What is meant by "marginal productivity"?

[TovChapaev]

Greetings comrades, first time poster here. Although I do not consider myself much of a newbie in Marxist thought, I am still a learner, as are all of us I would hope, so I have a question someone could hopefully answer.

I remember in an old debate in another forum, when I was trying to clarify that under socialism people are supposed to be paid according to their labour (as you can imagine, it was one of those "doctor-gets-paid-equal-amount-to-janitor-under-communism" kind of debates) and not be exploited by a boss, someone asked how would one know how much a person's labour is worth if not through "marginal productivity". I could not really answer then and I do not now, basically because I have no clue what any of this means. Is it a red herring, is it actually relevant and needs to be addressed, what is "marginal productivity"?

Thanks for your time.

[RadioRaheem84]

The canard capitalists use to justify exploitation after Marx took them to school. It's bascially the contribution to production each person makes; worker, manager, owner. Capitalists think that due to their owneship of the means of production, they aid production by giving a more sizeable contribution, i.e. through investment. The worker on the other hand his labor which is purchased by the capitalist is less deserving because of his minimal contribution.
http://www.marxists.org/archive/mattick-paul/1939/marginal.htm

[RadioRaheem84]

Have no fear of it though, even Libertarians like Thomas Sowell see the flaws in it:



Vulnerable as Marx's exploitation theory was, part of the marginalists economists criticism of it missed the mark, for the marginalists argued in terms of the respective contribution and rewards of factor inputs, rather than of people as such. Land may be productive without landlords being productive. Landlords may be growing richer in their sleep as John Stuart Mill claimed, earning an income solely because of the institutional artifacts of property ownership. The contribution of capital equipment to economic progress was not really an issue, for a Marxist revolution was not intende to abolish capital equipment but rather to abolish capital ownership by private individuals. The importance of capital equipment was implicitly recognized when Marx made its public ownership a key feature of it's new society.


- Thomas Sowell, Marxism, NY: Quill William Morrow Press, 1985 Ch. 10 pg. 191

[syndicat]

we can understand the definition without having to accept the ideological uses it was put to.

first of all, marginalists assume "diminishing returns." That is, they assume that as a firm hires more workers or buys more machines, the gain in revenue from each additional worker or machine will decline...because the market for the products is limited. so at some point they will hire worker A who contributes N additional revenue but they will hire no more additional workers after A because if they did, the worker would not bring in enough additional revenue to make it worthwhile. so the last worker hired, A, is said to be hired "at the margin." the revenue, N, gained by the firm from hiring A is thus the "marginal revenue product" of workers at that firm.

now, the marginalists go on to argue that this is the "just" or "fair" wage. they make this argument because they look also at the "marginal productivity of capital." So, this is the revenue, M, that results from the last unit of capital put into play in the firm that would make economic sense to add. in other words, if they added another unit of capital it's contribution to additional revenue would be too small to pay. so this is the unit of capital added "at the margin."

marginalists like JB Clark (one of the inventors of this theory) would argue that it is just for the capitalists to gain the "marginal revenue product' of capital. but he reaches this conclusion through a fallacious inference. he confuses the contribution of capital, as measured by its "marginal revenue product", with the contribution of capital owners. in fact a person contributes nothing at all simply from owning the capital.

[CartCollector]

Invariance wrote a long, but very good and thorough, refutation of marginalism:

http://www.revleft.com/vb/why-marginalism-wrong-t109362/index.html