ParEcon Questions & Answers

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Remuneration and Parecon

What is parecon’s value for income distribution?

fEconomies affect what share of the good or bad economic responsibilities and outputs we all receive. The term connotes that the allocation of burdens and benefits ought to be fair. Unlike with solidarity and equity, however, the value equity is quite controversial. It isn’t that some say let’s be fair  – while others say, the hell with fairness. Everyone claims to be a fairness advocate, but people disagree, sometimes dramatically, about what is, in fact, fair. To discuss we must consider the various candidate norms for what constitutes fairness.

  • The first candidate norm is that we should each receive from the economy a value in consumption items proportional to the sum total value of all the items that we ourselves or that property we own produce.
  • The second candidate norm is that we should each receive from the economy a value in consumption items equal to the sum total value of all the items that we ourselves produce, but only by our personal direct labors.
  • The third candidate norm is that we should each receive from the economy a value in consumption items proportional to our ability to demand them, to our bargaining power, regardless of the output of our direct labors or any property we may own.
  • The fourth candidate norm is that we should each receive from the economy a value in consumption items proportional to the effort and sacrifice we expend in socially valuable labor – or, what is the same thing, proportional to the duration, intensity, and amorousness of socially valuable labor we undertake.
  • Finally, a fifth norm, and the last of those seriously proposed by any economists regardless of their broader commitments, is that we should receive that which we need, with no correlation to any activity on our part, just by virtue of the need.

There is way too much to say about each of the above norms, about their use in combination or in contrast to one another, to cover in a succinct answer respecting this q/a format. Our brief answer can only very succinctly summarize, our reasons for thinking our value for remuneration should be equity – meaning that all those who can labor should receive income in proportion to the duration, intensity, and onerousness of their socially valuable efforts, while those who cannot labor, should instead receive income in accord with average levels (with attention to free supply of medical care or other special, socially agreed income.

Parecon values remuneration for effort and sacrifice plus, when necessary, for need. This advocacy has as its basis both rejection of other options and advocacy of this one.

The first thing to realize in determining our attachment to some norm of remuneration is what is at stake. Broadly, two things: (1) The morality of the resulting distribution. (2) The incentive effects in eliciting needed socially valuable labor. One can imagine a particular norm being desirable by one standard but not the other. We want a norm that is desirable by both.

  • We reject remunerating property on both morality and incentive grounds.

Morally, pareconists feel that piling wealth onto property has no justification. It rewards nothing of merit. It creates vast disparities for which there is no human justification and which breed all kinds of human deprivation. But there is also no economically desirable incentive benefit. Rewarding property – via profit – provides an incentive to those who own property to seek more, to protect what they have, to extract as much labor as they can from those working with their property, to reduce costs associated with the well being of those laborers to a minimum, to cut costs by not bothering to clean up ecologically and otherwise detrimental products of their production, among many other debits. And there is nothing worthy elicited, such as productive effort and wise use of materials and equipment, that couldn’t instead be elicited by means without these flaws and with additional benefits.

  • We reject remunerating bargaining power again on both moral and incentive grounds.

This is an economic norm that can reasonably be called blatant barbarism. It says you get more if you can take more. IT rewards great greed and force, plus manipulation, deceit, etc. That is not a worthy moral approach for humanity. It provides an incentive, as well, to strengthen self and weaken others, not a direction one wants social actors to pursue at all, much less as their highest priority.

  • We reject, as well, however, remunerating in proportion to the value of one’s own product by one’s own labor.

This is a more controversial norm with many advocates. Indeed, many critics of capitalism favor this norm, at least when speaking of their values. They often opt for markets or central planning, and public or state ownership of property, which in fact also enshrine the norm of remunerating power, which they typically do not acknowledge, but, at least in principle, they say rewarding output is their intention. So what about rewarding output?

To reward output says if a person produces x value, in whatever form, the person should get back from the social product in proportion to x, as should everyone else for their product. It might not be 100%, because society needs to allot some output to collective ends, but in principle we can think of it as getting back an equivalent to what you by your own hand produce. Morally this seems sound. After all, if you got more than your product you would be getting some of what someone else produced. If you get less, someone else would be getting some of your output. Both, at first glance, seem unfair. Incentive wise this option also has apparent logic. It elicits output, because our income rises and falls with our output.

So why doesn’t parecon opt for this norm of remuneration?

The problem is that this approach rewards many variables, quite a few of whish should not, in our view, be rewarded. Thus, it rewards the luck of having a better tool, the luck of producing something particularly valued, the luck of having highly effective workmates, the output engendered by training – rather than just the hardship of going through the training – the luck of being born with a genetic endowment that facilitates high productivity, among other things. There is no moral reason to reward these – and plenty to not do so. Why heap income on top of luck in the genetic lottery, etc.
There is also no incentive reason to reward these. This must be clarified. It is important that the incentive structure of a worthy economy elicits use of good tools, production of valuable outputs, etc. But these can be elicited without the immoral effects that rewarding the person involved directly, in proportion to output, entails. Of course there is no incentive effect on genetic endowment,

  • We support remuneration for effort and sacrifice – for duration, intensity, and onerousness of socially valued labor.

The idea is simple enough. If you work longer, you should get more. If you work harder, you should get more. If you work under more onerous conditions, you should get more. It is morally warranted to remunerate for these variables as they entail loss to the person involved, made up for by the income. It is incentive wise because these are precisely the variables that must be elicited via incentive effects.

It avoids the immoralities and inequalities and irrationalities of the other approaches. Seeing whether it is fully possible, and would work in all dimensions and respects, as with other values we favor, requires that we address institutions.


Because this remuneration norm is controversial we include two excerpts here…shprter. amd ;pmger. om turn…

Equity as a Value

Excerpt from the summary section of Realizing Hope

The third value we want a good economy to advance has to do with the distribution of outputs to actors. Capitalism overwhelmingly rewards property and bargaining power. It says that those who have a deed to productive property by virtue of that piece of paper deserve profits. And it says that those who have great bargaining power based on anything from monopolizing knowledge or skills, to having better tools or other organizational advantages, to being born with special talents, to being able to command brute force, are entitled to whatever they can take.

A good economy would instead be an equity economy whose institutions for production, consumption, and allocation not only wouldn’t destroy or obstruct equity, but would propel it. But then the question arises, what is equity?

People seeking equity of course reject rewarding property ownership. It can’t be equitable that due to having a deed in your pocket you earn 100, 1000, or even a million or ten million times the income some other person earns who works harder and longer. To be born and inherit ownership and by virtue of that inheritance and ownership despite  having done nothing of merit to have vastly better circumstances and vastly more influence than others – cannot possibly be equitable.

We also reject rewarding power with income. The logic of Al Capone, Genghis Khan, and the Harvard Business School is that each actor should earn as remuneration for their economic activity whatever they can get away with taking. This norm worships not equitable outcomes, but thuggishness. Being civilized, we of course reject it.

But more controversially and complexly, what about output? Should people get back from the social product an amount equal to what they themselves by their own labors produce as part of that social product?

This seems equitable. After all, what reason can justify that we should get less then what we ourselves contribute, or for that matter that we should get more than our own contribution? Surely we should get an equivalent amount to what we produce, shouldn’t we?

It may seem so, but suppose two people do the same work for the same length of time at the same intensity, why should someone who has better tools with which to generate more output get more income than someone who has worse tools and as a result generates less output even though working as hard or harder?

Why should someone who happens to produce something highly valued be rewarded more than someone who happens to produce something less valued but still socially desired and important to provide, again, even if the less productive person works equally hard and long and endures similar conditions as the more productive person?

Why should someone who was lucky in the genetic lottery, perhaps getting genes for big size or for musical talent or for tremendous reflexes or peripheral vision or for conceptual competency get rewarded more than someone who was less lucky genetically?

You are borne with a wonderful attribute. You didn’t do anything to get it. Why, on top of the luck of having it are you then regaled with greater income as well? There is no earning going on. No meritiable activity is being rewarded. No morality is being fulfilled.

In light of the implicit logic of these cursor examples, it seems that to be equitable remuneration should be for effort and sacrifice in producing socially desired items.

If you work longer, you should get more reward. If you work harder, you should get more reward. If you work in worse conditions and at more onerous tasks, you should get more reward. But you should not get more for having better tools, or for producing something that happens to be more valued, or even for having innate highly productive talents, nor should you get it even for the output of learned skills (though you should get rewarded for the effort and sacrifice of learning those skills), nor of course should you get rewarded for work that isn’t socially warranted.

Unlike our first two values, solidarity and diversity, our third value of rewarding only the effort and sacrifice that people expend in their socially valued work is controversial.

Some anti-capitalists think that people should be rewarded for the overall volume of their output, so that a great athlete should earn fortunes, and a quality doctor should earn way more than a hard working farmer or short order cook. An equitable economy, however, or at any rate a participatory economy, rejects that norm.

Pareconish equity requires instead that if one person has a nice, comfortable, pleasant, highly productive job, and another person has an onerous, debilitating, and less productive but still socially valuable and warranted job, for comparable intensity of work the later person should earn more per hour than the former. Parecon rewards effort and sacrifice at socially valued labor, not property, power, or output.

There are two other anti-capitalist stances regarding remuneration that we should address. They have in common that they take a wise insight past its applicability to a counter productive extreme.

The first approach says work itself is intrinsically negative. It asks why anyone thinking about a better economy should be thinking in terms of organizing or  apportioning work. Why not instead just eliminate it?

This insight correctly notices that our efforts to innovate should seek to diminish onerous components of work in favor of more fulfilling ones. But it moves from that worthy advisory to suggesting eliminating work entirely, and that is simply nonsense.

First and most obviously, work yields results we cannot and do not want to do without. The bounty that work generates, in other words, justifies the costs of undertaking it. In a good economy, people would desist before suffering insufficient returns. In parecon, we expend our effort and make our sacrifice only up to the point where the value of the income we receive outweighs the costs of the exertions we undertake. At that point, we opt for leisure, not more work.

Second, as the famed geographer and anarchist Peter Kropotkin expressed the point, “Overwork is repulsive to human nature—not work. Overwork for supplying the few with luxury—not work for the well-being of all. Work, labor, is a physiological necessity, a necessity of spending accumulated bodily energy, a necessity which is health and life itself.”

In other words, the merits of work are not solely in its outputs, but also in the process and act itself. We want to eliminate work that is onerous and debilitating, but not work per se. So we need to keep work, but to figure out how to do it differently than now.

A second and related anti-capitalist inclination that rejects our approach to remunerating duration, intensity, and onerousness of work, claims that the only criteria for remuneration ought to be human need. “From each according to ability, to each according to need” is the summary aphorism of this perspective.

What this view rightly highlights is that we believe people deserve respect and support by virtue of their very existence. If a person cannot work, then surely we don’t starve them or deny them income at the level others enjoy. Their needs, modulated in accord with social averages, are met. If, likewise, someone has special medical needs, these too are met even beyond just the volume or intensity or character of work the person is able to do.

The problem with rewarding need arises not regarding people who can’t work or who have special medical needs, but when we try to take the norm further than that.

What does it mean, really, to apply this norm for people who can work and who have no special medical needs?

If I am such a person, can I opt not to work and yet consume anyhow? And can I consume as much as I choose, with no external limits imposed? This is obviously not viable. We could have no one working and a the same time have everyone expecting to consume way more than now.

Usually what those who advocate payment for need and working to capacity have in mind is that each actor will responsibly take an appropriate share of consumption out of the social total and will responsibly contribute an appropriate amount of work to its production.

But the problem then arises, how do I know what is appropriate to consume or to produce? And, for that matter, how does the economy itself determine what is appropriate?

It turns out, in other words, that in real practice the norm “work to ability and consumption to need” becomes work in accord with social averages and consume in accord with social averages as well, with people going over and under the average only when warranted.

But how is it warranted, and more, how does one know what the social average is? How does the economy, for that matter, decide how much of anything to produce? How does anyone know the relative values of outputs if we have no measure of the value of the labor involved? How do we know if labor is apportioned sensibly and if we need innovations here or there on behalf of improving work life, and so on?

Whether one believes that remuneration for need and working to one’s ability is a higher moral norm than remuneration for effort and sacrifice – and this too is an open question – the former is not a practical norm unless there is an external measure of need and ability plus a valuation of different labor types, plus a way for me to weigh all this to determine what is warranted behavior on my part, plus an expectation I will do so. But all this is precisely what the parecon reward effort and sacrifice norm (and its institutions that we will describe shortly) provides while also meeting the actual underlying moral intent of the reward need norm and while also enabling people who are able to do so to work more or less and to as a result consume more or less as they prefer, and permitting everyone to judge relative values in tune with labor expended as well as in tune with resources included and effects embodied, which is to say in accord with full true social costs and benefits, as we will see shortly.

So, we have our third value, a controversial one even among anti-capitalists. We want a good economy to remunerate effort and sacrifice, and, when people can’t work, to provide full income and health care based on need, a humane addendum that even capitalism’s advocates honor.

Equity As A Value

Excerpt from the book, Parecon: Life After Capitalism – for those interested in reading a bit more, right off….

Nearly everyone favors “equity.” But controversy arises because different people mean different things by the term. We want fair income and fair situations, but fair in what way?

Equity 1: Income 

Regarding income, four distributive norms summarize available options for how people should be compensated for economic activity:

  • Norm 1: Remunerate according to the contribution of each person’s physical and human assets.
  • Norm 2: Remunerate according to the contribution of each person’s human assets only.
  • Norm 3: Remunerate according to each person’s effort or personal sacrifice.
  • Norm 4: Remunerate according to each person’s need.

Of course, historically the most frequently actualized norm is that people should get what they are strong enough to take, but virtually no one morally advocates brute force bargaining power as our preferred criterion for payment. No one thinks this common approach is ethically superior. No one thinks it is efficient. The idea that society should enrich the thug for being thuggish, though it is typically the rule that markets and many other systems impose, is no one’s stated ideal. For that reason it doesn’t require treatment in a book about economic vision. So, paying attention only to the four norms that people do advocate, let’s first consider norm one.

The rationale for rewarding people for the contribution that their private capital makes to output is that people should get out of an economy what they and their productive possessions contribute. If we think of economic goods and services as a giant pot of stew, the idea is that individuals contribute to how plentiful and rich the stew will be by their labor and by the non-human productive assets they bring to the kitchen. If my labor and productive assets make the stew bigger or richer than your labor and productive assets make it, then according to norm one, it is only fair that I eat more or more delectable morsels than you eat. Since I brought greater assets to the kitchen, I deserve greater reward. You own a hoe and I own a tractor. This makes me more productive than you and enables me to make a greater contribution to society’s total food output. It is only fair, therefore, that I be better remunerated than you.

Though this rationale has intuitive appeal to many, norm one’s advocates have the “Rockefeller’s grandson problem” to deal with. According to norm one, the grandson of a Rockefeller should eat 1,000 times as much stew as a highly trained, highly productive, hard-working daughter of a pauper. And this is warranted, says norm one, even if Rockefeller’s grandson doesn’t work a day in his life and the pauper’s daughter works for fifty years providing services of great benefit to others. The grandson has inherited property that “works” for him since he “brings it to the kitchen” and by norm one we credit the contribution of productive property to its owners. Bringing a tractor or 100 acres of Mississippi bottom land to the economy increases the size and quality of the stew we can make just as surely as having another person to dig or peel potatoes does—only more so. Therefore, if we inherit a tractor or land, then along with this inheritance comes a stream of income that we need do nothing whatever to “earn.” On the other hand, the fact that we have done nothing whatever to earn it makes it self-evident that we don’t deserve it morally due to some meritorious action on our part. There must be some other explanation than our being “morally deserving” for why we ought to have it.

And, indeed, a second line of defense for norm one is based on a vision of “free and independent” people, each with their own property, who, it is argued, would refuse to voluntarily enter a social contract on any other terms than benefiting from that property’s output. We need norm one, in this view, if these people are to freely participate in the economy. But while those who have a great deal of productive property would have a good reason to hold out for a social contract rewarding them for their property, why wouldn’t those who have little or no property have a good reason to hold out for a different arrangement that doesn’t penalize them for not owning property? And if this is true, then how come those with property get the norm they want, and those without property do not?

The historical difference is that those with property could do quite well for themselves (including buying enforcement of their wills via legislation) while waiting for agreements to be reached, whereas those without property could not avoid catastrophe if they had to wait long for an agreement. Requiring unanimity of all parties drives the bargain to favor the propertied. The unemployed eventually have to give in and seek work even under the conditions that profits will go entirely to owners. To do otherwise leaves them destitute. But that means norm one is established not due to moral desirability, but because of an unfair bargaining situation in which some are better able than others to tolerate failure to reach an equitable agreement (and therefore better able to coerce submission and defend their holdings). Thus, the social contract rationale for earning on property loses all ethical force and has its weight only due to contingent, unbalanced circumstances.

This analysis is nothing new, by the way, though it isn’t meant to be publicly discussed by those without property. Consider, for example, Adam Smith’s pithy formulation that “It is only under the shelter of the civil magistrate that the owner of valuable property … can sleep a single night in security.” Or consider this old anonymous aphorism: “The Law locks up the hapless felon who steals the goose from off the common, but lets the greater felon loose who steals the common from the goose.”

A related insight is that unless those who have more productive property acquired it through personal sacrifice, the income they receive from owning the property is unjustifiable on equity grounds. Basing income on private property is not equitable and must be rejected if we determine that those who own more productive property did not come to it through greater personal sacrifice. Pursuing this line of assessment in tune with the views of the advocates of norm one, we must now ask how property is acquired?

Acquisition of productive property through inheritance obviously entails no sacrifice by the heir. Consequently, we deny the would-be heir nothing that she has a moral claim to if we prohibit inheritance of productive property. But what about the rights of members of the older generation who wish to bequeath productive property to their progeny? Suppose (against all odds) that those who wish to make bequests came by their productive property in a manner consistent with a worthy conception of economic justice. That is, suppose they sacrificed more than others by working longer or harder, and rather than eating prodigious portions of caviar in the twilight of their lives, they prefer to pass on their hard-earned productive assets to their children or grandchildren. To deny them the right to do so would seem an unwarranted violation of their personal freedom to dispose of their legitimate rights to economic benefits as they wish. It certainly does interfere with this right.

But what about the right of members of the younger generation to equal economic opportunities? If we permit inheritance of productive assets, some young people will start out with advantages and others will be debited—all due to no failures of their own—a disparity that could grow from generation to generation. If members of an older generation when exercising their freedom of consumption have the right to pass along productive property, then they will have created for a younger generation unequal economic opportunities that violate the rights of the latter. On the other hand, if members of the younger generation are to be protected from this inequitable result, their elders must be precluded from dispersing their assets as they choose—a result that also seems unfair.

What do we choose? The right to bequeath means of production should be denied because the right for all generations to equal economic opportunity far outweighs the right of some of the members of one generation to bequeath income-generating wealth to their offspring. While some freedom of consumption for the older generation to acquire property and pass it on is certainly sacrificed by outlawing the inheritance of productive property, doing so is necessary to protect a more fundamental freedom of the younger generation to equal economic opportunities. More generally, con- freedoms of this sort are common in economics and other aspects of society as well, and rather than settling such conflicts by abstractly awarding a property right to one party or the other, thereby elevating the notion of property as the arbiter of difference, the goal should be to give every actor decision-making input in proportion to the degree that person is affected by the outcome, thereby elevating true democracy as the arbiter of difference. In other words, economic self-management—defined as having decision-making influence in proportion to the degree that one is affected—is a far superior norm than that of economic freedom based on the right to do whatever one chooses with one’s property.

In these terms, since the younger generation would be much more seriously affected by unequal economic opportunities than the older generation would be affected by limiting their freedom to pass on productive property, it is justifiable to limit inheritance rights. While the conflict between freedom of consumption for an older generation to bequeath their property and the right to an equal economic opportunity of a younger generation is only one of many conflicting freedoms in capitalist economies, it is a particularly important one. Awarding the property right in favor of inheritance is a particularly egregious violation of the principle of economic self-management since it permits those who are little affected (the ones making bequests) to greatly affect the lives of many others. These others, as a result, must start their economic lives with serious handicaps relative to a few of their privileged peers.

A second way—beyond actually sweating for it—that people in capitalism acquire more productive property than others, is through good luck. Working or investing in a rising or declining company or industry involves good or bad luck. Pursuing some line of industry and benefiting from ancillary activities of others or from changing global or domestic boom or bust dynamics involves good luck. Distributions of productive property that result from luck hardly reward sacrifices on people’s part. There is therefore no moral justification on their behalf, obviously.

A third way that people come to have more productive property is through unfair advantages such as differences in circumstances and human characteristics. For example, arbitrary factors could allow you to accumulate more productive assets than I because you have information that I do not have, or you operate in a town or country enjoying advantages that my locale doesn’t enjoy. Arbitrary differ- ences in human characteristics could mean that you have greater innate intelligence, strength, or dexterity than I do, all through no fault of mine and due to no greater effort or sacrifice on your part, and these could lead to your acquiring more property. And though these differences may seem unlikely to be too large, even slight initial inequalities in ownership of productive property will grow aggres- sively more unequal in economies where owners are paid for the contributions of their property. The initial advantage enlarges itself, providing the means to acquire still greater property. If the initial difference is unjust, still greater differences that result from ensuing accumulation are unjust as well.

But what if some people accumulate more because they work longer or harder than others? Or, what if some people consume less to accumulate more productive property? Most who argue for norm one as equitable would have us believe that this is how inequalities in the ownership of productive property usually arise. And, indeed, if someone accumulated more productive property through more work or less consumption in the past, then greater consumption (or leisure) commensurate with the greater past sacrifice is warranted. But this conclusion is a direct application of norm three—to each according to his or her effort or sacrifice—as long as “commensurate” compensation is the quantity required to compensate for greater past sacrifices, thereby making everyone’s burdens and benefits fair over time. It does not justify norm one, with its implications of remunerating for property even when it exceeds what effort and sacrifice warrant.

Most political economists accept that in capitalist economies the differences in ownership of productive property that accumulate within a single generation due to unequal sacrifices are minuscule compared to the differences in wealth that develop due to inheritance, luck, unfair advantage, and profit-making. That was what Proudhon meant when he coined the phrase “property is theft.” All evidence about the origins of differential wealth at the end of the twentieth century support the opinion Edward Bellamy voiced (in 1888) in his famous book Looking Backward: 

You may set it down as a rule that the rich, the possessors of great wealth, had no moral right to it as based upon desert, for either their fortunes belonged to the class of inherited wealth, or else, when accumulated in a lifetime, necessarily represented chiefly the product of others, more or less forcibly or fraudulently obtained.

A turn of the twenty-first century TV ad for the brokerage house Salomon, Smith, & Barney provides a delicious example of ethical doublespeak about property income. A man of obvious taste devoutly informs us that the brokers at Salomon, Smith & Barney believe in “making money the old-fashioned way, earning it.” What he means, of course, is that brokers discourage clients from the temptation of high-gain, high-risk strategies, and recommend instead expanding wealth more slowly but with greater certainty— precisely without earning a penny of it. As Ricardo noted: “There is no way of keeping profits up but by keeping wages down.” And in the typically pithy words of Groucho Marx: “The secret of success is honesty and fair dealing. If you can fake those, you’ve got it made.”

Norm two for remuneration is less straightforward to assess than norm one: Why not reward each according to the value of the contribution of only our human capital, that is, of only what we ourselves through our own efforts bring to the kitchen? While supporters of norm two generally agree with the case made above that property income is unjustifiable, they hold that we all have a right to the “fruits of our own labor.” Their rationale for this is at first review quite compelling. If my labor contributes more to the social endeavor, it is only right that I should receive more. Not only am I not exploiting others if I get more, but since I put the extra amount in the pot myself, they would be exploiting me by paying me less than the value of my personal contribution.

But the obviousness of the claim is a function of its familiarity and not of hard thinking about it. Careful thought shows we must reject norm two—rewarding personal output—for the same basic reasons we reject norm one—rewarding ownership of means of production.

Economists define the value of the contribution of any input (whether labor or machines or some resources) as the “marginal revenue product” of that input. If we add one more unit of the input in question to all of the other inputs currently used in a production process, how much would the value of output increase? That amount is the marginal revenue product. But this means the marginal productivity, or the contribution any input makes, depends as much on the quantity of that input available and on the quantity and quality of complementary inputs, as on any intrinsic quality of the input itself. In other words, the amount that my extra hour of labor can add to output depends on how many prior hours I work, and also on how many other hours others are putting in, and on the quality of their contributions, and on the tools we all use, and on the items we produce and their attributes, and so on. This fact alone undermines the moral imperative behind any “contribution based” norm, such as both norm two and norm one.

To reward differences in the value of personal contributions as norm two warrants is to reward differences due to circumstantial and personal factors beyond any individual’s control. When young people flock to the profession that you have labored in for twenty years, your marginal revenue product declines although you may work as hard as ever. When your employer fails to replace machines that other employers upgrade, your marginal productivity suffers even despite there being no decrease in your efforts.

Suppose we set aside or somehow account for the fact that the marginal productivity of different kinds of labor depends on the number of other people in each labor category and on the quantity and quality of non-labor inputs available as well as on technological knowledge. The “genetic lottery” constitutes another circumstance largely outside an individual’s control that can greatly influence how valuable one’s personal contribution will be. No amount of eating and weightlifting will give me a 6-foot-9-inch frame with 300 pounds of muscle so that I can “earn” the salary of a professional football player 50 times greater than the salary I “earn” now. The noted English economist Joan Robinson (1903-1983) pointed out long ago that however “productive” a machine or piece of land may be, that doesn’t constitute a moral argument for paying anything to its owner. And we need only extend this insight to individual human characteristics to realize that however productive an IQ of 170 or a 300-pound physique may be, that doesn’t mean the owner of this trait deserves more income than someone less productively endowed who works as hard and sacrifices as much.

 Luck in external circumstance and in the genetic lottery are no better basis for remuneration than luck in the property inheritance lottery—which implies that as a conception of equity, norm two suffers from the same flaw as norm one. If a person has the fine fortune to have genes that give her an advantage for producing things of merit, or if she is lucky as regards her field of work, there is no reason on top of this good luck to provide her with an exorbitant income as well.

In defense of norm two, its advocates frequently claim that while talent may not morally deserve reward, employing talents requires training, and therein lies the sacrifice that merits a reward. Doctors’ salaries are deemed compensation not for some innate capability the doctor has, but for the extra education they endure. But longer training does not necessarily entail greater personal sacrifice. It is important not to confuse the cost of someone’s training—which consists mostly of the time and energy of teachers who impart the training and of scarce social resources like books, computers, libraries, and classrooms—with personal sacrifice by the trainee. If teachers and educational facilities are paid for as a public and not private expense—that is, if we have a universal public education system—then the personal sacrifice the student makes consists only of his or her discomfort during the time spent in school.

Moreover, even the personal suffering that one endures as a student must be properly compared. While many educational programs are less personally enjoyable than time spent in leisure, the relevant comparison is with the discomfort that others experience who are working at paid jobs instead of going to school. If our criterion for extra remuneration is enduring greater personal sacrifice than others, then logic requires that we compare the medical student’s discomfort to whatever level of discomfort others are experiencing who work while the medical student is in school.

In short, would you rather be in medical school or slinging hash? Only if schooling is more disagreeable than working does it constitute a greater sacrifice than others make and thereby deserve greater reward, and the additional reward it would then deserve would be commensurate to that difference, but not more.

So to the extent that education is born at public rather than private expense, and that the personal discomfort of schooling is no greater than the discomfort that would be incurred by working instead during the same time frame, extra schooling merits no extra compensation on moral grounds. And if one pays for one’s education, then that marks the reward warranted, and no more. And if one’s education is onerous and demanding compared to working, that difference marks the extra compensation warranted, and no more.

The problem with the “I had to endure school so long” justification of norm two is the “doctor versus garbage collector problem.” How can it be fair to pay a brain surgeon, even in the unlikely event he puts in longer hours than most other workers, ten times more than a garbage collector who works under miserable conditions forty or fifty hours a week? Even if medical school is costly, and in fact even if it is more debilitating and harder than collecting garbage during the same time (which is a ridiculous claim), surely it would warrant far less than a lifetime of much higher pay to compensate the doctor for that temporary sacrifice, particularly since the subsequent job—brain surgery—has exceptional social and moral rewards of its own. The moral basis of norm two collapses.

So what about norm three—remunerate according to each person’s effort or personal sacrifice? Whereas differences in contributions from people’s labor will derive from differences in circumstance, talent, training, luck, and effort, of all these factors people control only their effort. To reward and punish people for things they cannot control violates the same basic tenet of social justice that says it is unfair to pay differently according to race or sex, for example. By “effort” we simply mean personal sacrifice or inconvenience incurred in performing one’s economic duties. Of course effort can be longer hours, less pleasant work, or more intense, dangerous, or unhealthy work. Or, it may consist of undergoing training that is less gratifying than the training experience of others, or less pleasant than the time others spend working. The underlying rationale for norm three is that people should eat from the stew pot according to the sacrifices they made to cook it. According to norm three no consideration other than differential sacrifice in useful production can justify one able-bodied person eating more or better stew than another.

Even for those who reject contribution-based theories of economic justice like norms one and two, there is still a problem with norm three: the “car crash problem.” Suppose someone has made average sacrifices for 15 years, and consumed an average amount. She is hit by a car. Medical treatment for crash victims can cost a fortune. If we limit people’s consumption to the level warranted by the effort they expend, we would have to deny hurt or sick people humane treatment (and/or income while they can’t work).

Of course this is where another norm comes in, norm four: payment according to need. But as attractive as norm four is, it is a norm in a different category from the other three. It is not really a candidate for a definition of economic justice. Instead, it expresses a value beyond equity or justice that we aspire to and implement when possible and desirable. It is one thing for an economy to be equitable, fair, and just. It is another thing for an economy to be compassionate. A just economy is not the last word in morally desirable economics. Besides striving for economic justice, we desire compassion as well. Thus we have our equity value, norm three, and beyond economic justice, we have our compassion, to be applied via norm four where appropriate such as in cases of illness, catastrophe, incapacity, and so on. And those are our aspirations for income.

Of course we know that it won’t be worthwhile to attain equity of income and even compassionate humanity about income, if in doing so the total productive output plummets or other nasty side effects cost us considerably in our broader lives. But that is a matter that we address when we assess whether we can institutionally implement our norms for economic reward in ways consistent with other values we hold dear. We shall investigate that as we proceed. First, there is another dimension of equity to consider.

Equity 2: Circumstances 

Why should one person have an economic condition at work that is fulfilling and pleasant, and another have a condition that is debilitating and depressing? What justification can there be for this difference? On what moral grounds should Anthony enjoy better economic circumstances than Arundhati?

Arguments regarding income carry over virtually without alter- ation. Surely it cannot be owning property that justifies Anthony getting better work conditions and circumstances than Arundhati does. Nor can it be due to some innate quality, nor to training. If Arundhati actually suffers a worse work situation than Anthony, we can certainly offset it by giving Arundhati a larger income to make the income/work package equal for her and Anthony.

The point is, in thinking about equitable economic conditions, we have to think in terms of not just equitable remuneration but also equitable circumstances. The only real justification for differential allocation of circumstances is if this benefits output, and in turn everyone. But surely, even if this were the case one would then offset the situation for the party who was suffering worse conditions with a higher income, while the party benefiting from better circumstances would receive a lower income.

This attitude toward making circumstances equitable is already inherent in the discussion of income and in the choice to remunerate according to effort and sacrifice, but it is worth pointing out on its own account for clarity’s sake. We will return later to the implications of equilibrating not only the quality of work in different jobs, but also how different jobs empower workers. But for now we consider the next area of concern about guiding values.

Next Entry: Self Management


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