The most important points for its criticism are the following
Value of Marginal Productivity
According to this theory the entrepreneur or owner of a firm can measure the value of marginal productivity of factors of production, and thus he can try to equate it with the prevailing factor rate in the market. However it is sometimes difficult to know the value of marginal productivity of factors of production for example in farming the marginal productivity of workers depend upon their efficiency and weather conditions which seriously affect their marginal productivity, thus it is difficult to determine the exact value of marginal productivity of factors of production.
Incorrect Assumptions
The two very important assumptions are i.e. perfect competition and prevailing of a state of full employment. But in the actual world both these cases cannot be seen.
Mutual Cooperation of Factors
Production is the result of factors working in cooperation with one another. The additional product which we attribute to the additional unit of a factor cannot be solely caused by the additional unit. It is the outcome of cooperation between different factors and it is impossible to produce something by using a single factor.
Variation in Proportion of the Factors
Variation in proportion of the factors of production in which they are employed is not easy. The proportion in which factors are used is determined by technical conditions of the business and not by an arbitrary decision of the entrepreneur. It may therefore not be possible to vary the use of a single factor without making a corresponding variation in the use of the other factors.
Fixed Supply
The theory assumes that the supply is fixed. Thus the theory approaches the problem only from the side of demand. In the factor market supply is as important as demand and any theory which does not properly explain the supply side cannot be a complete one.
Indeterminate Concept of Marginal Productivity
There is a serious difficulty in measurement of marginal net product. Marginal productivity of a unit of a factor in such a firm will be considerably less than that in the industry as a whole. Marginal productivity is thus indeterminate.
