The Rise and Fall of Capitalism

Capitalism and market order It is sometimes said that capitalism is ‘free markets’. Often accompanied by accusing governments of interfering with the markets and making them less free Markets occur when people make consensual exchanges of goods and services Markets will emerge in just about any context where there is scarcity, even when prohibited so, a capitalist society has to be more than just one in which markets are present Roughly, capitalism is about maintaining a balance between economic freedom and competition.

Lecture 1
What can philosophy bring to this?
- Many people today blame economic injustice on capitalism. Those who defend
capitalism are ‘pragmatic, even ‘apologetic’ - avoiding moral arguments
- This contrasts with the Golden Age of political economy. Adam Smith, John Stuart Mill
thought that capitalism would advance justice
- What went wrong??
What are the injustices of capitalism?
- Massive, growing dynastic inequality
- Increasingly oppressive labour markets
- Environmental destruction and resource wastage, driven by ‘consumerism’
- Disproportionate political influence of corporations
- Proliferation of harmful products
- Everyone needing to find work even though many jobs are crap and / or machines could
do them
- Encroachment of markets into the wrong places - some things should not be for sale
- Not enough done to address historical injustice, much of which is of an economic support
What’s to blame?
For any of the alleged injustices, it is usually possible to find someone attributing them to
capitalism
This raises questions about:
- How people see the economic status quo
- How people seem to want generalised, systematic deep explanations even for very
specific phenomena / events. Maybe it sounds better to speak of crony capitalism rather
than just cronyism
What is Capitalism
- Frequent use of slogans is not a theory, even if when the subject matter has significance
- Capitalism probably doesn’t describe the economic status quo very accurately. The status
quo was not designed according to some plan, but evolved haphazardly. And in any case
it varies across countries.
Capitalism and Market Order
- It is sometimes said that capitalism is ‘free markets’. Often accompanied by accusing
governments of interfering with the markets and making them less free

- Markets occur when people make consensual exchanges of goods and services
- Markets will emerge in just about any context where there is scarcity, even when
prohibited
- so, a capitalist society has to be more than just one in which markets are present
- Roughly, capitalism is about maintaining a balance between economic freedom and
competition. Moral considerations help us understand what this balance actually is
- Maintaining capitalism requires government institutions aimed at protecting market
freedoms. But they also do other things which may restrict freedoms.
Free Markets: No such thing?
- Capitalism does involve promotion of market freedoms, i.e. property and contract
- But it needs institutions that maintain competition. This helps define but also restrict the
proper content of market freedoms
- In any case, it is people (and maybe groups, organisations) who can be free or unfree, not
markets per se
Capitalism, Old-Fashioned Style
- Market order was first supposed to emancipate people from oppression, and to reduce
famines, wars and such
- Crucial to this is the comparison not with socialism but between capitalism and feudalism
- This comparison is not as out of date as you might think
Arguable implications (of capitalism!)
- Anti-migration laws need to end (and so detention of migrants definitely need to end
- Nobody should have to rely on selling their labour alone (and hence fear unemployment)
- Inherited wealth is unjust, at least when unequally distributed
- Companies should have no shareholders - the workers should own the capital
Our Aims
- What sort of arguments were originally given for the moral foundations of capitalism
- How compelling are these arguments and how well have they aged?
- What can we learn about how to reform specific aspects of the economic status quo in the
21st century
- And what arguments can be made about alternative systems
Why is economic freedom desirable?
- Freedom is market freedoms, they allow people to participate in markets such as freedom
to own stuff and do stuff with it and freedom to enter contracts
So why is it desirable?
- Partly, just because freedom is desirable and nice. It is one way of respecting human
diversity and individuality

- The case for economic freedom, involves arguments about how knowledge moves around
society
Why is competition desirable?
- Market order is competitive when it has low barriers to entry for participating in
productive exchange, and nobody enjoys special protections or beneficial imbalances
- More normatively, competition approximates equality of opportunity, while tolerating
some inequality of distributive outcomes
- Opposite of monopoly
Barriers to entry
- High cost of education
- Ability of wealth inequalities to impact on market opportunities (e.g. unpaid internships)
- Laws restricting specific activities (e.g. some licenses)
- Intellectual property with overly generous expiration conditions
- Simple coercion by established parties (e.g. lawsuits)
- Entry involves entering into some sort of market exchange
In practice
Capitalism involves
- Protection / enforcement of economic rights
- Dispersion of private property
- State supported institutions that make markets scalable (e.g. money itself, infrastructure)
- Carefully regulated labour markets (e.g. welfare state, minimum wage)
- The latter three conditions all suggest something about the limits of the first, which are
not absolute rights
Contrasting Definitions
Capitalism: Dispersed private ownership of capital, status equality, production managed by
freedom and competition
Socialism: State ownership of capital, status equality, production through coercive planning
Feudalism: Concentrated private ownership of capital, dynastic status inequality, production via
coercive planning
Status Equality
- Capitalism: YES - market freedoms are shared equally, and competition approximates a
kind of equality of opportunity
- Socialism: YES - distribution of goods, wages, etc aims at securing material equality

- Feudalism: NO - people’s rights and position in society depend on the social class they
are born into, may be legally enforced
Examples
- Legally segregated societies curtail market freedoms, e.g. Apartheid in South Africa and
Jim Crow laws in Southern USA
- Qualification: market order does not care about social norms but people do! And markets
will often exacerbate / compound prevailing norms.
Central Planning (vs Competition)
- Capitalism: NO - there is no overall controller of the economy
- Socialism: YES - the government sets targets and commands production, according to
some goal of serving the common good
- Feudalism: YES - the economic elites make commands as in socialism, but no obligation
or pretense to make commands for the common good
Examples
- Aus government are very keen to promote energy production through coal
- This is not very capitalist (big barriers to entry for green energy) Unclear if it should be
described as social or if this is vaguely feudalist (elites doing favours for each other)
Private Ownership (vs State Ownership)
- Capitalism: YES - capital is privately owned but dispersed to a degree for the sake of
competition
- Socialism: NO - there is no private property only public property except perhaps for some
personal, non-productive capital such as clothes or car
- Feudalism: YES - land and productive capital is privately owned but concentrated into
the hands of the economic elite
Examples
- The existence of any monopoly is a departure from ‘pure’ capitalism as we’re defining it
- Some australian industries seem to be approaching monopoly conditions (telecom,
grocery, retail banking)
- But markets will always fail to produce some goods, suggesting that some state
monopolies can be justified
The Real Liberal Tradition
- Adam Smith and sometimes JS Mill associated with classical liberalism
- In contemporary politics, this is sometimes represented as a ‘pro free-market’ position.
As we will see it is more subtle than thus
- Scholars sometimes speak of “high liberalism” to refer to 20th century views on which
market freedoms are somewhat downplayed
Lecture 3 - Political Economy, Part 1

What is political economy
- An attempt to simultaneously understand and evaluate the economy, including its past
and future
- Political economy is moralized, but takes the facts seriously. These include macro facts
about large structural features of the economy, historical examples, and micro-facts about
human psychology.
- Something of an ‘ancestor’ discipline to current specialized disciplines of economics,
political science and political philosophy
Mill’s Definition
Political economy is partly a moral exercise but it is also a social science exercise. (paraphrased)
Some Methodological Elements
- Economies evolve over time - principles of economic justice might evolve accordingly
- Principles are largely non-ideal: How can we improve the status quo, whatever it is?
Contrasts with ideal theory in political philosophy (what would a perfect society would
look like?)
- Examples: Smith on inheritance, Mill on work
The Golden Age
- Preceded by enlightenment era political philosophy, which pioneered secular thinking
about justice, governance, laws, etc
- Began properly with the first systematic work in political, Adam Smith’s Wealth of
Nations
- In text book it is picked from 1770 to 1870
Industrial Revolution
- Occured in Europe throughout the 19th century
- Impacted enormously on the nature and output of production,and on the character of
labour markets and inequality
- Philosophers from the golden age can be distinguished according to whether they were
pre or post industrial
Main Pre industrial players
- Adam Smith
- Thomas Malthus
- David Ricardo
Post industrial
- John stuart Mill
- Karl Marx

Two Reasons for old dead white men
- They were comprehensive - there are not recent texts with the same level of generality
- They had influence - if we want to understand central ideas in political economy, we lose
something if we skip the old texts. In many ways the questions have not changed
A note on studying historical figures
- Studying historical figures should not be hero worship
- They were not geniuses, they made mistakes and had biases
- Figures of the past who are worth studying tend to be behind our times but ahead of their
own
- Interesting questions is of where we should agree and where to disagree
Smith on Colonialism
- When you colonise people you stop them from being masters of their own economy and
this is a manifest violation of the most sacred rights of mankind
The pessimists
- Malthus: the labouring majority will remain poor because as soon as they get more food
they have more babies and thus remain poor
- Ricardo: the labouring majority will remain poor
- Marx: the labouring majority will remain dirt poor until they inevitable get sick of it and
start a revolution, leading to communism
The optimists
- Adam smith: capitalism is great! It gets things produced, improves our moral character,
breaks up privilege and hierarchy, and promotes world peace
- JS Mill: capitalism can do these things, but not automatically. It hasn’t been properly
tried yet, and may take time to promote justice. But, if we can get regulations right, it can
Historical or Atemporal
- Smith and Mill never use the word capitalism
- They speak of ‘commercial society’ and the ‘system of private property’
- The ‘atemporal’ definition of capitalism as a balance between freedom and competition is
derived from Smith and Mill’s writings
- It differs somewhat from the definition used by Karl Marx, which is historical
Marx’s main ideas
- The theory of history: Capitalism is a phase in economic evolution, lying between
feudalism and socialism
The Critique of Capitalism
- Capitalist production involves exploitation of workers

- Capitalist production alienates workers from their labour
- Marx’s texts are long and there is disagreement about which contain the central / best
ideas
Historical Materialism
- Human beings are innately proactive, and will find ways to keep makingnew things.
Social structures come and go accordingly
- Once production ‘outgrows’ the existing structure, some revolutionary process will
secure the move to a new structure
- Key Claim: There are laws that govern the evolution of social development. And these
laws can be discovered
Capitalism as a Phase
- Feudalism ended because non-agrarian means of production emerged
- E.g. in Britain Monarchical / Aristocratic power gave way to parliament, controlled by
owners of industrial capital
- The structure e.g. laws, changed so as to enable capitalists to get the most productivity
from workers
- Eventually the workers will rise up and another revolution will take place
Some Problems
- Actual history of the feudal-capitalist tradition doesn’t fit well with Marx’s theory, e.g.
cases of societies going forwards then backwards, or stagnating (e.g. Ancient Rome or
Venice)
- What to say about feudal - socialist transitions that arguably skipped capitalism (soviet
union, china)
- The predicted collapse of capitalism is hard to test: apparent counter-evidence is
dismissed as a deliberate ply (e.g. corporations losing court cases analysed as a ‘trick’)
Has Capitalism Ever Been Tried?
- Mill thought we never exited feudalism fully
- Instead we should see the process of social development as not wholly inevitable, but
something we can regulate / mitigate
- This helps motivate the search for principles of justice
The Theory of History vs The Critique
- Frankly this subject assumes that Marx was wrong about economic history
- Rejecting his theory of history does nothing to undermine Marx’s critique
- There arguably remain significant points of agreement, or at least continuity, between
Marx and other Golden Age thinkers

The 20th Century
- The word economics was invented by Alfred Marshall in the 1880s. End of Golden age
- In the 20th century, economics became more distanced from moral / normative concerns,
focusing on mathematics and predictive models
- Political philosophy went the other way, more about abstract and less about study of
economies
Lecture 4 - Political Economy, Part 2
The Fragmented Age
- Division of labour between moralized evaluation using theories and scientific predictive
work using data
- Since early 2000s, political economy has been making a comeback in research, though
teaching still rather fragmented
What is the economy
- Very abstractly, an economy is any system in which people interact to cope with scarcity
- Scarcity is any situation in which not everyone can have everything they want, all the
time, but can do better by working together
- Here, interaction can mean voluntary cooperation or coercive planning
- This definition however does not presuppose anything about cash or financial institutions
The economy vs its performance
- Oftwen people talk about the economy, they mean the output (GDP) or other ways of
measuring performance
- GDP is the market value of newly produced goods and services, growth is the rate of
increase of GDP
- Why is this valuable? Historically it is a proxy for things like employment, wage growth
and cheap(er) stuff
- Recessions are 2x consecutive quarters of negative growth
- We are currently in a recession
What is economics for?
- Economics identified itself as a science in the 20th century
- This involved shying away from value judgements like claims about justice
- At the same time, an economy is essentially about people interacting to increase their
well-being, which is a value laden concept
- In any case, it is possible to find implicit moral views in 20th century economic writings
Economic schools since fragmentation
- Classical (marx, smith, etc)
- Neoclassical

- Marxist
- Developmentalist
- Austrian
- Schumpeterian
- Keynesian
- Institutionalist
- Behaviouralist
Philosophy of Economics
- Is economics a science?
- YES: it aims to predict and explain, and there is a degree of agreement building up over
time
- NO: it’s predictive powers are inferior to established sciences, and there is more
disagreement. No controlled experiments
- Political economy is not about interrogating economics as a discipline it is concerned
with (re)integrating it with political philosophy
Political Philosophy in 1900s
- Ultimately still motivated by partly economic concerns - how to distribute share of
economic output
- But little attention to the mechanisms of market society
- Focus mainly on concepts with moral political significance - meaning of equality,
freedom, democracy, etc
- Large gap between Mills and Rawls (1970)
Two Key Concepts
- Legitimacy: How is it that a coercive state gets its authority? Why is anarchism false?
- Justice: How should the state exercise what a legitimate authority it has? How should
freedom and equality be balanced?
- Note: These questions were discussed before 20th century, but became dominant in
philosophy during the fragmented age
Traditions of Thought
- Social Contract Theory
- Utilitarianism
- Liberalism
- Egalitarianism
- Unlike schools of economics, there is a tendency to find overlaps between elements of
these traditions
Social Contract Theory
- Emerged in European enlightenment, developed by Hobbes, Locke and Rosseau

- Aimed to explain how the state has the consent of those it governs (coerces)
- Draws on the idea that contractual obligations are binding because we consent to them
- General Problem: Virtually nobody consents and exiting is not really an options
- Rawls - justice represents rules we would consent to if we didn't know our position in
society
Utilitarianism
- Emerged as a response to 19th century conservatism, on which pleasure was base and
that traditional hierarchies made sense
- The idea of maximising pleasure or wellbeing appears conceptually simple and is
amenable to measurement
- Has application to both ethical and political theory, and had influence in economics
Liberalism
- Individual freedom is of fundamental importance; we should value diversity and
experimentation over tradition and homogeneity; centralised power is fallible
- Much work has been done to identify which freedoms matter and why
- Libertarianism is one view on which economic freedoms are especially important and
government should be small, Other liberals such as Rawls downplay economic liberty
Egalitarianism
- Equality between individuals is of fundamental importance
- Again lots of questions about what this means and why it matters
- Much work since 1990s on material vs social conceptions of equality: is equality a matter
of distributions of stuff or relationships of status
- A lot of smith and mill that motivates social egalitarianism
Hybridisations
- Much work in political philosophy is about getting attractive elements of each tradition to
work together
- Mill: Utilitarianism and Liberalism
- Rawls: Social contract, egalitarianism and liberalism
- Since 1970 this has created a largely self sustaining industry of research
Feudalism
Anderson on employment justice
- Most workers in the US are governed by dictatorships in their work lives
- Public discourse and political philosophy neglects the pervasiveness of authoritarian
governance in our work and off hours lives
Feudalism and War

- Medieval europe was subject to constant attempts by feudal monarchies to conquer each
other
- Armies were raised by conscripting peasants
- This is sometimes romanticized but clearly it is morally abhorrent
Pre industrial labour markets
- Adam smith saw labour markets as a source of emancipation for peasant labourers
- He apparently assumed that all labour would consist in self employment or small scale
firms - “a nation of shopkeepers”
Post industrial labour markets
- The industrial revolution thwarted Smith’s vision of employment as a small associations
between free individuals interacting as equals
- Employers have become so large that hierarchical relationships may be making a
comeback, despite legal freedom of contract
- Anderson worries that things are drifting back to the feudal model of production that
Smith criticised
Why are there firms?
- Smith was wrong about one thing: Labour markets did not develop as a nexus of
contracts between individual freelancers and owners of capital
- Self employed workers exist but most workers (85% in aus) are employed by firms
- Why is this? Why have firms remained dominant when everyone can work for
themselves
Ronald Coase
- Self employment would usually require constant formation of contracts
- For much production, this is very inconvenient. You have to find someone able to
perform labour then workout a price with advance knowledge of what needs to be done
- Firms reduce these transaction costs by getting workers to sign contracts obliging them
to be directed by managers
Some more detail
- A firm is just any organisation that employs people to reduce transaction costs (charities
and governments too)
- Firms are limited in size because eventually the costs of management exceed the saved
transaction costs
- There are probably other reasons why firms endure e.g. brand familiarity
- But firms lose market share when new technology reduces transaction costs: airbnb
makes it easier for example

Distinguishing Questions
- At this point we as well as anderson are concerned about the inegalitarian character of the
relationship between employee and firm
This is distinct from
1. Questions about injustice of low wages
2. Questions about character of work itself
Whats the philosophical issue?
- Employment means giving up freedom to someone who will then order you around, in
return for some degree of security (guarantee of wages) that freelancers lack
- Notably, the employment contracts are unlike other contracts in being indeterminate
- This seems like the kind of relationship that needs to be carefully regulated, to avoid
morally objectionable hierarchy
Master and the servant (Coase)
- Employment contract is like master and servant
- There is a right of control and this dominant characteristics
- There are no internal markets in modern workplace
The autonomy / security tradeoff
- Self employed workers assume a lot of risk. Income is uncertain and they lack various
benefits of employment law
- We can view employment as trading freedom for security
- The philosophical isse is of what balane should be secured
- Anderson’s evidence suggeststhat in some cases thers an imbalance - too much freedom
given up for little security
Examples in the uSA
- Firing employee for facebook post
- Firing an employee for not providing facebook password
- Requirements to wear certain clothes, makeup and hairstyles
- Requirements not to use the toilet without permission
What sustains employer domination
1. High entry / exit costs for employees, they lack competition on employer side
2. Indeterminacy of employment contracts
3. Large firms struggle to maintain camaraderie or smithian sentiment
4. Much philosophical discussion of what domination and coercion are
Are we moving towards feudalism

- To some extent, arguably yes. All firms reintroduce hierarchy to an economy, some firms
seem to be behaving in quite coercive ways
- But this might be considered against some other factors
1. What sort of powers we think firms should have over workers
2. Whether the behaviour of firms is just traceable to features of people
Gig work
- Digital platforms lower transaction costs, but there is dispute about whether they employ
their workers
- In australia, fair work ombudsman ruled that uber drivers are self employed as they chose
their hours
- In england they ruled them as employers as they set the price
Possible Answers
- One view is that platforms are trying to have it both ways: taking workers freedoms
without security of employment
- More platforms deny freedoms they should provide some guarantees
Can firms regulate employee speech?
- Israel folau had employment terminated for contract breach following controversial social
media posts
- Controversial in part due to questions about when an employer can regulate private life
Freedom of contract?
- Barnaby joyce says folau was employed to play rugby not to be a pastor or anything
- His personal statements have nothing to do with his job
- But this poses questions of how could you be allowed to put that into someones contracts
- Do you sack nurses for it?
Rugby players vs nurses
- Not just to play rugby, if you are employed by rugby australia you are representing
everyone in australia
- Firm is trying to produce something more than just playing rugby unlike nurses
Key questions
- To what exten are there morally independent constraints of freedom of contract
- To what extent can employers appeal to the fact that employer behaviour may impeded
the good or service they are paying them to help
- Employment contracts are indeterminate and impossible to have every detail of what is
okay etc

Corporations need to be given a break?
- Corporations face strong reputational pressures to be for example less homophobic than
people
- Workplaces can be less stressful than homes and bring benefits
- Monopsony (firms having total monopoly on workers)z is actually quite rare even though
massive firms are common
Further implications
- A good theory of employment justice would say something about which freedoms are
given up for which obligations to follow orders
- Such a theory would help address grey areassuch as the gig economy. In which it is a
matter of dispute whether they are employed or freelance
- The boundaries of employment are an important area of debate
Solutions?
- Introduce more regulations to protect workers from dominations
- remove employers / employee distinction, make workers co owners of their companies
- Try to encourage greater competition of the labour market, so workers can change
companies more easily
No getting away from Coase
- Anderson thinks we can not get away from big girls
- Firms are not about to disappear, this doesn't need to be bad
- Lack of competition amongst employers is probably bad for workers
- Competition is important to distinguish capitalism from feudalism
Feudalism part dos
Main features
- High concentration of wealth in economic elite
- Unaccountable political power of elites over non elites
- Inequality with dynastic tendencies
- Violence (domestic and global) due to conflict between elites
- Low freedom of movement (especially of labour)
These were all features of pre-industrial economies. There is some evidence of a recent
resurgence of some of them
Three related distinctions
- Income (from labour) vs Wealth
- Stocks vs Flows
- Extractive vs Productive Income

These are important for understanding certain details about inequality and regulation (especially
taxation). The moral substance may attach mainly to the third distinction.
Income vs Wealth
- A persons wealth is not the same as their income. Some wealth will generate annual
income but not all
- So taxing the rich means something different depending on whether income or wealth is
the main tax base
- Income is a flow whereas wealth per se is described as the stock. This distinction is
imprecise but helpful
Some complexities
Most jurisdictions tax flows more than stocks. Why?
1. Flows have an easy to distinguish monetary value
2. Stocks can often ‘migrate’ overseas or be more easily hidden e.g. creating companies in
which you retain control rights, this sort of wealth tends to be unrealised.
- A consequence is that the tax burden tends to be shouldered by working people, rather
than those whose income is from capital
- Australia has some taxes on stocks e.g. land tax and corporation taxes.
The Philosophy Issue
- In the golden age, a distinction between productive and extractive activity was
emphasized
- In 20th century political philosophy, the following claims about inequality became
influential
1. John Rawls: Inequalities are easier to justify when they are necessary to benefit the worst
off
2. Luck Egalitarianism: Inequalities should result from choices, not circumstances / bad
brute luck
- On these views, unjust inequalities tend to be those associated with being lucky rather
than creative
Questions
- Given all these factors how might we revise the way in which we rely on taxation to
adjust distribution
- Is the current orthodoxy of taxing flows dependent on the assumption that the economy is
more capitalist than it actually is
In Australia
- The wealth stock is not generating dispersed increment, hence wage stagnation. Already
true pre covid

- The 21st century may be like the feudal era, in terms of your prospects depending more
on your wealth than your income.
Capitalism and wealth dispersion
- If wealth was dispersing maybe socialists would not find connection with the evils of
capitalism
Housing
- Property values in cities like Melbourne have greatly outpaced wage growth. This is no
doubt due to many factors
- One hypothesis is that land values rise when land is a safe bet or otherwise incentivised
as an investment vehicle
- In Australia, fiscal policy actually encourages investment in housing rather than
occupancy (e.g. negative gearing)
Why is housing special?
- There is philosophical disagreement about whether there is a special right to have the
opportunity to own one’s home
- One view is that renting involves a hierarchical relationship between landowner and
tenant, from which ownership provides escape
- So, the issue is partly one of class or status hierarchy, not just material inequality
- But extraction is the classic (anti-feudalist) concern
Smith on Landlords’ Income
- Houses can be owned and rented out to people but nothing is getting produced, the house
just sits there generating no output
- In order for someone to pay rent, that income has to come from somewhere else (labour
of the renter) so that wealth from renting housing is not new wealth. Just passes from
renters to owners
- This is extractive
- Housing can’t be produced easily and can be hoarded for a long time
- Australian situation may be part of a global trend for developed economies
Piketty on the 21st Century
- 20th century was an unusual one: high wage growth, helped by economic shocks that
broke up concentrations of ownership
- Normal centuries involve slower growth, with largely extractive activities enriching an
economic elite at others’ expense
- Piketty associates this with income from capital exceeding the rate of economic growth
Why is this bad?

- It’s intuitively unfair: Why should one’s chances depend on inheritance more than labour
market participation
- Wealth inequality may give rise to plutocracy
- Incentives to invest in extractive capital like housing may suppress creation of more
productive capital e.g. investment in companies
Conclusions
- Contemporary Australia seems to exhibit two features resembling feudalism
1. Wage stagnation and costly housing, as wealth generation becomes extractive
rather than productive
2. A tendency for inherited wealth to determine whether one is dependent on wages
or receives housing wealth
Solutions
1. Tax wealth so that inheritance flow gets reduced, or at least dispersed
2. Get back to the 20th century: Find a way to increase economic growth and hence wage
growth, so that those who don’t inherit can still ‘catch up’
How to do this?
- Impossible to make housing more affordable without hurting some group
- Reform of negative gearing will hurt people who acquired a mortgage recently. Changing
monetary policies will hurt all borrowers
- Increasing housing supply runs into problems of nimbyism (not in my suburb or place)
- Old difficulties of taxing wealth stocks due to valuation and realisation issues
Are there other examples of extraction?
- Gambling industry: what does it produce? (entertainment)? Does it just move existing
money around
- Anything involving intellectual property: At some point, IP is meant to expire. Here there
is a balancing act between incentivizing production, and not allowing the reward to go
beyond that incentive (in which case it becomes extractive)
Market Order
The positive case for capitalism
- Last week we saw an important part of the negative case for capitalism i.e. the injustice
of feudal economic order
- This week, we look at a case that is independent of the badness of other economic
systems
- This is not the common defence along the lines of free markets are brilliant. It also shows
when and why markets should not be relied upon

No such thing as a free market
- We should think of regulation in qualitative terms, good and bad
- This contrasts with less regulation good, more regulation bad
- Not all regulation is interference with a market, some is enabling
- Better to speak of market freedoms, which accrue to participants in a market not the
market itself
What is laissez faire?
- Literally translates as let it flow
- Can be misleading, insofar as the flow of the markets is in a large part enabled by
regulations, not just interrupted by them
- Taking steps to create a balance between freedom and competition means promoting
something other than laissez faire
Mill on Laissez faire
- The general practice should be letting alone (people and markets)
- Mill spends 35 pages proposing exceptions to letting people alone
What is freedom?
Competing philosophical positions as to which freedom has moral significance
3 main views
1. Freedom from coercion (nobody degrading one’s choice set)
2. Freedom to do things (having a good choice set)
3. Freedom from domination (more subtle, but to do with the absence of unjust hierarchies)
What are freedoms?
- Can be helpful to think of specific freedoms
- Some freedoms are arguably basic, i.e. cannot be restricted for sake of other goals
- Market freedoms (property and contract) might not be basic. Today’s argument allows
that they can be justified with reference to other values
Methodology
- The more interesting case for capitalism rests on the idea that economies are complicated
and we need to be humble when trying to control them
- For its proponents, this ‘epistemic humility’ is not defeatist
- It means we should try to increase our understanding of economies, but not try to conquer
them
- Smith: man of system likes to plan but cannot deal with the smallest deviation of any part
of the plan, he seems to imagine he can control all of society like chess pieces
Smith’s position in Wealth of Nations

- Famous is the invisible hand slogan. We pay the butcher, baker and brewer not because
we like them but because they provide us with goods
- Smith is often read as suggesting that people are selfish, capitalism being the system that
best accommodates thus
- Smith rather sort of believes that people aren’t slaves and fair cooperation makes us
better people
Spontaneous order
- Sometimes, creatures act in a highly rule governed way without anyone designing or
controlling, or even fully understanding these rules (i.e. unlike chess)
- Such rules can still be effective at solving problems, and evolve without changing
conditions
- The positive case for capitalism draws strength from the extent to which economic order
is successful because it is spontaneous in this sense.
Linguistic Analogy
- Languages evolve according to environmental pressures that are eased by
communications
- They are not planned, and it’s hard to see how they could be
- Some languages are better than others and different languages evolved in different places.
This suggests the evolution is some whatrandom, and not fully optimising
The pitfalls of analogies
- Analogies are good at illustrating a conclusion to make it more intelligible
- But we should still seek an independent argument for or against rather than simply
relying on the analogy
- The positive case for capitalism is a case in point. We want to use it to test the
resemblance between linguistic and market order
F.A Hayek
- Did much to build on smith’s project
- Held many controversial views about economic justice
- Thought egalitarianism was based on ‘envy’ but also believed in UBI
- We are focusing on what he said about prices, which is perhaps his best work
What do prices do?
- They send signals about supply and demand
- High prices = supply lower than demand, incentive to produce more and consume less
- Low prices = supply is higher than demand. Incentive to produce other things
- Hayek’s crucial point: There’s no good substitute for getting this info. Prices work to
incentivise / organise production and distribution better than other methods

Why can’t we plan an economy
- We dont automatically know what we ought to produce and who needs it most
- To the extent that we do know, this is because we have been able to see what the prices
tell us
- When we intervene to dictate prices, we will destroy this source of info
- The best way to ensure that price signals can work is by maintaining freedom and
competition, so that everyone can send the right signals
Application: ‘Fair Trade’
- People often feel that producers ought to be paid more, especially when long supply
chains mean much more retail value never reaches them
- But if we respond by raising prices, this tells people to keep producing the thing in
question
- This may mean that too much gets produced, and that other valued things get produced
less (especially in agriculture)
Example : Coffee
- Fairtrade movement attracted more farmers to coffee production, making the problem
worse
- Some charities ended up recommending that governments buy large quantities and
destroy it
- It would be better to encourage producers to switch to making something with unsatisfied
demand
Better Case for Fair Trade
- Not just about price manipulation
- It might involve pressuring monopolies in the supply chain to pass on more of the retail
prices to producers
- Hayek would welcome this - monopoly reduces competition i.e. people’s ability to
respond to signals
- But, it may still be better to help people produce something that is high in demand
Price Gouging
- In some cases, it seems like prices are unjustly high for specific goods
- True for things like essential goods in which people have to pay whatever the price is
- Matt Zwolinski discusses price spikes for ice during prolonged power outages when
diabetics are desperate to keep medication cool
No such thing as a free market pt 2
- Price system benefits from institutions that help it function

- So long as we don’t regulate the actual prices, Hayek need have no conceptual obligation
to other government regulation
- Most notable, price signalling might work less well given inequality of purchasing power.
In later work, Hayek defended basic income
What is Market failure?
- Narrow definition picks out cases where markets cannot get certain goods / services
supplied, due to the nature of their production and/or consumption
- The term is sometimes used more broadly to refer to cases where markets seem to have
perverse or unjust effects
- Really, we want to look at the various ways in which the spontaneous order of prices
seems to go awry
Classic market failure
- Applies to goods or services that market can’t supply as a matter of logic
- E.g. national defence, law and order, clean air and nye fireworks
- Called public goods
- Any good that is non rivalrous and non excludable
- Goods of this sort have no price and cannot get one
Is a vaccine a public good?
- Sort of
- Excludable good is vaccine itself
- Immunity is a public good created by sufficient consumption of the private good of the
vaccine
Coercive Supply
- Public goods are supplied by forcing people to pay through taxation
- This seems defensible for lots of things like law enforcement and national defence
- But there is nothing in the concept of a public good that tells us that it needs to be
produced or how much to spend on it
Case 1: Gendered Products
- Women's shaving products costing more
- Gendered words such as radiant, bliss, lotion bar for women and refreshes, better,
efficient for men
Gender and Price
- The causal story here likely has to do with sellers wanting to prevent consumers from
sharing e.g. razors
- Gender norms are affecting prices, but such norms do not reflect genuine difference in
need

- Even if women do need a product more but not to increase in price e.g. some men need to
shave more than others
The bigger picture
- Not just about prices, gendering of products happen quite widely but not always the same
product
- Hayek would probably suggest that we should do something about these arbitrary norms,
don’t blame the prices
- Some will argue that this requires regulation of prices. But changing norms can occur
mainly through other mechanisms
Case 2: The Housing Bubble
What is an Asset Bubble?
- Often described in terms of prices rising to unsustainable levels, increasing chances of a
crash
- A more precise characterization is in terms of people buying not to consume but to invest.
On the expectation the price will increase
What is going on here?
- Hayek could say that the price does not signal any real need for the asset
- Investors do not consume the good or really need it. They just sit on it, decreasing supply
for others
- So regulation to discourage excess investment might be justified for Hayek
What should we do?
- Price manipulation for housing is certainly possible
- Negative gearing, land tax and stamp duty
- Some reform is arguably needed but it is difficult to do without imposing a cost on some
group
Zwolinski on price gouging
- Makes a hayekian argument about price gouging being morally defensible because it
allows price signalling to actually take place
- Laws against gouging will prevent resources going to where they are most needed, and
impede expansions of supply
- Focuses on distribution of ice by people following a hurricane
Is the ice case unusual?
- Clear contrast between small minority of consumers who need resource to stay alive and
large majority who don’t need it as much
- Very quick for price signal to induce more supply

- Cause of demand spike a natural disaster, rather than consumer fear
Generalisations?
- Really the market is a mixture of cases in which price signals work well to regulate
behaviour of consumers and producers, and cases where they work less well
- Hayek / Zwolinski would still point out, quite rightly, that capping the price of toilet rolls
would not solve the problem
- But can we say this about other cases?
But what about other cases?
- Toilet paper and ice are similar in that consumer knows what they are buying and quickly
finds out whether it’s any good and can modify subsequent purchases
Examples
- Healthcare
- Financial services
- Universities
- Goods where prices are manipulated by social norms e.g. gendered products
- Goods where prices reflect a gamble on future values e.g. houses
- Goods that are subject to monopoly supply
University - Proposed Fee Hike
- Charge more for subjects in humanities subjects than stem
- This is actually a bit like socialism, insofar as the government thinks it can plan the
labour market by setting prices to drive students into particular modes of study
- It is also not like socialism as arguably a market price signal might not work anyway for
education
Tangentially: What is a degree good for?
- Public debate has focused on what skills are conferred by what degree programs
- Education has a signaling function as well: it conveys info about skills that may not have
been conferred by the institution
- Whatever degree you take, many employers care mainly that you met deadlines, worked
on long tasks with little supervision and did not punch people in the face
Arts degrees as signals
- Signaling can liberate students: study what you find interesting! Either way, you'll be
able to send the signals if you work hard and do well
- It also promotes a view on which students drive their own development rather than just
absorbing skills

- Universities often downplay the signaling factor, because they like to say they make you
smarter than you already are
Monopolies
- The price is not a reliable signal
- It is always possible that a monopoly is a result of some producer winning market share
fair and square
- But monopolies in long run undermine competition
Charity
- It is often suggested that voluntary charity, rather than the state or the market, should help
the needy
- Defensible view but they have their own problems
- Category of charity arises out of complex legal regulation e.g. tax breaks on religious
organisations
Mill on charity
- Charity has no signals to base themselves off
Socialism
Defining Socialism Negatively
- We can think of socialism as classically involving two elements of objection to market
society
1. Opposition to private ownership of productive capital
2. Opposition to class hierarchy
- This leaves room for much variation and may not capture all forms of socialism
Definiting Socialism Positively
- We can also think of socialism as having aspirations related tom but going beyond,
misgivings about capitalism
1. Promotion of a motive on which production is for the common good
2. Displacement of individualistic feelings with ones conducive to community and
fellow feeling
Origins of Socialism
Socialism really began as a 19th century idea motivated by the impact of the industrial revolution
- Industrial Revolution meant
1. Much higher production
2. Mass employment and urbanisation
3. Displacement of varied agricultural work by production line industrial labour
- Socialism has some heritage in authors like Smith and Ricardo. They weren’t arguing
against socialism but rather against feudalism and imperialism.

Production vs Distribution
- For smith, malthus and ricardo, political economy was largely about figuring out how to
get everyone fed, clothed etc. Questions of production and distribution lumped together
- The industrial revolution cheated half of the solution, more was being produced but was
not getting distributed evenly
- Inequality now looked different - owners of capital seemed to be growing rich on the
output of others’ labour, rather than hogging the land
Motivating Socialism
- There something unjust about a productive system that leaves many people behind,
especially when they’re the ones putting in hard work
- This differs from Smith’s concerns about feudalism - inefficiency, coercion, hereditary
privilege preventing production from getting going
- So socialism involves an idea about sharing or socialising the means of production and
the benefits from it, not relying on markets and individual freedom
What exactly do socialists dislike?
- Exploitation of workers by capitalists, as manifest in antagonistic class hierarchy
- Alienation of workers from their labour
Varieties
- Utopian: try to solve the problem from the bottom up, via small scale communities,
seeking to spread popularity
- Revolutionary: Try to solve the problem from the top down, overthrowing private
ownership, centralising state ownership and sharing output
- Market (Mill): Try to rely on markets to remove class distinctions
A methodological point
- How do we compare socialism and capitalism?
- The economic status quo rarely conforms to an ideal completely. This means it is always
quite easy to criticise an ideal by picking on the worst aspects of the status quo in which
that ideal is supposedly being pursued.
Actual vs Ideal
- Actual socialist societies subverted the theoretical ideal (gulags, purges, famines and
secret police)
- Proponents of socialism are free to claim these as perversions, and to continue defending
the ideal
- But the same standard needs to be applied to capitalism. The status quo in market
societies departs from most views about ideal capitalism

- So we should compare ideals against each other or the status quo
Utopian Socialism
- The idea that production / distribution can proceed by way of voluntary cooperation and
sharing, without class antagonism
- Varies in form but does not require centralised political control
- New Lanark and Jamestown settlement
Marxist Socialism
- Market order will be displaced by a planned economy with centralised power over market
freedoms
- This will require a sudden transition in order to break up prevailing class distinctions and
private property. Some believe you need multiple revolutions
- May give way, in due course to communism and the withering away of the state
Is this feasible?
- Revolutions tend to be extremely violent, compared to a more gradual introduction of
socialism but history shows they can occur
- Feasibility isn’t just about establishing a socialist order but getting it to deliver and
remain stable. This is the hard part
- People have to want to be productive and know what to do in order to be productive
The Incentive Problem
- People tend to be more productive when it advances their self interest
- Markets accommodate this, to some degree as people can only advance their interest by
offering something in return
- Socialist societies rely on some combination of central commands (coercion) and
individual desire to serve the common good
The Knowledge Problem
- With the best will in the world, planners and workers will struggle to know what to
produce without some source of info
- Taken together these are the same issue in getting people to respond appropriately to the
facts
- Socialists need a persuasive rejoinder for hayek’s argument
Is it desirable?
- Actual socialist societies couldn’t solve the knowledge problem, which is why they often
got famines and other chronic shortages
- One view is that the difficulty of centralising information is ultimately a problem of
technology

- Perhaps one day a centralised planning program can take care of both production and
distribution
- So it is worth asking how desirable socialism would be on the assumption that the
knowledge problem will be solved.
Cohenite Socialism
- We can evaluate capitalism vs socialism by asking what norms should govern
production / distribution in a small scale setting
- Then generalize these to larger scale societies
- Cohen thought how we want a camping trip to go shows preference for capitalism
Camping trip
- Imagine a camping trip where everyone asserts their rights over equipment and the talents
they bring
- Bargaining proceeds with respect to who is going to pay what to whom, most people
would hate that
- Communal reciprocity is the non market principle according to which i serve you not
because what i can get in return but because you need my service and you for the same
reason serve me
Communal vs Market Reciprocity
- We can produce / distribute things based on a spirit of sharing or via material incentives
Why the camping trip?
- Ronzoni argues that the large family is the closer analogy - family lasts much longer and
you don’t get to choose all your family members (unlike camping trip
- But families are not completely about sharing, they include private property, privacy and
even trade
Is the community exclusively socialist?
- Might there still be something attractive about a market order, in terms of how people
relate to each other?
- Still a question about desirability rather than feasibility
- Cohen wants to say in a market society the motive to produce is a mixture of greed and
fear in proportion to your needs.
- Cohen says this is horrible but we have just gotten used to it
Is capitalism really so bad?
- Cohen suggests that community is sacrificed by market order, which promotes fear and
greed

- Smith believed that markets might facilitate trust and fellow-feeling, Smith said if you
interact with someone in reciprocal way you begin to trust them
Marx on class hierarchy
- The history of all existing society is the history of class struggles
- Modern bourgeois society has sprouted from the ruins of feudal society
What is class hierarchy?
- 19th century: tiny propertied upper class own capital and large working class sell labour
Middle emerged of people who own property but still have to sell labour
- 20th century more complicated. Class is less central in economics than in classical
political economy
Theoretical perspectives on class
- Economics: quite scalar - a matter of position in material distribution. No sharp
boundaries
- Sociology: more qualitative - aspirations, tastes, etc. still correlated with economic
position, but manifest in behaviour and how people interact
- Key in contemporary sociology are concepts of cultural capital and social capital
Class in Australia
- Recent study identified 6 classes (precariat, new worker, aging worker, established
middle, emerging affluent and established affluent)
- These differ in terms of what cultural / societal capital is possessed
The moral significance of class
- Social egalitarians often treat class difference as parallel to gender and race: hierarchies
easily emerge, subject to discrimination and injustice
- Class position might unfairly influence treatment and opportunities, making class a
feature of morally problematic status hierarchies
- Tht class is less visible, and more taboo, than in the past may have moral significance in
itself (e.g. class war)
- Overall a careful case might still be made for class elimination as part of economic
justice.
Mill’s case for socialism
Market socialism will
1. Reduce economic inequality
2. Remove the hierarchical distinction between workers and owners
3. Enhance the mental development of workers

What is market socialism basically?
- Markets still exist meaning that there remain economic freedoms operating under
conditions of competition
- But there are no capital markets: owners of capital are also workers, not shareholders. All
firms are cooperatives (employee ownership)
- This means high degrees of profit sharing and workplace democracy
- Competition might also work somewhat differently
Which firms are cooperatives?
- In australia, the biggest cooperatives seem to be in wholesale and retail, especially food
- Cooperatives can and do exist on a smaller scale e.g. cafes and bike repairs
- There are quasi-cooperatives in which workers become owners after a long time (e.g. law
firms) though they might have shareholders too
Mill on the downside of labour markets
- Mills position is interestingly distinct from marx - little explicit emphasis on alienated
labour or exploitation
- In Mill, the emphasis is on the perils of laziness among the wealthy and the difficulty of
mental improvement under conditions of poverty
- This might be compatible with Marx but differs in refusing to blame social hierarchy on
markets per se
Workplace Hierarchy
- Conventional employment leads to oppressive workplace hierarchy in at least some large
firms
- Mill was encouraged by the emergence of worker cooperatives in his time and argued
that they should and would become the norm
Further Advantages of Market Socialism
- Main emphasis in Mill is on equality of association, incentives, the raising of wages and
associated mental improvement
- In addition exploitation is apparently impossible, because there are no capitalists who
extract profits from labour
- Workplace democracy presumably reinforces these benefits, but may bring others
Internal Questions
- What should be the conditions of entry into a cooperative
- Is MS compatible with some kind of pay hierarchy within a cooperative e.g. according to
level of skill, investment in training or burden
- Why do workers need to own the capital in their firm, as opposed to other capital?

Some qualifications
- Its not obvious that all firms ought to be market cooperatives, and Mill never actually
says more than that MS should predominate
- Some forms of employment e.g. short term, may still require conventional firms (or
worker cooperatives that employ a few other people
- Mill favours state ownership of some capital like things that tend towards monopolies
such as public transport
Desirability: Winners and losers
- Market socialism preserves the capitalist commitment to competition
- As with firm employment, this is supposed to ensure a high quality of output and
potential for innovation
- But it may still lead to unemployment and at least wage inequality as some cooperatives
make more money than others
Being your own boss
- Mill seems disdainful of the idea of work being a mere means to an end, and of people
being bossed around by employers
- But a properly liberal view might allow that some people are better suited to jobs in
which they are told what to do
- Not everyone responds well to competition and profit incentives. Some people work
better when told what to do
- Workplace democracy often means more work !
Is this really socialism?
- McCabe: yes. Mill was ambivalent about capitalism over his life. Like Marx, he saw
socialism as necessary for eventual economic justice. He just was not a revolutionary and
wanted to retain many advantageous elements of capitalism
- Miller: Not Really. Mill welcomed competition and always stuck to his liberl worries
about social pressure to conform - he worried that socialism would create a homogenous
population
McCabe on Mill
- A new article with lots on the balance between market and socialism in Mill’s MS
- Argues that Mill downplays competition: it’s necessary, but will tend towards “friendly
rivalry” if cooperatives the norm
- This will be more attainable once antagonistic class hierarchy has ebbed away
Feasibility: Why hasn't it happened?
- Mill believed it would happen anyway without state intervention

- One reason is that workplace democracy is inefficient - they quarrel whereas shareholders
almost never do
- The rise of technology often means high start up costs, requiring cash investment. Hard to
do this without shareholders
- Cooperatives tend to be ones where the members already have capital to supply, and
there is no need for shareholders to make big investments not airlines, universities, banks
and large scale manufacturing
- Worker owned firms also tend to go in the opposite direction to boom and bust: during
downturns, reluctant to fire. During booms, reluctant to hire
- In addition some form of capitals don’t get maintained when pooled (like kitchens or
bathrooms in sharehouse) The cooperatives on the list probably have distributed rather
than pooled capital
Rejoinders
- Maybe there isn’t enough done to remove the power of shareholder firms. States need to
assist cooperatives more
- Also we dont need total market socialism to get substantial benefits, as firms may need to
raise wages to lure workers from cooperatives
- So case for MS is that it might not be all or nothing, and might merely involve changing
the status quo to some degree
Socialism today
- What principles animate socialist movements in 2020?
- Victorian socialists call for nationalisation of key industries; action on climate change;
lgbtqia rights ; free healthcare; affordable housing; higher corporate taxes
Alienated Labour
The idea that capitalism works to make our work less connected with flourishing
Labour and Marx
- Industrial revolution increased production and yet poverty persisted
- This was largely because of ways in which production increased only in ways that kept
most labour cheap
- Marx focused both on the extraction of value from labour (exploitation) but also on other
unfortunate aspects of the mechanism enabling labour to become productive
Two important concepts
- Divided Labour: the tendency for production to scale up due to specialisation of its labour
inputs
- De skilling: the tendency for specialised labour to become easier to perform, making
workers easily replaceable

- These are not logically equivalent though they often coincide
- These processes change the nature of the work and experience of performing it
Undivided Labour
- Making a sandwich from scratch takes 6 months and costs 1500 usd. Mass produced
sandwiches are made quickly at lower production costs
- Mass production means more people working on specialised tasks, as per Ford factory
line or Smith’s pin factory example
- Production costs went down thanks to innovations that enabled divided labour such as
ford
- This sometimes reduces the quality of product, though not always and can improve by
standardising
Industrial Revolution
- Dramatically changed the character of work as people moved to cities to work in
manufacturing
- Agricultural work is hard, but somewhat varied, and subject to shorter hours
- Most industrial work is more monotonous and very uncreative, largely because it is
extremely specialised
Marx
- Developed most influential pessimist critique of industrial capitalism
- Central evaluative concepts are alienated labour and exploited labour
- Apparently developed multiple ideas of alienated labour without explicitly enumerating
them
Alienation (1)
- We madethe product and yet products ended up dominating us
- The precise concern here is hard to pin down but has something with products controlling
us
- We don’t know how products we own actually work etc
- We will come back to this when we look at conspicuous consumption and positional
goods
Alienation (2)
- When labour is deskilled, replacement of a worker tends not to change the output
- Contrast this with undivided skilled labour, whose output more easily represents the
individual who made it
- This is the idea of alienation that can be most philosophivally developed
Alienation (3)

- The rise of market society may have emancipated us from the coercion of feudalism
- But it makes us preoccupied with money and credit, corrupting our interactions (e.g. uber
drivers and shop assistants)
- Again hard to pin down, but the concern may resemble worries about individualism and
corruption of relationships by money
Aristotle on essential functions
- Marx can be read as having applied Aristotle’s view, claiming that creative activity is our
essential function
- If industrial labour stops us from enacting this function, then it stops us from living well
- Capitalists have an interest in deskilling labour, and so have an interest in making
workers have bad lives
What is human flourishing?
- Marx is what philosophers now call a perfectionist
- Broadly, perfectionists believe that our lives go best when we act in ways that make some
aspect of our nature perfected
- This places emphasis on achievements over raw pleasure or desire satisfaction
- Perfectionism kind of downplays human diversity
Alternatives to perfectionism
Wellbeing is a contentious philosophical topic. Perfectionism competes with other theories
1. Hedonism: our lives go better / worse according to our psychological states
2. Desire satisfaction: satisfaction and frustration of desires is key to having a good or bad
life
Neither of these views make assumptions about human nature or function
Is it so bad?
- Contemporary labour markets have plenty of well paid work that is skilled but alienated
in the 2nd sense. This may have been rare in 19th century
- This tells us that de skilling and divided labour are not equivalent - divided labour might
not drive wages down
A note on competitive markets
- If labour markets were competitive, would work not be less alienating?
- Maybe: firms forced to compete might have to make work more attractive
- But maybe not: firms competing for customers not employees which encourages de
skilling to drive down wages
Mitigating Factors

- We do not all feel an urge to be creative. Some of us might find monotony less stressful
than pressure to be creative
- We can regulate the labour market to ensure that people have leisure time
- This may be enough, indeed it may create more opportunity for creativity than can be
achieved within most jobs
- Alienated labour may be worth taking on if it pays enough to do our desired things during
leisure time or retire early
- Marx’s perfectionism would probably lead him to deny this, e.g. opium of the people but
we can still be creative during leisure time
What should we do about it?
- Very hard to use labour market regulation to turn a dull job into an interesting one
- High pay may not actually change this but merely compensate for it
- Maybe there is a case for leisure entitlement to increase in proportion to a job’s tendency
to alienate
What happens in ideal capitalism
- One can argue that ideal capitalism would involve some removal of some arguable
economic injustices
- Perfectly competitive market order might be free from inequality of opportunity,
inheritance, etc and have good supply of public goods by government
- But it is hard to see how it can avoided divided labour and hence alienated labour
Bullshit jobs
- White collar jobs in which people basically produce nothing, but where there is a
pretence these are important jobs
- Unclear how this might feature in an evaluation of capitalism
Biggest issue in political economy?
- Intuitions about exploitation are among the most powerful, and easily triggered, when it
comes to economic justice
- Sometimes quantitative - connected with being underpaid, especially when few
alternatives in labour market
- Qualitative - entire sectors of labour regarded as exploitative (e.g. sex work and child
labour)
Why is it hard to vindicate our intuitions
Labour market exchanges can easily have low pay and still be:
1. Uncoerced

2. Mutually advantageous
- Some people accept low pay out of desperation, but this does not explain by itself why
it’s wrong for others to offer such work on terms rationally accepted by desperate people
Wolff on exploitation
- We all think it exists but its really hard to say what exactly it is
- More specifically, we need to say what separates exploitation from non-exploitation.
- One of the great lessons from philosophy:an intuition can be very powerful but still very
hard to vindicate with a theory
Marxist Exploitation
- Roughly, workers are exploited because they are paid less than the value they put into the
production process
- The capitalist ends up getting a disproportionate share of this value as profit
- This is because the capitalist owns the means of production and can easily replace
workers
The labour theory of value
- Key idea: outputs of production have higher exchange value than inputs (raw materials)
- Where does this surplus value come from? Marx says labour
- This is very intuitive, after all, labour improves raw materials. Most things that have
value, required labour either to produce or bring to market
Applied
- If labour creates exchange value, it is clear how exploitation happens
- The capitalist captures the surplus value by selling labour’s outputs but keeping a large
chunk of it as profit, before paying wages
- This is very intuitive: if you work to produce something, but do not get paid enough to
buy things you’ve made, it seems that something has gone wrong
Problems
- Marx was not the only author to accept the labour theory of value
- But it has since become widely rejected as theory of exchange value
- Becomes easier to see as markets evolved
Standard counterexamples
- How much things are worth seems not to depend wholly on how much labour wentt into
them e.g. art
- Very difficult to disentangle multiple labour contributions. Should marx be paid for these
lectures?

- All of this is compatible with labour being a factor in the creation of value. But so too is
demand (or perception of quality)
- This means it is very hard to maintain the core marxist idea of exploitation as extraction
of surplus value
What next?
- The weakness of LTV does not undermine the intuition that labour markets involve
unfair exchange. It just means we cannot say that all workers are exploited in such a
straightforward way
- There are other ways of to show that workers get back less than they should from the
production process
- This is what current theories of exploitation try to do. It’s harder than it looks but
rejecting Marx’s theory of exploitation is not to deny that exploitation exists
Baselines
- An unfair price is to be measured by the departure from some independently plausible
level of a fair price
- Finding this baseline will solve the problem of separating exploitative from non-
exploitative wages and tells us how much any wage is exploitative
1st baseline: Competitive price (Alan wertheimer)
- Price is often dictated by competition on one side of the exchange
- This allows one party to effectively dictate the price of the exchange especially when one
party is desperate for the exchange
- This vindicates intuitions about exploitation in some cases
- E.g. drowning scenario
- This vindicates intuitions about exploitation in some cases e.g. monopsonic labour
markets
Problems
- Competitive price is not guaranteed to be at any level
- It may be that low prices endure even if nobody is dictating them
- Also counter examples: rich tourists are not exploited by being overcharged in poor
countries
Baseline 2: Respect (Ruth Sample_
- Persons have a value that needs to be respected
- This requires paying people a certain price for their labour. Paying a low price is
degradation
- This resembles the kantian idea that it is wrong to treat people merely as means
Problems
- Hard to be precise about how much pay is respectful

- It is unclear how failing to transact could restore respect
- Degradation may be present in other unjust aspects of labour markets. At best this
suggests that low pay enables degradation but not that it is degradation
Do we need the concept?
- Most of us would say that we think exploitation is unjust and that it occurs
- Does exploitation constitute an injustice or merely alert use to the presence of some other
background injustices
Deflationism
- Deflationism about a concept is the view that it doesn’t do the explanatory work often
attributed to it
- Claims about exploitation might still be true and our intuitions are tracking an injustice, it
is just that the injustice might be something else
- For example, poverty that enables exploitation might be the real injustice, and the sorts of
exploitative changes are its symptom
But what about high pay?
- Rise in high pay for athletes etc is high and well documented
- In some cases this is due to factors like audience concentration, due to tech like TV and
advertising
- In other cases such as executive pay, it may be unjust insofar as it is incompatible with
the duties triggered by relevant employment
The case of CEO pay
- Moriarty argues that CEO pay is hard to justify because it eats into shareholder value
- Others have suggested that CEOs are really talented these days
- High salaries often reflect employers taking a chance
Unemployment
- Labour markets create winners and losers, This goes for ideally competitive markets, and
actual markets
- The losers are those who face unemployment and/or the constant threat of it
- This week, we’re going to look at various institutions and proposals that have been used
or could be used to address unemployment, some of which aim to go further and radically
reform peoples dependence on selling labour
Why is unemployment bad or unjust?
1. It means you are poorer, and forced to accept weak offers out of desperation
2. It is stigmatised: in market societies, unemployment is a badge of shame, in ways that
may reinforce other social hierarchies

3. The threat of unemployment is a major factor enabling domination by employers among
those still employed
Unemployment in the era of Covid
- The pandemic will result in higher levels of unemployment than racent decades, and for a
prolonged period
- This may undermine unsympathetic narratives about ‘dole bludgers’ and associated
stereotyping
- The need to go to work has also been linked to spread of diseases, as people cannot afford
to stay at home, or are reluctant to get tested
What is employment anyway?
- The case of precarious labour shows that there is not really a clean division between the
employed and unemployed
- Employment comes with benefits not enjoyed by freelance workers
- There is an important and unresolved question about how the law should draw the line
between employed and self employed workers. The pandemic may impact on this
Capitalism may require unemployment
- Marxist idea of a reserve arming of unemployed enabling wages to staylow
- Unemployment might prevent wage / price spirals: High wages forces producers to
charge more for output, subject to a vicious cycle (NAIRU)
- Another idea is that the reserve army actually helps new businesses start up, helping
innovation
- There is some truth in these ideas, though they are debated by economists (inflation less
of a concern than in the 1970s)
Moral intuitions versus causation
- There is a tendency for us to think of low pay in terms of work being under valued, not
recognised
- But we should remember that the cause of low pay tends to be the ease with which an
employer can replace a worker
- Solutions should be designed accordingly
Solving vs Diagnosing
- In the 20th century, numerous countries made progress in addressing problems of poverty
and unequal distribution
- Various institutional solutions exist, though each has moral advantages / disadvantages
- We compare solutions even if we have not got to the bottom diagnosing what is unjust
about low pay (e.g. exploitation)

Ex ante vs ex post
We can distinguish between two categories of regulation to address labour market inequality:
1. Policies that let the labour market do its thing and then step in to change how the market
is allowed to work
2. Policies that make people less dependent on selling labour to avoid poverty, or otherwise
regulate aspects of life outside labour markets
Today the first type
Minimum wages
- Make it a criminal offence for employers to pay below a certain rate
- A very popular proposal for remedying persistence of low pay
- Australia has world’s highest min wage
What is the purpose of min wage?
- Anti poverty measure - redistributes wealth
- Doesnt help the unemployed. Workers might be helped indirectly - saving so when
unemployed you can afford it
- In turn, this might reduce domination, or at least unequal bargaining power, of employers
The standard objection
- Employers don’t have bottomless pockets
- Forcing them to pay more, means they will hire less and or pay skilled workers less
- So there are fewer jobs, and possibly some jobs that get dragged down to min wage that
otherwise would have been better paid
- Therefore, do not impose a minimum wage
Labour fluidity
- The standard argument makes one important assumption about competitive pricing
- This is that the exist costs of employments contracts are roughly equal for worker and
employer
- This is equivalent to saying that it is easy for employers to swap one job for another as it
is for employers to swap one worker for another
Labour fluidity is limited
- Smiths condition rarely applies in practice: most of us struggle to change jobs even when
we have skills to get re-hired
- Broadly speaking, workers carry higher exit costs than employers. There are costs even
when getting a better job is certan
- So a min wage might be defensible if it can approximate the price of labour given
equality of exit costs, i.e more fluid conditions
Living Wage

- Really the question isn’t of whether a minimum wage should exist but how high it
should be
- And it is hard to show that we can put in place one that is high enough to address how
much inequality. Perhaps all we can say is that a modest min wage would go some way to
address lack of labour fluidity
- This suggests that min wage is not the whole situation
Differential application
- Min wage can backfire when applied selectively
- Relevant to sunday penalty rates, a good example of how legislation often enables
domination even if the intention was the opposite
The Welfare state
- A system of insurance, not arbitrary redistribution
- There is no absolute distinction between a class of workers and a class of idlers: anyone
currently unemployed usually has been and will again be employed
- So, welfare grants are funded (partly) by the same people who receive them
The redistributive case
- A case can be made for unemployment on redistributive grounds
- Everyones talents have market value only because of circumstances prior to the talented
person’s efforts
- This is perhaps most obvious for star athletes, whose talents might be near worthless
without television
- The point is just that this type of argument is not needed to justify the classic welfare
state, and it may apply with more force to alternatives such as a UBI
The concept of insurance
- A bunch of people are similarly exposed to risk of harm
- They pool resources so that those incurring actual harm get payouts subsidised by those
who avoid the harm
- Pooling is efficient when more people participate
- So, the welfare state is a government managed unemployment insurance scheme, which
people pay into with their taxes
Abuse proof
- Insurance schemes need to be designed so that they can not be abused, else they just
collapse
- Home insurance requries demonstrating that you didn't do it on purpose
- This typically applies to the welfare state too, you have to demonstrate that you are trying
to get a job, this is where the moral complications occur

Unemployment and shame
- We live in capitalist societies in which contributions to output is esteemed
- If you can’t get a job you are judged negatively, or at least conditioned to feel bad
- According to some, this makes the shame of unemployment special: to qualify for
welfare benefits, you need to demonstrate that you have tried and failed to find work
- The welfare state might thereby compound this shame
Necessary or contingent?
- Some of these problems stem from avoidable poor design
- But it may be that the source of shame is unavoidable in a market order, where talent is
esteemed, and that the welfare state exacerbates it
- It would be good if we could understand this better - people do not feel shame when
receiving inheritance, or needing other insurance payouts and other cultures or times may
have not esteemed labour
Implications
- Empathy is not always easily triggered. It depends at least on the visibility of relevant
aspects of a person’s situation
- But it seems to get things right
- This may suggest that we should be careful about policies conceived by people not in a
position to image what it is like to be unemployed
Other objections to welfare state
- Costs money to run
- Gives state too much power, which could be misused (e.g. robodebt)
- It is fallible in ways that discourage employment
- We should be trying to make work less necessary, not cram people into the work force
- It introduces a bias towards short term employment, which may not be desirable
What is UBI?
- Universal: Cash grant given to everyone. No conditions attached
- Basic: The grant is large enough to cover basic necessities but not much else. Sufficient
to make work unnecessary as a means of survival
Some reactions
Unicorn economics:
- everything is magic including the generation and creation of wealth and rains from the
sky. Andrew Bolt says it is for slackers.
Would UBI cause inflation?

- If consumers had more cash, prices would rise accordingly
- Therefore, UBI would have no real positive impact on people’s ability to purchase
Cause of inflation
- Expanded supply of cash or cheap borrowing
- Contracted supply of goods / services
UBI doesn;t actually bring any of these about. It’s not the case that consumers have more cash,
rather movement of existing cash doesn’t depend on exchange for labour
What about NAIRU?
- UBI might help some workers bargain for higher wages. Their employers may need to
sell output at higher prices
- But so long as some people are not working, there will be some people whose income
does not go above UBI level
There is still room for debate - inflation is complicated
All govt spending causes some inflation here and there. UBI is another case, UBI may be
accompanied by cuts elsewhere, and by tax increases, both of which can dampen inflation
Would UBI advance justice?
- It relieves people of alienated labour at exploitation lebel wages
- It reduces poverty
- It gives people freedom to pursue a wider range of activities, including very productive
activities on a voluntary basis
- Promotes gender equality
- UBI is not likely to involve giving people more money than the welfare state
- If it is more effective in reducing poverty and improving people’s lives, it will be through
helping people do things that are hard to do in a welfare state, free up time to re-train,
change locations, rather than keep applying for jobs you won’t get and / or don’t want
Why it would not advance justice
- Enables people to free ride on others
- It might reinforce gender hierarchies
- Stigma and hierarchy can’t always be removed by giving people cash
When is free riding unjust?
- Our intuitions here seem to depend on coercive enforcement: rare to hear criticism of free
riding on voluntary fiving
- Is foregoing work for UBI akin to say tax evasion
- One difference: those being free ridden on can still choose to live off UBI any time

- Intuitions may be shaped by implicit ideas about work ethics, though UBI enables
valuable unpaid work to occur more easily
Other possible advantages
- Might relieve pressure on urban centres where people move for the sake of jobs
- This may move more wealth into rural regions
- The supply of voluntary labour might increase
- There would be more experiments in living and less conformity
Feasible?
- Ultimateily hard to predict what a UBI would do without testing it
- Back in 2005, UBI was often regarded as a utopian philosophical idea, now more talked
about
- Policies aimed at keeping people in work might be getting less feasible
- Automation is not a new thing and stimulation of new skills worked in the past
What about capital?
- UBI, min wage and welfare all preserve a class distinction
- But why leave this alone? Is it not unjust?
- John rawls was especially concerned about the role of wealth concentration enabling
plutocracy
Property owning democracy
- Seeks to redistribute capital rather than money
- Is said to be less remedial than UBI or welfare by enabling more entrepreneurship and
giving individuals more chance for self employment
- Parallels with smith’s vision of a nation of shopkeepers and markets based on dispersed
ownership of productive capital
Redistributing capital
- Inheritance taxes / wealth taxes can break up the elite class
- Find ways to spread capital around Including:
1. Direct (physical redistribution)
2. Indirect (subsidised means of acquiring capital e.g education or business loans)
Problems:
- Capital is hard to divide up into equal portions
- It is hard to move around, even indirectly
- It is heterogenous as to how people interact with it, such that:
1. People’s preferences differ - not everyone wants to run a business
2. People’s abilities differ - capital is easily wasted or poorly directed
- Cash is none of these things, UBI or welfare is not subject to these problems

Most businesses fail
- The failure rate for new businesses is contested. But lots do fail, even during periods of
overall prosperity
- This may be inevitable - innovations require testing and experimentation
- It is arguably good to lower barriers to entry to enable more of this, which dispersing
capital does. But what happens when people fail with their capital? Some sort of
insurance or UBI may be needed?
Incentives for property owning democracy (POD)
- POD requires Capital accumulation has legal limits
- This may suppress productive activity by capital owners
- Might require coercion to prevent economics of scale from generating large firms
- Proponents of POD might accept this but others see it as a problem
Planned order
- Critics of POD highlight difficulties of moving capital around and allocating in an
efficient manner
- Parallel with Hayek’s position on planned vs spontaneous order
- Critics worry that POD requires massive bureaucracy and potential for regulatory capture
A note on prices
- Money has its value only because it is somewhat scarce. People need to trust that it will
hold its value
- There is a sense in which there is always demand for money but this is not like demand
for toilet paper or ice, rapidly expanding value simply devalues existing supply, causing
inflation
- The point of creating money is therefore not to meet demand as such but to send money
carefully to where it will be put to good use
- For these reasons, money is basically exempt from hayekian arguments about price
signals
The concept of justice
- Philosopjers largely agree that justice is about the fair distribution of the benefits and
burdens of social cooperation
- But is easy to see how monetary policy fits within this. The price of borrowing will have
manny affects on the distribution of social benefits and burdens between different groups
including
1. Borrowers, savers and intermediaries
2. Different generations or birth cohorts
3. Different demographic groups

How do loans create money?
- Banks are able to create money by issuing loans that are not backed by prior deposits
- This power holds to some extent, banks must hold a certain amount of real cash, 9-10%
of all deposits
-
Creating something out of nothing?
- Money only really gets created from the interest when loans are repaid
- This is why controlling the money supply is largely about controlling the price of
borrowing
Reserve bank
- Sets basic cash rate
- Has sole power to issue physical money
GFC
- Caused by risky subprime lending in the USA and mortgage backed securities -
investment products where the income was supposed to come from mortgage payments
- To prevent a total collapse of the banking system, many banks received fiscal bailouts or
were nationalised. No such rescue for homeowners or victims of negative equity
- Australia had less explore to these securities
- We relied on something that wasn’t quite affected by GFC, e.g. China exports
How much power do the banks have?
- The fiat system seems to grant commercial banks an arbitrary privilege e.g. creation of
wealth, this looks like an arbitrary privilege
- But central bank has significant control, by setting interest rates so as to cap borrowing
and encourage
- Banks also have to do the work of separating reliable from risky borrowers. Banks can
still go bust if they get this wrong
- There are high barriers to entry though for banking
Is banking inherently unjust?
- No but might be very easily unjust in practice
- Classically banking is just facilitating contact between borrowers and savers, in practice,
fiat money expands this function but can be controlled by the government
1. Financial industry is subject to a hierarchy of privilege
2. The existence of borrowing might be divided into broadly enabling and
entrapping sectors
Central justice issues

Justice across demographic groups
- Some lending appears set up to extract money from the poor, rather than serve as a means
to eventually accumulate wealth or purchase important goods. This contrasts with its
more liberating potential for the middle classes
Justice across generations or birth cohorts
- Injustice can occur when monetary policy delivers delayed burdens to later cohorts after
benefiting earlier cohorts
Justice across participants: borrowers, savers and intermediaries
- Injustice can occur when monetary policy privileges the industry over its consumers, or
otherwise favours one type of group
Extractive vs Productive lending
- Middle class can use debt as a valuable service: by paying a bit extra to receive future
earnings sooner, and thereby access important goods sooner, perhaps becoming wealthier
in the long run
- Lending also helps businesses start up, or expand, and so appears to promote competition
and prevent monopoly
- So we need a theory to filter the benign cases from the unjust cases
Meyer on the right to credit
- Being denied credit can wreck dreams as well
- In societies with large wealth inequalities, the poorest members have particularly
compelling complaints but even if everyone owns the same amount of wealth, private
property excludes eachfrom control over most resources
- He states that the claim to access to credit has to have the status of a right as well
- Borrowing is a freedom to live in ways not determined by the wealth one already has
Herzog on backgroundjustice
- For some individuals, mortgages and other forms of credit are a tool for improving their
social welfare
- For other people it is a cycle of poverty and over indebtedness
- When debt is non-liberating, justice requires regulation to restrict it or at least rebalance
the benefits and burdens. There may be lots of ways of doing this
Structural injustice
- Structural injustice is of a sort that goes beyond isolated interactions between individuals,
particularly transactions in markets, that can look morally innocent when evaluated alone

- E.g. racial / gender stereotypes, wealth inequalities, poor housing, lack of education, etc.
There is a debate about how to make this precise, but the key point is that free choices are
shaped by these factors in ways that bear on how ‘free’ they really are
- According to Herzog, lending markets often conceal and / or reinforce structural injustice
Payday lending
- Relatively small loans sold to borrowers who can not qualify for mainstream credit
- Typically subject to high interest rates relative to mainstream lenders
- Regarded as exploitative or predatory
- Recent policy has restricted these loans
Applying herzog’s analysis
Concealment of injustice
- We condemn a hospital that turns away a patient that can’t afford it but lets one in that
can while burdening them with debt
- We condemn the former but not so much the latter due to the relevant background
structures
Reinforcement of injustice:
- It is already unjust if people cannot afford basic goods / services. If they go into debt
whenever a household items breaks down then debt is clearly not liberating
Payday lending injustices
- Exploitation
- Negative externalities:
- Weak agency: understanding how the compound interest works etc
- Unfairness: reliable borrowers subsidise unreliable ones
Possible rejoinders
- The price merely reflects the cost of running the lending scheme
- If payday lending were prohibited, then those who can’t qualify would simply not be able
to access loans
- Lenders are not acting unfairly as they don’t want unreliable borrowers, cost of screening
is presumably too high
- Even if intuitive that some debt liberates vs some debt traps, a theoretical account might
need more work
Justice between birth cohorts
- Australia subject to massive housing booms
- This has created a situation in which earlier birth cohorts have accumulated wealth,
whereas later birth cohorts now struggle to access the good of home ownership
- This is relevant as it relates to how lending is correlated with inflation

Asset bubbles
- Housing is prone to this because it allows lending to occur more readily
Australian scenario
Four groups
- Homeowners who have paid off a mortgage but want to sell to fund retirement later and
downsize
- Homeowners who still have high mortgage debt
- Young people looking to buy a home for the first time
- Very young people who might want to buy in a decade or so
It is hard for government to regulate the housing market without hurting at least one of these
groups
Why this is a mess
- For housing bubbles, prevention is much easier than the cure. Prevention is basically
restricting money supply through loans made as mortgages
- Rate cuts to help young buyers borrow will likely prolong the inflation
- Any policy to drive down prices stands to hurt those who want to sell for retirement and
those who might be left owing more than their home is worth
Justice across market participants
- Governments bailed out failing banks
- Justified on the grounds that the whole system would fail
- Even if this is true, this does not change the fact that there is a serious moral hazard
associated with banks thinking that profits are privatised and risks socialised
- Either banks actually do need to be let to fail or something needs to change the
incentives. Some possibilities
1. Much harsher penalties for individuals found to have engaged inrisk. Fines
become cost of doing business (prison isntead
2. Break up banks into smaller units
3. A more randomised approach to bailouts
Privilege and hierarchy in financial industry
- The system of money and lending is quite hierarchical. This compounds the problem of
perverse incentives by distributing risks unevenly
- For example, when the money supply is made to increase, the new money takes longer to
reach normal people than businesses. So the inflation’s impact is unequally distributed
- More familiar is the example of bailouts to banks but not homeowners
- All of this is quite complicated and the moralised, philosophical research is still emerging

Colonialism
Why discuss colonialism?
- There is a strong intuitive sense, with historical plausibility, that colonialism and
capitalism are linked in some way. The biggest imperial powers were ones that benefited
from the industrial revolution and rise of market order
- There is interesting recent work from political philosophers as to why exactly colonialism
is wrong
- Influential older work in political economy as to exactly what connects colonialism and
capitalism
- There are also some interesting questions about how to address the historic injustice of
colonialism, such as reparations and symbolism
Some Qualifications
- We will focus on European colonialism (mainly of post industrial sort)
- The wrong of colonialism would presumably apply to non-European cases too
- But the connection with capitalism means the European colonial programs deserve to be
central
- We are treating colonialism and imperialism as the same for our purposes
Why is this a good question?
- Nobody really denies that colonialism involved injustice. The historical evidence is
overwhelming
- But the fact that something is obviously wrong can obscure a richer understanding of
what the wrong was
- Having a theory of why colonialism was wrong may be of use when trying to address
contemporary controversies about how to handle its legacy
Philosophy and Conceptual Analysis
- In 20th century, philosophy became associated with practice of specifying conditions
under which a concept has extension
- In a less technical way, what this means is coming up with a theory of what unites all
cases where a concept applies
- E.g. X is a triangle if and only if it has exactly 3 corners
- The usual way of testing this approach is to ask whether an analysis is subject to counter-
examples. Either it under-generalises or over generalises
- Here, there is always a decision about whether an analysis is supported to simply unite
our intuitions or show us where we need to change our mind
Colonialism vs the Wrong of Colonialism

- Not trying to define what all instances of colonialism have in common, but what they
have in common by way of a wrong-making feature
- Colonialism per se is probably just the taking of territory by a country
- This might also form the basis the basis for an analysis of colonialism’s wrongness, but
the wrong making feature might not actually be much about taking territory
Deflationism
- Maybe on the other hand, there is not anything distinctively wrong with colonialism
- Colonialism is still wrong in a derivative sense, because it coincides with independent
wrong things like genocide and slavery, But there is not a single wrong that unites all
cases of colonialism and sets them aside from wrongs that occur without colonialism
- It does not make colonialism less wrong, it just means that colonial genocide oes not
include any wrong not already part of genocide
- In other words, “thats colonialism” does not have any special moralforce, except as being
a short hand for some combination of slavery, genocide and murder, etc
- Deflationism is probably a bit counter-intuitive
1) The Territorial Account
- Colonialism involves the acquisition of territory by definition
- The wrong making feature is that this taking deprives a prior people of their control of
that territory
- Because the indigenous people always have armstrong claim than the colonizers
- Because they have developed a stronger dependency on the land
Questions for the territorial account
- Any theory of how a group of people come to have a territorial right runs the risk of
promoting Western ideas
- Occasional cases of colonies that never had indigenous populations
- Very small scale colonialism might not take enough territory to violate an indigenous
right
- Some arguable violations of territorial rights are not usually described as colonialism e.g.
palestine, tibet and recent russian annexations
2) The pure domination account
- Colonialism is wrong because of the way in which it sets up a certain kind of governance
- It involves a form of political association that denies its members equality and reciprocity
in decision making
- The point is that colonialism is a procedural wrong that is not explained by the violation
of territorial rights, even if taking territory is a necessary feature of colonialism
Questions for the Pure domination account

- Doesn’t this overgeneralise: allowing that colonial rule involved domination, so too does
plenty of domestic rule
- Luara Valentini: What is wrong with colonialism, is the same as what is wrong with
regular domestic governments that fail to realise relational or democratic equality among
their members
- What about cases where some sort of representation is granted by the colonial power?
Wasn’t the colonisation of Ireland wrong, even though room was made for Irish MPs in
the British Parliament
3) The Violence Account
- Plenty of appaling violence in the history of colonialism, in large part because of
difficulties relating to minority rule
- The key idea is not just that the violence used was substantial but how it was used
- This may be a way of supplementing and narrowing the pure domination account:When
violence is used to sustain an absolute power relationship, it has a special moral status
Questions for the Violence Account
- What about the colonies that are or become non-violent? Though in the minority, there is
a difference between Congo, India, etc and Hong Kong. But they were all colonies
- Violence might not be an immediate feature of colonialism, but something that emerges
as the ambitions and capabilities of a colonial power increase
- Or we can revise our intuitions: Maybe Hong Kong ceased to be wrong as it became less
violent
Colonialism and wrongness
- One possibility not really considered in the material is that colonialism could be
distinctively wrong without always being wrong
- While there is a wrong of colonialism that distinguishes it from other wrongs, this wrong
only attaches to some cases of colonialism
- This might be one implication of the violence based account, if indeed there is something
distinctive about the kind of violence that usually occur under colonial rule
Fred Hirsch
- Developed one of the lesser known accounts of capitalisms eventual failings in his book
Social Limits to Growth
- Bit like Marx, focused on the limits of production’s output rather than problems of labour
Hirsch’s assessment
- Capitlism survives because of what it makes affordable. But the process through which it
does this haslogical limits
- As it raises limits and the pressures of what people expect but it cannot reach those

How does this work?
- Capitalism got off to a good start by meeting basic needs e.g. for food and shelter
- Stomachs have not expanded but other human needs - those of the mind and psyche -
have expanded in a way Smith did not envisage
- When markets relieve demand for something, demand for something else tends to get
stimulated
The Expanding Frontier of Wants
- The presumption that what the elite have today, the mass will demand and acquire
tomorrow has become deeply entrenched in Western society
- Toilets, glass windows, cars, overseas holidays, computers , etc
- Crucially: all such goods confer absolute benefit
Positional Goods
- broadly , any good that confers relative rather absolute benefit
- A good whose value to its possessor is the positionit places them in a ranking of shares
held by all relevant parties
- E.g. your highschool grades are good in terms of their ranking, an 80 is better in a 50
average class than a 95 average class
- Subject to “absolute limits on their supply” you can not make everyone’s share better,
relative to each other, at the same time
What are positional goods for?
- Sometimes they seem to valued for their own sake, like coming first in a race
- But very often they have evolved as a means for society to ration access to some other
good, which is scarce but not necessarily positional
- It is this rationing role that raises issues of justices when PGs get sold in markets
Hirsch again
- Capitalism ends in disappointment, resentment and social waste
- Markets cease to be cooperative systems but wars of all against all
- This is because not everyone can be better than average: but people can keep paying to
try
Market Failure?
- If we can’t expand the supply of a PG, then the price signal isn’t going to help
- More precisely: the signal exists as a measure of demand but cannot be responded to in
ways that lead to increased supply
- Indeed, the market will not adjust because the price remains high, competition for PGs
gives us a kind of bogus economic growth

- Economic advance appears as one of those hoax races that leave the participants in the
same place
- E.g. the race gets longer for the same prize
Why do we engage in positional consumption?
- In general one’s reasons to consume PGs have much to do with how one can be
appreciated by other people
Signalling
- This is something we do when we want to convey information about ourselves that is not
readily observable
- Sometimes this is arbitrary and wasteful
- In other cases, we actually rely on signaling to overcome issues, like personal
appearance or higher education
- Sometimes it is just to signal wealth
Conspicuous Consumption
- Buying a ferrari to signal wealth
Only signaling
- Higher education serves both a signaling function and a knowledge transfer function
- Some economists argue that the signaling function is by far the dominant one
Smith
- Says its just a societal thing
- We should wise up and just not do it
Judith Lichtenberg
- Minimum standards of decency are culturally relative
- This means that consumers must engage in positional competition or face large social or
professional costs
What about justice?
- Different explanations for what motivates PG consumption are interesting, and touch on
important questions in psychology
- PGs tend to become unequally distributed especially when sold through markets
- Is this morally significant in ways not always shared by other goods?
Positional vs non positional

- It is easy to draw conceptual distinctions between a good that confers absolute benefit
and a good that confers benefits due to position in a ranking
- But the way in which we encounter goods in real markets and the way we refer to them is
not so clear cut
Private education
- Private schools tend to be popular in ‘anglo’ countries like Aus and UK
- Students from private schools are statistically overrepresented at high ranking universities
- This apparently adds force to the Brighouse / Swift contention that markets in education
are unjust
- Also a parallel objection about nepotism, class hierarchy, which may not depend on
arguments about positionality
A qualification
- Institutions may be unjust when they create / maintain arbitrary privilege. But criticism of
private education is like criticism of any other institution: it is not aimed at individual
people
- Private schools may make a genuine effort to raise money for scholarships for
disadvantaged students
- One methodological commitment of liberal political philosophy is to try and keep
institutions and persons separate in this way
Rejoinders
- Parental choice matters
- Sometimes parents may want their child to play cricket or experience opera or something
- Educational inequality exists sometimes without private schools such as state quality
correlating with local wealth such as in the USA
More Rejoinders
- State monopoly on education may be bad
- Private education might offer a catch up for demographics with weak non-financial
capital (e.g. asian migrants)
- Educational inequality could still have positive externalities
What iseducation
- It is not a single positional good but the debate about fairness retains this assumption
- But it is obvious that education is a cluster of goods, with reasonable disagreement about
what that cluster should contain
- Some of these goods are clearly not positional, whereas some of them clearly are
- This further complicates the evaluation of markets in education

How do you consume education
- Strictly speaking you cannot buy an education
- What you can buy is access to educational resources
- You convert this access into an education by actually working when in school
- This is an important disanalogy between education and more straightforward PGs
Allocation Mechanisms
Hirsch distinguished two ways in which demand for a PG can be absorbed
1. Auctioning: selling to the highest bidder(s) thereby forcing some consumers out
2. Screening: making people jump through hoops so that the PG is distributed according to
broadly meritocratic criteria
The wrong allocation mechanism?
- Markets basically enable PGs to be auctioned
- Markets in PGs are problematic when they allow auctioning to replace screening and
there is independent moral reason to prefer screening
- This is one way to further articulate the Brighouse / Swift view that private education is
unfair, distinguishing it from other PG markets
Arms Races
- Any positional competition whose intensity escalates over time sort of leads to waste
- E.g. in education, children become overworked, they do not pursue non-positional
educational goods due to time pressure,
Moral reasons to restrict markets in education
- The cost of converting resources into advantage may burden children too much
- Markets may crowd out non positional goals of education
- Empirically, private schools may sometimes exert downward pressure on state education
by attracting the best students and teachers
Upstream Agency
- Sometimes positionality is already there e.g. vehicle size
- But sometimes a good is positional only because of background facts / influencers.
- Often this is linked to a positional competition among sellers
- E.g. university rankings or “organic” trade certifications
The Future of Work
- How will labour markets evolve in ways that bear on our free time?
- Are jobs becoming more meaningless?
- Is employment being eroded by the gig economy?

- Will machines steal all the jobs?
- Is there a way for us to organise the economy so that people can afford to work less?
The Goods of Work
- When we sell our labour, we tend to get various things in return
- Principally money
- But also some chance of meaningful work, friends and education
- However we do lose time
Intuitions
- In developed economies, we are used to thinking that we are entitled to time off
- But unlike money, leisure time is not necessary for labour to be productive
- Obviously workers need to sleep and can’t work 24/7. But the idea of leisure as
something beyond what is necessary to stay alive involves an entitlement that relies on
moral arguments
Dharavi, Mumbai
- Largest slum in India and one of largest in the world
- Estimated 0.6 to 1 million people in 535 acres
- Contrary to popular assumption, Dharavi has a large economic output and plays an
important role in Mumbai’s economy
- Freelance workers collect it and take it to Dharavi who melt it into pellets
- Pellets are then sold to manufacturers
Leisure
- The case for leisure is a moral one
- Early philosophical work on leisure was motivated by the concern about the effects of the
industrial revolution on urban workers
- Lack of leisure was seen as detrimental to workers’ health and mental improvement
Mill
- A desirable society would have well paid labourers but also sufficient leisure to cultivate
freely the graces of life
Three types of time
- Work time: Time you need to spend at work
- Basic needs time: time you need to spend performing unavoidable tasks (sleeping, eating,
caring for children, commuting, house work)
- Discretionary time: time that is leftover for whatever you like

The time-money substitutability claim
- The old view says that paying people money enables them to do things with the rest of
their time
- As such a just distribution of income and wealth takes care of the distribution of time
- Rose says no
Can money buy time? Only a bit
Rose says money only decreases one’s basic needs time but it will:
1. Only reduce those basic needs that can be outsourced (e.g. cleaning but not sleeping
2. Not create discretionary time if one has to commit work time to get that extra mone
Money really only
- Enables you to buy someone else’s time so that they can do things that free up some time
for you
- So getting money is helpful to some extent but not enough: justice requires more than just
distribution of income and wealth
Foundations of an entitlement to leisure
- You need discretionary time to develop and pursue your conception of the good life
- You need discretionary time to be politically engaged
- Both of these are important in a liberal society, so such societies must treat time as a
distinct good
How do we ensure a just distribution of discretionary time?
1. Provide state provided assistance to reduce basic needs time
2. Make it easier for people to reduce their work time
Assumptions
Rose’s assumptions rest on
1. The ability to separate workers from the capital associated with their jobs
2. The ability to regulate employment understood in a conventional 20th century sense
Bringing your work home
- There is a relative inseparability of labour and capital in certain industries
- This is especially true in skilled jobs in the service sector
- No tram driver ever complained about having to bring their work home with them
- It is harder to secure discretionary time when labour and capital are not easily separable,
even if law grants an entitlement
Is working so bad?
- Work time is not discretionary per se but it can still be somewhat discretionary

- It is surely nicer working full time as a lecturer than say part time in a call centre
- An advantage of bringing your work home is that you can actually keep away from the
office and the commute.
Employment vs freelancing
- Freelancers choose how many hours to work with contracts on a rolling basis
- There is no employer who can be required to provide certain extras such as holidays
- Some economists predict that freelancing will become more the norm. It may be hard to
distribute discretionary time to freelancers unless they qualify as someone’s employees
- But is freelancing so bad? You can be your own boss
Leisure and Community (shared labour)
- Shared discretionary time is favoured
- May be essential for the maintenance of valuable traditions that involve mass
participation
- It may be necessary for effective political participation
- But there are controversies about the timing of public holidays and effects on freelance
workers
Possible objections
- Technology! We can share shit like games and facetime
- National holidays is likely to involve a controversial decision about how to celebrate
history
- More generally maintenance of tradition by state laws / institution risks compounding
historic injustice
- Is this just a middle class problem? Skilled workers being time poor could simply fall
back on simpler lifestyles
End the rat race?
- If we can;t enforce leisure, maybe we can just reduce pressure to work
- This approach could be promoted with UBI
- The increased rise of automated labour combined with constant pressure to keep people
in employment needs to be resolved one way or the other
Is leisure time illiberal?
- If you want to be a workaholic that is okay etc
- Is forcing leisure time bad ?
Wealthy people already have their share of free time
- Paid leave entitlements would largely benefit people who already have disposable income
and could just work less already

Why are we still working so hard?
- Why do we need labour law to solve the problem of being overworked
- Shouldnt very high levels of production, plus automation, have ensured that there is
already relatively low demand for work anyway
- Production does not settle distribution
- But there is more than this
How much do we work?
- Aussies 32.9 per week
- These figures do lack countries without formal economies with monitored employment.
Very likely people work long hours in these countries
- Keynes thought by 2030 we would work 15 hours a week
Why was Keynes wrong?
- Cultural Hypothesis: We are addicted to working due to a desire to consume more than
our material needs require
- Political Hypothesis: Regulation of the economy has locked in the necessity to work, due
to incentives for governments / voters
Keynes on culture
- We have trained too long to strive and not to enjoy. It is a fearful problem for the
ordinary person, with no special talents, to occupy himself
David Graeber
- Keynes was wrong because he failed to anticipate growth in the administrative sector
- Labour markets in developed countries are now full of admin jobs that are basically
pointless
- Very bad for people who do these jobs
Why does this happen according to Graeber
- Esteem among executives increases with the number of underlings. So incentive to create
jobs that aren’t necessary. This endures even if the result is to make the firm less efficient
- Also applies to public sector employees
- The performance of bullshit jobs according to Graeber, does spiritual violence to workers
- Parallels with Marxist alienated labour
Protestant Work Ethic
- Idea that virtue and flourishing are linked to labour market participation. Historically
associated with the rise of capitalism in protestant nations in Britain
State complicity?

- Government is dependent on wages as its main tax base (Income and consumption)
- This is one reason why politicians continue to campaign on a mantra of jobs and growth
- One view is that the economy has or will reach a point when this ought to change
The paradox of automation
- We all still need to sell our labour to get a living
- And yet technology continues to improve in ways that apparently take away skilled work
or destroy jobs outright
- This scares people and influences voting preferences and politicians’ incentives
Automation is nothing new
- Paying wages has always been part of production
- Since end of slavery at least, owners of capital have wanted to replace labour with
machines they do not pay
- Even without slaves, automation may increase production in ways that make expensive
machines worthwhile replacements for human slaves
Market Free Zones
Should some things not be for sale?
- Certain goods have not been made the object of market supply
- They have been given by individuals for free or by the state or not at all
- Markets are currently encroaching on these goods or services, in ways some find morally
troubling
- Social norms against such markets are strong, including in pro market societies
For example
- Commercial surrogacy
- Sexual labour
- Citizenship
- Sponsorship of national symbols
- Human organs
What is the problem?
- Historically, markets are great at getting valued things produced
- Many of the goods on the list are valuable or do not attract moral disapproval when given
for free
- So why do we get upset when people seek to offer cash to get these goods
Commodification

- Anti commodification about X is the view that markets in X are morally problematic,
even though non market supply of X is unproblematic
- This depends on the view that subjecting X to market norms is to treat X, and / or the
parties exchanging it, in a morally objectionable way
- The challenge is to explain what this is and why it happens (or else reject anti-
commodification intuitions)
Commercial Surrogacy
- Paying a woman to gestate a child, that is then handed over to the clients
- Commercial surrogacy is illegal across Australia. Varies state to state re altruistic
surrogacy
- Pursuing commercial surrogacy overseas is also a crime in some states
Anderson’s view
- Market norms degrade surrogate women and those children
- This is because market norms treat these mothers and children as a product unlike in non
market production of children
Tobin
- Tobin argues that it harms children because of the lack of biological parent-child bonding
Essentialism
- Anderson’s view on surrogacy exemplifies what Debra Satz called an essentialist
objection to a market
- This is the view that providing cash for X must always be morally objectionable
- This is regardless of the amount paid or any other factors
Varieties of essentialism
- Markets disrespect / degrade the party supplying and/or buying the good or service (like
sex work)
- Markets disrespect the item being exchanged (e.g. sex does that to monogamous romantic
relationships)
- Markets will necessarily cause some social degradation
Satz’s view
- Essentialism is just too strong. Any attempt to establish a wrong making feature will have
counterexamples
- Essentialism is too uniform in its evaluation: There is a genuine moral difference between
different cases of sex work
- Essentialism ignores the social / cultural background in which markets are embedded but
Satz says this should inform the moral analysis

Satz’s opposition to sex work
- Her view is about the casual relationship between markets and social norms
- Her objections aim to accommodate the idea that there’s nothing troubling about
providing consensual sex for free
- She says most societies have unjust gender hierarchies in which women occupy a
subordinate position
- These hierarchies include norms specific to provision of sexual labour
- Markets in women’s sexual labour will typically exacerbate or reinforce these unjust
norms, even if some exchanges in that market do not so. As such, these markets
contribute to injustice even if they’re not the source of that injustice
Does this solve the issue of cash
- Arguably yes: this is because our social norms already say something about women who
have sex for money
- In other words, cash does not introduce anything to the exchange that is not already
embedded in social norms surrounding sex
- The problem is that the norms say something about cash, not that cash does anything
itself
Some advantages over essentialism
- No blanket condemnation - the market is not essentially unjust
- Allows that markets have not caused the gender hierarchy, while allowing that current
markets may be worsening it
- Prohibition will never solve the problem because it does not address the prior factors
causing the injustice
Evidence for Satz’s view
- Female sex workers are more stigmatized, probably due to unequal norms about
promiscuity
- Violence against women is more common in sex work industry
- Women seem to be more vulnerable in the sex industry than in other historically gender
segregated progessions
- Victim blaming in cases of rape / sexual assault
Questions
- Can we blame the market for reinforcing prevailing gender hierarchy
- Ideally, we want to gain a better sense of which aspects of hierarchy the market is
entrenching or worsening
Some other possible views

- Moral opposition to sex work draws on conventions favouring monogamous relationships
- The value of these conventions is not wholly about gender hierarchy
- Maybe markets in sex are like junk food: there is a healthier alternative but ok once in
awhile
Can markets supply everything?
- Some goods and services are in high demand but seem difficult to supply
- E.g. friendship, love, esteem
- One explanation is that these goods / services have a nature
- E.g. rentafriend.com is perhaps evidence that friendship is a cluster of goods which the
market can supply
- This may have something to do with equality and the asymmetric nature of consumer /
produce relationships
Who provides vs what is provided
- This raises question about whether the agent providing a good is relevant to what sort of
good is provided
- A stranger can’t accept cash to be your friend
Privatisation
- Often serves as a means of avoiding legislation and/or accountability
- Often inefficient because it creates monopolies
- But there may be more principled objections to privatisation of particular services such as
military and criminal justice
Done by vs done for
- Some acts have justification only when done by an authorised party