Leaving aside for a moment our figurative distribution, let us consider the relation of exchange to distribution. In the independent household economy where each family was self-sufficient there was no exchange. Production was for direct consumption. But as soon as a division of trades occurred where one man made shoes which he sold in the market and another made bread and another made houses and another produced wheat, the bread and shoes and houses and wheat were distributed in the proportions in which they were exchanged; that is, each of the producers got the share of the total product which was represented by the relative exchange value of his product in the market. These relative exchange values depended upon conditions of demand and supply. If one of the producers was inordinately selfish and asked too much for his product, producers from other fields would enter his trade and bring prices down to a reasonable level. If one of the producers was neglectful of his interests and offered his goods too cheap, the purchasers would compete with one another to secure them and would drive their prices up to a reasonable level.

Under modern conditions of production where the typical producer does not make a complete product himself, which he may sell in the market, but instead cooperates with others in producing a good, this close relation between distribution and exchange is obscured; but there still remains the influence of supply and demand in assigning to him his money income. The typical producer to-day, whether he be landlord or capitalist or laborer, sells the economic service which he controls to the employer, who combines it with other services. His real income depends upon the money income which he can get in exchange for his services and upon the amount of goods which he can get in the market in exchange for his money income.