Annie Rent Your Gun
April 16, 2009
I have, in the past, referred to Theodore Burczak’s article “A Critique of Kirzner’s Finders-Keepers Defense of Profit” because of its mention of David Ellerman’s labor theory of property (not to be confused with the much-maligned labor theory of value). I recently read Kirzner’s response from the same journal issue (The Review of Austrian Economics, 15:1, 2002) and I would like to address his comments. The original article had two lines of criticism but here I’m only concerned with the first line that directly refers to Ellerman’s ideas, since this has been a popular topic on my blog. My goal is not to defend Ellerman here but to demonstrate that Kirzner doesn’t appear to understand the ultimate point of the theory he is rejecting.
However, I find it difficult to resist pointing out…that…one has in one’s hand (if one chooses to use it) an insight which might defend the legitimacy of the wage-for-labor-time exchange, in spite of one’s accepting (as in fact I do certainly accept) that a worker never does lose ultimate moral responsibility for any actions he takes as an employee. Consider an owner of a gun who is asked to rent it for a day to a person whom he does not know to be a would-be bank robber. The owner may tell the would-be renter: “I am prepared to rent the gun to you for a day. However, since I do not know you, and fear you may use the gun for criminal purposes (for which I am not prepared to rent it to you), I propose the following: Let me retain the gun on my person for the entire day, except that I will accompany you wherever you wish to go during this day, and will gladly turn over the gun to you (whenever you wish to use it, for purposes which you will select), provided that your proposed use does not violate my moral code.” Let us suspend our disbelief concerning the plausibility of any such bizarre proposal. Clearly if such a proposal were made and accepted, we would have a case here the owner of the rented gun (a “thing” for sure) has retained moral and juridical responsibility for its use throughout its period of rental.
I see no reason not to understand the laborer’s position in an employment contract to be exactly that of my gun-owner; and the laborer’s rented time, to be exactly similar to the gun. There is nothing in such a contract which appears to be illegitimate, unjust, or fraudulent.
The problem is that Kirzner misunderstands the full thrust of Ellerman’s labor theory of property, namely the property part. He seems to think that the only point of contention is the (lack of) acknowledgement or recognition given to the worker’s responsibility. His example here demonstrates that in fact the worker can be seen to have responsibility even if he follows the lead of the entrepreneur. Well, fine but the story doesn’t end there; this is just the first step and it sets up the final thrust: the ramifications identifying responsible parties has for identifying firm membership and thus those eligible for sharing profit. It’s not merely a psychological issue about getting one’s due recognition but also about the legal ramifications with regard to property right imputation.
The outcome of assigning responsibility to the gun owner in Kirzner’s example is not simply to place a label on the owner but to also make him partly liable for the crime. When applying this analogy to employment however, Kirzner stops short of the implication that the employee would then be a “partner-in-crime”, which is the vital aspect that leads Ellerman to conclude that the employee then cannot be consistently excluded from the residual claim that falls to all responsible firm members. Kirzner believes he has solved what is only an aesthetic complaint when it is in fact one of imputation of real property.
Furthermore, he never acknowledges the obvious difference in a gun and labor: a gun can be physically used by another and labor cannot. To claim that renting labor is like renting a gun is forget that you cannot actually “gladly turn over” labor. You can gladly perform an action but you can’t gladly turn it over. All Kirzner does is repackage the same rent-and-transfer analogy of labor where the worker possesses her labor up until some finite point, where thereafter it is used by the employer like a rented gun.
But, all of that aside, the fact remains that Kirzner concedes responsibilty if he adopts this analogy. Therefore, he does nothing more than arrive at the same place Ellerman does when he begins to discuss property imputation, even if by a different path. If his goal was to defend the exclusion of labor from the residual claim on Ellerman’s terms, he stopped well short of what would be necessary.
Instead of a Blog 
April 29, 2009 at 07:15
“But, all of that aside, the fact remains that Kirzner concedes responsibilty if he adopts this analogy.”
Right. And he shows responsibility is not inconsistent with wage labour.
Ellerman defeased.
April 29, 2009 at 17:53
Gene,
Thank you for the comment but (and perhaps I failed to be clear) my post addresses this directly. I began from the point where Kirzner claims that he demonstrates this and then proceeded to show why it isn’t sufficient. The very thesis of the post was that acknowledging responsibility still leaves an open question, in Ellerman’s mind, with regard to the property rights involving the product produced by the firm. Kirzner does indeed show that one can acknowledge responsibility in one’s employee but why does he not examine what that means for the actions taken? The concept of inalienable responsibility is only a prelude to the second half of Ellerman’s theory, a half that Kirzner simply ignores.
So, whether you agree with Ellerman’s theory or not, ignoring the major part of it and what he does with the concept of responsibility once he has it is not sufficient to “defeat” Ellerman, especially when your conclusion is to reach agreement with Ellerman (in other words, Kirzner didn’t show that responsibility is irrelevant but rather that it is relevant and then…he stops).
To defeat Ellerman, Kirzner would need to discuss why responsibility doesn’t have any consequences for the legal imputations of firmhood. In his gun example, surely the gun owner would be taken to jail if he turned over the gun knowing the “employer’s” intentions. Ellerman would say that this is exactly his point, that by being seen as jointly responsible, there are certain imputations for the results of that jointly responsible action, namely joint ownership of the firm’s results (in the same way that you jointly “own” the outcome of a criminal conspiracy). Yet Kirzner simply doesn’t go there; his argument is therefore incomplete.
April 30, 2009 at 05:13
“Thank you for the comment but (and perhaps I failed to be clear) my post addresses this directly.”
No, in fact, your post tried to address this but misunderstood the force of what Kirzner was demonstrating.
“So, whether you agree with Ellerman’s theory or not, ignoring the major part of it…”
Neither Kirzner nor I ignored “the major part” of his argument. He showed it doesn’t work; I am re-iterating why.
“In his gun example, surely the gun owner would be taken to jail if he turned over the gun knowing the “employer’s” intentions. Ellerman would say that this is exactly his point, that by being seen as jointly responsible, there are certain imputations for the results of that jointly responsible action, namely joint ownership of the firm’s results (in the same way that you jointly “own” the outcome of a criminal conspiracy).”
Calling guilt in a crime “ownership” is fatuous. So, if the gun renter shoots an elk, does the gun owner (co-responsible) jointly own the elk? Of course not! Only the renter owns it — that’s what they agreed to in the rental contract.
Same with the renter of labour and the labourer. Kirzner example “goes there” and completely addresses Ellerman; you just missed how it does so.
May 1, 2009 at 15:31
Well, I’m very interested in understanding how I misunderstood him but neither of your comments goes into any detail. Would you mind elaborating on my errors?
Actually, again, in neither comment do you address why.
As for ignoring the major part, I beg to differ. Ellerman’s argument concerns the implications of responsibility on the question of ownership. Kirzner doesn’t provide a reason for rejecting Ellerman’s view of how ownership of the product is determined.
Gesundheit.
I would agree with you if I had used “own” literally. That is why I was careful to put it in scare quotes to indicate a different meaning (think “Own up to your guilt.”). The intention was not to say that guilt in a crime is ownership in the sense one owns scarce property but merely to highlight that, like the question of guilt, Ellerman believes that ownership is a question of legal imputation following from the identification of the responsible parties. Both “Whom do we prosecute for this crime?” and “Whom do we recognize as having homesteaded this property?” are for him both matters of legal imputation that require an examination of responsible action.
This begs the question. It assumes co-responsibilty is irrelevant when that is precisely the question at issue for Ellerman. Also, it assumes that one’s labor effort is alienable the way the gun is, that it can be physically handed over to be used by another person. Kirzner’s analogy also suffers from this problem. In the end, there is a transfer of physically alienable property possession. This is a common failing of most analogies that attempt to compare one’s will and actions to physical things that can be owned and rented. Kirzner’s analogy is just a shined up version of the same old story; he simply moves the transfer as late as possible but still has to make that jump.
If we are working in the framework of title-based property system, this statement is problematic. No matter what conclusion you reach about who owns the elk in the end, it is simply not the purview of contracts to decide initial ownership (i.e. homesteading). As Rothbard points out (and as the name of his title-transfer theory of contracts makes clear) contracts can only refer the the transfer of already-owned property. I think it is safe to assume that the elk in your example was unowned prior to this hunting expedition, right? If so, it is incoherent to say that the gun rental contract contained agreement as to who homesteads the elk, because contracts don’t and can’t concern themselves with such matters. Who homesteads the elk is a matter of imputation from the facts in the context of the prevailing property theory. It is the nature of those facts that is being discussed.
None of this is to say that I think Ellerman’s argument is flawless because I don’t think it has yet received a through libertarian analysis. I continue to turn it around and filter it through various lenses, so I appreciate any specific insights you have to share. At the end of the day, I’m looking for right answers and not any specific aesthetic outcome. I just don’t think Kirzner has dealt the deathblow he thinks he has.