The Labor Theory of Property and Heterodox Economics

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Abstract

After Marx, dissenting economics almost always used “the labor theory” as a theory of value. This paper develops a modern treatment of the alternative labor theory of property that is essentially the property theoretic application of the juridical principle of responsibility: impute legal responsibility in accordance with who was in fact responsible. To understand descriptively how assets and liabilities are appropriated in normal production, a “fundamental myth” needs to be cleared away, and then the market mechanism of appropriation can be understood. The property-theoretic analysis at the firm level shows how the neoclassical (and much heterodox) analysis in terms of “distributive shares” wholly misframes the basic questions. Finally, the paper shows how the responsibility principle (modernized labor theory of property) is systematically violated in the present wage labor system of renting persons. The paper can be seen as taking up the recent challenge posed by Donald Katzner for a dialogue between neoclassical and heterodox microeconomics. Katzner argues that some of the non-property-theoretic heterodox critiques of neoclassical microeconomics are objectively invalid, but he ignores the property-theoretic analysis (e.g., the labor theory of property) which often seems to be as unknown to heterodox as to orthodox economics.

Posted for comments on 6 Jul 2015, 10:33 am.
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  • Don Katzner says:

    I welcome David Ellerman’s willingness to engage in a dialogue between neoclassical and heterodox economics, and I am pleased that he has written “The Labor Theory of Property and Heterodox Economics” with that in mind. However, having said that, I still do not understand why my paper, “A Neoclassical Curmudgeon Looks at Heterodox Criticisms of Microeconomics,” is referred to by him. My paper was about specific, detailed heterodox criticisms of neoclassical microeconomics. But Ellerman’s purpose does not seem to be to criticize specific neoclassical argument. Rather he seems to be primarily interested in promoting the labor theory of property. The criticisms of neoclassical economics he does present are rather vague.

    For example, Ellerman says that neoclassical economics ignores the labor theory of property when explaining, say, firm behavior in relation to capital (pp. 8-10). This is, of course, true. But while Ellerman’s application of the labor theory of property focuses attention on ownership rights relating to the firm, he does not show how the labor theory of property changes our understanding of the operation of the firm. So it is not clear how this is a criticism of the neoclassical theory of the firm which, because it is an abstraction, necessarily omits many details from its purview. Another suggestion of criticism appears on p. 15 where Ellerman claims that in a previously published paper he has found a logical flaw in a proposition of welfare economics. But without actually seeing his argument (which is not given in the present paper), it is not possible to evaluate his claim.

    In another vein, the main point of Ellerman’s paper appears to be to present the labor theory of property and show some of its applications. But as it stands, this main point seems weaker than necessary; it doesn’t give the paper precise and forceful direction. As a result, the paper comes off as a scholarly collection of various topics that relate to the labor theory of property. There is no striking central result or argument that pulls everything together. I confess that I know very little about the labor theory of property and, for that reason, and the fact that Ellerman’s paper is considerably distant from the paper of mine that he cites, it is not appropriate for me to push this criticism any further.

    But I would add one other point that puzzles me. On p. 14 (lines 2-9) Ellerman questions a statement about Pareto efficiency by citing an analogy to the courtroom prosecution of a crime. I do not see why the courtroom analogy is relevant and Ellerman does not explain why it might be relevant.

    • Many thanks to Don Katzner for his comments since my paper referred to his previous paper where as a “neoclassical curmudgeon,” he called for more dialogue between neoclassicals and heterodox economists particularly concerning microeconomics. My paper did not respond to his specific criticisms since they were directed at the work of others and since my paper is also quite critical of much heterodox microtheory.
      My purpose was to redirect the dialogue to the area where neoclassical microtheory is particularly wanting—which is not the theory of the price mechanism but the theory, both descriptive and normative, of the underlying property mechanism.
      After correctly ascertaining that my paper was not a direct response to his, Katzner showed little inclination to engage on the topic of the mechanism that describes the initiation and termination of property rights in a private property market economy. Between the initiation and termination of property rights are their transfer in market transactions in input and output markets and that is much studied in neoclassical theory. But the problems arise in the initiation and termination of property rights, particularly in firms, where both neoclassical and heterodox economists often incorrectly describe how it is that one legal party rather than another has the initial ownership of a newly produced product (see the part of the paper helpfully labeled as the “Fundamental Myth”).
      Katzner’s comments are indicative of the difficulties of neoclassical-heterodox dialogue on microtheory when neoclassicals are out of their price-theoretic comfort zone. For instance, in spite of sections in the paper helpfully labeled as being about “descriptive” or about “normative” property theory, Katzner never recognizes the distinction and refers to the whole as the “labor theory of property”—which is only the normative theory. It is analogous to referring to the whole of neoclassical price theory as the Paretian efficiency analysis.
      Katzner also makes the baffling remark that the paper has “no striking central result or argument that pulls everything together.” The section of the paper helpfully labeled “The Fundamental Theorem of the Property Mechanism” contains the helpfully labeled “Fundamental Theorem” that pulls together the descriptive and normative property analysis in a manner analogous to the fundamental theorem of welfare economics that a competitive equilibrium (a descriptive concept) is Pareto efficient (a normative concept). It would indeed be hard to understand that fundamental theorem about the competitive price mechanism if one never bothered to distinguish the descriptive notion of a competitive equilibrium from the normative notion of a Pareto optimal state in the first place.
      Katzner also specifically mentions the results of pp. 8-10 about capital theory (and finance theory) which are in a section helpfully labeled as “Descriptive Property-Theoretic Implications” so they have nothing to do with the normative labor theory of property. There is a conceptual error (a version of the fundamental myth) in neoclassical capital and finance theory that is shared by a good bit of heterodox theory (e.g., Marxist theory) that the rights to the pure profits are part and parcel of the “ownership of the means of production,” i.e., the ownership of capital. In point of fact, the profits are attached to the contractual role of being the residual claimant (a fact that neoclassicals will generally recognize when not doing capital/finance theory)—and the owner of contractually hired-out capital is not the residual claimant in the production opportunity using that capital. The paper explains the specific error in the usual capitalized value of a capital asset formula in capital theory and finance theory, and the paper supplies indicative quotes from Miller-Modigliani and others—so I will not repeat the argument here. The argument is developed with full Miller-Modigliani math elsewhere (Chapter 12 in Economics, Accounting, and Property Theory. Lexington MA: D.C. Heath, 1982 available on my website) but I don’t think the problem in understanding the underlying concepts is mathematical.
      Finally, in his last paragraph, Katzner seems puzzled by the persons-things distinction—specifically the distinction between the legal-moral responsibility of the actions of persons in contrast to the casually-efficacious but non-responsible services of things. The person-thing distinction shows up normatively in the neoclassical notion of Pareto optimality (which ignores the revealed preferences of non-persons). But it is quickly forgotten in the usual attempt to present—as a theory of imputation—the “distributive shares” under marginal productivity pricing of the actions of persons and the services of things, all as “inputs” in competitive markets. As in the case of capital rights, the inability to find the R-word “responsibility” is largely shared by neoclassical and much heterodox microtheory (as is evidenced, for instance, in Steve Keen’s supposed “debunking” of marginal productivity theory discussed in footnote 6, p. 13).

  • Don Katzner says:

    Let me begin by thanking David Ellerman for responding to my comments of August 10. As he points out, it is not easy to have a neoclassical-heterodox dialogue on certain matters. Neoclassical and heterodox economists sometimes have different mind-sets making communication difficult. It would be more efficient to be sitting in a room face to face where I could repeatedly push him on his understandings and he could repeatedly push me on mine. But I will do my best to be as clear as I can here.
    My understanding of Ellerman’s paper is that (and I hope he will correct me if I am wrong), as far as the firm is concerned, what he calls the descriptive labor theory of property has to do with the transfer of property rights from resource holders to consumers through producers (not necessarily the owners of the firm’s capital). The markets for inputs and outputs are the means of transference as inputs and outputs are bought and sold. What he calls the normative labor theory of property concerns the legal responsibilities associated with the holders of property rights (not necessarily the owners of the property in question). The fundamental theorem in this regard is that in the absence of ‘externalities’ and breeches in market contracts, the holders of property rights have legal responsibility in relation to it.
    Now the neoclassical theory of the firm is important because it gives answers to many significant economic questions about the operation of the firm: What quantity of output does the firm produce? What input mix and what quantities of inputs does the firm employ? How does the firm react to various forms of competition? How might various taxing or other policies affect the firm’s demand for inputs and supply of output? And so on. I do not mean to suggest that the neoclassical theory of the firm provides the only or best explanation of how the firm operates. But it does provide a cogent explanation that resonates in part with certain well-known aspects of economic reality.
    My central questions to Ellerman are: Why is the labor theory of property, both descriptive and normative aspects, important in economics? What are the significant economic questions to which it provides answers? Would the theory, if accepted, add detailed realism to the neoclassical understanding of the firm, would it significantly modify the neoclassical vision of its operation, or both? If it would modify the neoclassical vision, in what ways? Personally, I am not opposed to consider changing my understanding of the firm, but I first need to know why I should. Addressing questions such as these would give, from the perspective of this neoclassical economist, the labor theory of property greater force in unifying the paper.
    What bothers me about the discussion of the analogy between Paretian efficiency and the courtroom prosecution of a crime (p. 14) is that Ellerman seems to suggest that ‘revealed preferences’ of animals and other non-human things are implicitly included in the neoclassical production function and the characterization of Paretian efficiency. There are two issues here. First, revealed preferences are actually defined with respect to behavior. They are conceptually distinct from, and independent of a priori preferences which neoclassical theory takes to be given and present in the minds of consumers. Paretian efficiency has nothing to do with revealed preferences; it only considers a priori preferences as represented in consumer utility functions. Second, when both human and non-human inputs appear in the neoclassical production function as they usually do, all that is important is their contributions to output and profit. In the standard neoclassical theory, neither a priori preferences nor revealed preferences are relevant for production. Moreover, if any inputs carry the responsibility for fulfilling production and profit goals, it is the human inputs. I do not see how, as also seems to be suggested by Ellerman, that the neoclassical theory of the firm imputes production-and-profit-goal responsibility to non-human inputs just because they appear along with human inputs in the production function. Of course it is assumed that the non-human inputs function as they are supposed to function in the production process.

    • Many thanks to Don Katzner for continuing the discussion. I am just back from a long trip and can concentrate on my reply.

      Katzner’s treatment of descriptive property theory

      In the second paragraph, he gives his understanding of the basic points of property theory and asks me to correct where he might get it wrong—so let’s start there.

      “My understanding of Ellerman’s paper is that (and I hope he will correct me if I am wrong), as far as the firm is concerned, what he calls the descriptive labor theory of property has to do with the transfer of property rights from resource holders to consumers through producers (not necessarily the owners of the firm’s capital). The markets for inputs and outputs are the means of transference as inputs and outputs are bought and sold.”

      Firstly, there is no such thing as the “descriptive labor theory of property” since the special role of labor only comes in the normative theory. In the descriptive theory about the current private property market economy, labor services are only another commodity or resource that the resource holders (workers) sell to the legal party playing the role of the firm or residual claimant—so labor has no special role in the descriptive property theory.

      Similarly the normative notion of Pareto Optimality should be distinguished from the descriptive theory of how the competitive price mechanism works. The descriptive notion of a competitive equilibrium is then related to the normative notion in the “fundamental theorem of welfare economics”: A CE is PO.

      Far “below” and more fundamental than the operation of the price system is the operation of the private property system in a market economy. There is a descriptive theory about the normal laissez faire operation of the property system wherein the Invisible Judge (judicial version of Invisible Hand) assigns the legal responsibility for the used-up inputs and produced outputs, and there is normative principle of imputation—where human action is the only “factor of production” capable of being de facto responsible for anything and where the normative principle is that legal responsibility should be imputed to the de facto responsible party. That juridical principle of imputation is the basic principle of justice invoked when considering the two types of injustice, e.g., when a person de facto responsible for a crime is not held legally responsible and when a person who is not de facto responsible for a crime is held legally responsible (which are analogous respectively to Type I and Type II errors from statistics where the “null hypothesis” is that the defendant is charged as being de facto responsible for the crime).

      This is the same principle used when a visible judge overrides the laissez-faire invisible judge to hold a trial. Visible judges use the responsibility principle when market property rules are violated, e.g., in property torts or crimes, so the natural question is whether or not the Invisible Judge imputes according to the same principle in normal market activity? That is the property-theoretic analogue of the price-mechanism question about whether or not markets achieve allocative efficiency. The fundamental theorem of the property system answers by showing “that in the absence of ‘externalities’ and breeches in market contracts” (as Katzner puts it) then the laissez faire assignments of legal responsibility by the invisible judge are in accordance with the corresponding de facto responsibility, i.e., the basic juridical principle for the assignment of legal responsibility (a.k.a., “labor theory of property”) is satisfied.

      Secondly, the transfer of property rights in markets is only half the story—the easy half. The hard part is the other half about the creation and termination of property rights in production and consumption. The traditional language for that creation and termination (as opposed to transfer) of property rights is appropriation, i.e., the appropriation of assets and liabilities in normal production and consumption (the economic activity outside of market transfers). When a commodity, as an input or as a consumer good, is finally used up and gone, then some party has to bear or “appropriate” that liability (as opposed say to suing some other party for reimbursement for those costs), and when a new product or byproduct is produced, then some party gets to appropriate or get the initial right to that product in order to sell it (or consume it). What is the mechanism that accomplishes those tasks in normal market activity (i.e., not when the legal system intervenes in some sort of a trial to explicitly assign liabilities and assets)?

      One conventional reflex view (the “fundamental myth”) is that those appropriation rights (bearing in mind that the input-liabilities are included) are part and parcel of the “ownership of the means of production” or the “ownership of the corporation.” But that argument is quickly defeated by considering the case where the “means of production” or capital assets owned by a corporation are rented out—in which case the “owner of the means of production” is not “the firm”, i.e., is not the legal party who bears the liabilities for the inputs used up in the production process using those (rented) means of production and who thus has the defensible first claim on the products. In more conventional terms understandable to “all” economists, the owner of capital assets is not necessarily the residual claimant. Katzner’s interjection about the residual claimant not necessarily being the owner of the capital used in production shows that he understands that “fundamental myth” part of the argument.

      It is not such “ownership” but the pattern of contracts that decides the question of appropriation in the laissez faire descriptive property mechanism. The single party who buys all the inputs used up in production and bears those liabilities (e.g., does not resell them or claim reimbursement for those liabilities) thus has those liabilities legally imputed to him by the Invisible Judge. The Invisible Judge says “Let it be.” And by eating those liabilities, that same party has the sole legally defensible first claim on the produced outputs which can be sold. So when that party sells the produced outputs, the Invisible Judge again says “Let that be” (and otherwise, if some party other than the one who paid all the costs claims and sells the product, then there has been some theft or conversion which creates grounds for a visible judge to intervene setting aside the laissez faire judgment of the invisible judge). That is the description of the invisible judge laissez faire market mechanism of appropriation.

      Perhaps the mechanism is better understood by considering a case where it is indeterminate, e.g., a case where a product is produced but there is divided ownership of inputs used up in production. For instance, there have been historical cases where workers go on strike and occupy a factory and then use the exiting inventory of inputs owned by their employer to produce a product, e.g., watches or bicycles. The invisible judge does not, as it were, know how to impute the ownership of the products since there is no one party who has appropriated all the input liabilities. If the workers paid for the other used up inputs or the previous employer paid them an agreed-upon wage for their labor, then there would be a unified last buyer of all the inputs and then the laissez faire imputation of the produced outputs would become determinate.

      In the quotation from Katzner given above about the descriptive side of the property mechanism, appropriation is never even mentioned, i.e., the initiation and termination of property rights as opposed to their transference. I cannot imagine how baffling the paper under review must be if one never considers appropriation!

      The role of the divergence principle
      Since micro-economists have some math training, we can couch the basic points in precise math terms. Consider a flat plane containing sources and sinks of some (incompressible) fluid with channels of fluid flow between the sources and sinks. Katzner’s description mentioned the transfers of property rights (fluid in this model) along the channels but ignored the “sources” (initiation of property rights) and “sinks” (termination of property rights which happens in both production and consumption). And the sources/sinks and the flows are related by what in calculus or graph theory (“flows on graphs”) is called the “divergence principle”.

      For instance, draw an arbitrary circle or closed curve on the plane, and then there is a theorem that the net outflow across that curve equals the net flow at the sources/sinks (where of course the flow into the sinks counts as negative) within the curve. In the one dimensional version, consider any differentiable function y = f(x). The derivative f ‘(x0) gives the creation (when positive) or termination (when negative) of the quantity y at the point x0. Two points “a” and “b” play the role of the closed curve to enclose a linear part of the x-axis, and the divergence principle in this case is the fundamental theorem of calculus that the sum or integral of net creation/termination of y = f(x) within that linear region from a to b is equal to the net outflow of the y quantity across the boundary of the region, i.e., f(b) – f(a).

      That divergence principle is the mathematical core of the fundamental theorem of property theory since it relates (obviously in a multi-commodity version) the market transfers (where no appropriation takes place) to the sources/sinks (where appropriation takes place). See the informal but precise reasoning in my recent paper: Ellerman, David. 2014. “On Property Theory.” Journal of Economic Issues XLVIII (3 (Sept.)): 601–24, or the full math version on my website such as: http://www.ellerman.org/hume-implies-locke-fundamental-theorem-of-property-theory/ . By ignoring appropriation, Katzner is, in effect, dealing only with the trivial special case of a pure exchange economy where no production or even consumption takes place!

      Katzner’s treatment of normative property theory
      All that is commentary on Katzner’s first couple of sentences of stating his understanding of property theory. Now let’s look at his version of the normative part and the fundamental theorem.

      “What he calls the normative labor theory of property concerns the legal responsibilities associated with the holders of property rights (not necessarily the owners of the property in question). The fundamental theorem in this regard is that in the absence of ‘externalities’ and breeches in market contracts, the holders of property rights have legal responsibility in relation to it.”

      To start with, Katzner seems to misread the notion of responsibility involved here. The argument has nothing to do with whatever might be taken as “the legal responsibilities associated with the holders of property rights” in the sense that property owners might be seen as being socially obliged not to create a public nuisance or endanger others or pollute the environment etc. All those sort of social “responsibilities” of a property owner or one’s role responsibilities in an organization have nothing to do with the notion of responsibility used in property theory, i.e., the standard juridical principle to impute legal responsibility in accordance with who was in fact responsible. The visible judge case is a criminal or civil trial; the invisible judge case is the market mechanism of appropriation. Katzner’s account never mentioned the de facto responsibility that is the target of the legal imputation: “who is the responsible party for what was done?”—which is a question that can be asked quite independently of the notion of organizational role-responsibilities or the social responsibilities of property owners.

      The metaphorical imputation of responsibility in neoclassical MP theory
      Indeed, the notion of the imputation of responsibility should not be so hard for neoclassical economists to understand since they seem to be perfectly familiar with the principle for the imputation when they use it metaphorically to apply to all “agents of production” in marginal productivity theory. The legally-trained economist, Friedrich von Wieser, introduced a broader persons-and-things notion of imputation (Zurechnung) into the discourse of economics but this was only an analogy with the juridical theory. Modern jurisprudence has always been clear that the responsibility principle applies only to persons (of normal capacity).

      “The statement that an individual is zurechnungfähig (“responsible”) means that a sanction can be inflicted upon him if he commits a delict. The statement that an individual is unzurechnungsfähig (“irresponsible”)—because, for instance, he is a child or insane—means that a sanction cannot be inflicted upon him if he commits a delict. … The idea of imputation (Zurechnung) as the specific connection of the delict with the sanction is implied in the juristic judgment that an individual is, or is not, legally responsible (zurechnungsfähig) for his behavior.” [Kelsen, Hans. 1985. “Causality and Imputation.” In Lloyd’s Introduction to Jurisprudence, edited by Lord Lloyd and M. D.A Freeman, 362–65. London: Stevens & Sons, 364]

      Regardless of their causal efficacy (e.g., marginal physical productivity), physical assets and animals are, a fortiori, unzurechnungsfähig—regardless of the crude analogical attempts in orthodox economics to interpret the juridical responsibility principle as “the ethical proposition that an individual deserves what is produced by the resources he owns” [Friedman, Milton. 1962. Capitalism and Freedom. Chicago: University of Chicago Press, 196] which Friedman even called the “capitalist ethic.”

      The only problem is that non-human resources are non-responsible or unzurechnungsfähig no matter how causally efficacious they may be, and everyone knows that (e.g., the “means of production” of crimes are never put on trial). Hence the use of “responsibility” reasoning is only metaphorical like “Land and labor together produce the harvest” instead of the non-metaphorical “humans by their labor use up the services of land (negative product) to produce the harvest (positive product).” Unfortunately Friedrich von Wieser blurted out that simple fact about only labor being responsible in the usual moral as well as legal sense of “responsibility”—which is the labor theory of property in a nutshell.

      “The judge … who, in his narrowly-defined task, is only concerned with the legal imputation, confines himself to the discovery of the legally responsible factor,–that person, in fact, who is threatened with the legal punishment. On him will rightly be laid the whole burden of the consequences, although he could never by himself alone–without instruments and all the other conditions–have committed the crime. The imputation takes for granted physical causality.

      “If it is the moral imputation that is in question, then certainly no one but the labourer could be named. Land and capital have no merit that they bring forth fruit; they are dead tools in the hand of man; and the man is responsible for the use he makes of them.” [Wieser, Friedrich von. 1930 (1889). Natural Value. Translated by C. A. Malloch. New York: G.E. Stechert and Company, 76-79]

      Hence the usual non-metaphorical notions of responsibility are unsuitable for the “official” task of the “science of economics” to give an “account” (i.e., “account” being a euphemism for an apologia) of the economic system, so von Wieser went on to define “economic responsibility” so that MP theory could be seen as making an “economic imputation” in accordance with “economic responsibility”, as satisfying a metaphorical version of the juridical principle.

      “In the division of the return from production, we have to deal similarly … with an imputation, – save that it is from the economic, not the judicial point of view.” [Wieser Ibid., 76]

      All that is well and good as a theory of marginal causal efficacy but, alas, the questions of appropriation deals with imputation from precisely “the judicial point of view” where “Land and capital have no merit that they bring forth fruit; they are dead tools in the hand of man; and the man is responsible for the use he makes of them.” Thus the produced “fruit” and the used-up services of land and capital are the positive and negative “fruits of the labor” of the persons working in the productive opportunity (represented abstractly by a production function or production set).

      The two equivalent presentations of normative property theory
      The labor theory of property has two historically different but equivalent formulations, one using the Lockean fruits-of-labor language and the other using the juridical notion of responsibility. As soon as MP theory was developed at the close of the 19th century, orthodox economics quite alertly developed the theory metaphorically using both narratives. We have already seen how Friedrich von Wieser developed the responsibility imputation version. It was left to John Bates Clark to develop the Lockean-sounding version.

      “When a workman leaves the mill, carrying his pay in his pocket, the civil law guarantees to him what he thus takes away; but before he leaves the mill he is the rightful owner of a part of the wealth that the day’s industry has brought forth. Does the economic law which, in some way that he does not understand, determines what his pay shall be, make it to correspond with the amount of his portion of the day’s product, or does it force him to leave some of his rightful share behind him? A plan of living that should force men to leave in their employer’s hands anything that by right of creation is theirs, would be an institutional robbery—a legally established violation of the principle on which property is supposed to rest.” [Clark, John Bates. 1899. The Distribution of Wealth. New York: Macmillan, 8-9]

      It seems to be only heterodox economics, in either its Marxist or non-Marxist versions, that has been unable to discover either treatment in non-metaphorical terms. The labor theory of property is unavailable to Marxist theory since it would displace the superficial but ideologically important “labor theory of value and exploitation” which is not even a critique of wage labor per se but only an argument that “wages-are-too-damn-low” (and ditto for the “neoclassical exploitation theory” when wages are below the value of labor’s marginal productivity). The non-Marxist but heterodox critiques of MP theory have yet to discover the r-word (and the juridical principle for imputing responsibility) so they have no critique of MP theory’s treatment of “imputation” in principle, and are reduced to harping on idealizations, non-competitive markets, and practical measurement difficulties of MP theory (e.g., the chapter on MP theory in Steve Keen’s Debunking Economics book) that are well-known to any thoughtful neoclassical economist.

      The modern treatment of the labor theory of property is just the property-theoretic application of the juridical principle of imputing legal or de jure responsibility in accordance with de facto responsibility. That principle in no way denies the causal efficacy of non-human inputs and, in fact, part of what the people working in a firm are de facto responsible for is the using up of those causally efficacious inputs (the negative “fruits of their labor”) and thus should bear those input liabilities since as von Wieser put it: “they are dead [i.e., non-responsible] tools in the hand of man; and the man is responsible for the use he makes of them.”

      The fundamental theorem of property theory then says that “in the absence of ‘externalities’ and breeches in market contracts” (along with some other standard assumptions), then the assignment of legal responsibility by the market mechanism of appropriation is in accordance with de facto responsibility, i.e., the normative labor theory of property is satisfied.

      The critique of the renting of persons, i.e., the employment contract
      The paper under review goes on to note that responsible human agency is not voluntarily de facto transferrable from “employee” to “employer” so the whole idea of responsible human actions being transferred from “resource-holder” to “firm” or “producer” in the employment contract is bogus—as is easily recognized in the case of the hired criminal. Since the employment contract is inherently breached by the non-transferability of responsible human agency, that premise of the fundamental theorem is violated and the market mechanism mis-imputes the input-liabilities and thus the output-assets to the contractual residual claimant instead of to the people working in the firm—”an institutional robbery—a legally established violation of the principle on which property is supposed to rest.” The people working in the firm should be legally recognized as the de facto responsible legal party as Lord Eustace Percy noted long ago.

      “Here is the most urgent challenge to political invention ever offered to the jurist and the statesman. The human association which in fact produces and distributes wealth, the association of workmen, managers, technicians and directors, is not an association recognised by the law. The association which the law does recognise—the association of shareholders, creditors and directors—is incapable of production and is not expected by the law to perform these functions. We have to give law to the real association, and to withdraw meaningless privilege from the imaginary one.” [Percy, Eustace. 1944. The Unknown State: 16th Riddell Memorial Lectures. London: Oxford University Press, 38; quoted in: Goyder, George. 1961. The Responsible Company. Oxford: Basil Blackwell, 57]

      It should be added that the fundamental theorems of price theory and of property theory are not based on one personally accepting the normative Paretian principle of efficiency or the usual juridical principle of imputation. The theorems just demonstrate that under certain conditions, those principles are satisfied, and, under other conditions, they are violated. One doesn’t “refute” the fundamental theorems by saying “I don’t like Paretian efficiency” or “I don’t like the juridical principle of imputation.” One is perfectly free to say I don’t personally care about Paretian efficiency (which many heterodox economists might do) or I don’t personally care about imputing the input-liabilities and output-assets to the de facto responsible party, i.e., to the “human association which in fact produces and distributes wealth” as Lord Percy put it. The point is not about some sort of normative persuasion but about theorems relating descriptive and normative concepts in abstract models of a private property market economy.

      Katzner’s central questions
      Katzner goes on to pose a number of descriptive price theoretic questions about how a neoclassical firm operates—but doesn’t ask the sort of property theoretic questions that are the topic of the paper—like:
      “how is it in a private property market economy that the liabilities for the inputs used up and the assets produced in a productive opportunity are legally assigned to one party or another?”

      Then Katzner asks the “central questions”:

      “My central questions to Ellerman are: Why is the labor theory of property, both descriptive [see above on there being no “descriptive” LTP] and normative aspects, important in economics? What are the significant economic questions to which it provides answers? Would the theory, if accepted, add detailed realism to the neoclassical understanding of the firm, would it significantly modify the neoclassical vision of its operation, or both? If it would modify the neoclassical vision, in what ways? Personally, I am not opposed to consider changing my understanding of the firm, but I first need to know why I should. Addressing questions such as these would give, from the perspective of this neoclassical economist, the labor theory of property greater force in unifying the paper.”

      Firstly, the “significant economic questions to which it [e.g., LTP] provides answers” are the sort of questions asked by John Bates Clark: Is the current economic system based on the renting of persons a “plan of living that should force men to leave in their employer’s hands anything that by right of creation is theirs, [which] would be an institutional robbery—a legally established violation of the principle on which property is supposed to rest”? In view of the answers, a neoclassical economist is likely to say “Well, I am not interested in those questions” or “I would not consider those to be ‘economic’ questions so I, as a ‘professional economist’, don’t have to ask them.”

      Or “As an economist, I am only interested in price-theoretic questions about a private property market economy.” If one only asks about the price-theoretic comparative statics of the neoclassical firm, then property theory won’t answer price-theoretic questions (but the theory of the firm can be reformulated in a property-theory-friendly way as noted at the end of these comments). Property theory is designed to deal with property theoretic questions like the one just given which could be reworded as:

      “the market mechanism for the transference of property rights is the system of contractual exchanges, but what is the market mechanism for the appropriation of the assets and liabilities created (i.e., for the property rights created and terminated) in normal production and consumption activities?”

      Usually neoclassical economists are not even able to formulate such a property theoretic question in a non-question-begging manner. For instance, they might beg the question with the trivial: “Who is to be the first owner of the products of a corporation?” without considering how it is that the products produced in a productive opportunity (e.g., described abstractly by a production function) become “the products of the corporation.” For instance, when an idle factory of the Studebaker corporation was leased out to Chrysler, then the cars rolling out of Studebaker’s factory building were not “the products of the Studebaker corporation.”

      The answer is given by the market mechanism of appropriation—and is supplemented (or preceded) by the understanding why the “fundamental myth” does not answer the question in a private property market economy. And as in the case of price theory, one can go on and ask normative questions, e.g., about the Paretian efficiency or inefficiency in price theory, or about the satisfaction or non-satisfaction of the juridical principle of imputation in production based on the employment relation of renting human beings. One could go through one’s whole professional life as a neoclassical economist analyzing the descriptive behavior of neoclassical firms—or of slave plantations for that matter—and never asking those normative questions about efficiency or about justice in appropriation and thus one could ignore the fundamental theorems of price theory and property theory.

      A simple mis-reading
      Katzner’s next set of comments seem to be based on a simple mis-reading.

      “What bothers me about the discussion of the analogy between Paretian efficiency and the courtroom prosecution of a crime (p. 14) is that Ellerman seems to suggest that ‘revealed preferences’ of animals and other non-human things are implicitly included in the neoclassical production function and the characterization of Paretian efficiency.”

      The juridical principle of imputation uses the basic distinction between responsible persons and non-responsible non-persons or things or what von Wieser called “instruments and all the other conditions”—a distinction which is ignored in the usual production function presentation of a productive opportunity q = f(x,y,z). Hence the natural question to ask is “where does the person-thing distinction show up, if at all, in neoclassical economics?” One answer is that it shows up in the notion of Pareto optimality that only considers the preferences of persons, not the “‘revealed preferences’ of animals and other non-human things”. I have no idea how Katzner reads this to be about those ‘revealed preferences’ somehow being included in a neoclassical production function. Only human preferences are included in the notion of Paretian efficiency and only human actions can be responsible in production—whereas the neoclassical production function ignores the responsible-actions/non-responsible-services distinction in its treatment of the causally efficacious “input services.”

      The imputation of responsibility versus role-responsibilities redux
      The rest of the comments just expand on that initial mis-reading except for the later comment: “Moreover, if any inputs carry the responsibility for fulfilling production and profit goals, it is the human inputs.” which again seems to be using the notion of role-responsibility in a company as an organization (“fulfilling…goals”), which is not the notion of responsibility used in the juridical principle. See the earlier quotes from Kelsen or von Wieser. In the philosophical literature, H.L.A. Hart uses some tortured prose to show many different ways that the word “responsibility” can be used.

      “As captain of the ship, X was responsible for the safety of his passengers and crew. But on his last voyage he got drunk every night and was responsible for the loss of the ship with all aboard. It was rumoured that he was insane, but the doctors considered that he was responsible for his actions. Throughout the voyage he behaved quite irresponsibly, and various incidents in his career showed that he was not a responsible person. He always maintained that the exceptional winter storms were responsible for the loss of the ship, but in the legal proceedings brought against him he was found criminally responsible for his negligent conduct, and in separate civil proceedings he was held legally responsible for the loss of life and property. He is still alive and he is morally responsible for the deaths of many women and children.” [Hart, H. L. A. 1968. Punishment and Responsibility. New York: Oxford University Press, 211]

      In particular, Hart discusses “role-responsibility” [Ibid., 212] as opposed to the notion of de facto responsibility. In an institution or organization, a person has a role, a job, or some set of specified tasks the individual is supposed to perform. That is the person’s role-responsibilities. The individual would be “deserving” of certain “merits” or “demerits” within the organization depending on whether the person fulfilled or fell short of fulfilling his or her “responsibilities.”

      These institutionally-defined role-responsibilities should not be confused with the notion of de facto responsibility as used in the juridical principle of imputation, i.e., in the labor theory of property. A group of people acting jointly are de facto responsible for the differences they deliberately make–in comparison with what would have occurred had they not acted. For the assignment of de facto responsibility for what they did, it does not matter if the joint action was the group’s “responsibility” or assigned-task in some organizational setting. If a corporate employee commits murder, the court presided over by a visible judge is really not concerned about the person’s “job responsibilities.” It should also be noted that the question of de facto responsibility is backward-looking or retrospective. The question is “Who did it?”–not what is one supposed to do in an institutional role or as a “socially responsible property owner.”

      How to re-develop the neoclassical theory of the firm in a property-theory-friendly way
      Since so many of Katzner’s comments focus on the neoclassical theory of the firm, let’s finally take a closer look at how the neoclassical theory is formulated. Can it be reformulated in a more property-theory friendly way? Firstly, it is, of course, perfectly possible to mathematically distinguish between the de facto responsible “inputs” and the non-responsible inputs as in done in the notation Y = f(K,L) as opposed to Y = f(X1,X2).

      Secondly, since “something” cannot be produced out of “nothing” by a single input, it is also possible for the whole of MP theory to be re-developed where the marginal products are vectors with positive and negative components indicating (under cost-minimization) that each marginal unit of an input “uses up” certain other inputs in the process of “producing” certain outputs. And when the “input” is a responsible factor, then we can remove the quotation marks on “uses up” and “produces.”

      The usual non-vectorial treatment of marginal products as scalar quantities in the neoclassical theory of the firm takes a different tact. As one unit of x is increased, then when the production process is shifted to a slightly more x-intensive form so that, with the other inputs being the same, some more output is produced—and that is the marginal productivity of that input x.

      In the usual implicitly ideological presentation of MP theory, that marginal unit of x “produces” those MPx units of output (as if the extra product was miraculously produced by the extra unit of x ex nihilo without using up more units of the other inputs—the “immaculate production” version of marginal products). Since each unit of the x input is like the marginal unit, each unit of an input is paid for “what it produces” under the marginal-product pricing of inputs in a competitive firm—i.e., Friedman’s “capitalist ethic” quoted above.

      This metaphorical treatment of picturing “inputs” as “producing” outputs has a mathematical dual in the equally metaphorical picture of the “outputs” as “using up” so many units of the inputs. The marginal unit of output “uses up” inputs with a certain minimum cost, i.e., the “marginal cost,” so under the marginal cost pricing of outputs in the competitive firm, each unit of output is “held responsible” for the inputs it “used up” and the cost of those liabilities is charged to it in the output price.

      Incidentally, this shows that the algebraically symmetric treatment of “creating outputs” versus “using-up inputs” is already there, in a certain form, in the neoclassical metaphorical picture of “distribution” of the assets and liabilities created in production—even though the apologetically important emphasis is on the immaculate production version where each unit of an “agent” of production is pictured as creating its marginal product ex nihilo.

      “At the point in the economic system where titles to property originate,—where labor and capital come into possession of the amounts that the state afterwards treats as their own,—the social procedure is true to the principle on which the right of property rests. So far as it is not obstructed, it assigns to every one what he has specifically produced.” [Clark, John Bates. 1899. The Distribution of Wealth. New York: Macmillan, p. v.]

      Thus the neoclassical treatment of the firm has lovely dual metaphors where non-responsible inputs are pictured as “producing” outputs and non-responsible outputs are pictured as “using up” inputs, and each is imputed, i.e., paid /charged for, what it “produced” or “used-up” so “justice” is served in this metaphorical application of the juridical principle of imputation.

      Alas, it is all metaphorical trying to take marginal causal efficacy of all “agents”, responsible or not, as if it were responsibility. But as von Wieser blurted out, in terms of actual non-metaphorical notion of responsibility: “Land and capital have no merit that they bring forth fruit; they are dead tools in the hand of man; and the man is responsible for the use he makes of them.”

      Instead of the property rights to the produced outputs being imputed to the inputs and the property liabilities for the used-up inputs being imputed to the outputs, there is one legal party who stands between the input-suppliers and output-demanders, and that one legal party legally appropriates all the input-liabilities and all the output assets as explained in descriptive property theory. Before economists learned to couch their descriptions in terms of the “distributive shares in the product,” some economists blurted out the property-theoretic fact that one party appropriated all the product (and covered all the costs) as per the property-theoretic description.

      “The owner of the slave purchases, at once, the whole of the labour, which the man can ever perform: he, who pays wages, purchases only so much of a man’s labour as he can perform in a day, or any other stipulated time. Being equally, however, the owner of the labour, so purchased, as the owner of the slave is of that of the slave, the produce, which is the result of this labour, combined with his capital, is all equally his own. In the state of society, in which we at present exist, it is in these circumstances that almost all production is effected: the capitalist is the owner of both instruments of production: and the whole of the produce is his.” [Mill, James. 1826. Elements of Political Economy. 3rd ed. London, Chapter I, section II]

      The whole “distributive shares” narrative tries to finesse those property theory facts with price-theoretic metaphors. How better to explain a metaphorical division or distribution of the property rights to the product than with an imputation using a metaphorical notion of responsibility? Justifying one metaphor with another metaphor is seen not as the apogee of apologetics but as a “deep” economic explanation in contrast to the “superficial” legal facts. Why focus on “superficial” property-theoretic facts when you can traffick in “deep” price-theoretic metaphors in the science of neoclassical economics?

      The basic normative question is not about the pricing of inputs or outputs of a productive opportunity but is about who is to be that one legal party, e.g., Capital, Labor, or the State, that is “the firm.” The usual juridical notion of responsibility answers that question as the legal party made up of all the persons working in the firm as noted in the previous quote from the conservative thinker, Lord Percy.

      Getting back to the non-ex-nihilo vectorial notion of the marginal product, given an extra unit of one input, then cost minimization determines what other increments of inputs need to be “used up” to “produce” extra output at minimum cost. Thus the vectorial marginal product would have as its negative components those extra units of other inputs that need to be “used up” in order to “produce” at minimum cost the extra units of output that are the positive components of the vectorial MP. The neoclassical theory of the firm has not bothered to work out the math of this vectorial treatment of MP theory—let me guess, perhaps because it does not have the ideological interpretation of “each factor getting what it produces” in the “capitalist ethic.”

      Furthermore, with the vectorial MPs, there is no “exhaustion of the product” result (under constant returns). But when one does recognize that L is the only responsible factor then, instead of the “product exhaustion theorem,” one can integrate the vectorial marginal product of responsible human action (i.e., “labor services” L) to find out in total what the persons in a firm are de facto responsible for creating and using up. The result is precisely what is called “Labor’s product” in property theory, e.g., p. 19 in the paper under review, without the MP theory detour. Thus the basic ideas of property theory can all be developed with all the whistles and bells of MP theory in the theory of the firm—but you won’t find that in the total sum of the neoclassical literature for the obvious reasons.

      If you are interested in how neoclassical theory of the firm can be reformulated using vectorial marginal products to make these property theoretic points explicit in that framework and how MP theory can be reformulated without the immaculate-production version of marginal products, then you can consult my treatment of all that which was published a couple of decades ago: “Chapter 5: Are Marginal Products Created Ex Nihilo?” in: Ellerman, David. 1995. Intellectual Trespassing as a Way of Life: Essays in Philosophy, Economics, and Mathematics. Lanham MD: Rowman & Littlefield, which can be downloaded at: http://www.ellerman.org/intellectual-trespassing/

  • Don Katzner says:

    I would like to thank David Ellerman, in reference to his comment of September 22, for his patience in clarifying the labor theory of property and explaining why it is important in economics. Apparently my neoclassical background led me to read his paper with different meanings and understandings than those appropriate for comprehending important parts of his argument. This, of course, is often a central problem in neoclassical-heterodox intellectual interaction. But it does not mean that such interaction is hopeless. I have learned from this exchange and hope he has benefited from the effort to communicate ideas to someone with a different mind-set.

  • Jamie Morgan says:

    This is a thought provoking paper. There may be issues you want to clarify or consider based on how it may be interpreted by the reader coming to this for the first time.

    You state in the conclusion:

    ‘this property-theoretic analysis of the employment contract has nothing – repeat nothing – to do with the size of the wage payment (which was never used in the analysis) so it is totally independent of the superficial exploitation theories of the neoclassical variety (paying less than the value of the marginal productivity of labour) or the Marxian variety (extracting more labour time than is embodied in the wages). The whole employment system of renting persons is a property system based on a ‘legally established violation of the principle on which property is supposed to rest’ that is established by virtue of the employment contract. It takes a property theory to critique a property system. Not a value theory… If the modest proposal were accepted that the contract for renting of human beings be recognized as invalid and be abolished, then production could only be organized on the basis of the people working in production (jointly) hiring or already owning the capital and other inputs they use in production. The market mechanism of appropriation would then correctly impute legal responsibility to the de facto responsible party… The legal members of the firm as a legal party would then be the people working in the firm. Such a firm is a democratic firm and the private property market economy of such firms is an economic democracy.’ (pp. 22-23)

    You situate this to the prior claim:

    There is a fundamental myth: product rights are part of capital rights – but there is actually a difference between command over the production process and capital ownership rights e.g. the myth may take the form one assumes that the capital owner has the contractual role of being the firm but the capital used in a firm may be rented etc; so there is a distinction.

    Responsibility: can be applied only to the actions of persons not of things – so labour is not a thing and cannot be an input in a thing sense – persons are a source of responsibility – rights exist for persons – the market system imputes responsibility qua consent to appropriation of assets – the transfer of alienable rights (labour and its product?)

    So, within markets we act as though product rights are included in pre-existing capital rights (an Invisible Judge that ‘lets it be’) – no intervention takes place and so the legal party who has purchased the inputs becomes the legal seller of the outputs… ‘The pattern of appropriation is conceptually defined not by the ownership of property but by the pattern of contracts’.

    ‘the whole product is in fact legally appropriated by one legal party, the party who stands between the input suppliers and output demanders, and who pays for all the inputs and sells all the outputs of production’

    But there is a basic problem:

    ‘It is the no-breach condition that is violated by the employment contract. The basic fact that connects the contractual mechanism and the imputation mechanism is that things (as opposed to persons) can, in fact, be transferred from the factual possession and control of one party to another…. But this mechanism breaks down when person A (an employee) tries to rent his or her self to person B (the employer)… the employee agrees to co-operate with the employer in a certain activity… there is no voluntary transfer of de facto responsibility. Both the employee and the working employer are jointly de facto responsible for the fruits of their joint activity. The employee’s responsible agency is inherently inalienable…. The invisible Judge mistakenly imputes all the legal responsibility to the employer for the using of the ‘input’ labour’ [in a mechanism that works by non-action – there is no intervention to highlight the violation of the real contract]. Appropriation then follows

    As such ‘Instead of the factual transfer of labour services between parties, there is only de facto responsible cooperation. In terms of the contractual machinery, the employment contract is impossible to actually fulfil with the transfer of responsible actions from the seller (employee) to the buyer (employer). Thus the employment contract systematically violates the no-breach requirement. In what might be taken as fraud on an institutional scale, an institutional robbery – a legally established violation of the principle on which property is supposed to rest or as Proudhon put it simply property is theft, the responsible cooperation of the employees is taken by the legal authorities as fulfilling (i.e. not breaching) the labour contract which allows the employer to take the contractual position of the whole product appropriator’

    How would you respond to the following line of critique:

    The argument as stated seems to imply that once clarified the law becomes the domain in which intervention is made and the problem of appropriation contested. But surely the law is not accidentally a place of tensions, contradictions and ambiguities – these are constructed as responses to power and as responses to requirements of systems that are assumed to function in given ways that must be smoothed by rulings to create, perpetuate or extend these tensions etc.

    What I mean here is that the idea of contradiction can be read differently; for example in terms of how we view constructing and contesting the law:

    Many people are employed by corporations – so their labour is appropriated by contracts with a legal or juridical person, but one whose modern form is basically contradictory – a non sentient, non corporeal entity with no conscience or actual form for agency – acquires the rights of agency, and a distinct existence in perpetuity – the basis is manifest inability to be ‘responsible’ or to take any part in a contract that involves inalienability (since how can a non-sentient form have any inalienability through which to participate with employees via contracts that are themselves contradictory in terms of alienability). The corporation cannot be human and as Corporate Watch notes modern corporations often act inhumanely (a recognition that goes back as far as Thurwell). It is not just the market that imputes here, but the courts (and the issue is not one resolved by simply stating or focusing on actual employers who participate, since the legal reality can start from the corporation and the corporation cannot participate or cooperate or buy). One might then equally argue that if one is clarifying the nature of a system that exploits or appropriates from some – one must also include the way the legal system is constructed to enable functionality, interest and power that limit justice (or shape how we think about it) – property may be theft but the legal system may also be the way in which theft (if we want to think of it this way) is constructed. Appealing to a contradiction in law may be illuminating but also in a different way beside the point. Ambiguities are already recognized, the law accepts them rules with them and treats with them – would contesting the contract be any different? If the argument rests on the contradiction as lever and the law replies with later rulings that construct or empower forms of tension that serve the purpose of appropriation via the contract – facilitating appropriation despite or in some sense in tandem with inalienability and with a focus on the issue of responsibility – would the force of the critique still stand (would property cease to be ‘theft’?)? if it is then are you moving beyond contracts to some other issue – or realm of legitimation what it is to be human (which is not law – except perhaps as natural law) ?

    This may then lead to the counterargument – which you recognize in a different way – that ownership of capital/property creates power, which in turn creates influence (and not just influence, also interests – since a system evolves to express tendencies and we can all feel we have vested interests in a set of interests that may also be ones in which we could have other interests – e.g. one may state: I currently need a job and don’t want the system as is to become chaotic whilst we contest the nature of employment contracts and seek democratic firms and markets). Wouldn’t a Marxist say the issue here is one of distribution – not just why we have low wages but the consequences of distributions for the system and reproduction of distributions – including the way the law is able to perpetuate ambiguities in form to some purpose…

    Since a system can be looked at in many different ways and there are always other contexts that can be illuminating – couldn’t a heterodox economist of other hues argue that labour is ‘sold’ as labour ‘power’ – that it becomes a commodity and so thing like – that the system requires it be treated as a thing, requiring in a certain sense the human to alienate what seems otherwise inalienable (free labour is after all not free – which was Marx’s main point about free labour in a capitalist system)

    One can then choose to focus on relations as legal but equally this seems a matter of choice for clarification rather than of necessity for understanding.

    If this all seems to misinterpret the substance or seems beside the point you want to make David (and it may well be all this is covered in your prior work) then it is worth considering these were the inferences I drew as a reader and these were the points that occurred to me in reading the argument you wanted to make…. Coming to it fresh…As such you may still want to consider them in order to improve the persuasiveness of your case….

  • Jamie Morgan says:

    Sorry David that should have been Thurlow – as in Lord Chancellor of England (famous quote ‘no soul’ etc see John Coffee, 1981 Michigan Law Review) – my typing is rubbish.

    Best, Jamie

    • David Ellerman says:

      I have read the comment by Jamie Morgan a few times and I am not totally sure about the point being made—so my reply may be missing the point(s).

      In broad terms, Morgan seems to be interpreting my argument as pointing out inconsistencies or tensions within the law and which might be dealt with and smoothed out by later rulings and the like. However, the argument is not about the law being internally inconsistent.

      Take the previous law about slavery. That law could have perfect internal consistency in treating those persons as things. The abolitionist argument was not that there were internal inconsistencies in slavery law that should be smoothed out. The “contradiction” was between the law treating certain persons as things that could be owned and the reality that the persons were not in fact things.

      In a parallel matter, the neo-abolitionist argument against the employment contract to rent (rather than own) other people is similarly based on the contradiction between the legal treatment of responsible human action (a.k.a. “labor services”) as being alienable when in fact the reality is that responsible human agency is factually inalienable. The hired criminal argument is the standard intuition pump for this argument [see the recent issue of this journal: Ellerman, David. 2015. “On the Renting of Persons: The Neo-Abolitionist Case Against Today’s Peculiar Institution.” Economic Thought. 4 (1): 1–20].

      Thus the argument was all along “moving beyond contracts to some other issue—or realm of legitimation what it is to be human (which is not law—except perhaps as natural law)”. That is why I made the contrast between the factual inalienability of the responsibility for the actions of a human, unlike the responsibility for the results of using some tool like a shovel which would be transferred from the owner of the shovel to the user/employer of the shovel when it is rented out. One archaic way to say this is that a contract to rent out a person is invalid at “natural law” (even though it is accepted in positive law) whereas a contract to rent out a shovel is not problematic in “natural law” or positive law (but that language may create as many problems as it solves).

      The argument is quite independent of the legal nature of the nominal employer which could be a natural person, a proprietorship, a partnership, an NGO, or a joint stock corporation—so the discussion of the legal nature of a corporation as a legal person is irrelevant to the argument.

      Towards the end of the comment, Morgan wants to drag me into the Marxist bog. Lord knows, I have written more than enough about the superficial Marxian labor theory of value and exploitation over the last 40 years or so (type “Marxist” in the search engine on my website: www/ellerman.org ).

      Morgan, however, gives a new twist in an “argument” that has nothing to do with value: “that labour is ‘sold’ as labour ‘power’—that it becomes a commodity or so thing like—that the system requires it be treated as a thing.” If the system in fact turned responsible human agency in some way into the services of things (how? drugs or computer chips or what?), then it would be wrong on those grounds (like killing a person) and one wouldn’t need any special heterodox theory to critique it. But such language would only be hyperbole in Marx’s day and hyper-hyperbole today.

      The standard liberal argument in favor of allowing the voluntary renting of persons is that it is voluntary. Even if the standard Marxist argument that the labor contract is not “really free” (in some sense that other contracts are “really free”) had any juridical validity, then it would still be superficial in that it does rise above the liberal voluntariness criterion by implicitly agreeing that it would be OK if it was “really free.” The inalienability argument works even on the assumption that the agreement to the contract is really voluntary. Inalienability, the recurring theme throughout Morgan’s comment, is more the topic of the previous ET paper cited above whereas this paper is on the labor theory of property.

      • Jamie Morgan says:

        Hello David I was commenting on how your paper read and so what you may want to clarify in order not to be read in these ways – I did not attempt to drag you into anything, and if x or y is irrelevant to your argument all well and good – you may wish to make this actually clearer so you succeed in making the argument you want to make in a way that has plausibility for a reader since presumably you want to persuade others of the position…

        Could you just clarify again: I suggested the law is internally inconsistent not that your argument was about this necessarily. The reality is that law is inconsistent and that this is acknowledged and managed within law to some purpose… how can this be irrelevant to any attempt to address the problem in a way that lends itself to different claims than are currently the case – where will these claims be made and in what sense…
        Best, Jamie

  • J. P. Rodriguez and J.G. Weeres says:

    Many costs are not counted or are un-priced in the economy. Dr. Ellerman has made an important contribution in revealing what may be the most critical un-priced cost in the economy—namely, the market termination of inalienable human rights.

    We only wish to add here the possibility that the entire institutional order—economic, political, and cultural—is involved in this violation of rights; that is, perhaps there exists a common institutional mechanism that has the ability both to generate such a cost and at the same time to prevent it from entering into the economic calculation.