Abstract

What explains and justifies factor shares, that is, the returns that workers and capital owners receive on their contribution to economic production? Arguably, neither economic theory nor theories of distributive justice give a satisfactory answer to this question. One important explanation of this shortcoming, this paper argues, lies in the fact that they fail to take the full measure of the phenomenon of increasing returns from specialisation or, as economist often call it, of total factor productivity. This paper aims to fill this gap by asking what follows for distributive justice from taking this phenomenon seriously. The paper proceeds in four steps. First, it demonstrates in detail how a sophisticated division of labour creates a cooperative surplus. Second, it puts forward a counterfactual experiment to measure this surplus. Third and crucially, the paper argues that justice requires an equal division of this surplus and that this idea turns out to be a surprisingly ecumenical one. The final section defends the equal surplus proposal against two objections, namely the suggestion that an equal distribution of the cooperative surplus is either politically unfeasible or economically inefficient.