of the community, namely, the proprietor of the land, the
owner of the stock or capital necessary for its cultivation and the
labourers by whose industry it is cultivated. To determine the laws
which regulate this distribution is the principal problem of political
The Principles of Political Economy and Taxation (1831)
During Ricardo's time, his definition of the issue of income distribution made sense on two levels—the income generated by the three factors of production, land, labor, and capital, was at the same time the income received by three distinct classes of the community. Hence his analysis of production by inputs was at the same time an analysis of distribution among people. In many less-developed countries today, the same rigid social stratification as in early nineteenth-century England draws clear lines between the social interests of large landowners, capitalists, and ordinary peasants/workers but in the developed countries these lines have become much more blurred.
With development, of course, the relative importance of agriculture has declined; hence the role of land as a productive input is no longer as important—indeed it is sometimes no longer separately mentioned in statistics on the "factoral" distribution of income. Labor and capital are the main inputs into the modern productive process but "labor" includes both minimum-wage, seasonal workers and secure professionals, like doctors or business executives. Likewise, although ownership of capital is quite concentrated today (see Chapter 3), those who live on the returns from capital include both aged pensioners and multimillionaires.