The missing concept for most people is that all economic roles are claims on uncertain future streams. Labor is a claim. Capital is a claim. The entrepreneur is a claim. The argument is never really about fairness in the abstract. It is about who eats first if the catch is small and who eats more if the catch is huge. That is all.
If you explain it in these terms people often discover that their intuitive notion of fairness secretly assumes away the possibility of loss. In their heads the boat always comes back full. That is why they find wage differentials offensive but never think to ask from whose pocket the losses come when things go wrong.
The complementary nature of capital and labor that you mention is easier to see once you look not just at the production function but at time. The worker most of the time is selling present effort for near certain near term cash flow. The owner is buying a slice of all future net cash flows good and bad and is last in line to get paid. If you flipped the order of payment reverse the risk queue and told the worker
You will be paid only after the owner the bank the suppliers and the tax man Sometimes you will earn nothing for months Sometimes you will earn ten years of pay in one season
most workers would reject that contract immediately. But that is what the owner does every day.
You also touch on something subtle that deserves to be pulled out explicitly. The fallacy of cross firm solidarity. There is more genuine community of interest inside the firm among people with very different roles than there is across firms among people with the same job title.
The fisherman on Boat A shares much more economically with the owner and captain of Boat A than with a fisherman on Boat B. They share the same technological constraints the same market the same shock exposure the same local knowledge and reputational capital. Their welfare moves together. The fisherman on Boat B is at best a benchmark and at worst a competitor. Yet the rhetoric of class lumps these two fishermen together and places the captain and owner on the other side of some imaginary line.
The missing concept for most people is that all economic roles are claims on uncertain future streams. Labor is a claim. Capital is a claim. The entrepreneur is a claim. The argument is never really about fairness in the abstract. It is about who eats first if the catch is small and who eats more if the catch is huge. That is all.
If you explain it in these terms people often discover that their intuitive notion of fairness secretly assumes away the possibility of loss. In their heads the boat always comes back full. That is why they find wage differentials offensive but never think to ask from whose pocket the losses come when things go wrong.
The complementary nature of capital and labor that you mention is easier to see once you look not just at the production function but at time. The worker most of the time is selling present effort for near certain near term cash flow. The owner is buying a slice of all future net cash flows good and bad and is last in line to get paid. If you flipped the order of payment reverse the risk queue and told the worker
You will be paid only after the owner the bank the suppliers and the tax man
Sometimes you will earn nothing for months
Sometimes you will earn ten years of pay in one season
most workers would reject that contract immediately. But that is what the owner does every day.
You also touch on something subtle that deserves to be pulled out explicitly. The fallacy of cross firm solidarity. There is more genuine community of interest inside the firm among people with very different roles than there is across firms among people with the same job title.
The fisherman on Boat A shares much more economically with the owner and captain of Boat A than with a fisherman on Boat B. They share the same technological constraints the same market the same shock exposure the same local knowledge and reputational capital. Their welfare moves together. The fisherman on Boat B is at best a benchmark and at worst a competitor. Yet the rhetoric of class lumps these two fishermen together and places the captain and owner on the other side of some imaginary line.