Is the Market Wage the Just Wage? A Reassessment of Factor Pricing and Distributive Justice

20 Pages Posted: 16 Apr 2018 Last revised: 7 Nov 2018

See all articles by Peter J. Boettke

Peter J. Boettke

George Mason University - Department of Economics

Rosolino Candela

Mercatus Center at George Mason University

Kaitlyn Woltz

George Mason University - Department of Economics

Date Written: March 30, 2018

Abstract

Do markets generate a “just” wage? The answer to this question will depend upon the particular theory of the market that the political economist employs. By comparing actual labor markets with the neoclassical theory of competitive equilibrium as its normative benchmark, Joseph Heath (2018) argues that factor pricing is orthogonal to normative issues such as distributive justice. We argue that Heath’s conclusion, though not invalid, is misplaced since it is directed towards a model of the market rather than the market itself. Though indeed classical political economists and early neoclassical economists failed to deliver an explicit theory of distributive justice, what Heath overlooks is that implicit to their understanding of the market process was an institutional theory of distributive justice. From this theory, distributive justice is evaluated on the degree to which institutions generate the conditions necessary for individuals to not only realize, but also increase their marginal product of labor. By arguing in terms of an equilibrium, Heath avoids the more relevant question of a comparative institutional nature, which is to understand under which institutional conditions a just wage can be discovered. Therefore, Heath evaluates factor pricing without taking into account the institutional conditions within which factor prices emerges in the first place.

Keywords: Income Distribution; Joseph Heath; Marginal Productivity Theory

JEL Classification: B1; D33; D41; P51

Suggested Citation

Boettke, Peter J. and Candela, Rosolino and Woltz, Kaitlyn, Is the Market Wage the Just Wage? A Reassessment of Factor Pricing and Distributive Justice (March 30, 2018). Erasmus Journal for Philosophy and Economics, Forthcoming. Available at SSRN: https://ssrn.com/abstract=3153138 or http://dx.doi.org/10.2139/ssrn.3153138

Peter J. Boettke

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States
703-993-1149 (Phone)
703-993-1133 (Fax)

Rosolino Candela (Contact Author)

Mercatus Center at George Mason University ( email )

4400 University Drive
Fairfax, VA 22030
United States

Kaitlyn Woltz

George Mason University - Department of Economics ( email )

4400 University Drive
Fairfax, VA 22030
United States

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