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§5. The Allocative and Distributive Role of Prices

1. In order to clarify Marx’s view further and to bring out what his implicit conception of justice may be, let’s distinguish between the allocative and the distributive role of prices.15 The allocative role is connected with the use of prices to achieve economic efficiency, that is, to direct the use of scarce resources and factors of production to those employments in which they yield the greatest social benefit. The distributive role of prices is their determining the income to be received by individuals in return for what they contribute to production.

Now, it is perfectly consistent for a socialist regime to establish an interest rate, say by setting up a money-market on which worker-managed firms can borrow funds for capital expansion. This interest rate will allocate revenues among investment projects and will provide a basis for computing rental charges for the use of capital and scarce natural resources such as land and minerals. Indeed, this must be done if these means of production are to be employed in the best way from a social point of view. For even if these resources fall from the sky without human effort, they are nevertheless productive, as Marx recognizes and takes care to assert. When combined with other factors of production a greater output results.

It does not follow, however, that there must be private persons who as owners of these resources receive as their personal income the monetary equivalents of these evaluations. Rather, accounting prices in a socialist regime are economic indicators to be used in drawing up an efficient schedule of economic activities. Except in the case of work of all kinds—mental and physical—prices under socialism do not correspond to income paid to private persons. Instead, the prices imputed to natural resources and collective assets have no distributive role. In capitalism these prices do have a distributive role, and it is this role that characterizes what I have called pure ownership. This distinction between the two roles shows the importance of distinguishing between the use of the market to organize economic activities efficiently and a system of private property in which the worth of resources becomes the personal income of the owners. This latter use illustrates private property as a basis of exploitation.

15. See Rawls, A Theory of Justice, §42.

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2.The point of Marx’s labor theory of value can perhaps be brought out as follows. Consider the objection to Marx’s view that says that just as Marx attributes the total output to labor, we can, if we like, attribute the total output to capital, or to land, and conclude that capital, or land, is exploited.16 In this case, land or capital, whichever we pick, produces more than is necessary to reproduce itself and so it yields a surplus. If, as factors of production, capital, land, and labor are to be viewed as perfectly symmetrical, we can indeed do this. Marx would consider it a formal trick: his point, as I have said, is that capital, land, on the one hand, and labor, on the other, are not to be viewed symmetrically.

Rather, he thinks that human labor is the sole factor of production that is relevant from a social point of view in considering the justice of economic institutions. This being so, pure profit, interest, and rent, as returns of pure ownership, are to be attributed to labor. These returns are viewed as paid out of the product of surplus labor, and they are equal to the total value produced by labor minus the amount that is consumed by labor itself.

Thus, I take Marx to say that when we step back from the various modes of production that have existed historically, and which will exist, we must of course recognize that capital and land are productive. But from the point of view of the members of society, as they might consider together these modes of production, the only relevant social resource is their combined labor. What concerns them is how social and economic institutions are to be organized so that they can cooperate on fair terms and use their combined labor effectively with the forces of nature in ways to be decided by society as a whole. I think this idea underlies Marx’s vision of a society of freely associated workers. See Capital, Vol. I, Chapter 1, §4 (Tucker, p. 327), where Marx says: “The life-process of society, which is based on the process of material production, does not strip off its mystical veil until it is treated as production by freely associated men, and is consciously regulated by them in accordance with a settled plan. This, however, demands for society a certain material ground-work or set of conditions of existence which in their turn are the spontaneous product of a long and painful process of development.”

3.I believe that Marx takes for granted the idea that people’s combined

16. See the Generalized Commodity Exploitation Theorem, as proved in John Roemer’s Value, Exploitation, and Class (New York: Horwood, 1986), in §3.2.

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labor is the only relevant social resource. For him, this basic point of view is obvious; and so, for him the basic idea of the labor theory of value is likewise obvious. A capital or a land theory of value that says that capital or land is exploited is simply frivolous. A society does hold and has control over certain productive natural resources; but from the point of view of the members of society in their social relations, the relevant resource they have as human beings is simply their labor and how they can best use it in accordance with a plan settled upon openly and democratically. This we will discuss in the next lecture.

Marx supposes, then, that all members of society equally have a claim, resting on justice, to full access to and the use of society’s means of production and natural resources. The basic question is how those means are to be effectively used, the work shared and commodities goods produced, and the rest. Therefore, for him pure economic rent of property ownership is unjust because it in effect denies just claims to access and use, and any system instituting such rent is a system of domination and exploitation. And this is why he describes capitalists’ appropriation of the product of surplus labor by such terms as robbery and embezzlement, forced labor and theft.

4. We have seen that Marx in Capital does not deny that capitalism as an economic and social mode of production has a fundamental historical role. It is the enormous achievement of capitalism to build up the means of production and to make possible the communist society of the future. That is the historical role of capitalism as a system of domination and exploitation. One aim of Capital is to explain this historical role and to describe the historical process by which it has been accomplished.

But in Marx’s day, capitalism has already fulfilled its historical role, and another aim of Marx’s Capital is to hasten its passing. Marx thinks that once we understand how capitalism works, we will recognize it as a system of exploitation—a system in which labor is made to work for a certain period of time in exchange for nothing (unpaid labor). We will see it as a system based on concealed theft. He assumes that we all implicitly accept the fundamental idea that labor is the only socially relevant resource as we all together, as a society, face nature. He assumes also that all of us should fairly share in doing the work of society and have an equal access to and use of its means of production and natural resources. This is why he rejects the legitimacy of private property in the means of production in its distributive role as inconsistent with basic justice.

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I conclude by reminding you that I have not commented on whether Marx’s various ideas about the justice and the injustice of capitalism are really consistent. Can we say that the basis on which he seems to say that capitalism is not unjust is consistent with his describing it as a system of forced labor and concealed theft? Is it consistent with his idea that human labor is the only relevant factor of production from a social point of view, and that all members of society equally have claim to have access to and to be able to use society’s means of production and natural resources? I think Marx’s various ideas about justice can be understood so as to be consistent with one another, and I begin with this in the next lecture.

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