In a previous video “Yes, Anarcho-Capitalists are Anarchists,” the case was made that anarcho-capitalism is a continuation of the historical anarchist tradition of Proudhon, Bellaguerrigue, Tucker and the rest, contrary to claims by ancoms that anarcho-capitalism has nothing to do with historical anarchism and is utterly foreign to it.

Some people mistakenly seemed to think that in that video we were calling Proudhon an anarcho-capitalist, which is a very different claim than the one we were making. Proudhon had more favorable and nuanced views about property than people expect when all they know about him is he is most famous for saying “property is theft.” But he wasn’t an Ancap.

While Proudhon defended private property in capital goods, he thought it was unjust for capitalists to profit from their ownership.

The most important argument he makes on this point is that there is a “collective force” of labor which is not getting paid.

In a review of Proudhon’s book What Is Property? The National Quarterly Review puts his argument this way “By an association of force five men are able to take a train of cars and two hundred passengers from New York to Chicago in thirty hours–a task no single man could accomplish in thirty years. The wages of these five men, working in combination, however, is just the same as they would be if they worked singly. So is it with every branch of productive industry in which the principle of associated labor can be utilized: the advantage accruing therefrom is carried to the account of profit, and goes to enrich the employer. Whose conscience is so dormant as to deny the right of the laborer to a share in such profits above the daily wages which he receives?”

As Proudhon put it “Is the exchange an equitable one? Once more, no; when you have paid all the individual forces, the collective force still remains to be paid. Consequently, there remains always a right of collective property which you have not acquired, and which you enjoy unjustly.”

As anarchist historian Shawn Wilbur writes “As for who extorts under the existing system, he was pretty clear that it is the proprietors, with his theory of collective force providing a critique of the systemic exploitation of labor he saw at the heart of actually existing capitalism.”

So while Proudhon might not have wanted to ban profit-making capitalists, he didn’t want them to exist either.

Proudhon always argued for justice and he thought it was unjust that this collective force of labor was remaining unpaid, with the proceeds going to the capitalist. When Proudhon wrote, the important turning point in economic science, the marginalist revolution of the 1870s, had not yet occurred. The economists Proudhon read like Adam Smith and Jean-Baptiste Say wrote nothing that could well answer the objections of Proudhon’s insightful thought. Even Frederic Bastiat did not get this right. Proudhon was asking the right question. But with the advance of marginalist economics, modern anarchists, known as anarcho-capitalists, now see how he was mistaken on this point.

Shawn Wilbur wrote in response to our video “Yes, Anarcho-Capitalists are Anarchists,” “So does the video go on to show that there is some loophole in Proudhon’s account of property, his theory of collective force and systemic capitalist exploitation, or perhaps in his argument against the droit d’aubaine, that allows capitalists to evade the critique? Nope.” Well, Shawn Wilbur, we are granting your request.

So while Proudhon was asking the right question, he looked at the problem the wrong way around, and with modern marginalist analysis we will put it right.

Suppose there is a task which requires 5 workers of equal skill and ability and that this joint task results in a product that is worth $100. Proudhon thinks a just solution would be for each worker to be therefore paid $20. We call this today the average product of their labor.

But suppose instead of there being 5 workers there are 6, all of equal skill and ability, and only 5 are needed for the task. The sixth worker will have to do some other, less productive task. Say this task results in a product that is only worth $10. Proudhon says, and says rightly, that in capitalism we should expect all 6 to be paid the wages of the single worker, that is $10. The six workers, all competing with each other for the more productive job, would underbid each other until they reached this point of $10, which is their alternative employment.

If we paid the 5 workers for their collective force and they each made $20 and the sixth worker only made $10, this would truly be a privilege to the five, making an extra $10 because they were lucky enough to get the collective rather than the individual job, yet they provided no more labor ability than the sixth.

If you demanded that all 6 workers be paid the same by their respective employer at any amount above $10 then the sixth would be paid more than the product he produces and his employer would stop employing him, which is not a just outcome by any means.

With these six workers what is the true value that each of them has contributed? That is, without any one of the workers, how much less value would there be? If, on the day that work for the project was about to start, one of the five took ill, the sixth would be hired away from his less productive work to join the other four and complete the project producing the product worth $100, with the product worth $10 not being made.

Therefore, what is really owed to each worker, how much value is created because he shows up for work, is only $10. This is called the marginal product of labor and with this justice is satisfied, the worker is paid the equivalent for his labor. The price that employs all the workers is also the fair price: the marginal product of labor.

Proudhon’s desire is realized, a true equivalent really is paid, but not in the way he thought.

As Carl Menger, the founder of the Austrian branch of marginalist economics, incisively puts it “The agitation of those who would like to see society allot a larger share of the available consumption goods to laborers than at present really constitutes, therefore, a demand for nothing else than paying labor above its value.”

As for the remaining $50, it goes to remunerate the person who provided the tools and equipment necessary or useful to complete the project, the capitalist. It should be remembered that if the 5 laborers needed no tools for the joint project, they could do it themselves and split the $100 between them. That they do not do this and instead are hired by a capitalist to do so is because they do not have the necessary tools. That is, without the tools, they couldn’t be this productive. Just as the laborers should be compensated for the value they provide, the person who provides the tool provides a value and should be compensated.

And the more productive these tools make the laborers the more the capitalist receives. Like the laborers, under capitalism, the capitalist receives a just equivalent for the value he provides.

Under capitalism, economics and justice are seen to agree. The correct price of labor is the marginal product of labor.

As marginalist economist John Bates Clark wrote in the preface to The Distribution of Wealth “It is the purpose of this work to show that the distribution of income to society is controlled by a natural law, and that this law, if it worked without friction, would give to every agent of production the amount of wealth which that agent creates.”

From the anarchy of production arises a just social order. Anarchy is Order! Government is Civil War!