The history of interest among economists in the distributioil of income is as long as the history of modern economics itself. Smith, Mill, Mar-shall, and others recognized that many areas of considerable economic importance were affected by it. Although poverty, for example, was partly defined in absolute terms, they recognized that each generation's" poor" are mainly those significantly below the average income level. In addition to poverty, the degree of opportunity, aggregate savings and investment, the distribution of family size, and the concentration of private economic power were thought to be affected. How does one explain then that in spite of the rapid accumulation of empirical information and the persisting and even increasing interest in some of these question, such as poverty, economists have somewhat neglected personal income distribution during the last generation?'In our judgment the fundamental reason is the absence, notwithstanding some ingenious and valiant efforts, of a theory of income distribution that both articulates well with general economic theory and is useful in explaining differences among regions, countries and time periods. Some earlier work2 by one of us led to the belief that an analysis of investment in human capital provides a theory of income distribution that satisfies both desiderata.

This is a report on a National Bureau of Economic Research study in progress3 that is developing such a theory and applying it to a variety of evidence. Not only is the report preliminary, but brevity of space requires that many details and proofs be skipped and the discussion concentrated on a few highlights. We expect to publish the full study before too long, which would permit our methods and conclusions to be examined more closely.