Self-sale and Self-rental

Are the self-sale and self-rental contracts on the same moral footing?

David Ellerman

Was historical slavery wrong because it was involuntary or because it treated persons as things? The usual answer is that slavery was wrong because it was involuntary. And since the current system of employing, hiring, or renting workers is voluntary, there is a clear moral separation between the old economic system of owning workers and the current system of renting workers. But the “problem” in that standard view was that from Antiquity up to the present, there have been prominent moral and legal philosophers who have argued that slavery (i.e., lifetime labor obligations) should be allowed if based on a voluntary contract. Moreover, examples of voluntary slavery contracts existed even in the ante-bellum United States.

But voluntary as well as involuntary slavery has been outlawed. If “involuntariness” was “why slavery was wrong”, then why is voluntary slavery outlawed too? Indeed, some modern libertarians such as Harvard’s Robert Nozick have argued that a free libertarian society would permit voluntary slavery. If, on the other hand, the case against slavery, either involuntary or voluntary, is based on it legally treating persons as things, then the voluntary self-rental contract appears in a different moral light.

Modern defenders of the voluntary slavery contract

Nozick’s view that voluntary slavery should be permitted is not representative of modern free-market libertarianism. The “only living published proponent of whom I’m aware” is Walter Block who notes that “until recently, only Nozick and I [i.e., Block] held this position” and that “Nozick had renounced this viewpoint before his death.”

Philmore vigorously reinforced Nozick’s argument by reviewing the classical proponents of voluntary slavery (some of whom I quoted in my post) and refuting the arguments of today’s liberals and libertarians who want to argue that the self-sale and self-rental are not on the same moral footing. Philmore’s paper even generated some more literature. One writer responded by giving even more arguments for accepting the self-sale contract and noted that the contract might be particularly useful in the Third World [Callahan, Joan 1985. Enforcing Slavery Contracts: A Liberal View. Philosophical Forum. XVI (Spring, 1985): 223-236″]. Philmore’s paper even provided an impetus for the political and feminist philosopher, Carole Pateman, to write a book, The Sexual Contract [Stanford University Press, 1988]. Pateman argues that feminists should not think that once the male-female relationship is on a voluntary contractual basis, then it is unproblematic—with Philmore cited as an example.

More strongly, Philmore, for example, argues for a ‘civilized form of contractual slavery’. Philmore cites Locke, which may seem surprising given the conventional view of Locke as an unambiguous champion of freedom…. Philmore makes no bones about the fundamental role of the employment contract in contractarian argument. He asserts that ‘any thorough and decisive critique of voluntary slavery…would carry over to the employment contract…. Such a critique would thus be a reductio ad absurdum‘. [Pateman 1988, 71]

Pateman goes on to argue, correctly in my opinion, that the employment contract, not to mention the self-sale contract, is inherently invalid due to the nontransferability of human labor.

Once the question of voluntary slavery punctures the smug Happy Consciousness of liberals (I always mean “liberals” in the philosophical sense of classical liberals which includes right-wing libertarians as a limit case) who think slavery is ruled out on grounds of involuntariness, then the race is on to put some philosophical daylight between the self-sale and self-rental contracts. There is almost a minor cottage industry of liberals trying to explain why the life-time labor contract (i.e., a civilized form of the self-sale contract) is morally beyond pale and should remain outlawed—while the short-term labor contract is morally beyond any shadow of doubt and is in any case the very foundation of our free-market economy.

Philmore takes direct aim at these “modern arguments against voluntary slavery” and argues that the long-term “lifetime” labor contract and the short-term labor contract are on essentially the same moral footing, and since the short-term contract is the very basis for our free-market system, it would be a reductio ad absurdum to think that it was inherently invalid.

The hypothetical Rothbardian argument

Since I agree with Philmore that the self-sale and self-rental contracts are on essentially the same moral footing (but draw the opposite conclusion since both contracts treat persons as things), I will let Philmore do my “talking” in answering the attempt by Murray Rothbard, as refined by Stephan Kinsella, to find grounds to rule out the lifetime labor contract while giving a clean bill of health to the short-term contract to rent people.

Hypothetical Rothbardian claims that the key difference between the self-sale and self-rental contract is the means of enforcement by specific performance. If the seller of labor by the lifetime should be struck by “seller’s regret” and wanted to exit the contract, then the hypothetical Rothbardian argument is that the legal authorities would supposedly be called upon to enforce the contract by specific performance (as with the Fugitive Slave Law for AWOL slaves) which today’s legal authorities would find “onerous” and thus such contracts are not allowed. The short-term labor contract requires no such onerous enforcement of specific performance (since workers are usually paid after the labor is performed) so the self-rental contract is perfectly permissible.

Actually the specific-performance argument against the self-sale contract has been around for some time, and accordingly Philmore addresses it explicitly in the 1982 article. Philmore first notes that, yes, the legal authorities consider it onerous to enforce breached contracts by specific performance rather than awarding material damages. But if one is to argue that the long-term labor contract is “invalid” because the courts would be reluctant to enforce it by specific performance, then one should be aware that this reluctance applies to all contracts, not just labor contracts.

Many contracts have one party performing “upfront” with the other party performing their part of the deal over a longer time period (e.g., any loan or mortgage or time-purchase contract—not to mention court-awarded child support or alimony payments). The legal authorities are reluctant to enforce any of these contracts by specific performance but that is hardly grounds for annulling all contracts that require future performance by only one party. Of course certain contracts are harder to enforce than others in the case of breach, but any free-market libertarian knows that this is all priced out in the free market. Insofar as the lifetime labor contracts offers greater legal difficulties in remedying a breach, then the lifetime sellers of their labor would be offered a lower price. Is this sudden lapse in the Rothbardian grasp of free-market economics perhaps a token of the strongly felt need to put some definitive moral distance between the self-sale and self-rental contracts?

Moreover, given the general reluctance to award specific performance in any contractual breach, why should that be the only available remedy for the breach of a lifetime labor contract? The courts could award material damages which could be paid off over a period of time (as with court-enforced alimony payments when the “till-death-do-us-part” marriage contract is breached). Philmore says all this and even quotes a free-market libertarian who points out that one could always walk away from a lifetime labor contract—without any courts being involved—by paying back a proportionate part of the upfront purchase price.

Thus, if A has agreed to work for life for B in exchange for 10,000 grams of gold, he will have to return the proportionate amount of property if he terminates the arrangement and ceases to work. [Quoted in: Philmore 1982, p. 50]

At least this free-market libertarian understood that there is no reason to rule out the lifetime labor contract per se—whatever the particular difficulties that such contracts might occasion (which would get priced out in a free market anyway). Who is this free-marketer who answers the hypothetical Rothbardian argument? It is Murray Rothbard himself [the quote is from: Man, Economy, and State. Los Angeles: Nash, 1962, p. 441].

Thus I take it that Philmore and Rothbard have answered the hypothetical Rothbardian argument.

Employment as the renting of people

In closing, I might address a smaller topic, that the Rothbardian would object to the employment contract being characterized as a “rental” contract. While I may not be aware of all the nuances of the free-market libertarian literature, I am well aware of the state of the argument in the conventional economics literature. Conventional economists support the employment contract 1000%, and they fully accept the characterization of the hiring contract as a rental contract—even if the use of the word “rental” is unusual in this context. That is just not part of the debate.

When one buys an entity, then one buys all the services it provides (plus the salvage value after its useful lifetime). But just as one can buy a car, one can also rent or hire a car for some limited time period. When one rents or hires a car for a day, then one buys its services in the quantity “one car-day”. In economics, the words “hire” and “rent” denote the same relationship of buying the services of some entity for a certain time period, e.g., car-days, apartment-months, or man-hours. Local linguistic habits may differ. For instance, in the U.S. we say “rental car” while in the U.K. they say “hire car” but we are both talking about the same thing.

Hence the characterization of the employment contract as the renting of persons is not some “accusation” that I am making; it is accepted as a description by both sides in the economic debates. I already quoted Paul Samuelson’s use of that phraseology in the last post, but that was not an isolated example. One can find similar statements even in the elementary textbooks of other perfectly conventional economists:

The commodity that is traded in the labor market is labor services, or hours of labor.  The corresponding price is the wage per hour.  We can think of the wage per hour as the price at which the firm rents the services of a worker, or the rental rate for labor.  We do not have asset prices in the labor market because workers cannot be bought or sold in modern societies; they can only be rented. (In a society with slavery, the asset price would be the price of a slave.) [Fischer, Stanley, Rudiger Dornbusch and Richard Schmalensee 1988. Economics. New York: McGraw-Hill Co., p. 323]