The Residual Claimant Theory: Jevons

The Residual Claimant Theory: W. S. Jevons

In countering the wages-fund hypothesis of Mill, an alternate theory known as the residual claimant theory was proposed. Adam Smith and others before him intimated that rent and profits were deductions from the produce of labor. William Stanley Jevons first stated the theory positively in 1862, but the analysis of Francis Walker, twenty years later, is usually re­ferred to. The essence of it is that portions of the product are first deducted for rent, interest, and profits. The remainder is the property of labor. The validity of the theory rests upon the independent determination of, and limitations upon, the shares of these three prior claimants. These being assumed, further economies in production or increased production would enlarge the share remaining for wages. The difficulty lies in establishing the independent determination of rent, interest, and profits. That apparently is yet to be done.