In his book A General Theory of Exploitation and Class (1982) (hereafter GT), John Roemer employs the tools of mainstream general equilibrium and game-theoretic analysis to develop a fundamental critique and broadbased reformulation of Marxian economic theory. Perhaps Roemer's most striking departure from traditional Marxian tenets lies in his explanation of the material basis of exploitation in capitalist economies. Roemer argues that capitalist exploitation must be understood as essentially the consequence of exchange given differential ownership of relatively scarce productive assets (DORSPA). In particular, Roemer concludes that capitalist exploitation does not fundamentally depend on capitalist domination of production, or what Marx termed the subsumption of labor under capital.
The Marxian theory of the tendentially falling rate of pro®t is shown to be consistent with a competitive equilibrium scenario for labor markets in which wages are determined by sequential bargaining within a stationary matching process. The central result establishes that if trade is possible, there exists a set of individually rational capital-using, labor-saving technical innovations which lower the equilibrium rate of pro®t if adopted universally. The model yields as an important special case wage conditions under which the universal adoption of any such innovation reduces the equilibrium rate of pro®t.
Recent writers have asserted that firms controlled by workers are rare because workers have diverse preferences over firm policies, while investors all support wealth maximization. However, the source of the asymmetry between capital and labor remains unclear. We resolve this puzzle by arguing that because financial capital is exceptionally mobile, capital markets induce unanimity. The lower mobility of human capital implies that labor markets are monopolistically competitive and hence that unanimity cannot be expected in labor-managed firms. Moreover, such firms are vulnerable to takeover by investors, while capital-managed firms are substantially less vulnerable to takeover by workers. Copyright 2007 Blackwell Publishing, Inc..
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