In the free market, economic agents have the freedom to transact resources with each
other with little or no government interference (Smith, 1776). In some markets however, this
freedom is in doubt, namely that economic agents have resources employed by another
without their intent to do so. These economic agents are called: captive employees. This
raises the question: Are these markets morally legitimate?
Apart from the question if is legitimate or not. What also should be taken into
consideration is one of the most relevant questions of them all: Are resources from captive
employees utilized efficiently? Which is the central question of this paper. This is important
because the answer of the moral question could lead to actions. Which could very likely
affect the efficiency by which these markets operate. Therefore, one needs to know how
efficient they are operating at this moment.
The markets exist, the captive employees are there, which means there is actual value,
otherwise it would not exist. Eliminating or changing these markets means that the
government would have to interfere and use its own resources to do so. These decisions
should not be taken lightly, for changing it will create a deadweight loss in the market and
eliminating it would cause the loss of value altogether. In both cases, the welfare of the
economy is worse off (Pindyck & Rubinfeld, 2013). Which means the moral question must
be quite significant if it were to justify it. Thus, to weigh the economic cost up against it will
require analysis of the economic efficiency of the utilization of these resources from captive
employment. This might even give a clue as to if is moral, because to get a high efficiency
would mean that the captive employees have a high incentive to produce the resources and
This paper will go in to detail about the morality and economics of captive
employment. The background of the term captive employment will be given. The criteria
which will be used to analyze the moral and economic aspect will be laid out. Two articles
will be analyzed, of which the subjects will set the context of the discussion. After which, the
central question will be analyzed. Throughout the paper, academic sources will be used to
give validity to the arguments presented. Finally, a hypothesis is stated which can expand the
scope of this investigation.
The term “captive employees” is relatively unknown. As described in the dictionary,
captive (adjective) means: “Imprisoned or confined” and employee (noun) means: “A person
employed for wages or salary, especially at non-executive level.” (Oxford University, 2018).
According to the “Assignment Moral Limits of Markets” document from the University of
Amsterdam captive employees are: “inmates; people with a cellular phone; people with very
limited occupational choice” (University of Amsterdam). The definition used in this paper,
which fits both the university description and dictionary definition, is: economic agents who
have resources employed by another without their intent to do so.
To provide a coherent, structured and consistent analysis requires a specific moral
theory to apply to practical matter. The model that will form the groundwork is that of
Nozick’s entitlement theory of justice. This theory states, that the distribution of wealth in
society is just when property is justly acquired and voluntarily exchanged. This is the best
form of justice because the free market protects the freedom and rights of individuals. The
state should provide protection against force and theft, while enforcing contracts, which puts
a moral limit on the government’s power (Nozick, 1974).
The models used to measure efficiency are economic cost and production efficiency.
Economic cost measures the costs to an institution through the utilization of resources in
production. Production efficiency measures the amount of output received from a given
input. (Pindyck & Rubinfeld, 2013)
Recently these articles were in the news: “Prison labor is a billion-dollar industry,
with uncertain returns for inmates” (The Economist, 2017) and “Should tech companies pay us
for our data?” (Weigend, 2017). The articles talk about captive employees and what is known
about them e.g. what they get in return, what and how much they produce. This raises all
kinds of questions.
In the United States of America, prison labor is a legal requirement. While this
became law, as described by the Thirteenth Amendment of the Constitution in 1865, slavery
was abolished (Congress of the United States of America, 1865). This transition has been
scrutinized ever since by a whole range of individuals and groups as a continuation of slavery
by other means. In the end of the 19th century and first half of the 20st century the brutality
of the system was severe (Browne, 2007). However, since then a lot of reforms improving the
rights of prisoners have taken place (Conley, 1978). Today, there are stories of released
prisoners who are successful on the job market because of the skills they have learned in
prison. However, the opposite seems to be prevalent (The Economist, 2017).
Data is recognized as the most important resource of the 21st century. It is gathered
through services people use. A lot of the data that is created and shared is about people’s
personal lives, for instance: where you live, where you work, who you love, who you spend
your time with, what you eat, what you own and what interests you. This could be perceived
as a huge intrusion into the personal lives of individuals, on top of which tech companies that
collect the data generate billions in revenue. This has sparked the debate whether this data
that is gathered should be bought instead of taken (Weigend, 2017).
Prison labor is the most extreme example of captive employment that can be thought
of, which is wrapped in euphemism. For instance, government-run production schemes are
called “correctional industries” and Federal Prison Industries are called UNICOR, which
calls their facilities “factories with fences” in reports. (The Economist, 2017). Sometimes
prison labor is referred to as slave labor (Pela?ez, 2008). Is this a correct view however? You
might agree, their freedom is taken away and the work they do is a legal requirement, not a
choice (Congress of the United States of America, 1865). However, they are not actually
someone else’s property. The prison has received legal custody of the inmates through the
process of the law, which they broke. Meaning they have been convicted for a crime beyond
any reasonable doubt by the court. Prisons are a necessary requirement in society because
when a well-functioning system of law enforcement is in place, imprisonment would deter
ex-prisoners and potential offenders from committing crime (MacCormick, 1950).
Should prisoners work? In the United States of America, people enjoy freedom, with
that comes the responsibility to make decisions that you believe will benefit yourself. If you
are unable to do this under the law, your freedom will be taken away for a time which the
court decides. That means that decisions will be taken for you in an environment called
prison. Prisons are expensive. The government i.e. the taxpayers, are in a way paying for the
crimes that are committed by having to spend money to take care of the prisoners. Through
work, they can repay a part of the cost of their own incarceration while still receiving a small
wage. To take care of yourself requires resources, which can be acquired with money through
trade. Through trade you exchange something that someone else values for something you
value. Which means, to create value, you must provide value to someone else, which can be
done through working (Smith, 1776). Evidence has been found that employment status
effects self-satisfaction, e.g. people who are employed have a higher self-satisfaction than
people who are not (Cohn, 1978). Prisoners need to acquire jobs if they are released from
prison. This will balance their lives and bring benefit to society. It is therefore no strange
thing to work in prison as well, this will get the prisoners used to employment, thus moving
towards rehabilitation and helps to combat recidivism (The Economist, 2017).
Should tech companies pay us for our data? Some tech experts say that they should.
This could be done with so-called nanopayments. Because data is such an important resource,
it has a value and could arguably be exchanged by paying for its fair value. However, the
methods to determine this value accurately and transact it do not yet exist and are costly to
create. Moreover, the estimated value of data is relatively insignificant in size per individual
(Weigend, 2017). Though all these changes could in theory be implemented, there is no
noticeable demand or supply for this. This suggests that it has not been tried successfully in
the free market, which inherently gives people the opportunity to do so (Nozick, 1974).
People share their data because they are willingly using services that gather it. When signing
up or using a service, customers must agree with the terms and conditions provided to them
by the company that provides the service. In those terms and conditions, tech companies state
if, and what kind of data is collected from the individual. Thus, data described in the terms
and conditions is not stolen, customers provide it voluntarily. If people do not agree with the
terms and conditions, they can choose not to use that service.
The common link between prison labor and data gathering, is that the people who are
subject to this might have resources gathered from them without their intent to do so. For
instance, in the case of data gathering on Facebook. The users of Facebook use Facebook for
two primary purposes: the need to belong and the need for self-presentation. (Nadkarni &
Hofmann, 2012). This, by the user, unintentional issue of data that is gathered from them
however, is consented to by accepting the terms and agreements. Which should not be
confused with intent. The Definition of intent: “Intention or purpose” and the definition of
consent: “Permission for something to happen or agreement to do something” (Oxford
University, 2018). Prisoners might not intend to work, however people who inhabit the
United States of America are legally obliged to live under the laws that are imposed. If an
individual does not consent to these laws, the individual is free to leave the country. This is
the essence of the question as to whether markets based on captive employees are morally
legitimate, namely: are people free to choose? The United States is a country wherein the
emphasis is on personal freedom (Congress of the United States of America, 1865). With the
concept of freedom comes freedom of the market, which means you have the freedom to do
voluntary bi-lateral transactions out of self-interest, this will inadvertently lead to the benefit
of society which solves the moral problem (Friedman, 1962).
There is a strong argument with respect to the environment in which these captive
employees could be situated however, which could be perceived as immoral. For instance,
when prisoners are subjected to prison, unlike with data gathering, they have significantly
less freedom of choice and closed off to the outside world. Most people do not go to prison
willingly, while in the case of data gathering, people decide to make use of a service that also
gathers data. This moral hazard of asymmetrical information makes prisons a place especially
vulnerable to malpractice. Therefore, the government should make sure that these prisons are
doing what they are supposed to do. And if necessary, set them to improved standards, since
the United States of America already has a lower standard of treating prisoners compared to
other industrialized nations (Vasiliades, 2005). In the field of data gathering there also exists
a moral hazard e.g. data could be gathered without approval or by a third party. Because of
the rapid technological advancements of the 21st century, government must do its best to keep
up with an appropriate legal framework that enforces contracts and protects against theft and
fraud in the digital age (Nozick, 1974).
Are resources from captive employees utilized efficiently? In the case of Prison labor,
business fears and resists prison industries because of the fear of potential competition
(Singer, 1973). This means that prison industry could rival other businesses in efficiency.
One way through which production efficiency is maximized, is through an efficient allocation
of both capital and labor (Pindyck & Rubinfeld, 2013). Because there are limitations on
capital in a prison environment, only certain kinds of labor are appropriate. This sets the
productive efficiency of a laborer in a predominant role. The effort a laborer puts in his work
is positively related to incentive. What incentivizes prisoners is the increased likelihood of
parole by showing good behavior, not having to be bored, and to not be punished. By
managing these incentives correctly, a high productive efficiency can be achieved. Prisoners
have labor at their disposal, choosing not to employ this labor will have significant
opportunity cost that go along with it. Therefore, to minimize economic cost, a prison will
have to employ them (Singer, 1973).
In the case of data gathering, there is a positive relation to creating and sharing data,
and interaction with a service. Therefore, people’s willingness to interact with a service is
what drives the productive efficiency of data creation and sharing (McAfee & Brynjolfsson,
2012). In a free market, the most attractive service providing company comes out on top and
will consequentially gain the most data. Because there exists competition and the data have
value to the company, the service can therefore decrease the price the user has to pay when
the company receives more data. This will provide a negative feedback loop to the most
competitive prices or even for free (Hayek, 1969). Because data has value, not collecting or
using this data has an economic cost. Therefore, to minimize the economic cost means to
collect the most, and most useful data and set it to its best usage.
A fitting hypothesis to this moral and economic discussion is to explore what the
welfare implications would be when restrictions or regulations in markets with captive
employees are created. This research will be vital, because moral questions that are acted
upon with good intentions might bring undesired consequences.
According to Nozick’s entitlement theory of justice, the free market protects the rights
and freedom of individuals. This requires the power of the government to be limited to
enforcing contracts and protection from force and theft. Criminals make the choice to break
the law, they cost society. To pay this cost, they can labor to better society and themselves.
Similarly, people can choose to use services that gather their data. While at the same time, the
free market provides the opportunity for people to trade their data. Through freedom, which
goes together with a free market, everyone has choice and opportunity. That is why, in a free
market, captive employment is moral.
The efficiency of captive employment is analyzed by looking at productive efficiency
and economic cost. The productive efficiency in prison has a positive relation to the incentive
of a laborer. If the laborer can be appropriately incentivized, the productive efficiency will
reach competitive levels. With data gathering, productive efficiency relies on the frequency
by which users interact with the service. Therefore, to gather the most data, a company must
have a service that people want to use a lot. Which implies that the most data are created and
shared in free market conditions. By setting the resources from captive employees to their
most valuable use, the economic cost is minimized.
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