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Deficiencies of the Three-Factor Theory of Value : External Deficiencies of the Modern Factor Theory of Value
Abstract
The marginal productivity theory is the modern form of the three-factor theory of value. It is the fundamental theory used in Western economics to describe value creation, as well as the fundamental Western theory dealing with wealth theory in the value category. Its original form is the “trinity formula,” composed of three propositions and formulated more than 200 years ago by Jean-Baptiste Say. Because of internal logical defects in the three propositions, the “trinity formula” is merely a hypothesis, and cannot be accepted as a scientific “theory.” The modern form of the three-factor theory of value is the marginal productivity theory proposed more than 100 years ago by John Bates Clark, and subsequently developed further by other researchers. The marginal productivity theory, however, still suffers from three defects of internal logic, and, correspondingly, from three external theoretical difficulties. The article explains that the marginal productivity theory, the modern form of the factor theory of value, has external deficiencies. First, the subject of distribution cannot be defined; second, the contributions made by the factors cannot be defined; and third, the ownership of the contributions cannot be defined.
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