There being a limit to how much I can obsess about the election, now scarcely more than three weeks away, I have decided today to put down on paper – or the electronic version thereof – some thoughts I have had for more than 40 years. I have laid out portions of this in one form or another but I do not think I have ever pulled it all together in a systematic and coherent fashion and I would like to do so now -- for the ages, as it were. If I may characterize this effort in general before undertaking it, I will be attempting an ideological critique of a standard sociological and, in some forms philosophical, explanation of the extreme income inequality that characterizes modern forms of capitalist economies.
To begin at the beginning, the distinctive mark of human
existence, at least for the past 12,000 years or so and perhaps for much
longer, is functional differentiation of productive activities, or as Adam
Smith memorably labeled it, the division of labor. Leaving aside our
prehistoric ancestors, for whom inadequate evidence exists, all of us eat food
we have not grown and processed, wear clothes we have not spun and woven and
tailored, live in houses we did not construct, drive in cars we did not
assemble, and dictate to a computer using programs we did not write.
Marx’s focus was on the contrast between capitalists and
workers, and he seems to have believed that as capitalism developed we would
move more and more into a world in which owners of capital stood over against a
mass of semiskilled and more or less interchangeable workers. The key to his
analysis of this situation was the concept of exploitation. But one of several
important developments in capitalism that Marx failed to anticipate was the permanent
existence of a steeply pyramidal array of unequally compensated jobs, all of
which in the account books of corporate firms stand on the side of “labor” but
whose compensation can vary, in the United States, from a minimum-wage of $7.25
an hour to managerial salaries of millions of dollars a year.
The most sophisticated ideological rationalization of the
exploitative character of capitalism is the theory of marginal productivity,
buttressed by a misinterpretation of a famous theorem by Euler. I have had my
say about that bit of flannery elsewhere and shall not repeat it here. But
there is a more recent “explanation” (which is to say ideological
rationalization) of the job and salary pyramid that owes its origins to early
20th century sociology and has gained credence in philosophical circles
by being taken up in the work of John Rawls. The key to this “explanation” is
the notion that I have labeled the “inequality surplus.” (I first introduced
this phrase in my little book on Rawls published more than 40 years ago.)
I am going to develop my argument by considering in very
elementary fashion an imaginary firm that I shall call Universal Widgets, Inc.
I do not believe that what I have to say will be in any way be weakened by this
bit of creative imagination. Universal Widgets, I shall suppose, is a firm with
100 employees. Ninety of them perform such functions as making the widgets,
boxing the finished product and putting it on trucks for delivery, cleaning
toilets, emptying wastebaskets, serving as secretarial staff, and so forth. The
other ten are management and run the company. All of them are employees and for
purposes of this analysis I am ignoring the question of company ownership.
To begin, let us suppose that with these hundred workers
randomly assigned to the 100 jobs, there is enough money left over after paying
for such things as raw materials and utilities to pay each worker $20,000 a
year – a total labor cost of $2 million. However, it turns out that if each
worker is assigned to the job for which he or she is best suited, the increased
efficiency thereby achieved will swell the sum available for wages to $4
million. Quite obviously, the most natural thing to do is to assign each person
to his or her appropriate task and then raise everybody’s wage from $20,000 a
year to $40,000 a year.
There are, however, two problems with this plan, one of
which can actually be solved fairly easily, the second not so much. The first
problem is that some of the positions in the Corporation require fairly
extensive training, of the sort that may take years. Let us suppose, for the
sake of simplicity, that the secretarial positions require a four-year college
degree and the managerial positions require an MBA in addition, while the
manufacturing, loading, and cleaning tasks only require as much training as is
currently provided by universal free secondary education. Those workers whose natural talents and
abilities mark them for secretarial or managerial positions may be unwilling
both to undertake the expense of college or postgraduate education and also to
be off the labor market for four or six years during which they would otherwise
be earning a wage. The first of these problems can of course be solved by
making college or postgraduate education free, as primary and secondary
education now is in the United States. In addition, the society can provide
support of an appropriate sort for those who have been selected for this
extended period of education.
So much for the difficulties easily handled. The real
problem, of course, is that the people identified as suitable for managerial
positions may not want to take them. Even though they have talents and
abilities that will make them enormously productive in those positions, thereby
increasing the total fund available for wages so much that every worker’s wage
can be doubled from $20,000-$40,000, they may simply not want those jobs.
Indeed, even after it is explained to them that by accepting those jobs they
will be doubling their wages (we will assume that they do not care about the
well-being of their fellow workers), they may be so disinclined to serve as
managers that they refuse to accept the assignment. “This is not the Army!”
They may protest. “I am a free American citizen. You can’t make me take that
job.”
What to do? Well, the story goes, we can induce them to
serve as managers and to undergo the undergraduate and postgraduate education
required to prepare them for that position, by offering them a salary larger
than $40,000 a year. Let us suppose that in order to get the ten individuals
best suited for management to agree to serve as managers, we must pay them $130,000
each, or an additional $110,000, which means that he wages fund must rise $1,100,000. This is where the concept of an inequality surplus enters the analysis.
With the ten individuals best suited for management serving as managers, at a
salary of $130,000 a year each, the wages fund available for distribution will
rise not $1,100,000 but actually $2 million. When the additional $1,100,000
paid to the managers is deducted from this fund, there will be $900,000 left
over, which means that each of the remaining 90 workers will experience a rise
of his or her wages from $20,000 a year to $30,000 a year. The additional $900,000
available to be distributed to the 90 nonmanagerial workers is an inequality
surplus. That is to say, it is a surplus that remains after the unequal wages
paid to the managerial workers are taken account of.
Now then, assuming that the 90 workers are not so envious of
the managerial workers that they would actually prefer to make $20,000 a year
so long as no one makes more than that rather than make $30,000 a year even
though 10 people are going to be making $130,000 each (this is the origin of Rawls’
odd and unexplained assumption of non—envy), the unequal structure of wages in
the company will, by a happy coincidence, be both explained and justified.
To see how bizarre this explanation actually is, let me
change the example a trifle. Suppose that instead of the Universal Widgets
Corporation, we are talking about a philosophy department at a university – oh,
let us say the Harvard University philosophy department. The department we
shall suppose consists of a number of full professors, several staff persons,
and (although no one ever bothers to notice this fact) several people who clean
Emerson Hall, empty the wastebaskets, maintain the grounds and do other
assorted tasks.
Imagine a young man and a young woman in their third year of
undergraduate study who are told that the needs of the society being what they
are, their career options are either to be a secretary in the Harvard
University philosophy department or a full professor in that department. The
two are given a battery of aptitude tests and it is determined that the young
man would be best suited for the secretarial position and the young woman for
the professorial position. These positions they are told are equally
compensated. (At this point I have to fudge with reality by pretending that the
Harvard University philosophy department is a profit-making operation with the
wages fund determined by the income generated by its employees – bear with me.)
“Well,” asks the young woman, “what are the terms of these
two jobs? What does one have to do in each of them?” The person administering
the battery of tests gives the following answer:
“If you become a secretary, you will be expected to work 40
hours a week, 48 weeks a year. You will sit at a desk, handle departmental
correspondence, manage grade sheets, answer the telephone, perform a variety of
secretarial tasks for the professors in the department, and respond to student
inquiries. If you become a professor in the department, you will be expected to
teach two courses or seminars in one semester and one course or seminar in the
other semester. A course meets either three times a week for 50 minutes or
twice a week for 75 minutes. A seminar meets once a week for two hours. Each
semester, allowing also for final examinations, is 15 weeks long. So you will
work 30 weeks a year and have the other 22 weeks completely free of official
duties. In addition to teaching, you will have other obligations including class
preparation, office hours, administrative duties, and – several times each
semester – grading of student papers and examinations. Taking all and all, and
allowing for the fact that once you have prepared a course teaching it a second
time is much less time-consuming, your weekly duties during the 30 weeks a year
that you are working will consume roughly 20 hours each week. To sum up, the
secretarial position calls for you to work 40 hours a week, 48 weeks a year,
and the professorial position calls for you to work 20 hours a week, 30 weeks a
year. The positions are equally compensated. If you are assigned to these
positions without reference to your abilities, then the income of the
department will make it possible to pay each of you $30,000 a year.”
“Well,” the young woman replies, “I would rather be a
secretary if that is what is involved.” The young man is more agreeable and
says he would happily accept either position. Notice that it is essential to
this argument that the young woman prefer the secretarial position because if
she too is agreeable to either job, then the maximum productivity of the
department could be achieved by making the young man the secretary and the
young woman the professor. But the young woman doesn’t want to be a professor,
so some way must be found to persuade her that does not require actually
lowering the salary of the young man.
The young woman is offered $100,000 a year, $150,000 a year,
$180,000 a year, and still she cannot be persuaded. Finally, someone has the
clever idea of offering the young woman a semester off every seven years – the
person with the idea calls it “a sabbatical.” Happily, this is enough to
persuade the young woman to agree to be a professor rather than a secretary and
at $180,000 a year, there is an inequality surplus in the department sufficient
to raise the young man’s salary as secretary to $50,000 a year. Everybody is
happy and the pay structure of Harvard University is simultaneously explained
and justified.
Do I needs to argue that this is nonsense?
Let me end, as I so often like to do, with a little personal
story. My big sister, Barbara, who has just had her 90th birthday
was a phenomenally good student. In 1947 – 48, her senior year in high school,
she was the grand national winner of the Westinghouse Science Talent Search, later
the Intel Science Talent Search. The victory gave her a prize of $2400,
sufficient to pay four years of tuition at Swarthmore College where she
graduated in 1952 summa cum laude in mathematics. She went on to earn a
doctorate in biology at Harvard and ended a long and successful career by
serving as the Ombud of the World Bank. As a teenager, Barbara took an aptitude
test arranged for by our mother who was a secretary at an organization called
the Child Study Association. When she finished the test, the psychologist who
was administering it said to her “you have many great abilities and will go far
but don’t ever be a secretary. You are completely unsuited for that position.”
41 comments:
Could you explain or could some other reader explain Rawls's assumption of non-envy?
Thanks.
"The real problem, of course, is that the people identified as suitable for managerial positions may not want to take them."
replace with
"The real problem, of course, is that the people identified as suitable for toilet cleaning positions may not want to take them."
In addition, you'll never persuade me that the damage, both physical and mental, done to those who do physically arduous labor isn't a whole lot greater than those who do mentally arduous labor. I think that's something Adam Smith did get approximately right.
I believe it has to do with Rawls' ideal theory: he's assuming perfect people in the original position and asks what would they do behind a veil of ignorance.
@ David Palmeter
Not really. R. does not assume perfect people anywhere. He does have psychological assumptions, or a moral psychology if you prefer that phrase, and he sorts envy, as I recall, into the categories of "excusable" envy and the kind that isn't. But the basic pt, I think, is that he thinks people will not envy those who are better off if the society's basic institutions are just or come reasonably close to being so. Anyway I haven't read the whole OP.
s. wallerstein:
[Very roughly] Rawls thinks that the distribution of goods in society should mimic what people would choose behind a veil of ignorance, which means they don't know what their place in society will be. He thinks that people behind the veil of ignorance would always prefer an unequal distribution of goods to an equal distribution of goods if the position of the worse-off individuals under the unequal distribution is better off than the position of everyone under the equal distribution. That assumes that people aren't 'envious' such that if they found themselves worse off than others, they would prefer those others be worse off even if that did not have the flip-side that they would be better off. If people are envious then they might prefer, behind the veil of ignorance, the unequal distribution that was worse for everyone, rather than, as Rawls claims they would, the unequal distribution in which everyone was better off than they would be under the equal distribution.
I must be missing something, but how could the position of the worse-off individuals be better under an unequal distribution than the position of everyone under an equal distribution?
Under an equal distribution everyone could, in theory, be equally destitute or equally at level x. Under an unequal dist where the poorest are at x+1, everyone is better off at least in material terms.
Incentives, for example. The more people are permitted to keep of what they produce (it is claimed) the more motivated they will be to produce. Somewhere between a system in which people can keep everything they produce, and a system in which everything is re-distributed equally, there is likely to be a system in which we redistribute some but not all of the product of those who produce more such that everyone is better off than they would be under the equal distribution which didn't reward effort or whatever, even though the people who produce the most are better off still than those who don't.
Perhaps I'm over-explaining it. The idea is just that the pie is bigger even though their (the worse off) fraction of the pie is smaller.
Thanks. I was assuming a constant income for the entire society. In other words, he's saying that a rising tide lifts all boats.
No he isn't saying that. That's an empirical assertion he doesn't make.
Quick way to get an overview is prob Stanford Enc of Phil online.
The analysis offered above sounds a lot like the prisoner’s dilemma, according to which a rational actor would prefer to betray his partner rather than risk being betrayed. The conclusion, from an exclusively analytic standpoint, is that rational actors would prefer to act out of self-interest rather than cooperate. Studies have shown that cooperation only emerges when the same players repeat the experiment over an extensive period of time, and conclude that altruistic strategies do better over time than those which emphasize self-interest.
There is a game show on TV which I have been watching during the pandemic as a break from writing briefs at 3 A.M. It is called Fried or Foe and involves 6 players who are divided into three teams of 2 each. The teams compete against each other answering trvia questions and being awarded money for correct answers. After a round is completed, the team with least money face off at a desk which conceals a “friend” or “foe” button underneath. Each player selects whether s/he is a friend or foe. If both players choose friend, they share the money equally. If one chooses friend, and the other chooses foe, foe takes all of the money. And if they both choose foe, neither receives any money. My observation is (without keeping a log) is that the cases in which one or both players choose foe far outnumber the cases where both players choose friend. I think that people reason that they would prefer to risk neither receiving any money than be taken advantage of by someone choosing foe when they choose friend.
s. wallerstein:
Yep exactly.
There are problems w Rawls's views, as with any other philosopher's, but his theory in my view is not primarily about justifying inequalities. But we've been round and round on this before.
Btw one book on my to-read list is Katrina Forrester's _In the Shadow of Justice_. Whether/when I'll get to it remains to be seen.
If anyone has the first edition of TOJ on the shelf, look at the two sentences at the end of the first graph on p.158. Don't have the patience to type them out right now (on phone).
Of course his theory is not primarily about justifying inequalities. No one who has read Rawls could think that.
I see reference here to 'The most sophisticated ideological rationalization of the exploitative character of capitalism is the theory of marginal productivity, buttressed by a misinterpretation of a famous theorem by Euler.'
Nobody ever actually offered an ideological rationalization, in so many words, of the exploitative character of capitalism, in so many words. Indeed, I hesitate to assume that you have anything resembling a formal definition of capitism in mind, here, at all. Let alone, of this 'exploitative' business, which I pretty much take to be a feeling. Hooray for feelings, at least they are 'real'. Otherwise, 'exploitative' is nothing that is actually real.
As to the theory of marginal productivity, or, that is, marginal physical productivity, this would be productivity of an input -- of a factor of production. There are three basic resources or factors of production: land, labour and capital. Of course, the factors are also frequently labeled "producer goods or services" to distinguish them from the goods or services purchased by consumers, which are frequently labeled "consumer goods". Actually, there are two types of factors: primary and secondary. Differences are most stark when it comes to deciding which factor is the most important, and I'll mention that there is what Marx considered the "elementary factors of the labor-process" or "productive forces" to be, but to distinguish 'Marxism' from 'Classical', and to distinguish both, from 'Neoclassical economics', as it developed an alternative theory of value and distribution.
But what about this misinterpretation of a famous theorem by Euler? Or put it this way -- what proposition can be proved by using Euler’s Theorem? The idea here is that the sum of the marginal products add up exactly to the total output, and every input is paid the value of its marginal product, and the entire product will always be handed out to those who work on it. There is thus neither a surplus nor a deficit left at the end.
Who is Euler? We are talking about Leonhard Euler, who introduced much of the modern mathematical terminology and notation, particularly for mathematical analysis, such as the notion of a mathematical function. One of the most eminent mathematicians of the 18th century and is held to be one of the greatest in history.
Note how we get int a 'controversy' here, is that a theme trumpeted by Karl Marx is that under capitalism workers are paid only a fraction of their productivity. This raises the general question of what should be the payment for labor or any other resource required in production, and in particular, shall we say, the notion that the entire output of an enterprise is entirely due to labor. And there is, I suppose, what this notion perhaps stems from, but I can't even guess.
What about this, Danny?
Karl Marx
Critique of the Gotha Programme
I
1. "Labor is the source of wealth and all culture, and since useful labor is possible only in society and through society, the proceeds of labor belong undiminished with equal right to all members of society."
First part of the paragraph: "Labor is the source of all wealth and all culture."
Labor is not the source of all wealth. Nature is just as much the source of use values (and it is surely of such that material wealth consists!) as labor, which itself is only the manifestation of a force of nature, human labor power. the above phrase is to be found in all children's primers and is correct insofar as it is implied that labor is performed with the appurtenant subjects and instruments. But a socialist program cannot allow such bourgeois phrases to pass over in silence the conditions that lone give them meaning.
'Do I needs to argue that this is nonsense?'
Or, that is, Multivariate functions that are “homogeneous” of some degree are often used in economic theory, and this is nonsense. And Here is a precise definition. I'm kidding. NEVER!!!
But while we are suppoisng Euler's theorem to be relevant, by the way, I could add a footnote that in contrast to the solutions of Wicksteed and of Wicksell, Walras and Barone, the solution furnished by Hicks and Samuelson proves the product exhaustion theorem without assuming constant returns to scale (i.e. first-degree-homogeneous production function) and without using Euler theorem.
--whatever the merit of the Hicks-Samuleson solution..
The marginal productivity theory caused something of a little tornado around the turn-of-the-century.
Accounts of the debates surrounding marginal productivity abound -- it was not immediately embraced by other economists, not even the other Neoclassicals, largely because it was not clear what the theorem said nor what its implications were. As such, it might be useful to clarify a few points of confusion. But I think I can settle for emphasizing that this is multivariate calculus. If you want to cover the basic mathematical tools used in economic theory, then knowledge of elementary calculus and so forth, will have to be assumed. If it's your cup of tea, concavity and convexity, optimization theory, differential equations, difference equations, then fine, also, multivariate calculus.
It might seem like somebody can points out errors and suggeste improvements, in 'mainstream economics', and fine, let us suppose that it does, seem that way. I would just track on what we take ourselves to be doing. Economics has always featured multiple schools of economic thought, with different schools having different prominence across countries and over time, and I imagine that mainstream economics can be defined, as distinct from other schools of economics, by various criteria. For whatever it is worth, I think we can all agree that many economists dismiss heterodox economics as "fringe" and "irrelevant", with little or no influence on the vast majority of academic mainstream economists in the English-speaking world. And my point of emphasis here, is let's be doing what we take ourselves to be doing.
I think mainstream economics is interesting enough, on its own terms. Your mileage, may vary.
@ Danny
If you glance at RPW's article on Marx's labor theory of value, which is accessible here via box. net, you'll see, esp from the last part, that RPW's use of the term "exploitation" is not simply the expression of a "feeling" as you put it. The question of whether you, I or anyone else agrees with the argument is separate from whether the contention is reducible to or equivalent to a "feeling" or an expression of distaste or something like that.
Of course, a strong "feeling" that a particular arrangement is unfair or unjust is not to be dismissed as worthless.
P.s I meant the box link at the top.
Back to one of Anonymous's Comments about toilet cleaning. I worked as a janitor at the Orlando air-port back in the eighties. Didn't much care for it. Just a piece of sociological observation: an alarming number of dudes seem to get off on masturbating in air-port rest-rooms. Just thought I'd share.
It seems to me Rawls's view ostensibly being criticized in the OP is more contingent than is acknowledged. That is to say, if it turns out that people suited to be neurosurgeons, corporate managers, judges or other occupations requiring some extended training need additional monetary rewards to persuade them to take the jobs, that's one thing. But if it turns out they don't need substantial additional inducements to undergo the training or to take the jobs period, then they won't get those inducements.
This is an area where normative and empirical questions can get intertwined and mixed up and one has to be clear which are which. Perhaps Rawls did not always manage to draw this line clearly in TOJ, for all his insistence that he was doing 'ideal theory'.
However, it does seem to me quite clear that Rawls did not think his principles of justice would lead to highly unequal outcomes, or, to be more precise, he acknowledged that possibility but thought it was highly unlikely, maintaining that the theory as he set it out has a "tendency to equality" (that phrase is the title of a section in TOJ). If you just look at the difference principle alone, you don't get an accurate picture since as R. pointed out repeatedly, it has to be viewed in conjunction w the other principles.
The passage from TOJ (first edition) p.158 that I referenced earlier but did not type out runs as follows (emphasis added, w my comments interjected):
"...the greater expectations of the more favored presumably cover the costs of training and encourage better performance thereby contributing to the general advantage."
Note it's a presumption: if the presumption turns out to be wrong, if you don't need to pay people more to "encourage better performance" or take certain jobs, then (one assumes) they won't get paid more.
Picking up the quote:
"While nothing guarantees that inequalities will not be significant, there is a persistent tendency [i.e. when the principles of justice are operating] for them to be leveled down by the increasing availability of educated talent and ever widening opportunities. The conditions established by the other principles [i.e. other than the difference principle] insure that the disparities likely to result will be much less than the differences that men [sic] have often tolerated in the past."
I suspect, btw, that one of several reasons Rawls published, toward the end of his life, the short Justice as Fairness: A Restatement is that he realized that TOJ, weighing in at almost 600 pp and written in the kind of prose just quoted, put a heavy burden on readers and led a fair number of them to conclude that a lot of it was just sort of "fretwork" (to use a word I think Prof Wolff has used) and not important. I think a lot of it is not mere "fretwork," but in the way it was initially presented the theory opened itself not only to various interpretations but also to various misreadings, and if indeed it was misread by some (which I think it was), then R's mode of presentation probably has to bear some of the blame for that.
(Another reason he published the restatement is that his views on certain questions had shifted, as indicated by what he said in Political Liberalism, but I don't think that's esp. relevant here.)
It's surely just my weird personal taste, but so much idealism (in the sense of seeing the world in rosier terms than it merits) in defense of the status quo as Rawls exhibits is irritating.
If you're going to be idealistic (in the sense of seeing the world in rosier terms than it merits), why not be radical like, for example, Herbert Marcuse? I appreciate Marcuse's idealism because of his radical goals, but if someone's going to defend the status quo, I prefer to read The Economist, which exhibits a certain realism, beginning with its title.
s.w.,
1) I don't think Rawls was defending the status quo (yes, there has been some dispute about this, w some seeing TOJ as a massive brief for a tweaked version of the postwar welfare state, but I, and quite a few others who have gone into it much more than I have, don't read it that way and I think such a reading lacks a lot of good support in the text).
2) Idealism "in the sense of seeing the world in rosier terms than it merits" has little to do with "ideal theory" in the Rawlsian sense. Idealism vs. realism is not the relevant dichotomy here, I think. The issue is rather whether it makes sense to ask what principles should govern a "well-ordered" or "perfectly just" society. He does assume that ordinary people have "a sense of justice" and can come to have a desire to act in ways that support just institutions, but he takes that to be basically a fact of psychology. I suppose one cd argue that that is seeing the world "in rosier terms than it merits," but the test of the psychological assumptions would come if we actually lived in a just society. Since we don't, we can't point to the behavior of people in an less-than-just society as proof that people are inherently bad, greedy, only out for themselves etc. and would act that way regardless of how the basic institutions of society were set up.
3) That said, it is of course very possible to disagree w the principles Rawls comes up with and to view them as either not radical enough or too radical. It is also possible to criticize "ideal theory" as a project but not, I think, simply by claiming it is insufficiently "realistic."
correction: a less-than-just society
LFC,
I appreciate your patient explanations of Rawls's theory. I confess that I have a copy of The Theory of Justice (which I never finished reading many years ago) at the bottom of a big pile of books in my spare room, which I have not bothered to dig out because of my bad back and because I anticipate the dust in the pile of books dirtying all my clothes.
I do not believe that people are inherently anything. Studies such as The Spirit Level show that people in more egalitarian societies tend to be less violent, to not suffer certain pathologies, to live longer, to use drugs less, etc.
The problem seems to be how to get from here to there, from a violent non-caring society to a peaceful one where consideration and concern for others, basic daily decency is, if not the rule (do we need more rules?), normal unremarkable behavior. That would necessarily be a non-capitalist society, I believe, but there also seems to be a need for some kind of radical mass conversion. Rawls's redoing of the social contract does not seem to contribute to that project in the least. I certainly don't have the blue-print myself either.
A radical mass conversion? Jesus accomplished that, post mortem, some 2000 years ago. And a lot of his converts profess love, kindness and altruism, and are voting for Il Duce.
Observe the chart presented in this post (https://www.epi.org/productivity-pay-gap/). Its title (“The gap between productivity and a typical worker’s compensation has increased dramatically since 1979; productivity growth and hourly compensation growth, 1948–2018”) is self-descriptive.
An example. By 2017, the latest year included in the chart, net productivity of the total American economy had increased 252.9% relative to its 1947 level, but hourly compensation of production/nonsupervisory workers in the private sector had increased only 115.6%, that is, less than half.
https://www.epi.org/productivity-pay-gap/
Danny writes (1:49 AM):
“Note how we get int a 'controversy' here, is that a theme trumpeted by Karl Marx is that under capitalism workers are paid only a fraction of their productivity.”
That chart suggests Karl Marx was right. Doesn’t it?
Moreover, one does not need to appeal to “feelings” to reach that conclusion, simple arithmetic does the trick just fine, thank you very much. Based on that data, 137.3% of value of the increased output went to capitalists (i.e. owners of means of production, or what Danny surely calls capital) without workers being paid.
If I were one of those American workers, I would not be saying hooray, with Danny. :-)
Another Anonymous
With respect to pay versus productivity:
The fact that median wages have been stagnant over the past several decades has been often remarked upon. Since productivity has not been similarly stagnant, it is an inescapable conclusion that workers have been systematically underpaid for decades. This isn't Marx, it's arithmetic.
Pew Research: For most U.S. workers, real wages have barely budged in decades
--'median wages', the U.S. Census Bureau lists the annual median personal income at $33,706 in 2018. Actually, $91,538 for profesional degree. $70,608 for masters degree, etc. Those numbers do include women, and also, field of study significantly affects earning potential, and the more specific education is disaggregated, the larger the variance.
You don't really think that 'median wages', have been 'stagnant'? do you watch television for such ideas?
Well then, hooray for arithmetic.
I have a joke about arithmetic.
I gather that in the Marxist conception, there are five or six modes of production: hunting and gathering, slavery, feudalism, capitalism and socialism. But if you want to know what is called by marxists a 'mode of production', well, one answer is 'the articulated relationship between the forces of production and the social relations of production of a given stage of world history'. Which, doesn't satisfy me. It's a specific combination of what, specifically? the answer will be about 'productive forces', and social and technical relations of production, and okay, social and technical relations of production, these include what? Well, you know, these include the property, power and control relations governing society's productive assets, cooperative work relations and forms of association, relations between people and the objects of their work and the relations between social classes..
Right. And is this codified in law? Answer: 'often'.
And those productive forces then, they include what? Well, you know, they include human labor power and means of production. Ah, well, for example? For example, tools, productive machinery, commercial and industrial buildings, other infrastructure, technical knowledge, materials, plants, animals and exploitable land. My reaction to this is to become impatient about there being supposedly five or six modes of production -- is it five? Or six? Somewhere I recall Nietzsche (maybe?) observing that if you examine Christian theology, you will gather the impression that Christians can barely count to three. Perhaps the upshot is that Marxists, can count to five or six.
"With respect to pay versus productivity:
(...)
"This isn't Marx, it's arithmetic."
That's an odd argument, isn't it? I mean, Marx claimed that workers produce more than they are paid for. There MUST be a difference, therefore it's arithmetic. As a matter of fact, I myself wrote that, didn't I?
The point is that according to mainstream economists that shouldn't happen. As Danny put it: "every input is paid the value of its marginal product" (October 12, 2020 at 1:49 AM)
Another Anonymous
We know the reply is that Capitalists benefit, from the performance of more labor than they pay for, with
the difference amounting to surplus labor. Just, to save any Marxists some trouble here.
Suppose that all labor is simple and paid the same wage and that the monetary expression of labor time is constant, which amounts to assuming for simplicity a constant price level and productivity, and have at it if you want. And even though labor power is distinct from labor performed, *in aggregate* the total amount of labor power purchased by capitalists will determine the total amount of average labor performed, and of course, according to Marx, an hour of average labor always creates the same amount of new value, irrespective of variations in productivity, and since a portion of this average labor is unpaid, the monetary expense of labor time exceeds the average wage rate, or, reciprocal of the value of the currency, and the capitalists appropriate surplus value. I offer none of this with a straight face, though I'm doing my best. My impression of Marx is that he's what they call a clever arguer, someone that has already decided on their conclusion and is making the best case they possibly can for it. But there is a specific sort of clever arguer, one that I have difficulty defining explicitly but can characterize fairly easily. When your theist parents ask you, “What? Why would you believe that?! We should talk about this,” they do not actually want to know why you believe anything, despite the form of the question.
Where there is nothing unique about Marxists is that your best arguments will fall on deaf ears. Your worst will be picked apart by people who are much better at this than you. Your insecurities will be exploited. If they have direct power over you, it will be abused. One thing that ought not to be added to it is the hope of convincing the other party – either of your position, or of the proposition that you are not stupid or insane for holding it.
By the way, maybe it's me, but the whole thought experiment here, pretending that the Harvard University philosophy department is a profit-making operation with the wages fund determined by the income generated by its employees, and proceeding to debunk 'a standard sociological and, in some forms philosophical, explanation of the extreme income inequality that characterizes modern forms of capitalist economies' -- I just don't think I follow the thread to know what is the argument, or even, what is the argument against?
Much here, supposing that that 'in order to get the ten individuals best suited for management to agree to serve as managers, we must pay them $130,000 each, or an additional $110,000, which means that he wages fund must rise $1,100,000', and 'This is where the concept of an inequality surplus enters the analysis', and you lost me.
This seems to be directed against Rawls somehow, but I think there must be something more interesting to be found in Rawls than has been successfully conveyed here, given that 'A Theory of Justice' sparked a revival in political philosophy. I'm not totally unfamiliar with Rawls, and in brief, I think the contribution of his thought is difficult to assess. There is little doubt, however, that 'A Theory of Justice' is one of the most important works in philosophy in the latter half of the 20th century.
In spite of my having some familiarity with Rawls, I still put my foot down about whether the op post is even truly begining from a general Rawlsian position at all.
'I am going to develop my argument by considering in very elementary fashion an imaginary firm that I shall call Universal Widgets, Inc. .. a firm with 100 employees .. ten are management and run the company.'
Okay..
'The real problem, of course, is that the people identified as suitable for managerial positions may not want to take them .. we can induce them to serve as managers and to undergo the undergraduate and postgraduate education required to prepare them for that position, by offering them a salary larger than $40,000 a year.'
Okay..
'This is where the concept of an inequality surplus enters the analysis. With the ten individuals best suited for management serving as managers, at a salary of $130,000 a year each, the wages fund available for distribution will rise not $1,100,000 but actually $2 million.'
I'm trying to watch your footsteps here, but where did 'the wages fund available for distribution' come from, and why will it rise by these specific amounts? Let's back up:
'Let us suppose that in order to get the ten individuals best suited for management to agree to serve as managers, we must pay them $130,000 each, or an additional $110,000, which means that he wages fund must rise $1,100,000.'
This is to say that we need to budget this money to pay these managers. If we pay them $130,000 instead of shall we say $40,000, then it's going to cost an extra $1,100,000.
Why is it that 'the wages fund available for distribution will rise not $1,100,000 but actually $2 million'? I follow along with this as being about how hiring managers will increase profits, because these managers will do good work and benefit the company, hypothetically. That's why we are hiring them.
'they have talents and abilities that will make them enormously productive in those positions, thereby increasing the total fund available for wages so much that every worker’s wage can be doubled from $20,000-$40,000'
And if we back up:
'To begin, let us suppose that with these hundred workers randomly assigned to the 100 jobs, there is enough money left over after paying for such things as raw materials and utilities to pay each worker $20,000 a year – a total labor cost of $2 million.'
So there is your $2 million. It's 'money left over after paying for such things as raw materials and utilities'. Everybody gets a $20,000 raise to $40,000, and thus, the total labor cost is $2 million. Of course, nobody actually would *get* a raise, because they were paid first, before all these calculations got made the following fiscal year, right? And why give them a raise anyways? Out of generosity perhaps? But who is in a position to be generous with this money -- whose money is it? People get paid what they agree to work for, they don't get paid the money that they didn't agree to work for which of course, would be more. People often agree to less than they could get, actually, such as when I buy fast food, and oh hey! They're running a special! Great! But I'd have bought the food either way. If I go into a restaurant and say 'how much is it?' Then the reply 'how much have you got?' would be .. novel. I'd walk back out, of course.
'The additional $900,000 available to be distributed to the 90 nonmanagerial workers is an inequality surplus.'
What about sending it all to Haiti, instead? They need it more in Haiti, don't they?
'That is to say, it is a surplus that remains after the unequal wages paid to the managerial workers are taken account of.'
And after the Haitians are not taken account of. Of course that's not what the company is likely to do, but they might have an R&D budget or something which gets cut in lean years.
'Now then, assuming that the 90 workers are not so envious of the managerial workers that they would actually prefer to make $20,000 a year so long as no one makes more than that rather than make $30,000 a year even though 10 people are going to be making $130,000 each (this is the origin of Rawls’ odd and unexplained assumption of non—envy), the unequal structure of wages in the company will, by a happy coincidence, be both explained and justified.'
I don't understand 'explained and justified' in this context. Explained and justified, to whom? What is there to explain and justify? The practice is to keep these sorts of numbers confidential in the first place, right? I could maybe work for Howard Stern, and demand a raise, and ask him to explain and justify what he himself gets paid, but will I deserve any explanation and justification at all? I'm not the one that is paying *him*..
This was all supposed to be directed at Rawls. Or, Rawls on envy and equality. Maybe we say that it's Rawls, taking up the apparently provincial question of how to respond to socially destructive envy propensities. Which off the cuff, is as an argument that might strike some as not particularly significant, and I wonder what is the answer to the question of why Rawls bothers to expend space on it.
It may be relevant, that something like envy can be taken not to motivate a rational person. So we might be tempted to assume, that there are not operative destructive psychological propensities as something like this. And yet, things work in theory but not in practice because the theory is wrong, and what is worse is that much of Economics used to be like this. In theory no one will ever buy a lottery ticket, because the chances of winning are so small, it’s almost certainly throwing money down the drain. Of course, in practice, millions of people buy lottery tickets.
So we can't, maybe, just *assume*, that because something like envy was taken not to motivate a rational person, that just makes it therefore totally irrelevant. This could wind up being like arguing that 'bumblebees cannot fly' when all that is really true here, is that if bumblebees had read the books on aerodynamics, they would never have gotten off the ground.
Economists might prefer to engage in general removal of special contingent psychological circumstances, just to keep things simple for themselves. And actually, we might say that there is a point in adopting such simplified assumptions, if we wish to arrive, anyways, at a situation in which contingencies that lack moral value were eliminated. That might all depend on whether you buy the Kantian interpretation of justice as fairness or such, and more generally, whether there is, or is not, evident moral value in any special psychological states.
So it might not have been a waste of time to simplify the situation a bit, but then Rawls proceeds to strike a new note, when introducing the question of envy. He's now admitting here that such psychological states as this do exist. They have, perhaps, in some sense, to be dealt with, although he didn't deal with them as part of the discussion of the original position. I mean where 'the original position' is about proceeding on the assumptions of aiming to clarify rational discussion of justice without introduction of contingencies that lack moral value.
Next, though, envy comes on the scene as a topic to be discussed, and we are asking as Rawlsians, whether the well-ordered society is one that will encourage feelings such as envy to develop and in so doing will create circumstances that are not favorable to its survival.
So the discussion of envy is a special case of a general problem of the stability of the well-ordered society.
Should this society really be subject to problems in terms of its possible encouragement of destructive propensities that destabilise it then okay, that's one thing, but I think a point that got lost here is that Rawls is careful to argue that there is nothing intrinsically moral about envy. There does not exist a moral principle that can be cited as a justification for envy. It's not a moral feeling. We might prefer to keep that question open, but I'm just defining what is 'Rawlsian'. Jealously is a 'real' feeling, and not that it's necessarily the same as envy, I dunno, but just, it's not a 'moral' feeling, by the Rawlsian definition. I'm not insisting that some sort of contrast between envy and jealously is 'interesting', I'm just saying that envy is a case of a more general idea, maybe also spite, shall we say, that it's not a moral feeling. It's a kind of vice in being a trait that is socially detrimental. And as such, it becomes relevant in terms of the likelihood of it endangering the stability of the well-ordered society.
One might say that the root of envy is a lack of self-confidence in our own worth combined with a sense of an inability to alter matters. I don't know that *I* would say that, but it sounds Rawlsian to me. And we can consider in somesuch light, conditions that might be likely to encourage envy in a destructive way. It's about the means to assess the construction of the well-ordered society. Certainly it's Rawlsian to gas about how publicly all are treated as equal and everyone possesses the same basic rights, and this dovetails with self-esteem being taken to be a primary good, and hopefully, a common sense of justice prevails and instills civic relations between persons. And maybe, just for the sake of enabling the less fortunate to 'bear better' the circumstances in which they are placed, we could insist that the less fortunate are not taken to be inferior in any central sense. And so forth. I'm not really invested in the notion that Rawls has dealt seriously enough with the topic, though I think it possible that the general account of moral psychology he has provided can be backed up further.
Another major issue with the "inequality surplus" explanation is that it presumes there are barely enough people with the right qualities to do the expensive jobs. If there are plenty of people who could be trained to do those jobs, then the idea that you'd have to pay them much extra falls apart--if one person turns it down, you get another one of the qualified people--they have no scarcity value. And considering some of the jackasses who end up high rolling corporate bosses, it seems to me the pool of people who could do the job as well given the training must be pretty dashed big.
Yet another problem is the very idea that you have to divide the labour in some particular specific way. Say instead of a few managers making lots of decisions and a bunch of workers making none, you distributed the decision making more, so that all the people with some capacity for thinking in those ways did a bit of decision making, but not enough to overload their supposedly limited capacity? And in fact, the percentage of managers in firms varies surprisingly widely in different countries (described in detail in "Fat and mean : the corporate squeeze of working Americans and the myth of managerial downsizing" by David M. Gordon). If the specifics of the division of labour are capable of variation, so would be the plausible "justifiable" pay for it.
Danny . . . I'm shaking my head. You go through all that verbiage to show you understand the math, and yet when you get to actually making a claim it has nothing to do with the math, and it becomes obvious that you managed to completely sidestep the point of what the math was about.
The thing is, Danny, you don't seem to be getting the structure of what's going on here. Wolff, in his example of Widgets inc. and so on, is describing a model (with which he disagrees), in a fair way without initially quibbling with it, so that he can then bring out the major problems he has with the model. The model is one originated elsewhere but mentioned and perhaps popularized by Rawls; Wolff is trying to specify its essential features. He then points out that those essential features are implausible.
You are going through the model making little quibbles and mockery of it, under the impression that that somehow invalidates what Wolff is saying, or validates your anti-Marxism, or something. But it's not Wolff's model. He's just describing it. So what you're rubbishing is an approach invented by people roughly on your side, who invented it as a defence of the idea of highly unequal wages. What's the meme? "Congratulations. You just played yourself."
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