As we may have mentioned once or twice, we like to get questions . . . if we can use our answers as blog postings, anyway. The other day we were handed a question that came in over the transom — and believe it or not, we lived for four years at college in rooms that had transoms, so we not only know what a transom is, we know how to submit something over one. Anyway —
“I was reading your definition of distributive justice (‘Many confuse the distributive principles of justice with those of charity. Charity involves the concept “to each according to his needs,” whereas “distributive justice” is based on the idea “to each according to his contribution.” Confusing these principles leads to endless conflict and scarcity, forcing government to intervene excessively to maintain social order.’) and I have a question I’m hoping you can answer. Under this definition, where justice is assigned by contribution rather than need, how are people who cannot contribute accounted for? This focus on ‘contribution’ seems quite exclusionary (and quite frankly, in my interpretation, ableist) towards people who cannot contribute, such as those requiring long-term care at a state-run hospital due to a disability like severe and persistent mental illness. Can you clarify how those who cannot contribute will still receive justice? And if government will no longer have to intervene based on charity or need, as I believe your definition seems to imply, what will happen to the people who rely on the government for their care/lives? I look forward to reading your reply.”
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| The Great Defunct Economist |
Dear Questioner (that wasn’t really the person’s name),
Please excuse the delay in getting back to you. We have a very small all-volunteer staff, and sometimes things get a little behind.
Your question is a good one and goes straight to the heart of the difference tween the Just Third Way of Economic Personalism and Keynesian economics, the most widely held school of economics in the world.
A fundamental principle of personalism is that every human being has the natural right to participate in social life. This obviously includes economic life and the right to be productive.
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| "I defined distributive justice." |
Justice, the premier natural virtue, is defined as rendering to each what each is due. In terms of strict or “commutative” justice in economic life, this means that if people are exchanging something, the parties to the exchange must agree to equality of value, e.g., a debt of $5 must be paid with something valued at $5.
In distributive justice, which governs participation in a common endeavor, all participants in the endeavor suffer losses or receive benefits in proportion to their contribution. In an economic or productive endeavor, if I contribute 10% to the effort, I lose 10% if the endeavor fails, or receive 10% of the profit if it succeeds.
For example, if I contribute $10 to a project to which others contribute labor and other resources valued at $90, and it makes a profit of $1,000, distributive justice demands that I receive $100 as my just due.
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| "I agree with Keynes." |
Obviously, this definition of distributive justice does not take into account the socialist redefinition of justice that came in during the early nineteenth century and confused the natural virtue of justice with the supernatural virtue of charity. Philosophers have warned against making this error for thousands of years. Charity (distribution on the basis of need) fulfills and completes justice (distribution on the basis of inputs), charity does not replace justice or substitute for it.
This is where Keynes’s error comes in, and which Louis Kelso corrected. Of course, the error did not originate with Keynes, but he did help embed it in popular thought. As far as Keynes was concerned, only human labor is productive. Capital, whether land or technology, only provides the environment within which human labor can be productive.
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| "I'm against it!" |
In modern economics, this error appears to have originated with David Ricardo, who “corrected” Adam Smith who said there are three factors of production, labor, land, and capital. No, Ricardo claimed, there is only labor, and only labor gives value to something. Karl Marx adopted Ricardo’s theory with all its contradictions (such as land both is and is not a factor of production) and congealed it into the labor theory of production since “obviously” if only labor is productive, nothing else can produce. (This is called a “circular argument” in logic, since it assumes the conclusion as the premise.)
Kelso realized that Keynes (and Ricardo and Marx) were wrong. Capital — technology and land — is productive in the same sense that human labor is productive. Whether a loaf of bread is made by hand or by machine, it’s still a loaf of bread and can be consumed. I recall seeing a special on Japanese television a few years ago in which a swordsmith was being interviewed. As he sat
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| "Let me think about that." |
explaining how only the ancient labor-intensive techniques could be used to produce a sword of acceptable quality, and how it was virtually impossible to find apprentices to learn the proper strokes and spend hours hammering the metal, in the background a robot was hammering the metal tirelessly with a perfect stroke each time and reinserting the blade into the furnace at precisely the right temperature. The robot apprentice was being far more productive than any human apprentice could hope to be.
The problem, as Kelso realized, is not that only labor is productive and thus the only way that people can be productive. As all economists before Ricardo knew, if people can’t produce by means of their labor, they must produce by means of their capital, whether technology or land. The problem is not that the traditional definition of justice is exclusionary, but that the new definition of economics is! By assuming that only labor is productive, Ricardo, Marx, Keynes, etc., excluded from participation in the economy everyone who cannot labor . . . and opened the door to, e.g., the Nazi definition of “useless eater” and “life unworthy of life.” In Nazi ideology, if your labor is not productive, and productive in a way that promotes the interests of Der Volk und Der Reich, you must be eliminated for the greater good.
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| "I already did." |
The problem, of course, is that if you have only your labor to sell, and nobody wants to buy it, you cannot be productive. You must obtain capital to be productive . . . but how? Kelso, a corporate finance lawyer, pointed out that the answer is obvious, once you get away from the idea that only labor is productive. If you want to buy capital and have no money, you buy the capital on credit, and pay for it with the future profits of the capital’s production — to which you are entitled under the classic definition of distributive justice. Once the capital has paid for itself, you as owner of the capital receive the income it generates under distributive justice to meet your consumption needs. Kelso designed the Employee Stock Ownership Plan (ESOP) to show how the technique can work for corporate employees, but anyone can use it, as in our proposed “Economic Democracy Act.”
I hope that answers your question.
Yours, etc.
#30#
