« Osborne's exhilarationist gamble | Main | Taxes and labour supply: more evidence »

January 29, 2011



Occam's razor declared missing.


The Roemer paper looks interesting, thanks Chris. "When does an unequal asset distribution become unjust?" does seem like a good question to be asking (even if never precisely answerable...).


"Tax-payers are compelled to pay tax. So the right’s objection to state exploitation holds.
There is, though, an obvious retort here. Tax is a fair exchange: we get public services in exchange."

You call that a fair exchange?

The people who pay the most tax use public services the least, yet they still have to pay the tax. This is a fair exchange to you?

It is robbery under the threat of imprisonment.


I rather thought the Marxist notion of exploitation was more to do with producing more than you gain from it, and the profit is the result of that. Remember Marx works from a use value perspective. So even a loss making industry would still be exploitative, apparently, since it imposes a false (read: capitalist) exchange value on a good. Plus Marxists can utter the magic 'false consciousness!' phrase in response to everything else (e.g. in justifying taking money in tax).


"""This, I think, justifies opposition to bankers’ pay: it arises from an unjust inequality - their capture of the state."""

How does this not apply to public sector unions?

Guido Fawkes

"Tax is a fair exchange: we get public services in exchange."

I pay for my children's education and my family's healthcare directly.

It is fair therefore that I reject your tax demands.


Hello everyone,
I'm a student at BYU. My fellow students and I are doing a internship project on strategy alignment and penetration. Help us out by taking a brief survey at the following link: http://qtrial.qualtrics.com/SE/?SID=SV_9ZI32VgYOg7mcL2

Thank you,
Tim Perkes


Guido - where are the teachers and medical staff that work in the school and hospitals that you pay for trained?

Leigh Caldwell

"Guido - where are the teachers and medical staff that work in the school and hospitals that you pay for trained?"

A better argument for taxes and public spending is the huge amount of positive externalities created by it. Even if Guido pays for his own schools, he gains immense benefit from the well-educated population in the rest of the economy, with all the services they provide, infrastructure they build, secure society they live in, investment opportunities they create and so on. No way are all these benefits captured in the prices or wages that he pays for things.

A more interesting question is this: "The rich and powerful can use their power - which might arise from control over scarce assets and/or over the state - to obtain better terms of an exchange than the poor and powerless."

The problem is that the rich and poor (or, as Chris is referring to here, employers and workers) are exchanging different things: the rich are offering money and the poor are offering labour. There is some exchange rate between one and the other. But in what sense can we say that the rich have better terms of trade? Compared to what?

The only way I can imagine measuring this is to look at producer surplus. Presumably for any given worker in any given job, there's a lowest wage L they'd be willing to work for. And a marginal product of their labour P which is the maximum they employer would pay. If the actual wage W they receive is closer to L, we could say that employers as a group have more power. If it's closer to P, employees may have more power.

My view is that W is probably closer to P than to L; that is, employees do capture most of the available surplus. This is based on intuition, not data. But I think employees (if they had to) would be willing to work for a lot less than they do. While profit margins of only 15-20% indicate that P is not vastly higher than W (though this is average net profit, not the profit on a marginal unit of labour, so it's hard to be sure).

Overall, employees are probably not doing as well as they were a few years ago, but I am not convinced they are being exploited in a significant way.


Leigh Caldwell,

A sane response, but re:

"employees (if they had to) would be willing to work for a lot less than they do."

Where then would they live? What if they're mortgaged to the hilt? Furthermore why are they mortgaged to the hilt? Is it not in many cases because they have been exploited (in a broad sense)?


@ Leigh - Roemer has suggested one measure of exploitation. People are capitalistically exploited, he said, if they would be better off if they could leave capitalism, taking with them not only their labour power but also their per capita share of alienable non-human property (land and capital).
This poses the question: do workers have the ability to organize themselves? Or do capitalists contribute to workers' well-being by having organizational skills which workers don't?
In this sense, we can only condemn capitalism if we have a plausible alternative.


Roemer's concept of exploitation is the reason why he has focused on distributional issues in the later part of his career (see Theories of Distributional Justice). However in my view it is very weak. What is exactly that is unjust here? Productive assets may have be acquired justly (i.e., through exchanges regulated by a non-captured government); they might not scarce, as in the case of technology; and most importantly they may be inalienable (such as the intelligence or character of an inventor or an entrepreneur). Maybe the inequality in productive assets is unjust because it brings about undesirable consequences. But these consequences couldn't be shown to be unjust to start with. So, what's left is that inequality is unjust in itself, not because of something else. Fine, but then it should be declared a self-evident truth, at least for those that agree with it.

I would add that the sentence "This, I think, justifies opposition to bankers’ pay: it arises from an unjust inequality - their capture of the state." is a strange non sequitur. Is the state a productive resource? Or is this just a rehash of the Glaeser-Scheinkman-Shleifer theory of institutional subversion? That's a bit trite, given the scarce empirical evidence in its support, and the fact that is routinely mentioned by mediocre economists at cocktail parties. Moreover, what does it have to do with Roemer's theory?

The comments to this entry are closed.

blogs I like

Blog powered by Typepad