[I] We rarely hear, it has been said, of the combinations of masters, though frequently of those of workmen. But whoever imagines, upon this account, that masters rarely combine, is as ignorant of the world as of the subject. Masters are always and every where in a sort of tacit, but constant and uniform combination, not to raise the wages of labour above their actual rate. To violate this combination is every where a most unpopular action, and a sort of reproach to a master among his neighbours and equals. We seldom, indeed, hear of this combination, because it is the usual, and one may say, the natural state of things which nobody ever hears of.--Adam Smith (1776) Wealth of Nations.
[II] Servants, labourers and workmen of different kinds, make up the far greater part of every great political society. But what improves the circumstances of the greater part can never be regarded as an inconveniency to the whole. No society can surely be flourishing and happy, of which the far greater part of the members are poor and miserable. It is but equity, besides, that they who feed, cloath and lodge the whole body of the people, should have such a share of the produce of their own labour as to be themselves tolerably well fed, cloathed and lodged.--Adam Smith (1776) Wealth of Nations.
Much of Smith's economic argument is designed to show that paying living wages is good for the economy as a whole. As a host of recent commentators have emphasized (notably Pack, Rothshild, and Fleischacker), Smith's target is the widely held view that the poor should be kept poor (both to incentivize them to work and to keep the economy competitive). Smith offers a bold, high wages vision toward economic prosperity. Smith was aghast at the dehumanization of the poor to be found among his contemporaries.
After my criticism of Jason Brennan's intemperate attack on the living wages movement, Brennan responded first explicitly and, then, more implicitly and (more) wisely. Now substantially our views are fairly close: we both think that mandating living wages is not the best way to improve the lot of the working poor; we advocate some form of basic income. We both also advocate open borders (although I suspect I am less cavalier about the likely effect on the working poor in the immigrant country); we are also both worried about rent-seeking corporations and corporate/politicals elite(s), although Brennan does not emphasize it as much. So, end of discussion? Well, no. My criticism of Brennan is informed by the classically liberal perspective as expressed by Adam Smith above. (Again, I do so to meet Brennan on his own grounds.)
First, Brennan's arguments are suffused with contempt for many of the working poor and unskilled. Here's some evidence:
[A]"Is it even plausible to think that all potential employees will produce $13.68/hr? Many low-income workers are dysfunctional, badly behaved, or just not very skilled. Sorry."--Jason Brennan
[B]"If Bob is so lousy and unproductive that he can produce only $40 of value to McBurger in a 40/hr week, and if McBurger pays him for his marginal product, then this just means Bob isn’t productive enough to pay his own way in this world. Bob is going to be a net drain on the world–to keep him alive will require that he consume more than he contributes. From an economic standpoint, the world is better without Bob than with him."--Jason Brennan
[A] and [B] slip easily between factual ("not very skilled" & "unproductive") and moral ("badly behaved" & "lousy") claims, some of which are strategically ambiguous between the factual and moral ("dysfunctional" and "a net drain"). That is:
- [1] The tenor of Brennan's arguments is to link (a) being productive with (b) certain moral qualities (or bourgeois virtues) of agents.
Second, [1] is connected to a related to a deep-seated problem with Brennan's economic thinking about productivity:
- [2] Brennan has a tendency to treat 'productivity' as a fixed property of an agent. Let's call this a hypostatic fallacy. [I hope readers direct me to the correct term!--ES] In addition to [A] & [B], here are some more examples from Brennan's blogs:
[C] "[T]here are people who are not very productive, and it’s not clear why their employers should have to pay them a living wage if their labor isn’t as valuable as the living wage."--Jason Brennan
[D] "This can hold for employees, too. A company with a high profit margin might be able to afford to pay its employees more than the marginal value of those employees,"--Jason Brennan
It's as if Brennan has been reading too much Marx and thinks that productivity is an embodied, intrinsic (or partially acquired) quality of an agent. Brennan knows better because he also regularly trots out claims about marginal productivity. Yet, marginal value is constant if and only if constraints are fixed--when a context changes marginal value may also change. (This is why Hayek and other Austrian economists tend to be subjectivists about economic value.)
As we learn from one of Adam Smith's most careful students, Alfred Marshall, the marginal productivity of a factor (say a worker) is (to quote the nice summary from Wikipedia): "the extra output that can be produced by using one more unit of the input... assuming that the quantities of no other inputs to production change." So, claims about worker productivity are extremely context-sensitive. As one (as it were) telescopes out from local constraints to broader ones, this kind of thinking also implies that one's own 'productivity' and marginal contribution to society involve considerable luck (again this is emphasized Hayek). None of this is to deny the fact that one's skills and work habits contribute to one's marginal productivity.
As an aside, marginalist thinking was often advocated in order to turn economics from a moral science (with value judgments) to an objective, 'scientific' discipline--so it is so jarring to see Brennan deploy marginalist ideas in moralizing fashion.
Now, when discussing conditions Stateside (as opposed to foreign 'sweatshops'), Brennan has a tendency to use wages paid to workers as a very reliable proxy to their marginal productivity. He is encouraged to do so by text-book economics. One might also add as Drusilla Brown* reminded me, that absent "perfect migration, wage differences in the nontradables sector are attributable to differences in productivity in the tradable sector." As Brennan sometimes realizes the real world is not identical to the text-book.
My (non-expert) view is that in corporations that sell services and a heterogeneous set of products it is extremely hard to calculate either individual or even category marginal productivity. In such circumstances it is, in fact, quite possible that within such firms/corporations the marginal productivity of individual workers is -- as Smith notes -- captured by (corporate) elites and the owners of capital. In a lot of firms internal pricing is sufficiently opaque (maybe deliberately so) that that my claim here is no science fiction. Or to return back to text-book economics (quoting Brown again): "When a firm earns a profit (above what they have to pay capital to work for the firm) then there is some value created that has not been paid to the factors that generated the value." [I leave it as an exercise to the reader to use this simple observation to find the problem in Brennan's reasoning here--answer next week!]
That is to say, I would find opposition to the living wages movement far more credible if it was accompanied with more suspicion about the lavish compensations that corporate insiders give themselves. The problem is that Brennan's tight conceptual linking among wages paid, productivity and moral qualities (not to mention epistemic qualities) does not lend itself to such suspicion--rather, it starts to look like what Marxists call 'ideology.'
*I met Professor Brown while a student at Tufts University; I never took an economics class with her, so she cannot be blamed for my errors.
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