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The sociology of neoclassical exploitation
The Sociology of Neoclassical Exploitation KENNETH H. MACKINTOSH* University of Central Arkansas
The sociological basis of labor terms in Cobb-Douglas production functions is developed by means of a general labor output function which adds moral inducements to the conventional variables—wages and force. Discussion of the relationships implied by the general equation highlights the need for plainly stated assumptions regarding the declining marginal utility of factors and the possibilities for minimizing the use of force in employment. It is shown that a functional labor term cannot be fully explained by wages even if labor is paid its marginal product. Portions of the labor term must be accounted for by moral inducements which accrue to employers primarily in the form of socially and culturally generated free goods. Discussion of ideological implications of permanent nonzero coercion theoretical terms.
The problem of distribution has spawned a number of ethical rules, including a product rule (to each according to product) and a needs rule (to each according to needs). Marx adopted the product rule in his analysis of wage labor, defining the exploitation rate as the ratio of net profit, interest, and rent to wages (e.g., Marx, 1967, p. 531). If labor produced the total product, labor should have it all. Anything less was exploitation. Absent wage labor, of course, Marx would adopt the needs rule. T. H. von Thu¨nen, who anticipated the theory of marginal productivity1 as early as the 1820s (Marshall, 1930, p. x), became a strong partisan of a combined product/needs rule (Douglas, 1934, p. 37). His formula for wages, which could also be interpreted as a definition of exploitation, was given as the geometric mean of the marginal product of labor and an amount sufficient to meet minimum subsistence needs. Herr von Thu¨nen objected to the implication of his emerging theory that with given inputs of capital and land, the marginal product of labor would decline as units of labor were added to the *Direct all correspondence to: Kenneth H. Mackintosh, 110 Stanford Road, Conway, Arkansas 72032-9206. Telephone: (501) 327-1230. E-mail: [email protected]. The Social Science Journal, Volume 36, Number 2, pages 271–284. Copyright © 1999 by Elsevier Science Inc. All rights of reproduction in any form reserved. ISSN: 0362-3319.
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production process. John Bates Clark, “the American founder of marginal productivity theory” (Blaug, 1985, p. 427), defended the product rule both as the universal law of efficiency and as “the dominant rule of life” (Clark, 1931, p. 180). If two individuals as different as Marx and Clark each favored the product rule it is because they measured the productivity of working people very differently. And whereas general acceptance of marginal productivity theory may have finished off the labor theory of value, it also seriously dampened the ethical appeal of the product rule. Across the intervening years individuals who carry out the tasks of philosophy have become more thoroughly immunized against finding ethical principles in the propositions of science, including those of the marginal productivity theory.2 Against this trend, however, it has been tempting to use the theory3 as a measure of exploitation. In the words of Lester Thurow (1973, p. 70), “a factor that is paid less than its marginal product is being exploited; a factor that is paid more than its marginal product is an exploiter.” Joan Robinson’s (1954, pp. 281–283), neoclassical definition of exploitation written as a Cobb-Douglas production function,4 is the difference between wages and the marginal product of labor measured in prices. What cannot be made to stand in efforts of this sort is the very notion of exploitation itself. It slips away from us leaving just the efficiency portion of Clark’s enthusiastic pronouncement. Rawls (1971, p. 310) only summarized the consensus of economists in observing that “the notion of exploitation is out of place here.” The production function turns exploitation into a system property which exists where productive factors are misallocated. Blaug (1985, p. 485) was bluntly dismissive in concluding that “the great mystery of the modern theory of distribution is why anyone regards the share of wages and profits in total income as an interesting problem.” Neoclassical approaches to the treatment of exploitation may be a closed chapter in the social sciences. But interest in distribution problems is undiminished and production functions of the Cobb-Douglas type retain an importance as econometric tools. It has been well understood that production functions rest on a politicosociocultural foundation.5 Economists have included such things as historically conditioned standards of living, interdependent preferences, expectations, relative deprivation, etc. as specific sociological factors which underpin the labor term that appears so tangibly in the functional equation. Taken in this form it is a strange sort of labor indeed. It responds only to wages, and the scope of its response is practically limited to a market equilibrating mobility.6 The following will be a formal attempt to incorporate two additional categorical factors into the distribution analysis. The first is political and has already been used extensively by economists and other social scientists. The second is sociological in a fairly narrow sense and has enjoyed only marginal acceptance in the specific uses to which it will be put in the following. It will be convenient to approach this task through an analysis of the labor factor which appears in functional expressions of the Cobb-Douglas type.
THE INDUCEMENT TO LABOR Pigou’s reference to wages (note 6, above), almost as if they were the sole inducement to labor, was not atypical of the times in which he wrote. One of the great ideological props of the modern age which runs through both market and socialist intellectual traditions has been that coercion is technically inefficient and will fade away as a function of economic and/or technological development.
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The seminal studies of the economically trained historians who adopted the label cliometricians,7 going back to 1965 and centering on the efforts of Fogel and Engerman (1974a, 1974b, 1991, 1992; but see also Fogel, 1989; Fogel, Galantine, and Manning, 1990), have tempered our optimism regarding future tradeoffs between wages and force as means of realizing human labor power. “Both slave and free societies rely on the combination of force and positive inducement to bring forth labor” (Fogel and Engerman, 1974b, p. 155). The functional relation between inducements (i.e., wages and force) and labor output can be formalized quite elegantly in terms of a production function of the full normal type.8 There is a third inducement to labor which has a particular significance for sociology. In Weber’s (1968, p. 154) terms it is a wertrational appeal to the value of work for its own sake. We are familiar with this inducement in the form of work ethics, in employer comments about hiring good attitudes, and so forth. To the degree that former generations tended to look upon this moral dimension as some portion of culture which insured, more or less, that individuals would enter fervently into work, it could be treated as a condition of employment no different from the biological characteristics and variations of a human population. Professional social scientists, whether of the left or the right, have generally held that a population with nothing to sell save its labor power can be trusted to look after its own motivations. Notwithstanding this disposition, however, at least since the publication of Management and the Worker (Roethlisberger and Dickson, 1939), a burgeoning employer willingness to invest resources directly in the human relations approach to personnel management has been cultivated, documented, and exhaustively studied in the social sciences. Businesses have grown up around such notions as Quality of Work Life, Quality Circles, and Principle-Centered Leadership, to which can be added vast sociological and psychological literatures on the productivity of worker-directed enterprise and the efficacy of intrinsic rewards (e.g., Rothschild and Whitt, 1986; Hochner, 1988; Kanter, 1983, 1989). In economics Leibenstein’s (1966, 1976, 1978, 1980, 1987) X-efficiency concept was unfolded as a consistent microtheoretical specification of the unnecessarily restrictive neoclassical effort assumptions. All of these departures acknowledge the variable nature of human effort in a context which includes a variety of inducements. Charles Lindblom formally proposed a third categorical mode of inducement, his preceptoral system, as a bona fide competitor to the more widely accepted mechanisms of resource allocation.9 He credited the unlikely pair of de Tocqueville (1900) and Rousseau (1935, 1972), respectively, as anticipating and developing the basic concept.10 The preceptoral system (from preceptor, meaning teacher) is a “massive highly unilateral persuasion in which a small enlightened governmental elite instructs the masses” (Lindblom, 1977, p. 54). Lindblom distinguished such systems from authority systems on the grounds of what he considered to be their rationality and hostility to bureaucracy. The stress on “education” and the intensity of “education” of cadres coupled with hostility to bureaucracy, support one of the most fundamental characteristics of a preceptoral system, perhaps its most definitive aspiration. It is to rely on individual energy and resourcefulness rather than on social coordination—far more than in conventional authority or market systems. . . . The assumption is that all other existing systems are grossly wasteful, because they fail to tap individual energies and resourcefulness (Lindblom, 1977, p. 60).11
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Lindblom’s preceptoral system elevates Weber’s wertrational appeal to the position of primary stimulus to labor. The “massive highly unilateral persuasion” of a “small enlightened governmental elite” is described a set of institutional arrangements which are designed to intensify and focus the moral inducements—which in other systems are left to culture and chance.
A FORMAL EXPRESSION If we add moral inducements to the more firmly accepted inducements of wages and coercion, we can state a broadly encompassing theory of labor output (or resource allocation) in the form of a production function of the full normal type. L 5 Habc 2 Aax 2 Bbv 2 Ccz
(1)
As per note 8, L is labor output; H, A, B, and C are constant coefficients; and a, b, and c represent respectively wage, moral, and force inputs. This equation will render a limited but important service. The absence of data to operationalize variables, estimate exponents, and specify constants does not strip away the equation’s essential theoretical function of revealing the general character of a pattern of relationships in a manner that greatly facilitates discussion (e.g., Hayek, 1978, p. 28). The coefficient H can be interpreted as a parameter which expresses “shifts of the production function, which are unrelated to changes in the quantity of the factors employed” (Blaug, 1985, p. 441). Abramovitz (1956) referred to such coefficients as measures of our ignorance. Its precise value would have importance only to econometricians, and its role in the general pattern will be confined to a single observation below. The exponents of the variable factors refer directly to psychophysiological conditions of actors and are thus a proper object of study in physiology and physiological psychology.12 They are important elements in the relationship as they will determine the rate at which increases in return rates, defined here as labor output, will decline as a function of increases in respective factor inputs. Beyond some point of physical and/or psychological exhaustion, for example, no increase in factor inputs will increase or even sustain a given level of labor output. It is not necessary to assume that x 5 y 5 z, but it is a matter of great importance to the social sciences to settle the question of whether it is reasonable to suppose that any of the exponents might be less than unity. Since Von Thu¨nen the idea has gradually spread across the social sciences that returns do diminish. For some this is a “universal relation prevailing between all useful resources” (e.g., Hayek, 1978, p. 302). There is probably no disagreement over the order of magnitude of the exponents for wage and coercion inputs, but the same cannot be said of the moral dimension. Lindblom’s claim to the efficiency of preceptoral systems was nonspecific on this point but it suggested an exponent somewhere in the neighborhood of unity. At the extreme it could amount to an assumption of increasing marginal returns. Allusions to the “absolute elaboration” of human creative dispositions, “unmeasured by any previously established yardstick” (Marx, 1964, pp. 84 – 85) which abound in discussions of preceptoral systems may evidence nothing more than an inherited rhetorical style. Ambiguity at this critical juncture, however, serves no one. The assumption of increasing,
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constant, or barely decreasing marginal returns for moral inducements would be radical, to say the least. If the assumption were plainly stated, seriously intended, and supportable to some degree (e.g., Herzberg, 1966; Lepper and Greene, 1978; Deci and Ryan, 1974, 1985; Leibenstein, 1978, 1980), it might reopen the exchange initiated by Mises (1935), Brutzkus (1935), and Weber (1968, pp. 100 –118) on the relative merits of market and planned economies. In the absence of such explicit and supported claims it would be prudent to proceed on the assumption that the moral incentives of preceptoral systems would not be unique among useful resources. Decreasing marginal returns for each of the variable inputs pose a practical problem for the members of any system, market or planned, that strongly opposes the credible threat and use of force as a means of inducing labor output (or compliance of any other kind). A situation in which coercion is held to levels that could be said to approximate some theoretical minimum will also be one in which very large short-run returns could be realized by small increases in that very factor. Less alarming perhaps, but also important, the functional relation also indicates, ceteris paribus, that a high-wage/low-morale system will net a smaller gain in labor output from wage increases, compared to a low-wage/ high-morale system which would be better served by wage increases.13 The constant product curves for labor output at any given level of coercion will display an inverse relation between wages and morale over a limited range of input levels. The narrowness of the tradeoff range which can be expected in the empirical world should be taken into account by researchers who confine their analytical efforts to linear regression. The factor coefficients can be taken to represent a sociopsychological condition of individuals which is their susceptibility to the various inducements. The smaller the coefficient the greater will be the salience of the inducement for the individual. Economists have argued, for example, that the sheer availability of high quality, inexpensive consumer goods will increase worker “responsiveness” to wage inducements (e.g., Fogel and Engerman, 1974b, p. 155; but see also Rothbard, 1962, pp. 183–184). Philosophers and social scientists of the left have created a vast literature in an attempt to show that this relationship is not coincidental and that it is pernicious.14 Changing individuals and their environments so as to drive down the salience of material inducements is programmatic in the transition to socialism.15 Whether or not Lindblom and other theoreticians of preceptoral systems would claim that the marginal returns on moral inducements are increasing, they certainly conceive an interest in increasing the salience of those inducements. Private employers, on the other hand, despite their considered and longstanding ideological preference for material incentives, have always been happy to accept whatever moral incentives workers bring gratis to the job and they can also probably be counted upon to utilize moral incentives of their own creation wherever it can be demonstrated that in so doing they will lower the money cost of labor (see below). Ideological appeals to the value and importance of religion, race, nation, social class, union, corporation, or to other of the socially constructed entities which define the human social condition constitute the standard approach to lowering the coefficient for moral inducements. Both capitalists and socialists, insofar as they are committed to minimizing the use of coercion as a productive tool, would have an interest in increasing the coefficient for the force input, irrespective of the value of its exponent.
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The ideal preceptoral system would have the largest possible coefficient for coercion, the smallest possible for the moral dimension and a very large (if not the largest possible) coefficient for material inducements. If this could be accomplished, the ratio of moral to wage inputs would be greater than unity for all possible levels of coercion. One of the less obvious properties of the functional relation, however, is that this ratio will increase in magnitude as the level of coercion is increased. At the lowest possible level of coercion rather large inputs in both the moral and the material dimensions will be required to elicit a unit of labor output. If the level of coercion is increased, the other input requirements will fall off sharply, but the material inputs will fall much faster than the moral inputs. Given the residual nature of the general coefficient H, it is not clear that it should be thought of as taking on values different from unity. As remarked above, only an econometrician would attempt to deal with this problem. But it will do no harm to note that the higher the value of H (which presumably implies a more efficient system of labor mobilization), the greater would be the ratio of moral to material inputs as coercion increases. Even prior to this endemic temptation to increase coercion, however, the resocialization difficulties which are anticipated as the normal condition of a period of transition from a market to a preceptoral system appear to guarantee a resort to coercion. For many commentators it is, in fact, precisely by means of coercion that factor coefficients are to be altered (e.g., Albert and Hahnel, 1978, pp. 281–286; Bauer, 1952; MacEwan, 1981; Richta, 1969, pp. 165–180; Wheelwright and McFarlane, 1970, pp. 143–158). The functional relationship is symmetrical with regard to the factors and their coefficients. Hence it can be said that a market system in which moral incentives were deplored would encounter the same difficulties with regard to propensities to resort to coercion. Constant product curves generated by specifications of Equation 1 (or some similar equation) would reveal the input combinations which elicit a unit of labor output. But if we had this information we still would not know the coordinates at which any given system of labor mobilization would operate. A market system would tend to operate at coordinates which minimize the money cost of a unit of labor output. In nonmarket systems the nebulosity of cost criteria carries over into the determination of coordinates. This leaves the problem open to ideological considerations that may be variable and difficult to anticipate.16
EXPLOITATION AND THE PRODUCTIVITY OF LABOR The Marxian insistence that production is a social relation means, among other things, that employers in the real world seldom, if ever, pay the full cost of a unit of labor output. In its simplest form a Cobb-Douglas production function which is homogeneous of the first degree can be written as follows (with P as total product; L and C as the respective factor inputs, labor and capital). P 5 LkC12k
(2)
The marginal product of labor is simply kP/L and the marginal product of capital is (1 2 k) P/C. In a state of competitive equilibrium,17 labor and capital will be paid their
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respective marginal products. The marginal return of the labor component has always been understood as wages. There is no difficulty in extending the wage concept to include a variety of material rewards such as employer contributions to Social Security and pension funds, health insurance premiums, day care, and so forth. If the labor unit (or units) represented by L can be understood as a function of material, moral, and coercive inducements, it becomes immediately obvious that the money wage paid to labor will not be sufficient to produce the unit of labor which, in turn, produces k/L of the total product. In a market system the wage component is the most straightforward element in the functional relation and thus the easiest to deal with. Capitalist employers expect to pay wages, they pay wages, and they also pay close attention to what they get in return. It is true that such things as minimum wage laws, tax credits for employers who create new jobs or jobs of a certain kind, the earned income tax credit, government-funded apprenticeship programs, and current legislative initiatives which tie important aspects of welfare benefit qualification to gainful employment, make the employer’s accounting tasks more difficult. These complications provide opportunities for profit and loss that have little to do with producing a good or a service and they also provide social scientific opportunities to sort out and argue over their myriad countervailing effects. Notwithstanding all this, it is not wrong to claim that private employers in market systems pay the bulk of their wage bills. Employers have always used coercion to elicit labor. At present private employers in the United States probably get less in the way of government-subsidized coercion services than at any time in history. They pay for most of what they use. The analysis of Fogel and Engerman (1974a) presents the abolition of slavery in the United States essentially as a sequence of political acts through which the cost of a unit of force was raised to a very high level. Some public employers, in particular the armed services, still use coercion as an acknowledged supplement to wages. The coercion (which is periodically agreed to by the employee) is combined with powerful moral inputs and appears to produce high levels of worker output. It is in the area of moral inducements that we find the largest potential gap between total input and input supplied by employers—particularly in private employment. The bulk of moral inputs appear more or less as a free good supplied by culture itself. What are to become the moral inputs are cultivated in individuals as a portion of primary socialization and continuously reinforced though a multiplicity of secondary socialization media. Although there are other elements involved, the generation at risk is said to be primarily at risk of missing crucial aspects of a moral preparation for gainful employment. As remarked earlier, it may be the case that private employers can often supplement the moral incentives of otherwise well-socialized employees, but they are not well equipped to provide the most fundamental components of preceptoral inducement out of their own resources. Judging from one of the most detailed theoretical descriptions of the day-to-day operation of a preceptoral system (Albert and Hahnel, 1978, pp. 254 –282), the large-scale creation of these inducements is a hugely time-consuming (expensive) process. It is to be expected then that the Cobb-Douglas equation will always include a labor term some portion of which has not been paid by the employer— even if labor’s marginal return were equal to marginal product (measured respectively in wages and value-added prices). And by implication, the marginal product of labor will be lower than it would
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appear to be if all of the costs of producing a unit of labor output had been counted. The marginal product of capital will, of course, appear to be higher. This is a familiar sounding controversy in a different form. Thurow’s assertion (1968), which failed to convince the economics profession (e.g., Okun, 1975, p. 55; or Thurow, 1973, p. 71), was that American labor was paid less than its marginal product. Thurow also suggested that employers, employees, and, above all, policy planners might systematically mistake actual returns for marginal products. Here the mistake with regard to marginal productivities results from a systematic failure to count the full cost of a unit of labor. As defined by Equation 1, the full cost is always paid, whether or not anyone takes account of it. From this vantage point it is instructive to look back at exploitation and the product/ needs rules of earlier reference. With the explicit inclusion of moral incentives the traditional ethical rules can no longer be applied in a straightforward manner. Exploitation remains as a system property but it cannot be rendered in the familiar neoclassical terms. Do private employers benefit by failing to pay the full cost of a unit of labor output? In a competitive economy the tendency will be toward lower prices, rather than higher profits, so it will be the case that some community of final consumers reaps the benefits of the unpaid portion of the extended wage bill. If there were no price structure (division of labor, if you prefer), that could be an end to the matter; the community pays a portion of the wage bill which it recoups through lower prices. But the structure is real and we have no guarantee (nor probably even any reason to expect) that savings will be passed through to the individuals who in some sense could be said to have actually paid the residual wage bill. This phenomenon is similar to the more familiar one of inflation in that its impact will be differentially distributed in a manner which is difficult to trace. It can be described in the most general terms as a resource transfer from motivated to unmotivated population segments, but it would be rash to attempt to identify these segments with the heavily aggregated, regional ethnic, and class stratification schemes of sociology. On the other side of this coin, the worker who produces a unit of labor output has obviously gotten what he or she needs to produce that unit irrespective of its source. But here the input mix matters a great deal. Hardly anyone in the social sciences expects to find significant degrees of persistent, pure neoclassical wage exploitation in a market economy. The presumption of wage exploitation is invariably interpreted as an indicator that coercion is also present in one form or another. Even in the case of slavery Fogel and Engerman demonstrated rather conclusively that American slaves forced into the gang system of labor received higher wages (and worked much more intensively) than people who could not be coerced. Wage exploitation, as estimated by Cobb-Douglas (1974a, p. 153), may have been no greater than about 12% but the absolute nonpecuniary loss resulting from that same coercion was larger by a factor greater than 10 (Cobb-Douglas, 1974b, pp. 158 –160). If the same argument can be made for moral inducements then, with the caveat raised by individuals who might be said to opt for contractual coercion (e.g., reenlisting Marines), exploitation and coercion become identical. At this level the coercion (or exploitation) is an individual as well as a system property that cannot result from any mix of material and moral inducements.
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DEFINING THE ISSUE The theory of Equation 1 has a very limited purpose. As previously noted, it merely indicates the general character of a pattern which asserts the categorical status of material, moral, and coercive inducements. Persuasion has often been deplored or applauded in the social sciences strictly as a function of where it occurs. The alienation and oppression of market persuasion so richly described in the constructivist literature is often said to be utterly transformed at some juncture. According to Weichert, who put it as succinctly as any, “the replacement of private capitalist property by socialist social property,” creates a condition in which the social interests “agree with the objective laws of social development” (Weichert, 1977, pp. 141–142). In theoretical terms of the sort introduced in Equation 1, Weichert denies the categorical distinction between moral and coercive inducements. Where private capitalist property exists, he says, these elements are bound together. But with the advent of socialist social property the coercive element simply vanishes. To call a law or anything else objective is to claim that it can become known to us through observation. Those who can read the objective laws of social development, therefore, are able to define as coercive any inducement to act in ways contrary to those laws. Coercion, in the Weberian sense, of the use or credible threat of force turns out in this alternative system of thought to have been only a misapprehension borne of an inability or unwillingness to read the objective laws. As discussed in the third section above, the disadvantage, if you will, of a system which stresses moral inducements while disparaging the material, is that it creates a situation in which even small increments of coercion will induce very large increases in labor output. When this is combined with a theoretical alternative which cannot recognize coercion in its Weberian form, the stage is set for catastrophe—if the theory of Equation 1 is generally valid. It is in this way, then, that the test of the theory becomes an important issue. Unfortunately, the test is a matter of paradigmatic commitment rather than one of empirical demonstration. It is a test of social scientists rather than of data. Those who believe that objective laws of social development exist are likely to reject Equation 1— on that account.18 If they are wrong their error is grievous. A social science that envisions coercion as an ineradicable portion of the human condition and attempts through one means or another merely to facilitate a search for ways of trading it off advantageously against other goods undoubtedly loses much of its luster. Bitter as this might seem, it could be much worse to mistake the sheer efficacy of coercion in human relations for a transitory stage in some teleological scheme of social development.
NOTES 1.
The marginal productivity theory formalizes the experience common to all individuals who have ever engaged in the technological process of combining productive factors, say land and labor, that total product cannot be increased infinitely by increasing the input of a single factor. As inputs of a single factor are added to a production process, each subsequent addition will yield a smaller increase in total product than the previous one until the increment falls to zero and then turns negative. The last unit of the factor added to the production process is referred to as the marginal unit. Its contribution to total product is small in relation to all of the previous
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7. 8.
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THE SOCIAL SCIENCE JOURNAL Vol. 36/No. 2/1999 units of that factor but it defines the productivity of all. The marginal productivity of a factor thus sets an upper limit on the market price (or the wage) an actor would be willing to pay for units of that productive factor. Friedman and others have argued that the product rule could be shown empirically to have normative status for the great bulk of the citizens (e.g., Friedman, 1982, p. 167), but that falls short of an ethical status claim. Others, most notably Hayek (e.g., Hayek, 1988), have treated the realm of ethics itself as an evolutionary phenomenon. Since publication of The Theory of Wages (Douglas, 1934) consideration of the product rule, and, more generally, exploitation, has frequently been cast in terms of production functions of the Cobb-Douglas type (see below). Needs/rule-based definitions of exploitation provided the substance of a heated debate of 20 years’ duration beginning with the publication of Harry Pearson’s (1957) article “The Economy Has No Surplus”. Other major contributors included Dalton, 1960, 1963, 1972, 1974; Harris, 1959; Mandel, 1962; Frank, 1970; Newcomer and Rubenstein, 1975; and Newcomer, 1977. It is one of the oddities of contemporary social inquiry that this exchange appears to have been rather tightly insulated from the mainline of controversy provoked by the discovery of marginal productivity. A discussion of the Cobb-Douglas production function is developed in the fourth section of this paper, Exploitation and the Productivity of Labor. For a more extended discussion see Blaug, 1985, pp. 440 – 451. Economists of the “Austrian School,” most notably Mises, 1935, 1936; Robbins, 1934; and Hayek, 1969, have insisted on the incorporation of the sociological context while others, such as Taylor, 1964; Lange, 1964; Dickinson, 1939; and Lerner, 1944, have judged this larger context to be beyond the realm of economic inquiry (see Lavoie, 1985a). In fairness to Pigou it should be noted that he initiated a line of inquiry which related exploitation to labor output in functional terms. He referred to the value of the marginal net product of labor as “the normal inducement to give as much work as the general interest demands” (Pigou, 1920, p. 538). Robert Fogel defines cliometrics “as the application of the behavioral models and statistical methods of the social sciences to the study of history” (Fogel, 1989, p. 423). Fogel and Engerman (1974b, pp. 155–159) use the common tool of production-isoquant mapping to illustrate the relation of wages and force to labor output as a function of cost. Constant labor-output equations were not included in their presentation they would take the general form of L 5 Hac 2 Aa x 2 Cc z , where L is labor output and H, A, and C are constant coefficients, with a and c representing the respective wage and force inputs. Discussion of coefficients and the exponents will be taken up below. In his role as contemporary economic historian, Mark Blaug (1990, p. 64) acknowledged the potential importance of Lindblom’s effort as a serious contribution from the side of radical political economy which should not be ignored. Along the way Lindblom could have cited Weber (1968, pp. 110 –111) in his assertion that “a planned economy may have command over certain ideal motives of what is in the broadest sense an altruistic type, which can be used to stimulate a level of achievement in economic production comparable to that which [has been achieved] . . . in a market economy.” It is impossible to know what Lindblom meant by the term “social coordination,” given that he applied it equally to authority and market systems. The market is useful precisely for its ability to coordinate “individual energy and resourcefulness” without conscious intention. It is clear enough that Lindblom wished to avoid the repressive administration of authority systems,
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but he left the impression that somehow coordination of individual efforts in the preceptoral system would not be problematic. The economic democracy position (Lavoie, 1985b, pp. 125–171) adumbrated by advocates of “decentralized planning” (e.g., Crotty and Boddy, 1975; Alperovitz and Faux, 1977; Buell and DeLuca, 1977; Buell, 1982; Harrington, 1965, 1982; Hayden, 1982; Heilbroner, 1982; Lekachman, 1982) is closely related to the preceptoral concept. At the point of market extinction the two positions become identical. 12. In his treatment of X efficiency, Leibenstein (particular 1978, pp. 17–38, 1980, pp. 22–39) provides a Freudian personality theory which could be used as a data source for both the exponents and the factor coefficients. He ignores the Weberian categorical apparatus of inducements employed here in favor of a more general perspective which treats departures from economic rationality as a residual category. The indifference curves of Leibenstein’s selective rationality derive from his personality theory which can potentially be extended upward to encompass interpersonal relations, organizations, social institutions, and culture itself, depending upon the specific purposes of the investigator. For example, Leibenstein (1978, p. 54) uses the superegoistic element of his personality theory to include “the value society places on entrepreneurship” versus “employment in the civil service, the professions, political careers, careers in church organizations, military organizations,” etc. 13. The interesting deduction which follows, ceteris paribus, is that systems in which increments in moral inducement net significant increases in worker output must be relatively high-wage systems. By theoretical specification, employers would judge the significance of productivity gains while the appraisal of wage levels would fall to the workers. 14. This is not meant to imply that only committed socialists are averse to the kinds of consumer goods which are so characteristic of market systems. Starting with Schumpeter (1962, pp. 145–155), the disdain of intelligentsias for mass consumption has been thoroughly analyzed and amply reported. 15. Richta (1969, pp. 167–169) goes so far as to place the word consumption in quotation marks when he refers to consumption in market systems. The sorts of consumption of which he approves are actually human capital investments. Consumers in the mature planned economy he was expecting will be treated to A rational system of analyzing consumer demand and setting scientifically based standards (nutritional standards, “the rational wardrobe,” models of transport, housing, etc.) backed by a considered policy of built-in economic and social stimulation, [all of which] can serve to divert a maximum amount of resources to the development of human creative powers. 16.
17.
18.
It is clear that the ability of social institutions, particularly government, to effect change by influencing factor costs is often more important and less intrusive than direct attempts to alter factor coefficients. There will be no opportunity here to pursue this important matter. The argument is theoretical in the sense, as suggested above, of revealing a set of functional relationships. Hence, there is no suggestion that an empirical system is capable of achieving the state of full competitive equilibrium. The reader will recall the option of constant or increasing marginal returns to moral inducements which may or may not have been seriously intended by Lindblom.
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REFERENCES Abramovitz, M. (1956). Resources and Output Trends in the United States Since 1870. American Economic Review: Papers and Proceedings, 46: 5–23. Albert, M. and R. Hahnel. (1978). Unorthodox Marxism: An Essay on Capitalism, Socialism, and Revolution. Boston: South End Press. Alperovitz, G. and J. Faux. (1977). Building a Democratic Economy. The Progressive. Bauer, R.A. (1952). The New Man in Soviet Psychology. Cambridge: Harvard University Press. Blaug, M. (1985). Economic Theory in Retrospect, 4th Ed. New York: Cambridge University Press. ———. (1990). Economic Theories, True or False? Essays in the History and Methodology of Economics. Brookfield: Edward Elgar. Brutzkus, B. (1935). Economic Planning in Soviet Russia. London: George Routledge & Sons. Buell, J. (1982). After Reaganomics, What? Democratic Socialism if We Dare. The Progressive. Buell, J. and T. DeLuca. (1977). Let’s Start Talking About Socialism. The Progressive. Clark, J.B. (1931). The Distribution of Wealth: A Theory of Wages, Interest and Profits. New York: Macmillan. Crotty, J.R. and R. Boddy. (1975). Who Will Plan the Planned Economy? The Progressive. Dalton, G. (1960). A Note of Clarification on Economic Surpluses. American Anthropologist, 62: 483– 490. ———. (1963). Economic Surplus Once Again. American Anthropologist, 65: 389 –394. ———. (1972). Peasantries in Anthropology and History. Current Anthropology, 13: 385– 416. Dalton, G. (1974). How Exactly Are Peasants Exploited? American Anthropologist, 76: 553– 561. Deci, E.L. and R.M. Ryan. (1985). Intrinsic Motivation and Self-Determination in Human Behavior. New York: Plenum. ———. (1974). Accounting for United States Economic Growth: 1929 –1969. Washington; DC: Brookings Institution. Dickinson, H.D. (1939). Economics of Socialism. Oxford: Oxford University Press. Douglas, P.H. (1934). The Theory of Wages. New York: Macmillan. Fogel, R.W. (1989). Without Consent or Contract: The Rise and Fall of American Slavery. New York: W. W. Norton. Fogel, R.W. and S.L. Engerman. (1974a). Time on the Cross. Boston: Little, Brown. ———. (1974b). Time on the Cross: Evidence and Methods. Boston: Little, Brown. ———. (1991). Without Consent or Contract—Technical Papers, Vol. 1. New York: W. W. Norton. ———. (1992). Without Consent or Contract—Technical Papers, Vol. 2. New York: W. W. Norton. Fogel, R.W., R.A. Galantine, and R.L. Manning. (1990). Without Consent or Contract— Evidence and Methods. New York: W. W. Norton. Frank, A.G. (1970). On Dalton’s “Theoretical Issues in Economic Anthropology.” Current Anthropology, 11: 67–71. Friedman, M. (1982). Capitalism and Freedom. Chicago: University of Chicago Press. Harrington, M. (1965). The Accidental Century. New York: Macmillan. ———. (1982). A Path for America: Proposals from the Democratic Left. Dissent (Fall). Harris, M. (1959). The Economy Has No Surplus? American Anthropologist, 61: 189 –199. Hayden, T. (1982). The American Future: New Visions Beyond the Reagan Administration. New York: Washington Square Press. Hayek, F.A. (1969). Individualism and Economic Order. Chicago: University of Chicago Press.
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———. (1978). The Pretense of Knowledge (Nobel Memorial Lecture, Stockholm, Dec. 11, 1974). In F.A. Hayek, (Ed.), New Studies in Philosophy, Politics, Economics and the History of Ideas, pp. 23–34. Chicago: University of Chicago Press. ———. (1988). The Fatal Conceit. Chicago: University of Chicago Press. Heilbroner, R. (1982). Does Capitalism Have a Future? New York Times Magazine (Aug. 15). Herzberg, F. (1966). Work and the Nature of Man. Cleveland: World. Hochner, A., C.S. Granrose, J. Goode, E. Simon, and E. Applebaum. (1988). Job Saving Strategies. Philadelphia: Upjohn Institute of Employment Research. Kanter, R.M. (1983). The Change Masters: Innovation for Productivity in the American Corporation. New York: Simon and Schuster. ———. (1990). When Giants Learn to Dance: Mastering the Challenge of Strategy, Management, and Careers in the 1990s. New York: Simon and Schuster. Lange, O.R. (1964). On the Economic Theory of Socialism. In B.E. Lippincott (Ed.), On the Economic Theory of Socialism, pp. 55–143. New York: McGraw-Hill. Lavoie, D. (1985a). Rivalry and Central Planning. New York: Cambridge University Press. ———. (1985b). National Economic Planning: What Is Left? Cambridge: Ballinger. Leibenstein, H. (1966). Allocative Efficiency Versus X-Efficiency. American Economic Review, 56: 397– 409. ———. (1976). Beyond Economic Man: A New Foundation for Microeconomics. Cambridge: Harvard University Press. ———. (1978). General X-Efficiency Theory and Economic Development. New York: Oxford University Press. ———. (1980). Inflation, Income distribution and X-Efficiency Theory. New York: Barnes & Noble. ———. (1987). Inside the Firm: The Inefficiencies of Hierarchy. Cambridge: Harvard University Press. Lekachman, R. (1982). Greed Is Not Enough: Reaganomics. New York: Pantheon. Lepper, M.R. and D. Greene. (1978). The Hidden Costs of Reward: New Perspectives on the Psychology of Human Motivation. Newark: Lawrence Erlbaum. Lerner, A.P. (1944). The Economics of Control: Principles of Welfare Economics. New York: Macmillan. Lindblom, C.E. (1977). Politics and Markets: The World’s Political-Economic Systems. New York: Basic Books. MacEwan, A. (1981). Revolution and Economic Development in Cuba. London: Macmillan. Mandel, E. (1962). Marxist Economic Theory, Vol. I. New York: Modern Reader. Marshall, A. (1930). Principles of Economics: An Introductory Volume (8th Ed.). London: Macmillan. Marx, K. (1967). Capital: A Critique of Political Economy, Vol. 1. New York: International Publishers. ———. (1964). Pre-capitalist Economic Formations. Hobsbawm, E. J. (Ed.), J. Cohen (Trans.), London: Wedenfeld and Nicolson. Mises, L. (1935). Economic Calculation in the Socialist Commonwealth. In F.A. Hayek (Ed.), Adler, S. (Trans.), Collectivist Economic Planning: Critical Studies on the Possibilities of Socialism, pp. 87–103. London: Routledge & Sons. ———. (1936). Socialism: An Economic and Sociological Analysis. Kahane, J. (Trans.), London: Jonathan Cape. Newcomer, P. (1977). Toward a Scientific Treatment of “Exploitation”: A Critique of Dalton. American Anthropologist, 79: 115–119. Newcomer, P. and H. Rubenstein. (1977). Peasant Exploitation: A Reply to Dalton. American Anthropologist, 77: 337–338.
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Okun, A. (1975). Equality and Efficiency: The Big Tradeoff. Washington: Brookings. Pearson, H.W. (1957). The Economy Has No Surplus. In K. Polanyi, C. M. Arensberg, and H.W. Pearson (Eds.), Trade and Market in the Early Empires, pp. 320 –341. New York: Free Press. Pigou, A.C. (1920). The Economics of Welfare. London: Macmillan. Rawls, J. (1971). A Theory of Justice. Cambridge: Harvard University Press. Richta, R. (1969). Civilization at the Crossroads (3rd Ed.). Prague: International Arts and Sciences Press. Robbins, L. (1943). The Great Depression. New York: Macmillan. Robinson, J. (1954). The Economics of Imperfect Competition. London: Macmillan. Roethlisberger, F.J. and W.J. Dickson. (1939). Management and the Worker. Cambridge: Harvard University Press. Rothbard, M.N. (1962). Man, Economy, and State: A Treatise on Economic Principles. Los Angeles: Nash Publishing. Rothschild, J. and J.A. Whitt. (1986). The Cooperative Workplace. New York: Cambridge University Press. Rousseau, J.J. (1972). Emile. New York: Everyman’s Library. ———. (1935). The Social Contract. New York: E. P. Dutton. Schumpeter, J.A. (1962). Capitalism, Socialism and Democracy (3rd Ed.). New York: Harper Torchbooks. Taylor, F.M. (1964). The Guidance of Production in a Socialist State. In B.E. Lippincott (Ed.), On the Economic Theory of Socialism, pp. 41–54. New York: McGraw-Hill. Thurow, L.C. (1968). Disequilibrium and the Marginal Productivity of Capital and Labor. Review of Economics and Statistics, 50: 23–31. ———. (1973). Toward a Definition of Economic Justice. Public Interest, 31: 56 – 80. Tocqueville, A. (1900). Democracy in America, Vol. 1. New York: Co-Operative Publication Society. Weber, M. (1968). Economy and Society, Vol. 1. G. Roth and C. Wittich (Eds.), New York: Bedminster Press. Weichert, W. (1977). Freedom and Property in Socialism. In C. Wellman (Ed.), Equality and Freedom: Past, Present and Future, pp. 139 –143. Wiesbaden: Franz Steiner. Wheelwright, E.L. and B. McFarlane. (1970). The Chinese Road to Socialism. New York: Monthly Review Press.
The sociological basis of labor terms in Cobb-Douglas production functions is developed by means of a general labor output function which adds moral inducements to the conventional variables—wages and force. Discussion of the relationships implied by the general equation highlights the need for plainly stated assumptions regarding the declining marginal utility of factors and the possibilities for minimizing the use of force in employment. It is shown that a functional labor term cannot be fully explained by wages even if labor is paid its marginal product. Portions of the labor term must be accounted for by moral inducements which accrue to employers primarily in the form of socially and culturally generated free goods. Discussion of ideological implications of permanent nonzero coercion theoretical terms.
The problem of distribution has spawned a number of ethical rules, including a product rule (to each according to product) and a needs rule (to each according to needs). Marx adopted the product rule in his analysis of wage labor, defining the exploitation rate as the ratio of net profit, interest, and rent to wages (e.g., Marx, 1967, p. 531). If labor produced the total product, labor should have it all. Anything less was exploitation. Absent wage labor, of course, Marx would adopt the needs rule. T. H. von Thu¨nen, who anticipated the theory of marginal productivity1 as early as the 1820s (Marshall, 1930, p. x), became a strong partisan of a combined product/needs rule (Douglas, 1934, p. 37). His formula for wages, which could also be interpreted as a definition of exploitation, was given as the geometric mean of the marginal product of labor and an amount sufficient to meet minimum subsistence needs. Herr von Thu¨nen objected to the implication of his emerging theory that with given inputs of capital and land, the marginal product of labor would decline as units of labor were added to the *Direct all correspondence to: Kenneth H. Mackintosh, 110 Stanford Road, Conway, Arkansas 72032-9206. Telephone: (501) 327-1230. E-mail: [email protected]. The Social Science Journal, Volume 36, Number 2, pages 271–284. Copyright © 1999 by Elsevier Science Inc. All rights of reproduction in any form reserved. ISSN: 0362-3319.
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production process. John Bates Clark, “the American founder of marginal productivity theory” (Blaug, 1985, p. 427), defended the product rule both as the universal law of efficiency and as “the dominant rule of life” (Clark, 1931, p. 180). If two individuals as different as Marx and Clark each favored the product rule it is because they measured the productivity of working people very differently. And whereas general acceptance of marginal productivity theory may have finished off the labor theory of value, it also seriously dampened the ethical appeal of the product rule. Across the intervening years individuals who carry out the tasks of philosophy have become more thoroughly immunized against finding ethical principles in the propositions of science, including those of the marginal productivity theory.2 Against this trend, however, it has been tempting to use the theory3 as a measure of exploitation. In the words of Lester Thurow (1973, p. 70), “a factor that is paid less than its marginal product is being exploited; a factor that is paid more than its marginal product is an exploiter.” Joan Robinson’s (1954, pp. 281–283), neoclassical definition of exploitation written as a Cobb-Douglas production function,4 is the difference between wages and the marginal product of labor measured in prices. What cannot be made to stand in efforts of this sort is the very notion of exploitation itself. It slips away from us leaving just the efficiency portion of Clark’s enthusiastic pronouncement. Rawls (1971, p. 310) only summarized the consensus of economists in observing that “the notion of exploitation is out of place here.” The production function turns exploitation into a system property which exists where productive factors are misallocated. Blaug (1985, p. 485) was bluntly dismissive in concluding that “the great mystery of the modern theory of distribution is why anyone regards the share of wages and profits in total income as an interesting problem.” Neoclassical approaches to the treatment of exploitation may be a closed chapter in the social sciences. But interest in distribution problems is undiminished and production functions of the Cobb-Douglas type retain an importance as econometric tools. It has been well understood that production functions rest on a politicosociocultural foundation.5 Economists have included such things as historically conditioned standards of living, interdependent preferences, expectations, relative deprivation, etc. as specific sociological factors which underpin the labor term that appears so tangibly in the functional equation. Taken in this form it is a strange sort of labor indeed. It responds only to wages, and the scope of its response is practically limited to a market equilibrating mobility.6 The following will be a formal attempt to incorporate two additional categorical factors into the distribution analysis. The first is political and has already been used extensively by economists and other social scientists. The second is sociological in a fairly narrow sense and has enjoyed only marginal acceptance in the specific uses to which it will be put in the following. It will be convenient to approach this task through an analysis of the labor factor which appears in functional expressions of the Cobb-Douglas type.
THE INDUCEMENT TO LABOR Pigou’s reference to wages (note 6, above), almost as if they were the sole inducement to labor, was not atypical of the times in which he wrote. One of the great ideological props of the modern age which runs through both market and socialist intellectual traditions has been that coercion is technically inefficient and will fade away as a function of economic and/or technological development.
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The seminal studies of the economically trained historians who adopted the label cliometricians,7 going back to 1965 and centering on the efforts of Fogel and Engerman (1974a, 1974b, 1991, 1992; but see also Fogel, 1989; Fogel, Galantine, and Manning, 1990), have tempered our optimism regarding future tradeoffs between wages and force as means of realizing human labor power. “Both slave and free societies rely on the combination of force and positive inducement to bring forth labor” (Fogel and Engerman, 1974b, p. 155). The functional relation between inducements (i.e., wages and force) and labor output can be formalized quite elegantly in terms of a production function of the full normal type.8 There is a third inducement to labor which has a particular significance for sociology. In Weber’s (1968, p. 154) terms it is a wertrational appeal to the value of work for its own sake. We are familiar with this inducement in the form of work ethics, in employer comments about hiring good attitudes, and so forth. To the degree that former generations tended to look upon this moral dimension as some portion of culture which insured, more or less, that individuals would enter fervently into work, it could be treated as a condition of employment no different from the biological characteristics and variations of a human population. Professional social scientists, whether of the left or the right, have generally held that a population with nothing to sell save its labor power can be trusted to look after its own motivations. Notwithstanding this disposition, however, at least since the publication of Management and the Worker (Roethlisberger and Dickson, 1939), a burgeoning employer willingness to invest resources directly in the human relations approach to personnel management has been cultivated, documented, and exhaustively studied in the social sciences. Businesses have grown up around such notions as Quality of Work Life, Quality Circles, and Principle-Centered Leadership, to which can be added vast sociological and psychological literatures on the productivity of worker-directed enterprise and the efficacy of intrinsic rewards (e.g., Rothschild and Whitt, 1986; Hochner, 1988; Kanter, 1983, 1989). In economics Leibenstein’s (1966, 1976, 1978, 1980, 1987) X-efficiency concept was unfolded as a consistent microtheoretical specification of the unnecessarily restrictive neoclassical effort assumptions. All of these departures acknowledge the variable nature of human effort in a context which includes a variety of inducements. Charles Lindblom formally proposed a third categorical mode of inducement, his preceptoral system, as a bona fide competitor to the more widely accepted mechanisms of resource allocation.9 He credited the unlikely pair of de Tocqueville (1900) and Rousseau (1935, 1972), respectively, as anticipating and developing the basic concept.10 The preceptoral system (from preceptor, meaning teacher) is a “massive highly unilateral persuasion in which a small enlightened governmental elite instructs the masses” (Lindblom, 1977, p. 54). Lindblom distinguished such systems from authority systems on the grounds of what he considered to be their rationality and hostility to bureaucracy. The stress on “education” and the intensity of “education” of cadres coupled with hostility to bureaucracy, support one of the most fundamental characteristics of a preceptoral system, perhaps its most definitive aspiration. It is to rely on individual energy and resourcefulness rather than on social coordination—far more than in conventional authority or market systems. . . . The assumption is that all other existing systems are grossly wasteful, because they fail to tap individual energies and resourcefulness (Lindblom, 1977, p. 60).11
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Lindblom’s preceptoral system elevates Weber’s wertrational appeal to the position of primary stimulus to labor. The “massive highly unilateral persuasion” of a “small enlightened governmental elite” is described a set of institutional arrangements which are designed to intensify and focus the moral inducements—which in other systems are left to culture and chance.
A FORMAL EXPRESSION If we add moral inducements to the more firmly accepted inducements of wages and coercion, we can state a broadly encompassing theory of labor output (or resource allocation) in the form of a production function of the full normal type. L 5 Habc 2 Aax 2 Bbv 2 Ccz
(1)
As per note 8, L is labor output; H, A, B, and C are constant coefficients; and a, b, and c represent respectively wage, moral, and force inputs. This equation will render a limited but important service. The absence of data to operationalize variables, estimate exponents, and specify constants does not strip away the equation’s essential theoretical function of revealing the general character of a pattern of relationships in a manner that greatly facilitates discussion (e.g., Hayek, 1978, p. 28). The coefficient H can be interpreted as a parameter which expresses “shifts of the production function, which are unrelated to changes in the quantity of the factors employed” (Blaug, 1985, p. 441). Abramovitz (1956) referred to such coefficients as measures of our ignorance. Its precise value would have importance only to econometricians, and its role in the general pattern will be confined to a single observation below. The exponents of the variable factors refer directly to psychophysiological conditions of actors and are thus a proper object of study in physiology and physiological psychology.12 They are important elements in the relationship as they will determine the rate at which increases in return rates, defined here as labor output, will decline as a function of increases in respective factor inputs. Beyond some point of physical and/or psychological exhaustion, for example, no increase in factor inputs will increase or even sustain a given level of labor output. It is not necessary to assume that x 5 y 5 z, but it is a matter of great importance to the social sciences to settle the question of whether it is reasonable to suppose that any of the exponents might be less than unity. Since Von Thu¨nen the idea has gradually spread across the social sciences that returns do diminish. For some this is a “universal relation prevailing between all useful resources” (e.g., Hayek, 1978, p. 302). There is probably no disagreement over the order of magnitude of the exponents for wage and coercion inputs, but the same cannot be said of the moral dimension. Lindblom’s claim to the efficiency of preceptoral systems was nonspecific on this point but it suggested an exponent somewhere in the neighborhood of unity. At the extreme it could amount to an assumption of increasing marginal returns. Allusions to the “absolute elaboration” of human creative dispositions, “unmeasured by any previously established yardstick” (Marx, 1964, pp. 84 – 85) which abound in discussions of preceptoral systems may evidence nothing more than an inherited rhetorical style. Ambiguity at this critical juncture, however, serves no one. The assumption of increasing,
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constant, or barely decreasing marginal returns for moral inducements would be radical, to say the least. If the assumption were plainly stated, seriously intended, and supportable to some degree (e.g., Herzberg, 1966; Lepper and Greene, 1978; Deci and Ryan, 1974, 1985; Leibenstein, 1978, 1980), it might reopen the exchange initiated by Mises (1935), Brutzkus (1935), and Weber (1968, pp. 100 –118) on the relative merits of market and planned economies. In the absence of such explicit and supported claims it would be prudent to proceed on the assumption that the moral incentives of preceptoral systems would not be unique among useful resources. Decreasing marginal returns for each of the variable inputs pose a practical problem for the members of any system, market or planned, that strongly opposes the credible threat and use of force as a means of inducing labor output (or compliance of any other kind). A situation in which coercion is held to levels that could be said to approximate some theoretical minimum will also be one in which very large short-run returns could be realized by small increases in that very factor. Less alarming perhaps, but also important, the functional relation also indicates, ceteris paribus, that a high-wage/low-morale system will net a smaller gain in labor output from wage increases, compared to a low-wage/ high-morale system which would be better served by wage increases.13 The constant product curves for labor output at any given level of coercion will display an inverse relation between wages and morale over a limited range of input levels. The narrowness of the tradeoff range which can be expected in the empirical world should be taken into account by researchers who confine their analytical efforts to linear regression. The factor coefficients can be taken to represent a sociopsychological condition of individuals which is their susceptibility to the various inducements. The smaller the coefficient the greater will be the salience of the inducement for the individual. Economists have argued, for example, that the sheer availability of high quality, inexpensive consumer goods will increase worker “responsiveness” to wage inducements (e.g., Fogel and Engerman, 1974b, p. 155; but see also Rothbard, 1962, pp. 183–184). Philosophers and social scientists of the left have created a vast literature in an attempt to show that this relationship is not coincidental and that it is pernicious.14 Changing individuals and their environments so as to drive down the salience of material inducements is programmatic in the transition to socialism.15 Whether or not Lindblom and other theoreticians of preceptoral systems would claim that the marginal returns on moral inducements are increasing, they certainly conceive an interest in increasing the salience of those inducements. Private employers, on the other hand, despite their considered and longstanding ideological preference for material incentives, have always been happy to accept whatever moral incentives workers bring gratis to the job and they can also probably be counted upon to utilize moral incentives of their own creation wherever it can be demonstrated that in so doing they will lower the money cost of labor (see below). Ideological appeals to the value and importance of religion, race, nation, social class, union, corporation, or to other of the socially constructed entities which define the human social condition constitute the standard approach to lowering the coefficient for moral inducements. Both capitalists and socialists, insofar as they are committed to minimizing the use of coercion as a productive tool, would have an interest in increasing the coefficient for the force input, irrespective of the value of its exponent.
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The ideal preceptoral system would have the largest possible coefficient for coercion, the smallest possible for the moral dimension and a very large (if not the largest possible) coefficient for material inducements. If this could be accomplished, the ratio of moral to wage inputs would be greater than unity for all possible levels of coercion. One of the less obvious properties of the functional relation, however, is that this ratio will increase in magnitude as the level of coercion is increased. At the lowest possible level of coercion rather large inputs in both the moral and the material dimensions will be required to elicit a unit of labor output. If the level of coercion is increased, the other input requirements will fall off sharply, but the material inputs will fall much faster than the moral inputs. Given the residual nature of the general coefficient H, it is not clear that it should be thought of as taking on values different from unity. As remarked above, only an econometrician would attempt to deal with this problem. But it will do no harm to note that the higher the value of H (which presumably implies a more efficient system of labor mobilization), the greater would be the ratio of moral to material inputs as coercion increases. Even prior to this endemic temptation to increase coercion, however, the resocialization difficulties which are anticipated as the normal condition of a period of transition from a market to a preceptoral system appear to guarantee a resort to coercion. For many commentators it is, in fact, precisely by means of coercion that factor coefficients are to be altered (e.g., Albert and Hahnel, 1978, pp. 281–286; Bauer, 1952; MacEwan, 1981; Richta, 1969, pp. 165–180; Wheelwright and McFarlane, 1970, pp. 143–158). The functional relationship is symmetrical with regard to the factors and their coefficients. Hence it can be said that a market system in which moral incentives were deplored would encounter the same difficulties with regard to propensities to resort to coercion. Constant product curves generated by specifications of Equation 1 (or some similar equation) would reveal the input combinations which elicit a unit of labor output. But if we had this information we still would not know the coordinates at which any given system of labor mobilization would operate. A market system would tend to operate at coordinates which minimize the money cost of a unit of labor output. In nonmarket systems the nebulosity of cost criteria carries over into the determination of coordinates. This leaves the problem open to ideological considerations that may be variable and difficult to anticipate.16
EXPLOITATION AND THE PRODUCTIVITY OF LABOR The Marxian insistence that production is a social relation means, among other things, that employers in the real world seldom, if ever, pay the full cost of a unit of labor output. In its simplest form a Cobb-Douglas production function which is homogeneous of the first degree can be written as follows (with P as total product; L and C as the respective factor inputs, labor and capital). P 5 LkC12k
(2)
The marginal product of labor is simply kP/L and the marginal product of capital is (1 2 k) P/C. In a state of competitive equilibrium,17 labor and capital will be paid their
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respective marginal products. The marginal return of the labor component has always been understood as wages. There is no difficulty in extending the wage concept to include a variety of material rewards such as employer contributions to Social Security and pension funds, health insurance premiums, day care, and so forth. If the labor unit (or units) represented by L can be understood as a function of material, moral, and coercive inducements, it becomes immediately obvious that the money wage paid to labor will not be sufficient to produce the unit of labor which, in turn, produces k/L of the total product. In a market system the wage component is the most straightforward element in the functional relation and thus the easiest to deal with. Capitalist employers expect to pay wages, they pay wages, and they also pay close attention to what they get in return. It is true that such things as minimum wage laws, tax credits for employers who create new jobs or jobs of a certain kind, the earned income tax credit, government-funded apprenticeship programs, and current legislative initiatives which tie important aspects of welfare benefit qualification to gainful employment, make the employer’s accounting tasks more difficult. These complications provide opportunities for profit and loss that have little to do with producing a good or a service and they also provide social scientific opportunities to sort out and argue over their myriad countervailing effects. Notwithstanding all this, it is not wrong to claim that private employers in market systems pay the bulk of their wage bills. Employers have always used coercion to elicit labor. At present private employers in the United States probably get less in the way of government-subsidized coercion services than at any time in history. They pay for most of what they use. The analysis of Fogel and Engerman (1974a) presents the abolition of slavery in the United States essentially as a sequence of political acts through which the cost of a unit of force was raised to a very high level. Some public employers, in particular the armed services, still use coercion as an acknowledged supplement to wages. The coercion (which is periodically agreed to by the employee) is combined with powerful moral inputs and appears to produce high levels of worker output. It is in the area of moral inducements that we find the largest potential gap between total input and input supplied by employers—particularly in private employment. The bulk of moral inputs appear more or less as a free good supplied by culture itself. What are to become the moral inputs are cultivated in individuals as a portion of primary socialization and continuously reinforced though a multiplicity of secondary socialization media. Although there are other elements involved, the generation at risk is said to be primarily at risk of missing crucial aspects of a moral preparation for gainful employment. As remarked earlier, it may be the case that private employers can often supplement the moral incentives of otherwise well-socialized employees, but they are not well equipped to provide the most fundamental components of preceptoral inducement out of their own resources. Judging from one of the most detailed theoretical descriptions of the day-to-day operation of a preceptoral system (Albert and Hahnel, 1978, pp. 254 –282), the large-scale creation of these inducements is a hugely time-consuming (expensive) process. It is to be expected then that the Cobb-Douglas equation will always include a labor term some portion of which has not been paid by the employer— even if labor’s marginal return were equal to marginal product (measured respectively in wages and value-added prices). And by implication, the marginal product of labor will be lower than it would
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appear to be if all of the costs of producing a unit of labor output had been counted. The marginal product of capital will, of course, appear to be higher. This is a familiar sounding controversy in a different form. Thurow’s assertion (1968), which failed to convince the economics profession (e.g., Okun, 1975, p. 55; or Thurow, 1973, p. 71), was that American labor was paid less than its marginal product. Thurow also suggested that employers, employees, and, above all, policy planners might systematically mistake actual returns for marginal products. Here the mistake with regard to marginal productivities results from a systematic failure to count the full cost of a unit of labor. As defined by Equation 1, the full cost is always paid, whether or not anyone takes account of it. From this vantage point it is instructive to look back at exploitation and the product/ needs rules of earlier reference. With the explicit inclusion of moral incentives the traditional ethical rules can no longer be applied in a straightforward manner. Exploitation remains as a system property but it cannot be rendered in the familiar neoclassical terms. Do private employers benefit by failing to pay the full cost of a unit of labor output? In a competitive economy the tendency will be toward lower prices, rather than higher profits, so it will be the case that some community of final consumers reaps the benefits of the unpaid portion of the extended wage bill. If there were no price structure (division of labor, if you prefer), that could be an end to the matter; the community pays a portion of the wage bill which it recoups through lower prices. But the structure is real and we have no guarantee (nor probably even any reason to expect) that savings will be passed through to the individuals who in some sense could be said to have actually paid the residual wage bill. This phenomenon is similar to the more familiar one of inflation in that its impact will be differentially distributed in a manner which is difficult to trace. It can be described in the most general terms as a resource transfer from motivated to unmotivated population segments, but it would be rash to attempt to identify these segments with the heavily aggregated, regional ethnic, and class stratification schemes of sociology. On the other side of this coin, the worker who produces a unit of labor output has obviously gotten what he or she needs to produce that unit irrespective of its source. But here the input mix matters a great deal. Hardly anyone in the social sciences expects to find significant degrees of persistent, pure neoclassical wage exploitation in a market economy. The presumption of wage exploitation is invariably interpreted as an indicator that coercion is also present in one form or another. Even in the case of slavery Fogel and Engerman demonstrated rather conclusively that American slaves forced into the gang system of labor received higher wages (and worked much more intensively) than people who could not be coerced. Wage exploitation, as estimated by Cobb-Douglas (1974a, p. 153), may have been no greater than about 12% but the absolute nonpecuniary loss resulting from that same coercion was larger by a factor greater than 10 (Cobb-Douglas, 1974b, pp. 158 –160). If the same argument can be made for moral inducements then, with the caveat raised by individuals who might be said to opt for contractual coercion (e.g., reenlisting Marines), exploitation and coercion become identical. At this level the coercion (or exploitation) is an individual as well as a system property that cannot result from any mix of material and moral inducements.
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DEFINING THE ISSUE The theory of Equation 1 has a very limited purpose. As previously noted, it merely indicates the general character of a pattern which asserts the categorical status of material, moral, and coercive inducements. Persuasion has often been deplored or applauded in the social sciences strictly as a function of where it occurs. The alienation and oppression of market persuasion so richly described in the constructivist literature is often said to be utterly transformed at some juncture. According to Weichert, who put it as succinctly as any, “the replacement of private capitalist property by socialist social property,” creates a condition in which the social interests “agree with the objective laws of social development” (Weichert, 1977, pp. 141–142). In theoretical terms of the sort introduced in Equation 1, Weichert denies the categorical distinction between moral and coercive inducements. Where private capitalist property exists, he says, these elements are bound together. But with the advent of socialist social property the coercive element simply vanishes. To call a law or anything else objective is to claim that it can become known to us through observation. Those who can read the objective laws of social development, therefore, are able to define as coercive any inducement to act in ways contrary to those laws. Coercion, in the Weberian sense, of the use or credible threat of force turns out in this alternative system of thought to have been only a misapprehension borne of an inability or unwillingness to read the objective laws. As discussed in the third section above, the disadvantage, if you will, of a system which stresses moral inducements while disparaging the material, is that it creates a situation in which even small increments of coercion will induce very large increases in labor output. When this is combined with a theoretical alternative which cannot recognize coercion in its Weberian form, the stage is set for catastrophe—if the theory of Equation 1 is generally valid. It is in this way, then, that the test of the theory becomes an important issue. Unfortunately, the test is a matter of paradigmatic commitment rather than one of empirical demonstration. It is a test of social scientists rather than of data. Those who believe that objective laws of social development exist are likely to reject Equation 1— on that account.18 If they are wrong their error is grievous. A social science that envisions coercion as an ineradicable portion of the human condition and attempts through one means or another merely to facilitate a search for ways of trading it off advantageously against other goods undoubtedly loses much of its luster. Bitter as this might seem, it could be much worse to mistake the sheer efficacy of coercion in human relations for a transitory stage in some teleological scheme of social development.
NOTES 1.
The marginal productivity theory formalizes the experience common to all individuals who have ever engaged in the technological process of combining productive factors, say land and labor, that total product cannot be increased infinitely by increasing the input of a single factor. As inputs of a single factor are added to a production process, each subsequent addition will yield a smaller increase in total product than the previous one until the increment falls to zero and then turns negative. The last unit of the factor added to the production process is referred to as the marginal unit. Its contribution to total product is small in relation to all of the previous
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THE SOCIAL SCIENCE JOURNAL Vol. 36/No. 2/1999 units of that factor but it defines the productivity of all. The marginal productivity of a factor thus sets an upper limit on the market price (or the wage) an actor would be willing to pay for units of that productive factor. Friedman and others have argued that the product rule could be shown empirically to have normative status for the great bulk of the citizens (e.g., Friedman, 1982, p. 167), but that falls short of an ethical status claim. Others, most notably Hayek (e.g., Hayek, 1988), have treated the realm of ethics itself as an evolutionary phenomenon. Since publication of The Theory of Wages (Douglas, 1934) consideration of the product rule, and, more generally, exploitation, has frequently been cast in terms of production functions of the Cobb-Douglas type (see below). Needs/rule-based definitions of exploitation provided the substance of a heated debate of 20 years’ duration beginning with the publication of Harry Pearson’s (1957) article “The Economy Has No Surplus”. Other major contributors included Dalton, 1960, 1963, 1972, 1974; Harris, 1959; Mandel, 1962; Frank, 1970; Newcomer and Rubenstein, 1975; and Newcomer, 1977. It is one of the oddities of contemporary social inquiry that this exchange appears to have been rather tightly insulated from the mainline of controversy provoked by the discovery of marginal productivity. A discussion of the Cobb-Douglas production function is developed in the fourth section of this paper, Exploitation and the Productivity of Labor. For a more extended discussion see Blaug, 1985, pp. 440 – 451. Economists of the “Austrian School,” most notably Mises, 1935, 1936; Robbins, 1934; and Hayek, 1969, have insisted on the incorporation of the sociological context while others, such as Taylor, 1964; Lange, 1964; Dickinson, 1939; and Lerner, 1944, have judged this larger context to be beyond the realm of economic inquiry (see Lavoie, 1985a). In fairness to Pigou it should be noted that he initiated a line of inquiry which related exploitation to labor output in functional terms. He referred to the value of the marginal net product of labor as “the normal inducement to give as much work as the general interest demands” (Pigou, 1920, p. 538). Robert Fogel defines cliometrics “as the application of the behavioral models and statistical methods of the social sciences to the study of history” (Fogel, 1989, p. 423). Fogel and Engerman (1974b, pp. 155–159) use the common tool of production-isoquant mapping to illustrate the relation of wages and force to labor output as a function of cost. Constant labor-output equations were not included in their presentation they would take the general form of L 5 Hac 2 Aa x 2 Cc z , where L is labor output and H, A, and C are constant coefficients, with a and c representing the respective wage and force inputs. Discussion of coefficients and the exponents will be taken up below. In his role as contemporary economic historian, Mark Blaug (1990, p. 64) acknowledged the potential importance of Lindblom’s effort as a serious contribution from the side of radical political economy which should not be ignored. Along the way Lindblom could have cited Weber (1968, pp. 110 –111) in his assertion that “a planned economy may have command over certain ideal motives of what is in the broadest sense an altruistic type, which can be used to stimulate a level of achievement in economic production comparable to that which [has been achieved] . . . in a market economy.” It is impossible to know what Lindblom meant by the term “social coordination,” given that he applied it equally to authority and market systems. The market is useful precisely for its ability to coordinate “individual energy and resourcefulness” without conscious intention. It is clear enough that Lindblom wished to avoid the repressive administration of authority systems,
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but he left the impression that somehow coordination of individual efforts in the preceptoral system would not be problematic. The economic democracy position (Lavoie, 1985b, pp. 125–171) adumbrated by advocates of “decentralized planning” (e.g., Crotty and Boddy, 1975; Alperovitz and Faux, 1977; Buell and DeLuca, 1977; Buell, 1982; Harrington, 1965, 1982; Hayden, 1982; Heilbroner, 1982; Lekachman, 1982) is closely related to the preceptoral concept. At the point of market extinction the two positions become identical. 12. In his treatment of X efficiency, Leibenstein (particular 1978, pp. 17–38, 1980, pp. 22–39) provides a Freudian personality theory which could be used as a data source for both the exponents and the factor coefficients. He ignores the Weberian categorical apparatus of inducements employed here in favor of a more general perspective which treats departures from economic rationality as a residual category. The indifference curves of Leibenstein’s selective rationality derive from his personality theory which can potentially be extended upward to encompass interpersonal relations, organizations, social institutions, and culture itself, depending upon the specific purposes of the investigator. For example, Leibenstein (1978, p. 54) uses the superegoistic element of his personality theory to include “the value society places on entrepreneurship” versus “employment in the civil service, the professions, political careers, careers in church organizations, military organizations,” etc. 13. The interesting deduction which follows, ceteris paribus, is that systems in which increments in moral inducement net significant increases in worker output must be relatively high-wage systems. By theoretical specification, employers would judge the significance of productivity gains while the appraisal of wage levels would fall to the workers. 14. This is not meant to imply that only committed socialists are averse to the kinds of consumer goods which are so characteristic of market systems. Starting with Schumpeter (1962, pp. 145–155), the disdain of intelligentsias for mass consumption has been thoroughly analyzed and amply reported. 15. Richta (1969, pp. 167–169) goes so far as to place the word consumption in quotation marks when he refers to consumption in market systems. The sorts of consumption of which he approves are actually human capital investments. Consumers in the mature planned economy he was expecting will be treated to A rational system of analyzing consumer demand and setting scientifically based standards (nutritional standards, “the rational wardrobe,” models of transport, housing, etc.) backed by a considered policy of built-in economic and social stimulation, [all of which] can serve to divert a maximum amount of resources to the development of human creative powers. 16.
17.
18.
It is clear that the ability of social institutions, particularly government, to effect change by influencing factor costs is often more important and less intrusive than direct attempts to alter factor coefficients. There will be no opportunity here to pursue this important matter. The argument is theoretical in the sense, as suggested above, of revealing a set of functional relationships. Hence, there is no suggestion that an empirical system is capable of achieving the state of full competitive equilibrium. The reader will recall the option of constant or increasing marginal returns to moral inducements which may or may not have been seriously intended by Lindblom.
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