mises.ca / Robert P. Murphy / Sunday, June 15th, 2014
A popular Marxist slogan is that the workers should be paid the “full value of their product.” Ironically, Austrian economists have no problem with the motto, it’s just that Karl Marx and his disciples failed to see that market forces generate this outcome. In particular, Marx relied on an exploitation theory of interest, in which the capitalists skimmed their net returns off the top of what “labor” produced; Eugen von Böhm-Bawerk exploded that line of reasoning. Once we take into account the fact that present goods are subjectively more valuable than future goods, we see that the workers are indeed paid the “full value of their product.”
In the discussion of Thomas Piketty’s Capital in the Twenty-First Century, these old debates over income distribution have returned. I want to point out one major problem in the handling of so-called “labor productivity,” which is actually quite misleading.
People who want to challenge the free-market economist’s claim that workers tend to be paid wages according to their marginal product will often produce charts like this one, taken from a Bureau of Labor Statistics essay: