The London Libertarian

The London Libertarian

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PoliticsPosted by Jan Lester Wed, April 09, 2014 20:03:15

exploitation The two main meanings for this term are 1) using for gain (i.e., without intending any *moral evaluation of the process), and 2) unfairly using for gain (possibly by “taking advantage of someone’s weakness”). The main issue here is whether using *persons within the framework of the *free market, is ever exploitation in the unfair sense; and, if so, whether this is *rights-violating unfairness.

There is no ‘surplus value’ that the employer or ‘capitalist’ ‘extracts’ from the employee or ‘worker’, as *Marxist theory has it. *Marginalist theory explains that the employee tends to be paid his marginal product: exactly what he contributes to the business. Employers and employees use each other to their mutual benefit. In particular, the employer tends to offer the least wage he can to attract the necessary employees, and the employees tend to take the greatest wages they can find. Typically, the employers have a choice of employees and vice versa. Even where the choice of either is severely restricted, by no unlibertarian means, it is hard to see how it can be unfair (let alone rights-violating) for an employer to offer a ‘low’ wage or for an employee to require a ‘high’ one. Both sides freely participate; both sides gain; there is no moral obligation to pay more, or work for less, than we can; and flouting the market rate of pay would disrupt *economic efficiency.

Mutual and voluntary ‘exploitation’ among persons is cooperation, not *oppression. The alternatives are 1) *aggressively to impose a *privilege for one of the parties, or 2) aggressively to prohibit such cooperation. The *state, by contrast, necessitates *proactively imposed exploitation of its *subjects and this is both immoral and *criminal.

See also *competition and cooperation; *factors of production; *sweatshops; *unions.

A Dictionary of Libertarianism

  • Comments(4)

Posted by Lee Waaks Thu, April 10, 2014 20:31:39

Thanks for your reply David & Jan.

Jan: I would leave in the sentences about surplus value but I think Reisman is right about marginalism as it applies to the determination of wages at the level of the firm (see my reply to David just below).

David: Reisman does not reject marginalism at the macro level, but he does argue that the concept is misapplied at the level of the firm. Of course, workers do contribute to the production of goods/services, but the price of labor is determined by supply & demand and is merely a cost. Determining the marginal productivity of each factor of production on a "case-by-case" basis is not plausible. Consumers determine relative wages and where labor is to be allocated/reallocated. See his discussion, pp.666ff. and also pp.484ff.

Posted by Jan Lester Thu, April 10, 2014 13:04:25

I was persuaded to put in more economics than I had originally intended. I am not at home with the details of economics theory. I could only go into the marginalist-Austrian debate in detail at the expense of philosophy. And even then I would probably not be confident about the answer. So I think I had better leave that debate to others. My preference is simply to drop these two sentences: “There is no ‘surplus value’ that the employer or ‘capitalist’ ‘extracts’ from the employee or ‘worker’, as *Marxist theory has it. *Marginalist theory explains that the employee tends to be paid his marginal product: exactly what he contributes to the business.”

Posted by David McDonagh Thu, April 10, 2014 10:13:43

The two uses of the word exploitation are use and abuse. On the market we do consent to others using us so it is not likely to be abuse, though it might be in some odd cases where the use agreed to was not quite explicit enough beforehand thus not fully agreed to.

The source of profit is customer patronage. The source of loses is customer [usually quite unwitting] neglect or indifference. It is true that wages, rent, interest to the banks are costs that may leave no profit. So the workers, the landlords and the capitalists might be said to aid the entrepreneur in making what he thinks will sell; but it is not clear that Lee is right that Reismsan has a case against marginal theory. I aim to go through the book of his called Capitalism (1990) here on this blog in the future.

Posted by Lee Waaks Thu, April 10, 2014 00:26:45

Following George Reisman, I think the marginal productivity doctrine is wrong. As I explain in my post, Justice for the 1%, the doctrine implies that profits are subtracted from wages and capitalists are "rewarded" with interest (a discount on wages) for abstention (saving) for "advancing" the workers' wages. However, wages are actually subtracted from profits. Wages are just a cost, like the other factors of production. However, interest does have a connection to time preference: the more capitalists choose to consume now rather than save/invest for the future is what actually determines the interest rate. Wages are simply costs deducted from sales. The workers, no matter how instrumental they are to production, are still only helpers and are paid as such based on supply and demand. Profits are infinite without any costs to subtract and the primary form of income. Wages come into existence after the formation of capital.