Exploitation in economies with heterogeneous preferences, skills and assets: An axiomatic approach
| Author | Roberto Veneziani,Naoki Yoshihara |
| Published date | 01 January 2015 |
| Date | 01 January 2015 |
| DOI | http://doi.org/10.1177/0951629814538911 |
| Subject Matter | Articles |
Article
Exploitation in economies
with heterogeneous
preferences, skills and assets:
An axiomatic approach
Journal of Theoretical Politics
2015, Vol. 27(1) 8–33
©The Author(s) 2014
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DOI:10.1177/0951629814538911
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Roberto Veneziani
School of Economics and Finance, Queen Mary University of London, London, UK
Naoki Yoshihara
The Institute of Economic Research, Hitotsubashi University, Tokyo, Japan
Abstract
This paper provides a novel axiomatic analysis of exploitation as the unequal exchange of labour in
economies with heterogeneous optimising agents endowed with unequal amounts of physical and
human capital. A definition of exploitation is proposed, which emphasises the relational nature
of exploitation and the resulting inequalities in the allocation of labour and income. It is shown
that, among all of the major definitions, this is the only one which satisfies two formally weak and
normatively salient axioms, and allows one to generalise a number of core insights of exploitation
theory.
Keywords
Exploitation; unequal exchange of labour; Profit Exploitation Correspondence Principle
1. Introduction
What is exploitation? In political philosophy, the most general definition affirms that A
exploits Bif and only if Atakes unfair advantage of B. Despite its intuitive appeal, this
definition leaves two major issues in need of a precise specification, namely the kind of
unfairness involved and the structure of the relationship between Aand Bthat allows A
to take advantage of B. There is considerable debate in the economic and philosophical
literature on both issues. Although both aspects of exploitative relations are arguably
crucial, the analytical focus of this paper is on the unfairness or, more precisely, on the
economic inequalities involved in the concept of exploitation.1
Corresponding author:
Roberto Veneziani, School of Economics and Finance, Queen Mary University of London, Mile End Road,
London E1 4NS, UK.
Email: r.veneziani@qmul.ac.uk
Veneziani and Yoshihara 9
To be specific, this paper analyses the theory of exploitation as an unequal exchange
(UE) of labour, according to which exploitative relations are characterised bysystematic
differences between the amount of labour that individuals contribute to the economy, in
some relevant sense, and the amount of labour they receive, in some relevant sense, via
their income.
There are several reasons to focus on labour as the measure of the injustice of
exploitative relations. First, in many economic interactions, the notion of exploitation
is inextricably linked with some form of labour exchange. Second, as Fleurbaey (1996,
2014) has argued, the UE definition of exploitation captures some inequalities in the dis-
tribution of material well-being and free hours that are—at least prima facie—of norma-
tive relevance. For instance, they are relevant for inequalities of well-being freedom,as
discussed by Rawls (1971) and Sen (1985),2because material well-being and free hours
are two key determinants of individual well-being freedom. Third, a UE exploitation-free
allocation coincides with the so-called proportional solution, a well-known fair alloca-
tion rule whereby every agent’s income is proportional to her contribution to the economy
(Roemer and Silvestre, 1993). Proportionality is a strongly justified normative princi-
ple, whose philosophical foundations can be traced back to Aristotle (Maniquet, 2002)
and it can be justified in terms of the Kantian categorical imperative (Roemer, 2010,
2012). Empirical studies have shown that proportionality is indeed a widely held idea of
equity (Tornblom, 1992). Finally, in a private-ownership economy with positive profits,
class and UE exploitation are strictly related, and they reflect an unequal distribution of
assets (Roemer, 1982; Yoshihara, 2010; Yoshihara and Veneziani, 2009): in equilibrium
the wealthy emerge as exploiters and members of the capitalist class, whereas the poor
are exploited and members of the working class. From this perspective, UE exploitative
relations are relevant because they reflect unequal opportunities of life options, due to
differential ownership of productive assets.
Although the definition of UE exploitation is seemingly intuitive, it has proved sur-
prisingly difficult to providea fully satisfactor y general theory of exploitation. Outside of
stylised, two-class economies with a simple linear (Leontief) technology, homogeneous
labour, and restrictive assumptions on agents’ preferences over consumption and leisure,
two problems arise. First, the appropriate definition of the amounts of labour ‘contributed
to’ and ‘received by’ agents is not obvious, and several approaches have been proposed,
which incorporate rather different, and often implicit, normative and positive intuitions.3
Second, the core insights of exploitation theory do not necessarily hold (Yoshihara and
Veneziani, 2012).
In his classic work, Roemer (1980, 1982) has analysed the normative foundations
of exploitation theory and has extended exploitation analysis to include a general con-
vex technology, a complex class structure and optimising agents. This paper builds on
Roemer’s seminal work and extends his key insights from both a substantive and a
methodological viewpoint.
To be specific, exploitation is analysed in economies with a general convex technol-
ogy and optimising agents with heterogeneous preferences and with different amounts of
both physical and human capital.4The formal model is outlined in Section 2: it extends
Roemer’s (1980, 1982) classic economies, and the related equilibrium notion, to include
some key features of advanced economies, such as heterogeneous skills and general pref-
erences over consumption and leisure, that are central in debates about the normative and
positive relevance of the concept of exploitation.
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