1.0 Introduction
I wrote this decades ago.
Here is a simple parable. Consider an island with a particularly simple
society with two people, Robinson and Friday. Robinson and Friday live
on one good, call it corn. At the start of our story, Robinson and Friday
have just finished a feast. Both Robinson and Friday have each eaten
food baked out of 50 bushels of corn. Also, Robinson has 50 bushels corn
remaining. Friday, perhaps because he's newly arrived, has none.
2.0 The Initial Deal
Both Robinson and Friday can see that they must continue to eat in the
future. They understand that their continual survival could be achieved by
planting the remaining corn, saving 50 bushels corn in next year's harvest,
and living off of the remainder. (In this story, Robinson and Friday are
each able to go a year between meals.)
So Friday says to Robinson, "Why don't you share your seed corn with me.
We'll each plant 25 bushels, and tend it half our time throughout the year.
If your island is like my tribe's, that will allow us to harvest three
bushels of corn for every bushel we plant. So at the end of the year,
each of us will have 75 bushels. We can each eat 50 bushels and use
the remaining 25 bushels for seed in the next year."
Robinson says, "Why should I give you anything? I happen to believe in
property rights."
Friday says, "You don't want to see me starve, do you? What do you propose
I do?"
Robinson says, "I'll tell you what. Why don't we come to the following
voluntary agreement. You take the 50 bushels of corn, plant it, and tend it
throughout the year. After harvesting, I'll take the 150 bushels we'll
get and pay you 50 bushels for your helpful work."
Friday says, "Why should I agree to that? I do all the work, and you
loaf around all year in a tropical paradise."
Robinson says, "Well, it's my seed corn."
Friday says, "Oh, all right. It's a deal."
3.0 The Story Continues
At the end of the year, Friday consumes his wages of 50 bushels. Robinson
consumes his profits of 50 bushels. They are in the same situation as they
were originally. They strike the same deal again and continue year after
year.
4.0 Friday Reads A Book
It seems Robinson has brought the captain's library off the shipwreck
with him. One day Friday happens to notice this library. He says to
Robinson, "What are all these books?"
Robinson says, "I don't know. Being a practical person of the middle
order of society, I never bothered to read them."
Friday says, "Well, can I have that big tome by that fellow Marx."
Robinson says, "Unlike the corn, it's of no use to me. You can have it."
Friday takes away the book and tries to read Marx. He finds it quite
head-scratching in places, particularly the Hegel. That part seems so
deep as to be incomprehensible. But he does get some glimmers from it.
5.0 A Debate
One day at the end of three years of work, Friday confronts Robinson
and tells him, "You're exploiting me. I only get a third of the
produce. This year I should get 26/27th of it. And if we continue on in
this way, I should get all of it eventually."
Robinson can't make anything out of this. He says, "But I provide the
seed corn. Labor and seed corn are measured in different units. How
can you make a fair claim on any portion of the output but what we
have agreed to?"
Friday says, "It will take me a little while to explain." Robinson
says, "Unless some pirates show up, we have time. Go on."
Friday says, "Each year we harvest 150 bushels corn using 1 year of
labor and 50 bushels seed. We can see that any proportion of the
harvest was due to the corresponding proportions of the labor and the
seed corn. Here's some examples." And Friday draws the following
table in the sand:
Table 1: Inputs and Outputs
| Proportion | Seed Corn | Labor | Harvest |
| 1 | 50 Bushels | 1 Year | 150 bushels |
| 2/3 | 33 1/3 Bushels | 2/3 Year | 100 bushels |
| 1/3 | 16 2/3 Bushels | 1/3 Year | 50 bushels |
| 2/9 | 11 1/9 Bushels | 2/9 Year | 33 1/3 bushels |
| 1/9 | 5 5/9 Bushels | 1/9 Year | 16 2/3 bushels |
Robinson says, "That seems fairly obvious. I don't see where you are
going with this." Friday says, "We can use these numbers to break down
my work in each year to produce the output in the following years:"
Table 2: Reduction of Gross Output to Labor Inputs
| Year | Work Torward
Year 3 Harvest | Work Torward
Year 2 Harvest | Work Torward
Year 1 Harvest |
| 1 | 5 5/9 Bushels seed
& 1/9 year's labor
produce
16 2/3 Bushels | 11 1/9 Bushels seed
& 2/9 year's labor
produce
33 1/3 Bushels | 33 1/3 Bushels seed
& 2/3 year's labor
produce
100 Bushels |
| 2 | 16 2/3 Bushels seed
& 1/3 year's labor
produce
50 Bushels | 33 1/3 Bushels seed
& 2/3 year's labor
produce
100 Bushels | |
| 3 | 50 Bushels seed
& 1 year's labor
produce
150 Bushels | | |
Robinson says, "I guess that's fairly clever. If I add horizontally,
I see that you have allocated each year's seed, labor, and output to
your columns. That's good. But if I add the first column vertically,
all I see is that our 150 bushels corn is the result of 1 4/9 year's
of your work and 5 5/9 bushels of my initial seed corn. What's your
point?"
Friday says, "Wasn't that seed corn the result of your work before
I showed up?"
Robinson says, "Well, yes. I worked hard for it. And I was even
generous enough to feed you at first."
Friday says, "That may be. But can't we say that the 150 bushels we
have now embodies the sum of 1 + 1/3 + 1/9 + 1/27 and so on year's
labor? And therefore that, the total labor embodied in this third
year's harvest is 3/2 year's of effort?"
"I don't know."
"It's just arithmetic. My contribution to this year's harvest, as
you saw, is 1 4/9 years of work. The 5 5/9 bushels you originally
contributed represents the remaining 1/18 years needed to produce
the harvest. Since [ 1 4/9 ]/[ 1/18 ] is 26, I should get 26 bushels
for every one of yours in the harvest."
Robinson says, "Um..."
"In other words, I, Friday, should get 26/27ths of this year's produce
as I said originally."
"Furthermore," Friday continues, "as long as we continue to follow
your deal, your fair share should become smaller and smaller. In the
limit, all of the annual harvest has been produced by me alone if you
don't help out at all."
6.0 The Upshot
Robinson says, "Aren't you denying my capital is productive?"
Friday says, "We certainly need the seed corn. But how is your
ownership of it productive?"
"Sure it is. You need me to make the decisions what to do with it."
"Maybe so. My labor's the horse, and your capital is the lash."
This comment seems subversive to Robinson, and he gets angry. "Look,
your argument only works because of the simplicity of our island.
Excess profits and losses indicate where investment can be
directed most advantageously."
Friday says, "You are only arguing that the rate of profit be
calculated, not that profits be paid out. That indicator is
only one among several. We could have any of many different
incentive schemes."
Frustrated, Robinson says, "A deal's a deal. Whatever comes out of
our market transactions, that's what's fair. I refuse to do
arithmetic, so I can continue to talk nonsense."
This blockheadedness on Robinson's part so angers Friday that he
stages a revolution and kills Robinson. The island lives on in
communism from that day forward.
7.0 Some Notes
This story is un-Marxist. According to Marx, capitalism did not
arise through people rationally constructing capitalist institutions,
property rights, markets, etc. Nor will it fall by convincing
people of its unjustness by rational argument. Rather historical
materialism describes beliefs as reflecting changes in productive
forces as part of an historical process. My story is much too idealist
for Marx. Also, my story does not contain money, and money is
central to Marx's account of value.
The story can be made more realistic. We can add many workers and
capitalists, and assume perfect competition. We can also assume
continuously differentable production functions. For example,
this parable is consistent with the Cobb-Douglas production
function:
Q(L, X ) = 3 (50)1/3 L1/3 X(2/3)
where Q is the corn harvested at the end of the year, L is the
number of person-years of labor during the year, and X is the
bushels of seed corn. Whatever wage comes out of the market will
be equal to the value of the marginal product of labor. These
assumptions and this equality of the wage and the value of the
marginal product of labor are compatible with some such calculations
as in the story. Unless the workers eventually get the entire product,
they are exploited, as above.
While my parable is non-Marxist, the arithmetic for the concept of exploitation used in
it is based on my understanding of some aspects of Marx's theory.
"...we must understand the importance which Marx attached to his
distinction between 'labour' and 'labour-power': an importance
essential for the context of exploitation as a key to understanding
the bourgeois (or capitalist) mode of production. The role of the
labour theory of value in relation to the theory of surplus value
is frequently misunderstood. Often this is interpreted as embodying
a Lockean 'natural right' principle, to the effect that the product
of a man's labour belongs 'of right' to the labourer; whence it is held
that the appropriation of part of this product by the capitalist is
'unnatural' and unethical. Hence exploitation is interpreted as a
quasi-legal or ethical concept rather than a realistic economic
description. If what we have said about labour and the labour process
has been appreciated, it should be clear that this is an incorrect
interpretation. What could be said, of course, is that the notion of
labour as productive activity implicitly afforded the definition
of exploitation as an appropriation of the fruits of activity by
others - appropriation of those fruits by those who provided no
productive activity of their own. But far from being an arbitrary
or unusual definition of 'productive' and 'unproductive', this would
surely meet with general aggreement as normal usage of these words. The
problem for Marx was not to prove the existence of surplus value and
exploitation by means of a theory of value: it was, indeed, to
reconcile the existence of surplus value with the reign of market
competition and of exchange of value equivalents. As he himself expressed
it: 'To explain the general nature of profits, you must start
from the theorem that, on an average, commodities are sold at their
real values, and that profits are derived from selling them at
their values ... If you cannot explain profit upon this supposition,
you cannot explain it at all.'
The point of this can the better be appreciated if it is remembered
that the school of writers to whom the name of the Ricardian
Socialists has been given (such as Thomas Hodgskin, William Thompson
and John Bray), who can be said to have held a 'primitive' theory of
exploitation, explained profit on capital as the product of the
superior bargaining power, lack of competition and 'unequal exchanges
between Capital and Labour' (this bearing analogy with Duhring's
'force theory' which was castigated by Engels). This was the kind of
explanation that Marx was avoiding rather than seeking. It did not
make exploitation consistent with the law of value and with market
competition, but explained it by departures from, or imperfections in,
the latter. To it there was an easy answer from the liberal economists
and free traders: namely, 'join with us in demanding really free
trade and then there can be no "unequal exchanges" and exploitation.'"
-- Maurice Dobb, "Introduction" in K. Marx, A Contibution to the
Critique of Political Economy, Progress Publishers, 1970, pp. 12-13.
Interestingly enough, the great Austrian economist Eugen Böhm-Bawerk's
account of capitalism arguably does not challenge Marx's claim that
the workers are exploited.
"Whoever is the owner of a capital sum is ordinarily able to derive
from it a permanent net income which goes under the scientific name of
interest in the broad sense of the term.
This income is distinguished by certain notable characteristics.
It arises independently of any personal act of the capitalist. It
accrues to him even though he has not moved a finger in creating it,
and therefore seems in a peculiar sense to arise from capital, or,
to use a very old metaphor, to be begotten by it...And, finally, it
flows without ever exhausting the capital from which it arises, and
therefore without any necessary limit to its continuance. It is, if
one may use such an expression in mundane matters, capable of
everlasting life.
And so the phenomenon of interest presents, on the whole, the
remarkable picture of a lifeless thing, capital, producing an
everlasting and inexhaustible supply of goods. And this remarkable
phenomenon appears in economic life with such perfect regularity that
the very concept of capital has often been founded on it. Thus
Hermann, in his Staatswirtschaftiche Untersuchungen defines capital
as 'wealth which produces a constant flow of income without suffering
any diminution in exchange value.'
Whence and why does the capitalist receive this endless and
effortless flow of wealth?
-- Eugen von Böhm Bawerk, Capital and Interest, "Volume 1:
History and Critique of Interest Theories", p. 1.
Notice that attempts to change the conditions don't attack the logic
of the above story. I don't see how the ability for some workers to
save to become capitalists or attempts to justify some highly
paid personnel as being paid for the labor of supervision threatens
the logic of the story. If you want to criticize the logic, show
that it's not reasonable within its own assumptions. But this cannot
be done. On the other hand, those that understand, say, the John von
Neumann model of growth know how to generalize the story to make it
much more realistic.
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