Marginal Productivity Theory : What Does it Explain – Distribution or Employment?

Marginal productivity theory occupies a prime and significant place in the section on distribution in almost all microeconomics textbooks, explaining the determination of factor prices. In fact, historically and logically, it stands as the tallest theory in this group. This paper tried to examine the validity of marginal productivity theory as the theory of distribution. After a series of logical arguments advanced herein, I came to a conclusion that marginal productivity theory explains employment at the micro as well as macro levels, but fails to provide a satisfactory answer to the question of factor pricing.