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Distribution
Textbooks on economics regularly recite the axiom that an economic system
answers three basic questions: What? How? and For Whom? In meeting the
material requirements of humans, these abbreviated questions translate into
the following: What do we produce (composition of goods and services)?
How do we produce it (productive arrangements and technology)? And
for whom is it produced (who gets to consume the output)? Any economic
system, whatever its particular characteristics, is supposed to answer these
questions if it is to qualify as an economic system.
In this second section of the topic, we essentially covered the irst two of
these questions commensurate with the discussion of production and con-
sumption, without saying it in so many words. Responding to the third
question—who gets what—is the all-important task of distribution theory in
economics. It is the most important question and the most problematic.
The Question of Who Gets What
The most striking differences among economic systems, and the most stri-
dent controversies, occur in addressing questions of distribution. After all,
answers to the “what” questions lean to whatever people want and need, in
both a survival and cultural sense. To be sure, people from industrialized
nations with wealthy economies demand a wider range of consumer goods,
whereas people living in nonindustrialized nations with poorer economies
can afford fewer “luxury” goods, as opposed to more basic necessities. Even
then, especially in a private-property market economy, those questions
largely answer themselves. Furthermore, modern-day questions as to what
to produce may have little relationship to the actual requirements of citizens
in a particular economy, given the intense focus on production for export
and trade. As such, the chosen products in any given economy—especially
the less industrialized—are likely to be whatever the particular, specialized
resource base allows to be exported and sold somewhere.
For example, Ecuador extracts and consumes oil—not because its peo-
ple need a great deal of it, but because there are large amounts of petro-
leum reserves in Ecuador, and wealthier nations are willing to pay for it.
Consequently, the “what” question of production is often dictated by the
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