A Risk Theory of Exploitation
This chapter offer a risk theory of labour exploitation that is based on contemporary economic and financial theory. In advanced economies capitalists have very sophisticated ways of spreading their risk through portfolios of investments in stocks, bonds, and other instruments. This diversification of capital allows them to reduce or control natural aversion to risk to large losses. Now, because workers only own their workforce, they must contemplate unemployment as a threatening alternative to any employment offer they may consider. Therefore, they must make high-stakes decisions under conditions of risk aversion. Since they make risk-averse decisions, they are led to accept wages and conditions that they would reject if they could choose in a risk-neutral way. The chapter suggests that labour law is a set of institutions that tends to rectify the situation of risk aversion to which labourers are led by a productive and legal system that, simultaneously, allows capitalists to diversify their risks.