On the Labor Theory of Property: Is the Problem Distribution or Predistribution?

Abstract

The value of the marginal productivity of labor is the usual basis for the ideal competitive distribution of pay to workers. But the prior question of predistribution is: “Who is to be the firm in the first place?” That question is addressed by the modern treatment of the labor or natural rights theory of property—which implies that the members of the firm should always be the people who work in it who would thereby jointly appropriate the positive and negative fruits of their labor.

Notes

The word “rented” is used deliberately even though American English prefers to say that cars are rented but people are hired. In the UK, rental cars are called “hire cars,” and the economic relationship (buying the services of a productive factor instead of the ownership of the factor) is the same no matter what it is called. Moreover, this is not a matter of controversy; as the late dean of neoclassical economics Paul Samuelson put it: “Since slavery was abolished, human earning power is forbidden by law to be capitalized. A man is not even free to sell himself: he must rent himself at a wage” (1976, 52, italics his).

By any standards, a collectively bargained employment contract is “more” voluntary than the usual contract of adhesion between an individual consumer and a supermarket.

The point is about Marx’s theory that “wages are too damn low,” not his personal views. Of course, he was personally against the institution of wage labor, at least in its private form. The point is that he only brought a value theory to a property-theoretic fight, so it would have still been ineffectual even if it was a good value theory.

The termination of rights was an original meaning of “expropriation.” “This word [expropriation] primarily denotes a voluntary surrender of rights or claims; the act of divesting oneself of that which was previously claimed as one’s own, or renouncing it. In this sense, it is the opposite of ‘appropriation.’ A meaning has been attached to the term, imported from foreign jurisprudence, which makes it synonymous with the exercise of the power of eminent domain” (Black 1968, 692, entry under Expropriation). Since “expropriation” now has this acquired meaning, I will treat the “expropriation (termination) of rights to the assets + X ” as the “appropriation of the liabilities – X.”

Thanks to Branko Milanovic for the idea of applying Jacob Hacker’s phrase to worker ownership. For instance, legislation to increase worker ownership through Employee Stock Ownership Plan (ESOPs) or worker cooperatives is predistributive, while raising taxes on the 1 percent is redistributive.

Since Bernie Sanders recently raised the idea of Scandinavian social democracy, it might be noted that one of the founders of the Swedish version, Ernst Wigforss, actually had an analysis based on the labor contract being invalid because it bogusly pretends that labor can be factually transferred like a commodity. This remarkable passage (found and translated by Swedish filmmaker Patrik Witkowsky) is in the 1923 report of the Wigforss Commission on industrial democracy. “There has not been any dearth of attempts to squeeze the labor contract entirely into the shape of an ordinary purchase-and-sale agreement. The worker sells his or her labor power and the employer pays an agreed price. What more could the worker demand, and how could he or she claim a part in the governance of the company? It has already been pointed out that the determination of the price can necessitate a consensual agreement on how the firm is managed. But, above all, from a labor perspective the invalidity of the particular contract structure lies in its blindness to the fact that the labor power that the worker sells cannot like other commodities be separated from the living worker. This means that control over labor power must include control over the worker himself or herself. Here perhaps we meet the core of the whole modern labor question, and the way the problem is treated, and the perspectives from which it is judged, are what decide the character of the solutions” (Wigforss 1923, 28).

Of course, a contract involving a crime is legally null and void. But the worker is not de facto responsible for the crime because he made an illegal contract. The employee is de facto responsible because the employee, together with the employer, committed the crime (not because of the legal status of the contract).

For instance, “To each according to what he and the instruments he owns produces” (Friedman 1962, 161–62).

Much ink has been spilt by Knight (1965) and others on the near tautology that the party who “bears the risks” (i.e., appropriates the negative product) should also appropriate the positive product. Of course, one party appropriates the whole product (i.e., both the positive and negative products). The real question is: who is to be that one party?

The mathematics of vectorial marginal productivity theory was worked out a couple of decades ago in chapter 5, “Are Marginal Products Created Ex Nihilo?” in Ellerman (1995).

See, for example, Dahl (1985). The best examples today are probably the Mondragón industrial cooperatives in the Basque region of Spain (see Oakeshott 1978; Whyte and Whyte 1991; or, in their own words, http://www.mondragon-corporation.com/eng/).

Additional information

Notes on contributors

David Ellerman

David Ellerman is a Visiting Scholar at University of California/Riverside.