Imputation Process

Imputation Process

Imputation, the process of attributing value to productive resources in accordance with their contribution to the value of their products. It was a logical development following the emergence of the theory of subjective value in the rSo's, and it represented an important step in the development of a unified (marginal productivity) theory of the prices of the factors of production by breaking away from the earlier views of distribution as comprising the allocation of income between social classes. These earlier views regarded the share of landowners (rent) as a surplus determined by demand which did not form part of production costs, the share of labour (wages ) as determined by the size of the 'Wages Fund' and tending in the tong run to a subsistence level (the Iron Law '), and the residual share as profits.

The theory of imputation argued that the value of factors ('higher-order' goods) was S all oases determined by (imputed from) the value of the final ('lower order') goods to whose production they contributed. The value to be imputed to a factor then followed from the proposition that, since the proportions in which factors could be combined to yield a given product can be varied, their relative marginal contributions could be isolated and assessed.

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