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Anthony de Jasay*
September 6, 2004
Socialist intellectuals squirm when reminded of such basic tenets of Marxist economics as surplus value, the iron law of wages and the declining rate of profit, tenets that were sacred in the glory days of advancing socialism but that are now kept under glass in the museum of strange ideas.
While the old stuffing of Marxist economics has been knocked out of socialism, two major attempts have been made to replace it with some alternative intellectual content. One was to upgrade the vague and emotional notion of "social justice", and underpin it with the idea that since "veils" of ignorance or uncertainty hide the future, the rational individual must opt for an egalitarian social order for his own safety ("society as mutual insurance").
It was then the obvious move to infiltrate the redistributive demands of "social justice" into the capitalist system which may in other respects remain intact. Germs of this attempt can be traced back to mid-19th century English thought. It came to full flowering after World War II in the American brand of liberalism and in European social democracy. However, as a positive theory it is feeble. It needs bolstering by normative judgments condemning inequalities except if morally justified. But if we accept these judgments anyway, then we can safely throw away the theory. It is redundant and cannot salvage socialism's intellectual respectability.
At first sight more promisingly, the other major salvage attempt starts off as a non-normative economic theory, (though it does not end like one). The starting point is that though total income is equal to total product, we cannot say that individual income is equal to the individual's contribution to the product. Each contribution is rendered possible, or is "owed" to, countless past and present contributions by others. Society owes its product to itself. Given that it owns it, it may distribute it among its individual members in any way it chooses by switching on some recognized collective choice mechanism, such as democracy. It can bring about the chosen distribution either by taking the means of production and exchange into "social" ownership or, the more modern way, by using the tax code. The latter proceeding is supposed to preserve the principle of voluntary exchange and the essentials of the capitalist system. Paradoxically, this is a socialist theory of income distribution that states, in effect, that there is no theory of income distribution; it is always what society chooses it to be.
The idea that "every contribution depends on, and is owed to, every other" is a trivial truth. It is tantamount to saying that since you could not work and earn an income if you did not eat, you owe your income to the farmers, processors and retailers of food. You also owe it to all who helped make you what you are and who in various ways help to keep you going.