In some situations, society permits individual citizens to not fulfil otherwise binding requirements when the latter conflict with the individual’s deeply held ethical convictions. The classic example are pacifists who obtain an exemption from military service. I submit that an argument along these lines also applies to collective pension plans. Such plans need to offer their participants a minimal level of influence over their portfolios to be legitimate.
Category: Work (Page 1 of 2)
The category of „meaning“ is not one that analytically-minded folks working on public policy and PPE issues use very often. And yet, it is one that I could not stop thinking about for quite a while. I mean by it, very broadly, the kinds of projects that individuals pursue, in which certain values are realized – love, beauty, truth, or whatever, in whatever interpretation individuals chose. A quote from a text about professionalism, by historian Thomas L. Haskel, captures an unease that I had had about markets, and the economic way of thinking about them, for a long time: “Where would liberation stop if the entire social universe was given over to competing selves, none acknowledging any standard higher than his or her own desires?”
My central objective in writing this paper (“On the Very Idea of a Just Wage”) was to respond to the reappearance of what Paul Krugman has referred to, somewhat abusively, as a “cockroach idea.” The thing about cockroaches is that, no matter how many times you kill them, they keep coming back. Similarly, there are some ideas that, no matter how many times they may be refuted, nevertheless keep reappearing, or get “rediscovered” by people who consider them fresh insights.
The idea that the marginal productivity of labour represents the “contribution” that an individual worker makes to production is a cockroach idea in this sense. It is something that many people would like to believe, because it implies that the natural tendency of markets will be to set wages at a level that corresponds to an intuitively plausible principle of distributive justice (i.e. “to each according to his or her contribution”). It was, however, intensively debated in the early 20th century and rather decisively rejected.
There are valuable human activities which require the motive of money-making and the environment of private wealth-ownership for their full fruition. […] But it is not necessary for the stimulation of these activities […] that the game should be played for such high stakes as at present. Much lower stakes will serve the purpose equally well, as soon as the players are accustomed to them. (John Maynard Keynes, The General Theory of Employment, Interest, and Money, New York: Harcourt, 1953 , 374)
This quote from John Maynard Keynes suggests that while a capitalist economy requires incentives to function, the magnitude of these incentives is variable. This suggestion puts Keynes at odds with the conventional wisdom in economics today. The latter includes the idea, eloquently presented by Joe Heath in his EJPE article, that there exists a rigid trade-off between economic efficiency and equity: If, as a society, we try to make wages more just, we will necessarily thereby undermine the efficiency of the market.
I shall argue that this conventional wisdom suffers from an important blind spot, which can explain why it overestimates the rigidity of the equity-efficiency trade-off. This blind spot lies in the fact that economists take as given the labour supply preferences of economic agents, rather than treating them as a variable of their analysis. To see why this matters, we need to introduce two concepts: reservation wages and economic rent.
Does the market generate just wages? This question has plagued the minds of those concerned with justice for centuries (Aquinas, 1485). In his recent (open-access) article, “On the Very Idea of a Just Wage,” Joseph Heath argues that the market does not generate just wages. Instead, he argues that factor pricing is irrelevant to normative issues like distributive justice. Heath argues that market forces will produce efficient wages, but not just wages.
We challenge Heath’s argument, arguing that his conclusion, while not invalid, is misplaced. His critique is of a model of the market and not the market itself. In particular, his critique is of equilibrium models of the market.
Gregory Mankiw argues that those who are more productive should get a higher income not only as an incentive, but because this income is rightfully theirs (295). In a competitive market, factors of production are paid the value of their marginal product (32), which is the change in output associated with adding an extra unit of that input. Firms hire workers of a given type up to point at which the revenue the firm gains from hiring an additional worker is equal to the cost of that worker. Thus, in competitive equilibrium “each person’s income reflects the value of what he contributed to society’s production of goods and services.” In this way, the theory of “just deserts” gives “a new normative interpretation” to the economic theory of competitive equilibrium (295).
Joe Heath responds that wages in a competitive market aren’t intrinsically fair. Wage-setting is not a unidirectional process from unequal skill and effort to unequal contribution to unequal wages. Where workers of a given skill-level are more abundant, they will be cheaper, and so hired for lower-value tasks, and so less productive even if equally skilled and diligent. The rationale for pricing labour according to supply and demand is that it directs people’s talents to where they can best be used, generating prosperity that can benefit everyone. As Heath says, “[t]he market has one job to do, and it does that job very well [allocating resources efficiently]. Producing ‘just’ wages, however, is not that job” (31).
In this post, Huub Brouwer and Thomas Mulligan introduce a four-part Justice Everywhere series on the question: What is a just wage? Over coming weeks, this will feature posts by Andrew Lister, Peter J. Boettke et al., Peter Dietsch, and Joseph Heath.
In the aftermath of the 2008 financial crisis, smoldering questions about what just wages are, and whether markets are providing them, have erupted again. Some charge that unprecedented inequalities in income and wealth threaten national comity and are injustices in themselves. For others, regulation and egalitarian transfer policies are the real culprits, hampering efficiency and treading on property rights. Still others would like a world where people get what they deserve, and income and wealth come not through inheritance or social connections but effort and skill.
These are debates in the public sphere, but, of course, philosophers have discussed the nature and the possibility of a just wage for millennia. Plato, Aristotle, Thomas Aquinas, and Adam Smith—among many others—all grappled with the issue. But despite this timelessness, it seems to have new relevance now.
As I am finishing yet another application for a position with limited chances of success (I did my statistics homework), I am reminding myself again that I shouldn’t get too emotionally invested: I shouldn’t picture myself with this specific position in this particular place just yet. I should take a potential ‘No’ lightly as a sportive challenge and not see it as a fundamental rejection of my work and my value as a member of the academic community. I know all of that. But it is emotionally exhausting. It requires energy and time to deal with the anxieties and insecurities this process brings up. And, importantly, it often requires the support and care of people that are close to me.
In a world where “wellness” has become a cultural signal of the American elite (think yoga and spa treatments), employers have not been afraid to market wellness programs as a one-way ticket to greater health, wealth, and happiness. Watching this kind of rhetoric on display in the wellness movement, it’s hard not to think that wellness programs actually strengthen biases against what they’re intended to combat: disability, economic stagnancy, and mental illness. In this post, I articulate precisely this worry.
This is an interview with Isabelle Ferreras, who has just published a book on workplace democracy – to my knowledge, it’s the most detailed argument and proposal for a specific form of workplace democracy that has been provided in recent years. To get a sense of what it is all about, check out the animated trailer at www.firmsaspoliticalentities.net. We asked Isabelle to tell us more about her book, and we are very happy that she immediately agreed to do so.
Q: How did you get interested in the topic of workplace democracy?