[Paleopsych] Stephen Kershnar: Giving Capitalists Their Due

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Stephen Kershnar: Giving Capitalists Their Due
Economics and Philosophy (2005), 21:65–87 Cambridge University Press
SUNY-Fredonia

Abstract

In general, capitalists deserve profits and losses for their contribution
to the general welfare. Market imperfections and the range of permissible
prices (at least within the boundaries of exploitation) prevent the
alignment from being a direct one, but the connection generally holds. In
the context of the market, this thesis preserves the central place of
moral responsibility in moral desert. It also satisfies the fittingness
and proportionality conditions of moral desert and provides a
backward-looking and pre-institutional ground of it. In addition, the
focus on contribution unifies several different types of act-based desert,
specifically deserved profits and losses, deserved punishment, and
deserved wages. Hence, to the extent that desert-satisfaction is relevant
in the selection of an economic system, this result strengthens the case
for capitalism.

1. INTRODUCTION

Recent discussion has focused on the notion that desert-satisfaction is a
factor that determines the value of states of affairs.1 If this is
correct, then an assessment of the value of capitalism will depend at
least in part on the degree to which the free market satisfies desert. In
this paper, I will argue for two theses. First, allowing capitalists to
keep their profits and losses will in general satisfy desert to a greater
degree than will other arrangements (e.g., socialism). Second, the first
thesis is the result of the capitalist's contribution to the welfare of
others. These theses do not justify the market if one is not a
consequentialist (or a non-consequentialist who emphasizes desert) since
the goodness of the free market will not directly support its being
permissible.

Before beginning, it is worth setting out a few notions related to
capitalists' profits. The market is a system whereby production and
distribution is the result of the voluntary exchange or gift by individual
persons or groups. A non-market system is one in which production and
distribution does not occur via the market. Socialism is a system whereby
the government determines production and distribution and is the primary
example of a non-market system.

A capitalist is one who has two functions. First, he organizes production.
That is, he chooses what, when, and how much to produce. Second, he owns
the business's assets. The two combine to explain the central function of
a capitalist: control over production. For example, even if the capitalist
hires persons to organize production, the capitalist will delegate and
approve (at some level) the actions of the organizing employee.

In a market, capitalists receive a return, which is the amount of income
minus costs. The costs depend on the use of productive resources such as
natural resources, labor, and capital. The return is either profit or loss
depending on whether the difference is positive or negative. The profits
and losses can be either individual or collective depending on the way in
which persons coordinate their capitalist activities.

A person's well-being is the extent to which her life goes better. I shall
assume but not defend the view that how well a person's life goes is a
function of two factors.2 The first factor is the degree to which she
experiences pleasure or desire-fulfillment. The focus on
desire-fulfillment rests on the notion that various desired experiences do
not have any phenomenal feature in common, e.g., appreciating a
philosophical argument and eating cupcakes do not have any shared
experiential features. The second factor is the degree to which she has
access to various objective-list elements. Objective-list elements are
things that make a person's life go better independent of whether they
bring her more pleasure or result in greater desire-satisfaction. This
includes things such as knowledge, agency, meaningful relationships, and
virtue.

My argument has three parts. In the first part, I set out an account of
desert and of the desert-based criteria by which to judge capitalist
profits. In the second part, I argue that capitalist profits are in
general deserved. The argument begins by examining the case in the context
of a perfect market and then considers the claim that market imperfections
make the connection between profit and desert less direct but still
reliable. In the third part, I respond to objections.

2. THE NATURE OF DESERT

Desert is a type of value. I shall assume that it has the following
structure:

    1. A person, S, deserves benefit or cost X if and only if
          1. other things being equal, it is intrinsically better that S
receive X than that he not receive it,
          2. S does action or has character A, and
          3. (a) in virtue of (b).

       There might also be a causal condition (d).

          1. (b) causes S to receive X.

An area that illustrates this last condition is poetic justice. One can
imagine a case where a person commits a battery and gets an appropriate
punishment for battery but for one that he did not commit. In this case
(a) through (c) are satisfied but it is not clear that the criminal gets
the punishment that he deserves.

The notion that desert concerns the good rather than the right has several
appealing features. First, it intuitively seems that the issue of what
persons deserve is distinct from the issue of who has a duty to give it to
them. This is particularly attractive where desert rests on such things as
virtue or interactions with persons who are now deceased. Second, viewing
desert-satisfaction as a determinant of the good allows us to capture our
intuitions about the relative value of certain states of affairs. In
particular, it allows us to say that other things being equal, the world
is a better place when the virtuous get pleasure and the vicious pain than
vice versa. Again, these intuitions are appealing regardless of whether we
view someone as having a duty to redirect pleasure to the virtuous. Third,
viewing desert in terms of the good allows us to distinguish desert from
rights, where the latter are relations in which interpersonal duties
occupy a central role.

Other conditions on desert are worthy of note. First, the act or character
in question is something for which the agent is morally responsible. This
is not obvious because we sometimes say that a person deserves
compensation for an injury, where she is not responsible for receiving
that injury. We also say things such as “all children deserve an
education,” where the children didn't do anything that warrants an
education.3 If this broader sense of desert is correct, then the desert
theorist will have a hard time explaining what distinguishes desert from
other intrinsic-value judgments. In any case, I shall confine desert to
intrinsic-value judgments in which the agent is morally responsible for
the ground of value. If one thinks that this is unduly narrow, then she
should substitute “responsibility-type desert” where I have written
“desert.”

Second, there must be an alignment between the object of desert, X, and
the ground, A. In particular, if the ground, A , is morally permissible or
morally good (depending on whether it is an act or character trait), then
the object of desert is good for the person. The converse also holds. This
feature relates institutions to desert. An institution is a rule-governed
social activity.4 The goodness of an action (and hence the relevant
property of it) might causally come about because of the role of
institutions but it does not make essential reference to the institution.
The bad- or wrong-making feature (e.g., malicious motive or duty
infringement) might come about because of the person's intentional action
in the context of various social conventions, but the violation of the
social convention by itself doesn't explain why the act itself is
wrongful. Since the relevant properties of the ground and object of desert
are not institutional, desert is pre-institutional (i.e., conceptually,
but not causally, independent of institutions).

Moral desert is also not a forward-looking justification. That is, a
person's desert rests on some past or present act, rather than on the
consequences of her receiving the object. This in part explains two
fundamental features of desert. First, the object of desert must fit the
ground of it. That is, the object must be the right sort of thing. For
example, a person who wins a track meet because he is the best runner does
not on that basis deserve high grades in his academic courses. Second, the
object of desert must be proportionate to the ground.5 For example, a
person who does a kind act for a neighbor does not deserve an eternity in
heaven for it. These features are inferred from our intuitions.

It is also worth noting that, on some accounts, moral desert can be
incorporated into forward-looking theories of the right. Desert is
backward-looking because it makes essential reference to the past or
present. However, on these accounts, desert-grounded duties might be
forward-looking. This is because desert can be incorporated into the
consequentialist duty to bring about the best state of affairs in the
future since desert in part determines the value of a state of affairs.
Thus, on these accounts, while desert is a backward-looking determinant of
the good, it is compatible with forward-looking theories of the right.

It might be objected that a theory of the right is backward-looking if it
requires persons to bring about outcomes because they stand in a
particular relation to the past. This objection raises difficult issues as
to whether the bearer of value in such a theory is merely a future state
of affairs, a relation between the past and future states of affairs, or
both. If this objection is sound, then desert can still be incorporated
into a maximization ethic even if it rules out forward-looking theories of
the right.

If these assumptions about moral desert are correct, then it has the
following properties. It must be pre-institutional and not
forward-looking. It must have the right structure and also satisfy both
fit and proportionality requirements. I shall argue that capitalist profit
satisfies these conditions.

3. CAPITALISTS DESERVE THEIR PROFITS AND COSTS

3.1 Thesis

In this section I shall argue that in general capitalists deserve profits
and losses and that this desert is grounded in their contribution to the
general welfare. Here general welfare is a function (e.g., total or
average) of individuals' welfare. The desert-satisfaction generally tracks
profits and losses rather than directly tracking them for two reasons.

First, profit and loss will not strictly track contribution to the general
welfare. This is in part because of market imperfections, e.g., imperfect
information and transaction costs, that lessen the degree to which
resources satisfy demand. This is also in part because what satisfies
demand will not necessarily enhance the general welfare – either because
the demander's practical reasoning (e.g., about her or others' interests)
is defective or because the content and strength of persons' desires do
not track the outcome of this practical reasoning.6 The latter
misalignment creates room for akrasia.7

Second, in some isolated transactions there is a range of profits due to
the arbitrary point by which persons divide the benefits of a transaction.
In this case, each individual's profit need not track the contribution to
overall welfare even if the aggregate profit does so.

3.2 Assumptions

Before proceeding, it is worth laying out my undefended assumptions about
the market. First, I assume that the market is just (i.e., it respects
persons' moral rights). This might rest on claims about the value of
non-coercive interference, efficiency, or both. This assumption is a weak
one for it need not deny that a welfare-state supplement to the market is
just or permissible. The latter might also be just, for example, if
persons voluntarily consent to it by choosing to live within a particular
country.

Second, I assume that as a general matter current private property rights
are morally permissible. This assumption rests on the value of autonomy,
which is relevant since autonomy requires the use of objects.8 It also
involves some mechanism by which claims of the distant past are cut off.9
This assumption is relevant because on some accounts, the distribution of
private property rights might affect the distribution of wealth but not
overall productive decisions. This might come about since the more
efficient producer will in theory use a particular resource, but a wealth
transfer might still be necessary where the more efficient producer is not
the party with the legal right to the resource.10

One objection is that the first two assumptions are unnecessary. The
concern here is that the thesis of the paper is that capitalism is just
because it tracks desert. But if this is the case, then there is no need
to assume that the market is just because it respects rights. The objector
might assert that the second assumption is similarly superfluous. He might
say that if I am defending capitalism, then I am defending an account of
private property rights. This objection misconstrues my argument, which is
for the value of capitalism, not its justness. It is not obvious that
desert is a feature of justice, especially if the former is an element of
the good and the latter an element of the right.

This is not to say that the justice of the background institution of
property and the value of capitalism are completely independent of one
another. The justice of capitalist property rights is conceptually prior
to the value of capitalism since the distribution of moral rights affects
what individuals deserve. To see this priority consider a scenario where
two persons transfer the control of cars from lone individuals who are not
using them to poor families that desperately need them. The first person
gets the car by repossessing it when the owner stops making payments (and
the sale contract allowed for repossession); the second steals it. Here,
the former act grounds positive desert, the second likely does not. In
this case, the distribution of moral rights in part determines the value
of the acts by affecting what people deserve.

Third, I assume that price is, at least within the boundaries of
exploitation, a moral-free zone.11 That is, I assume that there is no
morally privileged way to distribute a transactional surplus. This
assumption allows us to avoid concerns about whether a capitalist receives
a disproportionate share of the transactional benefits.12 Such an account
rests in part on the notion of a reservation value. This is a value at
which a party's gain from the transaction is equal to her best alternative
to a negotiated agreement. The reservation value is then used to set the
reservation price. This is the minimum price she is willing to accept to
enter into the agreement. The space between the parties' reservation
prices constitutes the bargaining range. Any outcome within the bargaining
range involves a transactional surplus that is the difference between the
buyer's and seller's reservation prices. This surplus is the gain by the
two parties from the contract. A reservation price may be judged as the
party's actual reservation price (determined by a counterfactual about the
minimum price that a party would accept) or a moral reservation price (the
minimum price that a party ought to accept). The latter may take into
account the subjective preferences of the relevant party but it is not
fully subjective since the party may be mistaken about what is in her
interest. The claim of exploitation in a mutually beneficial transaction
involves the stronger party using the vulnerability of the weaker party to
take a disproportionate share of the transactional surplus relative to
each party's moral reservation price. If we set the level of vulnerability
as involving a significant threat to a person's or their loved one's
overall well-being, then exploitative transactions under current
conditions will likely be rare.

Fourth, I will assume that, in general, economic value tracks persons'
well-being, i.e., the amount of money spent for a particular good
generally tracks the contribution of that good to a person's well-being.
This relies on the notion that persons have features such as transitive
ordered preferences and the ability to select appropriate means to their
ends and that such features explain their spending preferences. This
generalization is defeated to the extent that aggregate demand does not
track well-being due to market imperfections, or if consumers fail to
properly reason about what promotes well-being, or if there is a
widespread misalignment between the conclusion of such reasoning and
persons' desires. With these assumptions in mind, I set out the notion
that in the actual market profits track contribution.

3.3 Profits in the market track contribution

The ideal market is one that is characterized by absence of externalities,
zero transaction and information costs, full information, perfect
competition, and rational individuals.13 These characteristics lead to the
maximally efficient use of resources. Under such a system, there will be
no entrepreneurial profits since the costless shifting of resources
eliminates any inefficient malallocation. The capitalist will still make a
profit on his capital that is equal to its marginal value. When we move to
the actual market, these characteristics no longer hold. For example,
there are real and in fact quite weighty transaction costs. Nevertheless
the market will over time move successively closer to the ideal market
since it will adopt increasingly lowered costs of production and
distribution as resources will be shifted to the most efficient producers
and distributors. The actual market will be more efficient than a
non-market since it allows for greater specialization in the use of
information and better harnesses self-interested motivation.

In the actual market, the capitalist receives profits both from a return
on capital and from his entrepreneurial activity. Entrepreneurial activity
results from the reorganization of production. This second type of profit
results because costs decrease but income stays largely fixed. The
increased profit is thus the result of earlier malallocation of the
factors of production. This second type of profit will decrease over time
as competitors will adopt the innovations in production.

On this account, the increased profit will in general track the
contribution to the general welfare since the size of the additional
profit is proportional to the gains in well-being that result from the
correction of malallocated resources. The idea behind the claim that
increased profit will in general track the contribution to general welfare
rests on the following general assumptions. First, entrepreneurial profits
result from innovations that decrease production and distribution costs.
Second, decreased production and distribution costs increase aggregate
preference satisfaction, since buyers can now buy the same or better goods
for less. Third, increased aggregate preference satisfaction tracks
increased welfare, since persons prefer things that increase their
welfare.

The value of the correction of malallocated resources is a function of
some factors that are not under the producer's control, e.g., the nature
of consumer demand and the productive threat of competitors. A concern is
what the capitalist contributes when it is the workers who actually do the
work of changing the workplace. The capitalist's ownership of workplace
assets makes changes in the means of production in part attributable to
him.

Production systems that do not use the market will be less able to reward
persons' contribution to the overall welfare. This is because without the
market it becomes extraordinarily difficult to measure contribution. The
market allows us to gauge the nature and strength of different consumer
demands. Without such a mechanism, sales patterns are more likely to
reflect governments' rather than consumers' choices as to products and
prices, thus blocking any inference about the collective welfare.

An objector might claim that workers or consumers can know which citizens
have contributed without paying for it. They might cite the case of
baseball teams that know which of their players have contributed without
having to know what they get paid. The objector might conclude that
non-market production systems are as capable of rewarding persons'
contributions as well as market systems. The issue is not whether
non-market systems are as capable of rewarding contribution as market
systems, but whether they will do so. My claim is that prices are part of
a system that provides for the strongest incentives to gather and analyze
the relevant data. The baseball-team analogy supports my contention. The
value of a player is the result of numerous factors including the value of
his likely replacement and the player's value to competitor teams.
Measuring these values requires sophisticated statistical studies that
would probably not have been developed or applied without a competitive
market for the information, a market that in turn depends on a competitive
market for players. This connection between measuring contribution and
prices becomes even more important for production that does not have the
same type of fan interest. For example, the communication of the
contribution of raw cotton to well-being when comparing its use in
underwear versus towels is unlikely to be accurately measured unless
persons have the incentive to be concerned with this particular
comparison.

3.4 Argument No. 1: The contribution model satisfies the desert criteria

The capitalist receipt of profits and losses on the basis of contribution
aligns with the general pattern of desert. First, profit/loss receipt is
preinstitutional (conceptually, but not causally, independent of
institutions). The productive contribution to the well-being of others is
not a fact that makes essential reference to institutions. The market in
which this occurs may, although this is not clear, make essential
reference to an institution but this merely serves as the context in which
the contribution occurs. Second, the contribution is a past or current act
and hence does not provide a forward-looking justification for capitalists
keeping their profits and losses. Third, deserved profits and losses have
the right structure for desert. They involve an in-virtue-of justification
of treatment that is claimed to make the world a better place than its
absence. Fourth, the capitalist keeping his profits and losses satisfies
the fit and proportionality requirements. It intuitively seems appropriate
that a person who creates economic value for others should receive
economic value himself. The fit criterion is one that is a function of
intuition rather than abstract argument. For example, consider the
fittingness element of punishing culpable wrongdoers, giving good students
high grades, and giving the fastest runner the prize. The consequentialist
gains can in part account for these results, but they cannot justify the
fittingness relation because of their forward-looking nature. Allowing
capitalists to keep their profits and losses satisfies the proportionality
requirement since there is a general correlation between profits (and
losses) and the contribution to the well-being of others.

The link to contribution also unifies the different elements (i.e., moral
responsibility and the fittingness condition). Contribution as a ground of
desert preserves the essential link to the agent's moral responsibility
since it focuses on outcomes, which are closely linked to practical
reasoning. This is because practical reasoning, at least on some accounts,
has an intention as its conclusion and intentions often, if not always,
refer to outcomes the agent wants to bring about. This close relation to
practical reasoning is significant since it is practical reasoning that
lies at the heart of responsibility. This brings in the fittingness since
in the context of capitalist activity it is about the creation of economic
value (although not necessarily for others) that the capitalist reasons.

Entrepreneurial losses generally result from a misallocation of resources
and where so caused reflect a diminishment of general welfare. There is an
issue of whether all failures to use resources to contribute to the
general welfare constitute such a misallocation given opportunity costs. I
leave aside this issue since nothing in this paper rests on this claim. If
contribution to the general welfare makes it desirable that the capitalist
receive wealth, then a symmetrical account of desert would suggest that
diminishment of welfare makes it desirable that she lose wealth.

3.5 Argument No. 2: The contribution model fits into a deeper explanation
of desert

The link to contribution also unifies the different types of act-based
desert and relates it to character-based desert and in so doing provides
the deeper explanation for desert. Through a person's responsible actions,
he connects himself to certain values. For example, a person who culpably
performs a rape connects himself to certain traits, e.g., cruelty, on
which supervene value or disvalue, e.g., badness. Thus, our treatment of a
person reflects the fact that he has responsibly connected himself to
certain values. It is in part through the bringing about of outcomes that
this connection occurs. A similar thing is true of character-based desert.
One likely explanation of this unity is that character-based desert rests
in the end on the responsible actions whereby a person formed his
character in certain ways. The practical reasoning whereby he did this did
not focus on the effects of his character but rather on particular acts.
Nevertheless, in deciding to do certain acts the agent formed himself in
certain ways thereby strengthening his connection to certain values.

3.6 Argument No. 3: The contribution model fits with two other areas of
act-based desert

I shall argue that the capitalist receipt of her profits and losses is
deserved for its contribution to the overall well-being. I begin by noting
that we intuitively hold that contribution is an appropriate ground of
desert in two other areas: punishment and wages.

3.6.1 Deserved punishment. Punishment is deserved for the culpable unjust
harm done on others. The harm factor explains why we think that persons
who cause greater harm (e.g., murder and rape) deserve more punishment
than do those who cause less harm (e.g., theft and battery). Harm can be
interpreted as the wrongdoer's contribution to the unjust diminishment of
another's well-being. Some of the other factors like culpability can't
produce our intuitive sense of the proportionality of deserved punishment.
Other factors, e.g., the utility produced by a punishment, cannot act as
the ground since they are forward-looking.

It might be thought that it is the risk of harm, not the actual harm done
that could equally account for my intuitions.14 The risk of harm here is
the product of its probability and magnitude. The problem with this
suggestion is that likely harm is relevant only in so far as it relates to
culpability, which suggests that this is just a restatement of the
culpability condition. To see this, consider cases where persons pose a
great risk of harm but where they are unaware of this risk. For example,
imagine that persons who steal license plates generally sell them to
underground garages. Unbeknownst to the license-plate thieves, the garages
sell these license plates to gangs who then use them to get away with
drive-by shootings. For reasons of police investigation, this fact is
never publicized. It seems that the license-plate thieves do not deserve a
severe punishment because even though they impose a great risk of harm on
others, they are not culpable for doing so.15 The amount of deserved
punishment involves such factors as the wrongdoer's culpability, the
degree of injustice and, most significantly for my purposes, the harm that
the wrongdoer brought about.

3.6.2 Deserved wages. The most plausible candidates for the ground of
deserved wages are each party's sacrifice, hard work, or contribution.
Deserved wages do not rest on a person's sacrifice. Persons with greater
ability often can do tasks with considerably less sacrifice than those
with lower ability. This is especially true where the cause of the greater
ability is something that the more able persons enjoyed developing or
which is largely the result of causal factors that did not require
sacrifice, e.g., superior genetic endowment. If persons with greater
ability are more able than others to accomplish the same type of tasks
then it seems that they have sacrificed less to bring about the result.
And if a deserved distribution tracks each individual's sacrifice, then
the more able persons ought, as a matter of desert, to be given a smaller
share of the social surplus. This seems counterintuitive. For example, if
two builders do the same task for the same client but one is able to do it
more efficiently than the other due to his greater abilities, it does not
seem to be a demand of desert that the less efficient builder be paid
more. A similar pattern occurs with regard to desert viewed in terms of
hard work. For example, consider a case in which master and apprentice
create a great work of art together and the apprentice ends up doing most
of the legwork (e.g., more total brushstrokes), thereby putting in the
greater effort. It intuitively seems that the master deserves a greater
share of the rewards since his contribution (e.g., the idea or vision) is
greater. If desert tracks hard work and if persons with greater ability
need not work as hard to complete the same task as persons of lesser
ability, viewing desert in terms of hard work will produce the same
counterintuitive pattern of results as does the focus on sacrifice.16

Viewing deserved wages in terms of proportionality to each participant's
objective contribution has several advantages. First, it gets around the
problem of discrimination against persons of greater ability that
characterized the sacrifice- and desert-based analyses of fairness.
Second, this account tracks our intuitions with regard to products
produced as a result of the efforts of multiple persons. Here it seems
that the fitting reward for each person's participation is proportional to
her contribution. This is why we often think it deserved that persons who
work longer hours receive more pay but think differently where one
person's labor requires considerably greater skills than the others.
Consider a case in which two workers do a job. The first puts in 10 hours
using a backhoe while the second puts in 50 hours using a shovel. Because
of the greater efficiency of the backhoe, the first accomplishes ten times
as much. It does not seem undeserved for the first to get paid
considerably more.

Third, this account is compatible with different accounts of value and
models of contribution that might be used to fill out claims of fairness.
In particular, the account is neutral with regard to whether the
contribution of each person's labor is a function of its marginal product
and whether the value of a contribution is a function of the socially
necessary labor time that brought it about.17 My general point about the
relation of contribution to deserved wages could be accepted while
rejecting one or both of these ideas.

Hence, in the context of wages, desert tracks each party's contribution.
The focus on contribution unifies the different types of act-based desert,
e.g., deserved punishment, wages, and profit, and unifies the act- and
character-based desert-types. It unifies the types of act-based desert by
viewing desert as a fitting response to values adopted when the agent acts
to change in the world. In both cases, we respond to the values to which a
person has connected himself.

3.6.3 Desert and effort. The most powerful objection to this argument
focuses on the relation of desert to moral responsibility. The objector
argues that since the ground of moral desert is something for which the
agent is morally responsible, the wage a worker deserves depends on some
factor that is substantially within her control. The objector continues
that since a worker has substantial control over her efforts and not over
her contribution or sacrifice, the former is the ground of desert. The
objection thus rests on the following three propositions:

    1. If something grounds moral desert, then it is something for which
the agent is morally responsible.
    2. If the agent is morally responsible for something, then she has
substantial control over it.
    3. The agent has substantial control over, and only over, her
efforts.18

One problem with this argument is that it is not clear why the agent
doesn't have substantial control over contribution. She may not have as
much control as she has over her effort, but this is not required for
something to ground desert. It should be noted that the worker has control
over the production of certain objects, but not over whether these objects
satisfy others' preferences. This is analogous to how a wrongdoer deserves
punishment for doing actions that infringe on the rights of others in part
where such actions cause the victim to suffer even though the wrongdoer
does not control whether the acts bring about another's suffering.

A second problem with effort theory arises when we try to identify the
scope of effort that grounds deserved wages. For example, consider where
one middle-aged worker, Al, has worked much harder than a second, Bob, to
develop specific abilities or more disciplined work habits, and as a
result is much more efficient. As a result, the two put in the same effort
but Al is far more productive. Intuitively, Al seems deserving of higher
wages. But if we count the efforts that a worker puts toward developing
specific abilities or general abilities (e.g., discipline), then we end up
looking at effort that goes far beyond the workplace. For example, Al's
discipline might have been acquired in the college weight room. This
broader scope breaks the link between the desert ground and moral
responsibility. This is because in many cases the decision to develop or
not develop general habits, and perhaps some specific abilities, is made
where the agent lacks sufficient information about the relevance of these
abilities to future jobs. For example, a player's efforts in learning the
intricacies of basketball are often made without considering how this
might influence his future employment as a talent scout.

A third problem with effort-theory is that the agent's efficiency is a
function of her planning and her monitoring and adjusting her effort in
response to feedback.19 These features are often the result of
imagination, intelligence, and other mental events and capacities that do
not result from conscious decision. Even if persons can plan or plan to
plan, they often can't plan to plan to plan. A dilemma then arises as to
whether these mental events (e.g., planning) ground deserved wages. If
they do but do not result from conscious decision, then the desert ground
is disconnected from moral responsibility. If they do not ground desert
but do affect production, then some seemingly relevant effort will not
ground desert. Also, on this second horn, wasteful and inefficient effort
will generate as much desert as well-planned and well-executed effort.
This is counterintuitive. This counterintuitive result persists even where
we discount the failure to plan, monitor, or adjust by persons' lower
capacities.

3.7 Conclusion

In general, capitalists deserve profits and losses for their contribution
to the general welfare. Market and demand imperfections and the moral-free
nature of prices (at least within the boundaries of exploitation) prevent
the alignment from being a direct one, but the connection generally holds.
The role of contribution preserves the central role of moral
responsibility by placing value on the object of practical reasoning. It
satisfies the fittingness and proportionality relations. It also provides
a backward-looking and pre-institutional ground of moral desert. In
addition, the thesis fits into a deeper explanation of desert in terms of
persons connecting themselves to values. The contribution thesis also
unifies several different types of act-based desert, specifically deserved
profits and losses, deserved punishment, and deserved wages. I now turn to
some of the objections to the thesis that capitalists deserve their
profits and losses based on their contribution to collective well-being.

4. OBJECTIONS

There are roughly three different types of objections that are raised to
my thesis. First, capitalists do deserve profits and losses but not on the
basis of their contribution to the general welfare. Second, persons do
have moral desert but capitalists do not deserve profits and losses.
Third, persons do not have moral desert. I shall address the first two,
the third takes us too far afield.

4.1 Capitalists deserve profits but not on the basis of their contribution
to general welfare

On some accounts, deserved profits rest on things other than contribution.
These theories fit into two types of grounds: forward-looking and
backward-looking theories. An influential forward-looking theory is that
put forth by N. Scott Arnold.20 Arnold views deserved punishment as a type
of institutional desert. Institutional desert consists of those rules that
award costs and benefits in a way that best achieves the market's
essential goal. He asserts that since the market's essential goal is the
efficient distribution of scarce resources, market-based desert consists
of the rule or rules that best achieve this goal. On his account, the rule
(or a member of the set of maximally efficient rules) that does so
involves capitalists keeping their profits and losses. He argues that this
reward system is maximally efficient because it provides capitalists with
an incentive to produce efficiently, transfers resources to them in a
manner proportionate to their past efficiency in reorganizing production,
and communicates the efficient means of production to competitors. Hence,
on his account, the effects of allowing capitalists to keep their profits
and losses makes them deserved.

This account has several problems. The most glaring is that it makes the
effects of capitalists' receipt of profits and losses rather than their
acts the ground of the desert claim. This is not an act-based ground and
this severs any connection between moral responsibility and deserved
profit. This is problematic to the extent that one thinks that desert
necessarily involves a ground for which the agent is morally responsible.
Another problem is that it is forward-looking. To the extent that desert
is not forward-looking, this approach is mistaken. Arnold is aware of this
objection and claims that institutional desert can be forward-looking
where the institution in question is justified on forward-looking grounds.
This conflicts with our intuitions about desert because it threatens to
categorize a large set of forward-looking value judgments as desert
judgments. This account also relies on an institutional desert. As
mentioned above, this confuses desert whose grounds are institutional with
desert whose ground is pre-institutional but whose effects causally
involve institutions. It is hard to see how a ground can essentially refer
to an institutional property when such properties are themselves neither
something for which the agent is morally responsible nor something that is
a good- (or right-) making property.

The backward-looking theories agree that capitalists deserve their profit
but claim that their desert rests on something else such as risk or the
postponement of gratification. The notion that risk can ground desert is
unconvincing. Intuitively persons do not deserve things just for taking a
risk, independent of the nature and degree of risk.21 For example, persons
who take extreme risks often seem to deserve little (e.g., persons who
play the lottery). Similarly, persons who take risks that offer little
benefit to the risk-taker or others also do not intuitively seem to
deserve very much (e.g., persons who invest in mining gold in areas where
there is little evidence that it occurs). Moreover, the fit element is not
met. It is intuitively unclear how taking a risk makes it valuable for a
person to receive a benefit or loss. If we link this risk to the
contribution to others' welfare the fit does intuitively seem to be met,
but it seems to be contribution and not risk that explains the intuitions
involved.

The postponement of gratification suffers from similar difficulties.22
Postponing gratification does not seem especially valuable; again it seems
to be a function of the likely outcome and perhaps reason for the
postponement. The fit element is again not met. Postponement of
gratification intuitively seems to be neutral since it is not clear why it
matters when a person experiences gratification. However, when linked to
something like contribution the fit element does appear to be satisfied.

Other theories might rest deserved profits and losses on hard work or
sacrifice.23 These approaches intuitively fail to satisfy proportionality
in other areas since inefficient or mentally slow workers do not seem to
have strong deserts based on their hard work or sacrifice. For example, we
intuitively think that a talented quarterback (Ken) who leads his team to
repeat championships deserves more income for his playing than does a
quarterback with mediocre talent who worked as hard as Ken but who could
not read defensive alignments as well. In the context of punishment, there
is a similar disconnection between hard work and sacrifice and deserved
punishment. If we have analogous intuitions with regard to capitalists,
and I think we do, then this suggests that these grounds will not satisfy
the proportionality feature of desert.

George Sher argues to the contrary that hard work grounds desert because
the person is investing his time and energy into a project. Since this is
in effect an investment of his life, it has value.24 This argument rests
on the premise that since a person's life has value, whatever the life is
invested in also has value. This is plausible because it appears able to
satisfy the fit relation (because the life has value) and proportionality
(since the amount of value tracks the amount of the agent's life mixed
in). Like the investment of labor, it is not clear that a person can
literally invest his life into a project. After all, a life is not an
object but an object's duration in time and this seems incapable of being
mixed into other physical objects.25 A more figurative account of mixing
one's life into a project escapes this metaphysical concern but only by
making Sher's position obscure.

Assuming then that I am right in arguing that if capitalists deserve their
profits and losses, then contribution grounds it, we still need to look at
a challenge to the antecedent.

4.2 Persons deserve things but capitalists don't deserve their profits and
losses

John Christman raises a powerful objection to the idea that contribution
grounds capitalist desert.26 Christman notes that in an imperfect free
market, profit and loss are the result of consumer demand and the
competitive threat posed by other competitors (the proximity and capacity
of potential competitors). Christman then argues that profits and losses
do not satisfy the proportionality requirement of desert because neither
the consumer benefit nor the producer's contribution determines the size
of profit.27 Christman provides three main reasons in support of these
claims. First, consumer demand and competitive threat determine profit
level but are not part of the consumer benefit. Second, since greater
competitive threat benefits consumers, the size of profit is in fact
inversely related to consumer benefit. Third, the consumer and competitor
conditions are not things within the producer's control and hence not part
of his contribution.

The first reason should be quickly rejected. The proponent of the
contribution thesis asserts that the shape and magnitude of consumer
demand and competitive threat are the context in which the benefit is
provided. He does not assert that it is part of the consumer benefit. This
is analogous to the way in which a starting baseball player has more value
to his team the less able his backup, but the weakness of the backup is
not itself a benefit that the starter provides to his team. Similarly, the
amount of misallocation of resources is the context in which the consumer
benefit is provided, but it is not itself a benefit.

The notion that the profit is inversely related to the benefit provided to
consumers also rests on an error. The error occurs since Christman
apparently holds the benefit fixed in different competitive environments
and then argues that, given this level of benefit, additional profits
merely harm the consumers. The problem here is that this is not something
a contribution theorist would hold fixed. If one producer vastly improves
production efficiency as compared to his competitors, then over time he
contributes more to consumers than one who only slightly improves it. If
this is correct and if profits track the degree of improvement, and I
assume that they do, then profits will track contribution.

The third assumption is trickier for it seems to make the contribution
theorist allow that the desert ground involves causal factors outside of
the agent's control. Every desert theory must make such an allowance,
however, at least to some extent. This is because it is logically
impossible for agents to deserve (or even control) the traits and
conditions that make their actions and character possible. That is,
acceptance of the following proposition will make moral desert impossible:
If a person does not deserve to have X and X makes Y possible, then that
person does not deserve Y.

This can be seen in that no one can deserve the ability to exert effort or
a life-sustaining environment.28 Such desert would only be possible for a
self-caused being and such a being is impossible. However, once we allow
the causal basis of desert grounds to include things outside the agent's
control, then the door is sufficiently open to allow persons to deserve
things based on the contribution to consumers even though this depends in
part on contextual factors. This is because what desert requires is merely
that the ground of desert is substantially under the agent's control. The
choice of what, where, and when to produce meets this test.

An objection that might be raised to this line is that the fact that
persons have different opportunities to make a capitalist contribution
undermines the case for desert.29 The different opportunities are relevant
only if moral desert is comparative, either in general or in the economic
context. This is not true of other areas of desert. Consider deserved
punishment. How much a rapist deserves to suffer for his act is
intuitively independent of how much punishment past and future rapists
will be given. If, for example, misogynistic judges have given other
rapists one-week sentences, this does not mean that such a penalty for
future rapists is deserved. A similar thing appears to be true of
character-based desert. A virtuous person does not appear to deserve a
life of suffering even if this is what has been given to other similarly
virtuous persons. Similar intuitions hold in the context of economic
desert. If others who contributed greatly to consumers have received very
little benefit for their contribution, then it hardly seems deserved for
the next great contributor to get little. If this pattern holds, then
moral desert is probably not relational. The explanation for this is that
fittingness relation is a function of the values a person has connected
himself to (and perhaps also the strength of the connection) and this is
conceptually independent of others' actions and characters.

Another objection is that capitalists don't deserve their profits and
losses because desert rests on virtue or vice alone and capitalists'
characters vary. The objector might be arguing that the negative desert
that accompanies the vicious character of some capitalists overrides the
positive desert that accompanies their contribution to others. This,
however, is compatible with the conclusion of this paper since there is
nothing about the conclusion that prevents different deserts from being
combined to produce an overall desert analogous to the way that
vector-forces combine to produce a net vector-force. To be interesting,
then, the objector must be asserting the following.
Strong Character Theory: Moral desert rests on, and only on, an agent's
character.

There appear to be four main arguments for this theory. One argument
behind this notion is that a person is constituted by her character and
hence it is what should determine a person's desert. The idea is that what
should ground punishment is who we are rather than what we do. One concern
with this argument is that desert rests on some factor for which we are
responsible and, on a libertarian account of free will, we are fully
responsible for who we are only if we chose to be that way.30 This is
because on a libertarian account a person's responsibility must rest on
factors that are in the end not traceable to factors outside of his
control, such as his environment or genetics. On a fundamental level, only
an agent's choices are not traceable to environment or genetics. If we
view choices as a type of mental act, then this theory thereby asserts
that desert fundamentally rests on acts. Hence, this first argument fails
to support the Character Theory.

A second argument is that the Strong Character Theory explains why we
normally focus on acts. We focus on acts because we can't make reliable
judgments of a person's character. We further think that acts ground
deserved punishment only in so far as they reflect character. This
explains why provocation and duress excuse or partially excuse the agent.
They excuse because they involve a disconnection between a person's act
and his character. The problem with this account is that the excusing
effects of provocation and duress can also be explained in terms of their
undermining a person's responsibility for his acts. They do so by
introducing emotional forces that overcome a person's ability to control
his acts (and would do so for an ordinary person). Thus the role of
excuses such as provocation and duress does not support the Strong
Character Theory.

A third argument for the Strong Character Theory is that character is less
subject to moral luck (external influences that affect a person) than
other factors and hence a more appropriate ground for desert. The problem
with this argument is that there is also constitutive moral luck, i.e.,
moral luck that shapes what character one has.31 This influence is
obviously quite strong, which is why we think that it is important when
raising children to have healthy environments. If the influence of moral
luck prevents a factor from grounding desert, then this undermines the
notion that character grounds desert. One might argue that moral luck
shapes character formation less than other factors, e.g., acts and
attempts. However, it is not clear what argument supports this claim. This
is particularly true if we recognize the significant role genetics plays
in determining a person's intelligence, personality, and life outcomes.32
It is not clear in what sense genetics plays a similar role in determining
whether someone attempts to perform or performs an act, although it may
come into play in so far as a person's character explains in part his
thoughts and actions. Thus, the problem of moral luck does not provide
clear support for the Character Theory.

A fourth argument from intuitions does support the Character Theory . Here
our intuitions suggest that the world is a better place if virtuous rather
than vicious persons receive increased well-being. Consider the following
case, involving the allocation of opium.

There are two persons with the same level of unhappiness, both of whom
have a painful terminal illness. The first is virtuous, although his role
as a space explorer has not allowed him to express it by directly
benefiting many people. The second is vicious but was unable to express
this for the same reason. It intuitively seems that if we have enough
opium for only one person (and it can't be divided), then the world is a
better place if we give it to the virtuous rather than the vicious person.
These thought experiments seem a little hard to imagine since it is hard
to believe that very different characters over the life of the relevant
individuals didn't translate into a different number of wrongdoings. If
one thinks that this difficulty does not undermine our confidence in our
intuitions, then this thought experiment and ones like it still do not
provide any support for the Strong Character Theory because they do not
rule out acts as a ground of desert.

The objector might concede that the Strong Character Theory is false, but
assert that the only acts that ground desert are ones done from certain
motives (e.g., duty or love of humanity). He might assert that capitalist
acts are rarely done from such motives. The problem is that some acts that
ground positive desert (e.g., benefiting one's children where one
identifies their interests with one's own) are done out of self-interest.
Also, some acts that ground negative desert (e.g., injuring others in the
pursuit of an ideological goal or to promote the interests of one's
children) are done out of desirable motives. If this is correct, then
act-based desert need not reduce to motive-based desert. This makes sense
since that which grounds desert is something for which a person is
responsible and it is not clear that persons can select the motive from
which they act.

In conclusion, then, there is no support for the notion that acts don't
ground desert. If this is correct, then in deciding whether capitalists
deserve their profits, we have to be concerned with both their character-
and act-based desert. The latter includes capitalist contributions to the
welfare of others.

One last objection that might be raised is that capitalist desert rests on
the legitimacy of the capitalists' ownership of the means of production
both in general and in the particular ways found in the actual world.33 A
defense of this claim will take us far afield but arguments based on
either autonomy or consequences are available to support the claim of
legitimacy.

One last type of objection rests on the denial of moral desert in general.
But a general defense of desert is a project that is outside the scope of
this essay. Such a defense will likely rely on showing that our considered
moral judgments cohere around certain intrinsic “better-than” judgments in
which the moral ground is something for which persons are morally
responsible and the existence of moral desert best explains this
coherence. I will instead merely stipulate that my conclusion depends on
the undefended claim that persons deserve things.

5. CONCLUSION

In general, capitalists deserve profits and losses for their contribution
to the general welfare. The role of contribution preserves the central
role of moral responsibility, satisfies the fittingness and
proportionality relations, and provides a backward-looking and
pre-institutional ground of moral desert. In addition, the thesis fits
into a deeper explanation of desert in terms of persons connecting
themselves to values. The contribution thesis also unifies several
different types of act-based desert, specifically deserved profits and
losses, deserved punishment, and deserved wages. Hence, to the extent that
desert-satisfaction is relevant in the selection of an economic system,
this result strengthens the case for capitalism.34

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Notes

1 See, e.g., Feldman (1995), Kagan (1999), and Hurka (2001).

2 Parfit (1984: 493–502).

3 The idea for these points comes from Fred Feldman (1997), especially
182–86.

4 Arnold (1987: 390 n.6).

5 This condition is part of (1)(a) if benefit or cost X is individuated in
terms of both type and amount.

6 The idea for this point comes from Thad Metz.

7 A developed argument for this claim is found in Watson (1977: 316–39).

8 For the autonomy defense of private property rights, see Loren Lomasky
(1987) and Kershnar (2002).

9 For arguments that current property rights can survive claims of
injustice in the distant past, see Simmons (1995) and Waldron (1992).

10 Demsetz (1972).

11 The notion of a moral-free zone as ambiguous between the claim that the
transacting parties are morally permitted to arrive at any price and that
any price is equally good. I mean the former, whereas some factors, e.g.,
deserved wages, affect the latter.

12 This account comes from Werthemier (1996 : 20ff., 211). An account of
disproportionate gain should focus on whether the stronger party is taking
unfair advantage of the weaker party, not on whether the stronger party
takes advantage of an unfairness to the weaker party. In the latter case
the stronger party is not the cause of the unfairness to the weaker party.
Focusing on the latter would make most transactions, no matter how
rational and appropriate given the background conditions, unfair if the
background conditions reflect injustice or unfairness, and this seems
counterintuitive. Unfairness in the context of a disproportionate gain is
a property of particular transactions not a property of macrostate
distributions of wealth (or other resources). This distinction is useful
because exploitation can take place within a just economic system and
because a non-exploitative transaction can take place within the context
of an unjust economic system. Also, since the wrong-making features of
distributive injustice and economic exploitation might differ, the two
should be kept separate for the purposes of analyzing the permissibility
of different acts.

13 Buchanan (1991: 184ff).

14 This view can be seen in Parker (1991: 732–38).

15 One might invoke proximate cause in explaining this intuition. However,
if proximate cause is a stand-in for moral responsibility, and I think it
is, then we still need an explanation as to why the license-plate thieves
are not responsible for this further harm.

16 For a discussion of a type of desert grounded by hard work, see, e.g.,
Sher (1987: ch. 4). For a discussion of desert grounded by sacrifice, see,
e.g., Feinberg (1970: 55–94). For a discussion of desert grounded in
contribution, see, e.g., Slote (1999 : 210–23). Some theorists argue that
there are several desert types and that these types have different types
of grounds. See, e.g., Sher, ibid. and McLeod (1999: 271–82).

17 An argument against the marginal product account can be found in Sen
(1992). An argument against the labor theory of value can be seen in Cohen
(1979: 338–60).

18 Thad Metz argues that contribution is not substantially under our
control because it is influenced by endowment (cf. Metz 2000 ). Endowment
also affects the intensity, duration, and decision to exert effort and the
planning that directs it. It is not clear why endowment substantially
undermines our control for the former and not the latter, especially if we
consider, as I argue below, the role of planning.

19 The idea from this paragraph comes from George Sher, “Effort and
imagination”, unpublished manuscript.

20 Arnold (1987: 387–402).

21 This point can also be seen in Christman (1988: 11–12) and Arnold
(1987: 395). For example, persons who risk their health by copying the
stunts in Jackass – the movie (Paramount 2002) do not deserve profit.

22 Postponement of gratification likely makes sacrifice the basis for
desert and past a certain amount of wealth it is no longer clear that
postponing gratification is a sacrifice. Schweickart (1991: 179).

23 The emphasis on hard work can be seen in Miller (1976: 109), Sadurski
(1985: 134–35), and Sher (1987: ch. 4); the emphasis on sacrifice in
Feinberg (1970: 55–94).

24 Sher (1970: 60–62).

25 The idea for this point comes from Waldron (1983: 39–42).

26 Christman (1988: 12–15). A similar point can be seen in Nathanson
(1998: 56).

27 Christman, 13.

28 The idea for this point comes from Sher (1970: ch. 2, esp. 26). Alan
Zaitchik points out that the idea behind this attack on desert is that
since desert cannot rest on a foundational base it must rest on an
impossible infinite regress, Zaitchik (1977: 373). Both arguments are
aimed at Rawls (1971: 104, 310–15).

29 The idea for this point comes from Gillian Brock.

30 The notion that desert must rest on factors that we control has been
challenged, Feldman (1997: 178–84). I claim that Feldman's counterexamples
(e.g., injured parties owed compensation) capture claims rather than
desert.

31 This point can be seen in Nagel (1982: 181–82).

32 Pinker (2002: 372–78).

33 Schweickart (1991: 175–76).

34 I am grateful to John Christman, Thad Metz, and George Schedler for the
extremely helpful comments and criticisms of this paper.