The Labor Theory of Property

Is Labor Peculiar?

David Ellerman

It is remarkable that the human science of “Economics” has not been able to find or recognize any fundamental difference between the actions of human beings (i.e., “labor”) and the services of things. Attempts by economists to recognize the “peculiarities” of labor have been noticeably barren. For instance, Alfred Marshall [1920, Chapter IV and V of Bk. VI] noted a number of peculiarities:

1. workers may not be bought and sold; only rented or hired,
2. the seller must deliver the service himself,
3. labor is perishable,
4. labor-owners are often at a bargaining disadvantage, and
5. specialized labor requires long preparation time.

Professor Samuelson has also recognized the first peculiarity.

Since slavery was abolished, human earning power is forbidden by law to be capitalized. A man is not even free to sell himself; he must rent himself at a wage. [1976, 52 (emphasis in the original)]

Instead of being a characteristic of labor itself, Marshall and Samuelson only give an observation about present-day legal institutions; it did not hold a century and a quarter ago [see Philmore 1982]. Neither Marshall nor Samuelson offer any basic institution-free differentiation of labor from machine services which would account for why the services of a person may not (now) be sold all at once. Quite to the contrary, the (first) “fundamental theorem of welfare economics,” the theorem that a competitive equilibrium is allocatively efficient (“Pareto optimal”), must assume away the first peculiarity by presupposing that labor can be sold all at once. Complete future markets must be assumed for all commodities to yield the optimality of competitive equilibrium, and “labor is a commodity.”

Now it is time to state the conditions under which private property and free contract will lead to an optimal allocation of resources…. The institution of private property and free contract as we know it is modified to permit individuals to sell or mortgage their persons in return for present and/or future benefits. [Christ 1975, 334; quoted in Philmore 1982, 52].

Far from providing any analysis or rationale for Marshall’s first peculiarity of labor, modern economics bases one of its proudest achievements (“A competitive equilibrium is allocatively efficient”) on the assumption that the perfectly competitive capitalist model incorporates what is essentially a voluntary contractual form of slavery [see Philmore 1982].

The second peculiarity of labor, that the seller must personally deliver the services, has no profound import. The employee plays two roles: the owner of the entity being hired out, and the entity which is hired out. Thus the services of the entity are the services of the owner of the entity. Marshall notes how this peculiarity makes the laborowner particularly concerned with the conditions under which the labor is employed. Moreover, the mobility of labor is thereby as limited as the mobility of the laborer. But neither of these consequences is of great importance. In addition, this peculiarity does not even hold when there is a resale market for labor as in the ancient practice of laborgang contracting–which in modern times is called “employee leasing.” The ultimate employer contracts not with the workers but with the intermediate agency or contractor who, in turn, hires the workers. The contractor selling the labor to the employer does not personally deliver the services.

The third, fourth, and fifth “peculiarities,”

that labor is perishable,
that labor-owners are often at a bargaining dis advantage, and
that specialized labor requires long preparation time,

are not really unique to labor at all (as Marshall even indicates).

The inability of capitalist economics to recognize any unique and relevant characteristic of labor is an ideological blind-spot based on the desire to theoretically reflect the symmetrical fact that both labor services and the services of land and capital are salable commodities in the employment system. Any fundamental differentiation of labor from the other factor services would threaten that symmetry.

Radical economists have also attempted to find a unique and relevant characteristic of labor (“Only labor is creative”) that would differentiate it from the other factor services. These attempts have not been particularly fruitful.

Marx attached great importance to his “discovery” of the distinction between labor power and labor time. Yet that distinction is not even unique to labor. When one rents a car for a day, one buys the right to use the car (“car power”) within certain limits for the day. The actual services extracted from the car are another matter. The car could be left in a parking lot, or driven continuously at high speeds. To prevent being “exploited” by heavy users of “car time,” car rental companies typically charge not just a flat day rate but have also a “piece-rate” based on the intensity of use as measured by mileage.

Marx touched on deeper themes when he differentiated human labor from the services of the lower animals (and things) in his description of the labor process.

We presuppose labour in a form in which it is an exclusively human characteristic. A spider conducts operations which resemble those of the weaver, and a bee would put many a human architect to shame by the construction of its honeycomb cells. But what distinguishes the worst architect from the best of bees is that the architect builds the cell in his mind before he constructs it in wax. At the end of every labour process, a result emerges which had already been conceived by the worker at the beginning, hence already existed ideally. [Marx 1977, 283-284]

This conscious directedness and purposefulness of human action is part of what is now called the “intentionality” of human action [see Searle 1983]. This characterization does has significant import, but Marx failed to connect intentionality to his labor theory of value and exploitation (or even to his labor-power/labor-time distinction). This is in part because Marx tried to develop a labor theory of value as opposed to a labor theory of property.

Other radical political economists of Marx’s day such as Pierre-Joseph Proudhon, William Thompson, and Thomas Hodgskin were less successful at developing a theoretical superstructure. But they did move in the right direction by trying to develop the labor theory of property as expressed in the claim of “Labour’s Right to the Whole Product” [see Hodgskin 1832 or Menger (Anton) 1899].

Only Labor is Responsible

If we move from the artificially delimited field of “Economics” into the adjacent field of Law and Jurisprudence, then it is easy to recognize a fundamental and unique characteristic of labor. Only labor can be de facto responsible. The responsibility for events may not be imputed or charged against non-persons or things. The instruments of labor and the means of production can only serve as conductors of responsibility, never as the source.

An instrument of labour is a thing, or a complex of things, which the worker interposes between himself and the object of his labour and which serves as a conductor, directing his activity onto that object. He makes use of the mechanical, physical and chemical properties of some substances in order to set them to work on other substances as instruments of his power, and in accordance with his purposes. [Marx 1977, 285]

Marx did not explicitly use the concept of responsibility or cognate notions such as intentionality. After Marx died, the genetic code of Marxism was fixed. Any later attempt to introduce these notions was heresy. Moreover, these notions would not supply an apologia for state ownership so they were of little use to Official Marxism.

Nevertheless, while Marx did not use the word “responsibility,” he clearly describes the labor process as involving people as the uniquely responsible agents acting through things as mere conductors of responsibility. The responsibility for the results is imputed back through the instruments to the human agents using the instruments. Regardless of the “productivity” of the burglary tools (in the sense of causal efficacy), the responsibility for the burglary is imputed back through the tools solely to the burglar.

The human actor has the role of the “prime mover” without being a first cause. Clear thinking in jurisprudence requires differentiating between responsibility and causality.

If we say that a definite consequence is imputed to a definite condition, for instance, a reward to a merit, or a punishment to a delict, the condition, that is to say the human behavior which constitutes the merit or the delict, is the end point of imputation. But there is no such thing as an end point of causality. The assumption of a first cause, a prima causa, which is the analogon to the end point of imputation, is incompatible with the idea of causality, at least with the idea of causality implied in laws of classical physics. The idea of a first cause, too, is a relic of that state of thinking in which the principle of causality was not yet emancipated from that of imputation. [Kelsen 1985, 365]

The natural sciences take no note of responsibility. The notion of responsibility (as opposed to causality) is not a concept of physics and engineering. The difference between the responsible actions of persons and the nonresponsible services of things would not be revealed by a simple engineering description of the causal consequences of the actions/services. Therefore when economists choose to restrict their description of the production process to an engineering production function, they are implicitly or explicitly deciding to ignore the difference between the actions of persons and the services of things [see Mirowski 1989 for the use of physics as a model for the human sciences].

The Juridical Principle of Imputation

The pre-Marxian classical laborists (“Ricardian socialists”) such as Proudhon, Thompson, and Hodgskin tried to develop “the labor theory” as the labor theory of property. The most famous slogan of these classical laborists was “Labour’s Claim to the Whole Product.” This claim was hobbled by their failure to clearly include the negative product in their concept of the “whole product.” This allowed the orthodox caricature, “all the GNP would go to labor and none to property” [Samuelson 1976, 626], as if there were no liabilities for the used-up inputs. If Labor appropriated the whole product, that would include appropriating the liabilities for the property used up in the production process. Present Labor would have to pay Property (e.g., past Labor) to satisfy those liabilities.

The classical laborists’ development of the labor theory of property was also hindered by their failure to interpret the theory in terms of the juridical norm of legal imputation in accordance with (de facto) responsibility. A person or group of people are said to be de facto or factually responsible for a certain result if it was the purposeful result of their intentional (joint) actions. The assignment of de jure or legal responsibility is called “imputation.” The basic juridical principle of imputation is that de jure or legal responsibility is to be imputed in accordance with de facto or factual responsibility. For example, the legal responsibility for a civil or criminal wrong should be assigned to the person or persons who committed the act, i.e., to the de facto responsible party. Ronald Dworkin notes that this is

a principle about natural responsibility, and so, as a guide for adjudication, unites adjudication and private morality and permits the claim that a decision in a hard case, assigning responsibility to some party, simply recognizes that party’s moral responsibility. [Dworkin 1980, 589]

In the context of assigning property rights and obligations, the juridical principle of imputation is expressed as the labor theory of property which holds that people should appropriate the (positive and negative) fruits of their labor. Since, in the economic context, intentional human actions are called “labor”, we can express the equivalence as:

The Juridical Principle of Imputation: People should have the legal responsibility for the positive and negative results of their intentional actions.

The Labor Theory of Property: People should legally appropriate the positive and negative fruits of their labor.

In other words, the juridical principle of imputation is the labor theory of property applied in the context of civil and criminal trials, and the labor theory of property is the juridical principle applied in the context of property appropriation.

Some individuals, such as infants or the insane, are not capable of de facto responsible actions.

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 1985, 364]

Regardless of their causal efficacy, things are, a fortiori, unzurechnungsfähig.

De facto responsibility is not a normative notion; it is a descriptive factual notion. The juridical principle of imputation is a normative principle which states that legal or de jure responsibility should be assigned in accordance with de facto responsibility. In the jury system, the jury is assigned the factual question of “officially” determining whether or not the accused was de facto responsible for the deed as charged. If “Guilty” then legal responsibility is imputed accordingly.

Economics is always on “jury duty” to determine “the facts” about human activities. These are not value judgments (where social scientists have no particular expertise). The economist-as-juror is only required to make factual descriptive judgments about de facto responsibility. In this chapter we are not concerned with the normative principle of juridical imputation (i.e., the labor theory of property applied in the courtroom), only the descriptive question of responsibility. The normative and descriptive questions should be kept conceptually distinct. That separation is difficult since, given the juridical principle, de facto responsibility implies de jure responsibility.

In a given productive enterprise, the descriptive question asks what set of people are de facto responsible for producing the product by using up the various inputs? The economist-as-juror faces that question. The marginal productivity of tools (machine tools or burglary tools) is not relevant to this factual question of responsibility either inside or outside the courtroom. Only human actions can be responsible; the services provided by things cannot be responsible (no matter how causally efficacious). The original question includes the question of who is responsible for using up those casually efficacious or productive services of the tools .

The question of de facto responsibility, whether posed in a courtroom or outside, presupposes the understanding that persons act and things don’t. Yet it is precisely the presupposition that is “overlooked” in economic theory which treats both the services of human beings and the services of capital and land symmetrically as “input services.” Economists choose to limit their description of the human activity of production to an engineering description of the causally efficacy of the various types of input services. The unique responsible agency of human activities is not acknowledged.

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