Debra Satz

This paper considers the normative assessment of bonded labor from the perspectives of libertarianism and Paretian welfare economics. I argue that neither theory can account for our objections to bonded labor arrangements; moreover, they fail in interesting ways. Reflecting on their normative failures focuses us on other considerations besides individual choice and efficiency. Such considerations include: the effects of labor markets on workers' preferences and capacities; the exploitation of the vulnerabilities of the poor; and the permanent binding of one person to another

This paper points to a lost and ignored strand of argument in the writings of liberalism's earliest defenders. These “classical” liberals recognized that market liberty was not always compatible with individual liberty. In particular, they argued that labor markets required intervention and regulation if workers were not to be wholly subjugated to the power of their employers. Functioning capitalist labor markets (along with functioning credit markets) are not “natural” outgrowths of exchange, but achievements hard won in the battle against feudalism. Further, and crucially, the existence of such markets required closing off other market choices. Footnotesa I would like to thank the other contributors to this volume, and its editors, for their helpful comments on an earlier draft of this essay.