These sections gather together a potpourri of misinterpretations propagated by both critics and advocates of the labor theory of property. The modern treatment of LTP differs from the classical treatment in at least two respects:

• the explicit inclusion of the negative product in the whole product, and
• the identification of de facto responsibility as the relevant unique attribute of labor.

Many misinterpretations result from neglecting the negative product. Out of nothing, nothing comes. To appropriate the positive product, the same legal party must appropriate the corresponding negative product. Ignoring the negative product is the fallacy of immaculate appropriation.

The whole product concept can be applied at the most decentralized level at which a complete set of inputs and outputs can be identified–namely at the enterprise level. Enterprises can be vertically integrated (vector sum of whole products), but there is no property theoretical argument for the necessity of that integration.

State socialists advocate complete vertical integration at the level of the state. Their argument is roughly as follows.

This argument ignores the enterprise's negative product. It caricatures the worker-owned enterprise as claiming the outputs without paying for the inputs, and thus the state is pictured as having to subsume and internalize all the enterprises to account for the inputs. However, the enterprise's appropriation of its negative product takes into account the social division of labor; the raw materials and semi-finished goods from the myriad of other firms are paid for to satisfy the input-liabilities.

Marx, for his own reasons, argued that Labor could not receive the whole product.

The liabilities for the capital stock used-up would be part of the liabilities which the workers would have to bear in addition to appropriating the positive product of an enterprise.

Samuelson criticizes LTP for imputing all the (positive) product to labor. He knows there are costs (liabilities) to be met.

There is no need for these misunderstandings to persist for semantic reasons. The phrase "whole product" is used with two senses:

(1) in the naive sense to mean all the produced outputs (the positive product), and

(2) in the technical sense to mean all the produced outputs as well as the liabilities for the used-up inputs (i.e., the positive product plus the negative product).

Quite often confusion is caused by sliding between the two meanings. The Ricardian Socialists hardly expected some other party to pay for all the input liabilities and then for Labor to get the "whole product" in the naive sense of only Q. Thus with just a bit of sympathetic interpretation, one can read the technical sense back into the Ricardian Socialists' slogan of "Labour's Right to the Whole Product." Yet critics, ranging from Marx to Samuelson, choose to interpret the slogan only in the naive sense and then criticize its alleged naivetŽ.

These criticisms of LTP also fail to appreciate that the input-liabilities are incommensurate with the produced outputs; the liabilities for the used-up inputs does not cancel some of the ownership of the positive product. If the workers in a labor-managed firm used up 18 gizmos to product 27 widgets, they would appropriate

Labor's product = (27 widgets, –18 gizmos, 0).

Critics, like Samuelson, who apparently claim that Labor cannot appropriate the full 27 widgets because of the 18 gizmos are mistaken about the structure of property rights and obligations. One legal party can appropriate both the full 27 widgets as assets and the liabilities for the 18 used-up gizmos. One cannot cancel the gizmos against part of the widgets.

Perhaps the critics only mean the banality that the legal party cannot have the value of all the 27 widgets as their net income. That is of course true, and it follows by pricing out the assets and liabilities appropriated by the party. The labor theory of property is not a theory about net income or about income at all; it is a theory about property rights and obligations. In terms of the price-quantity distinction in economics, LTP is a theory about the appropriation of (positive and negative) quantities, not a theory about prices.

The ideological interpretation of marginal productivity (MP) theory can be viewed as a hypothetical horizontal separation of an enterprise into "marginal enterprises." If one more unit of labor is used, the marginal product of labor, MPL, is produced.

This argument suffers from the usual flaw of the ideological interpretation of MP theory (i.e., metaphorical property rights and metaphorical responsibility), and, for those reasons, the argument is not an application of LTP. The marginal unit of a non-labor input K cannot be responsible for "its marginal product" since it is not a responsible agent at all. Instead the workers are responsible for using it up.

In addition, it is technologically absurd to consider the marginal enterprise as a separate enterprise since it pictures, for example, the marginal unit of labor as producing MPL units of outputs without using any inputs, i.e., as if the whole product could be (MPL, 0, –1). That would again be "Immaculate production," the neo-classical miracle. Instead of being produced by the marginal unit of labor in a separable subenterprise, the marginal product MPL is the increase in the total output of the whole enterprise when an extra unit of labor is taken on. Moreover, the production process is assumed slightly shifted to a more labor intensive form so that more output can be produced with no extra input K.

There is an old joke about the country farmer who comes to New York and "buys the Brooklyn Bridge" from a con-man. The joke is that the con-man couldn't sell it because he didn't own the Brooklyn Bridge in the first place. But the apocryphal story is not entirely implausible since there are two types of property deeds the farmer could have purchased. There is the warranty deed which warrants that the seller holds title and then passes that title to the buyer. There is also the quitclaim deed which simply transfers from the seller to the buyer any title which the seller might have had in the property without any warrant that the seller actually had title. The farmer could have purchased from the con-man a quitclaim deed to the Brooklyn Bridge which transferred whatever claim the con-man had to the farmer.

One of the crudest defenses of capitalist appropriation is just to "interpret" the employees as selling the produced outputs to the employer. That "interpretation" would not account for the employer's direct control rights over the employees' labor. And it mistakes the actual property rights. Since the employees in an employment firm do not bear the costs of production (i.e., do not legally appropriate the negative product), it would be another "immaculate appropriation" for them to appropriate the produced outputs and then sell them to the employer. If the employees do not own the outputs in the first place, then they could not sell them to the employer–at least not with a warranty deed.

The idea of a "quitclaim deed" is therefore used in a refined version to defend the employer's appropriation of the produced outputs in an employment firm. The idea is to "interpret" the employment contract as including a quitclaim deed on the product; the employees sell their labor to the employer along with any property rights they might have in the produced outputs. The employees are not robbed of the fruits of their labor; they voluntarily quit any claim on those fruits in the employment contract.

Responsibility is a double-edged sword. The employees are also de facto responsible for using up the inputs, but they bear none of the costs of those inputs, i.e., none of the legal responsibility for the negative product. Naturally, anybody would like the ability to voluntarily "quit" claims against them, but it is not the debtor who can "forgive" a debt. It is the owner of the used-up inputs who would have to quit any claim against the workers for using up the inputs.

To be internally coherent, the quitclaim interpretation of the employment contract must involve a two-way quitting of claims. The employer quits any claim against the employees for the used-up inputs (including "their" labor), and the employees quit any claim on the outputs in favor of the employer. Does this quitclaim interpretation of the labor contract answer the critique of the contract?

This quitclaim interpretation of the employment contract does not add anything to the substance of the contract; it only makes explicit what was otherwise implicit in the contract. For centuries, employers have been legally appropriating the input liabilities and the output assets–without explicitly releasing the workers of charges against them for the inputs and without the workers explicitly quitting any ownership claim on the outputs. All that is part and parcel of selling labor in the employment contract.

When the owner of a van rents out the van, there is no necessity for the van-user to explicitly release the van-owner from the costs of the activities where the van is used or employed, and there is no necessity for the van-owner to explicitly quit any claim on fruits of the activity of the van-user. Such quitclaim clauses could be added to the rental contract, but it is already implied by the rental arrangement.

The employment contract can be viewed both as an instrument to transfer property rights in labor and as an instrument of governance (a limited Hobbesian contract in the workplace). In the latter role, the governing rights of the employer are sometimes explicitly spelled out in a "Management Rights Clause" specifying all the various management prerogatives. The "Quitclaim Clauses" considered above would be an analogous explication of the property rights consequences of the contract.

Does the quitclaim analysis offer a defense of the employment contract? Does it affect either the question of de facto responsibility or property rights?

The inclusion of the "Quitclaim Clauses" in the employment contract does not suddenly make de facto responsibility transferable–as witnessed by the criminous employee who certainly desires to quit any claim on the fruits of his labor. The inalienability of de facto responsibility is hardly affected by new quitclaim language in the contract.

Perhaps the quitclaim interpretation is supposed to apply to property rights. The charge against capitalist appropriation is not that the workers give up their property in the outputs without a proper transfer deed (such as a quitclaim deed). The charge is that the workers never have–in the first place–the property rights in the produced outputs or the liabilities for the used-up inputs. The quitclaim clauses do nothing to address that charge.

But can't the workers sell their product Q in exchange for (say) the money wL and the non-labor inputs K? They certainly may, but that would be an example of labor-managed production. The workers would then legally appropriate the liabilities for the inputs and thus they would legally appropriate the product Q which could be sold (with a warranty deed). That is not the scenario envisioned by the quitclaim defense of the employment contract. Indeed, that isn't an employment contract at all but a contract wherein the workers purchase the inputs and sell the outputs (perhaps in a package deal).

In the quitclaim interpretation, the employees do not sell the outputs Q after initially claiming them, they give up any initial claim on the outputs in the first place. Similarly, the employer does not sell the inputs K to the employees but releases the employees from any claim against them for the used-up inputs.

If the quitclaim interpretation does not change the facts about de facto responsibility and does not effect legal transfers of the inputs K or outputs Q, then what is its appeal? The root of the appeal is voluntariness. The workers are not robbed of the outputs because they voluntarily give up any claim on the outputs, and the employer is not robbed of the inputs because the employer voluntarily releases the employees from any claim against them for the inputs they used up.

But now we have come full circle. Involuntariness was not the charge against the employment contract made by the labor theory of property, democratic theory, or inalienable rights theory. Thus the rebuttal that the workers voluntarily quit these claims and so forth, is not to the point. Voluntariness does not make de facto responsibility (or de facto decision-making) alienable.

Another misunderstanding of LTP is the assumption that all appropriation is individual. It is true that many of the Lockean stories are told in terms of a single worker appropriating the fruits of his or her labor. But non-mythical production is typically joint. Production is usually a multi-person undertaking so appropriation should be by Labor, the legal party consisting of all the people working in the enterprise, not by individuals. There would rarely be enough separability in the production process so that individual whole products could be identified. The distribution of the net value produced between the members in a worker-managed firm is determined by their collective decision. No guidance is provided by LTP since it addresses the question of who is to be the firm, not the question of income distribution between the members of the firm.

One tactic used by LTP critics is to simply assume that the labor theory requires individually discernable products, and then to take the difficulties in that assumption as a difficulty in the theory.

Yet there seems to be no proponent of LTP who thinks appropriation must be individual so the argument is only with a strawman.

The application of the labor theory of property to "land" (economists' term for all non-produced inputs such as natural resources) has been a fertile source of confusions. The application is a negative one.

Any legal claim to land is solely the creature of positive law without any natural foundation in labor.

This "no natural claim" implication of the labor theory of property is commonly confused with the "no value" assertion of the labor theory of value. Land in a pristine state untouched by the hand of labor can, of course, have value. That land (and time) have "no value" has always been one of the most implausible assertions of the theory of labor as a measure of value.

Even though land is not the fruits of anyone's labor, the using up of the services of land and of natural resources is part of the negative fruits of the labor of those who farm or mine the land. Thus LTP implies that they should hold the liabilities for using up the land services or resources. But the labor theory does not determine to whom the liabilities should be owned. In any actual property system, that would be determined by positive law.

The slogan "The land to those who work it" does not receive unqualified support from LTP. Farmworkers, like all workers, should be self-managed, e.g., in family farms or worker cooperatives, so they will own the positive fruits of their labor and be liable for the negative fruits of their labor. But this does not imply that they should own the land. The absence of any private labor-based claim on land throws the question of land tenure into the public domain. For instance, land users could pay rent to the government with long-term leases. Or there might be a social decision to have private ownership of land with property taxes to tax away the land value not created by the current or prior users (i.e., natural and community-added site value).

Orthodox economics illustrates its penchant to misinterpret labor-theoretic arguments in the treatment given to Henry George and the Single Tax Movement. According to the orthodox view, George's theory was built on the inelasticity of the supply of land. Natural land value should be taxed away because the land owners cannot "dodge" the tax by passing it on to anyone else.

This view focuses on a technical detail and misses the real point of the argument. Land is in inelastic supply because "no man made the land"; it is given by Nature. Since no one has a labor claim on the natural value (or the community-added site value), George argued that it should be socially intercepted using a land tax system. The argument was based on the labor theory of property, not the inelasticity of land supply.

The slogan "The factories to the workers" also does not receive unqualified support from LTP. There seems to be no general reason to assume that the current workers in a factory are somehow responsible for the factory. It may have been paid for by profits that could have gone to past workers, but there may be little or no overlap between those past workers and the current workers.

There is a related misinterpretation used by some proponents of the labor theory of property as an argument for worker ownership [see Abrahamsson and Broström 1980]. Instead of analyzing the basic capitalist myth of "ownership of the firm," some critics of capitalism accept the myth but argue that the workers have created the firm and thus should own it.

This argument has many flaws aside from its use of the firm ownership myth. What is the "firm" used in this argument? Corporations are indeed owned but they are only a means of legally packaging certain real assets, and there is no reason to always assume that the current workers created those assets or the wealth that purchased those assets. Setting aside all the flaws in this pseudo-LTP argument, it is not an argument for a democratic firm. If the "firm" was awarded to the current workers as their property, then as the workforce turns over, the new workers would be the employees of the "firm" owned by the past workers.

The modern labor theory of property is stated in terms of the product of production (both positive and negative). It argues that labor should appropriate the whole product. In the employment system, the ownership of the product is not determined by the "ownership of the firm" but by who is the last owner of the inputs consumed in production. The basis for capitalist appropriation is not private ownership of the means of production; it is the employment contract which sets up the conventional corporation as the last owner of the labor.

The labor-theoretic critique of capitalist appropriation is thus logically completed by the critique of the employment contract based on the inalienability of labor. With the abolition of the employer-employee relationship and of the whole practice of voluntarily renting human beings, production would be refounded on labor–with labor always hiring capital and with workers appropriating the positive and negative fruits of their labor. That labor-theoretic argument for the democratic firm is thus quite different from the argument that the workers created "the firm" and thus should own it.

Property is rightfully owned if it is rightfully acquired ultimately from those who rightfully appropriated it [see Nozick 1974]. This property could include privately owned means of production such as machines or other capital goods, or it could be financial capital. Property rightfully owned may be rented out in return for rent or interest, or it may be sold. Thus property income may be generated in an economy using labor-based appropriation of property and voluntary transfers.

The "labor theory" is rather often clumsily applied as a critique of property income such as rent or interest. It is said that the property owner does not "earn" the rent or interest by his or her labor so that the income is illegitimate. This sort of muddled reasoning is not an application of LTP. The labor theory of property is a theory about appropriation, and a property owner renting out property is not involved in appropriation but exchange. The property owner is one of the parties to whom the whole product appropriator is liable for the used-up services of the property. Thus rent or interest received on rightfully acquired property does not conflict with LTP (since no appropriation is involved in that transaction). Some people may have other objections, e.g., Aristotle-Aquinas interest grumbles, but that is unrelated to LTP.

When a worker deposits labor income in a savings account, he or she is exchanging it for a stream of interest payments and the future return of principal. The interest stream and future principal payback are the market equivalent to the present deposited income. There is no need to "earn" that income twice. The objection that the interest payments are unearned by labor is irrelevant; there is no need for them to be based on labor. The interest payments are not the outcome of appropriation but of intertemporal exchange: the present savings deposit in return for the future stream of interest and the principal payback.

But what about interest received on a bond issued by a slave plantation? Isn't that interest illegitimate? It is not the interest per se but the activity of the slave plantation that is illegitimate. The two should not be muddled together in an emotional appeal.

The same is true when the enterprise is based on renting people instead of owning people. The problems involved in receiving interest from a capitalist enterprise lie solely in the enterprise itself, not in the interest.

What about dividends and capital gains from share ownership in a capitalist enterprise (or a slave plantation for that matter)? That depends on whether one interprets shareholders as members of the corporation (their formal legal role) or only as holders of glorified variable-income debt securities. With the wide dispersion of infinitesimal shareholders and the resulting separation of ownership and control, shareholders are more like holders of a special sort of debt instrument so dividends would be viewed like interest payments.

When shareholders are, however, viewed in their legal role as the members of the firm, then the activities (renting people in the capitalist firm or owning people in the slave plantation) are their activities. Then the income on the shares is not income from exchange but from appropriation–the appropriation of the positive and negative fruits of other people's labor.

This analysis is based on the distinction between appropriation and exchange. This distinction is not available to those who have accepted the basic capitalist myth of "ownership of the firm." Under that view, there is no appropriation; the rights to the produced output are considered part of the pre-existing property right, "the ownership of the firm." The product rights are considered part of the ownership of capital–as if capital could not be rented out instead of labor being hired in. Thus critics of capitalist production feel compelled to question property income obtained from the ownership of capital. The flaw in their reasoning goes back to accepting the myth that the product rights are part of capital. Once the myth is set aside in favor of a clear understanding of the market mechanism of appropriation, then it is easily seen that no capitalist appropriation is involved in renting out capital in return for interest or rent. If the property claim to the capital is legitimate, there is no need to earn it twice by "earning" the interest or rent.

The distinction between the productivity of capital and of the capital owner has become a commonplace in current left-wing criticism of capitalism.

It is one of the points emphasized by the Cambridge England side in the Cambridge Controversy in Capital Theory of recent decades. The owner of capital rented to an enterprise does not "earn" the marginal product of his capital.

This critique is one of the best examples of muddled thinking on the Left. Orthodox economists correctly sense that they have caught their ideological opponents in a snare and they readily agree to the distinction.

This is a snare for would-be critics both in what they have not challenged (the "productivity" of capital or land) and in what they have challenged (the legitimacy of property income). By not questioning the "productivity" of capital or land, the critics have at least implicitly accepted the animism involved in personifying capital or land as a responsible agent.

By questioning the property income of property owners, the left-wing critics have cast doubt on the whole system of private property. Thus capitalist appropriation, which is based on denying the natural labor basis for private property appropriation, is allowed to parade as a defender of the "natural system of private property."

The antebellum defenders of American slavery defended it in the name of "private property." The answer to slavery was not to accept the identification of slavery and private property and then to challenge private property. The answer was to abolish the institution of owning people and to reconstitute the property system in a way that did not violate those basic human rights.

Today, our economic system of production is based on renting people–on the employer-employee relationship. It is also defended in the name of "private property." Luckily for capitalist apologetics, many critics of the system had accepted that identification and had called for the abolition of the private property system (except for personal consumer items). Instead of criticizing capitalist production as violating labor-based property appropriation as well as violating people's inalienable right to democracy in the workplace, Marxism allowed capitalism to be identified with both private property and democracy.

When a group of people act jointly, they are de facto responsible for the total difference they make. That difference may be more than the sum of the "marginal effects" of the individual participants. The excess of the whole over the sum of the parts is not a natural event; it is the result of their joint effort.

This can be illustrated with the case of the "marginal murderer." Two people co-operate together to murder a third person. Each empties his gun into the victim who expires. The actions of each by himself would have been sufficient to kill the victim. The marginal productivity of labor was zero. The two are caught and are charged with murder. The marginal murderer contends that the victim would still have been murdered even if he had done nothing so he cannot be guilty of murder. The other person notes that labor is homogeneous; he also is the marginal killer. Thus neither one is guilty of murder; the victim must have expired of natural causes.

The flaw in their reasoning is the assumption that their only responsibility is their marginal effect. Suppose an abundance of homogeneous workers produce a product so that the same product would be produced if one person withdrew. The marginal productivity of labor would be zero, but the product would not be the result of natural causes. The workers would jointly be responsible for the (whole) product.

"Responsibility" is a notoriously slippery word. There is an abundance of different meanings and shades of meaning. H.L.A. Hart illustrates the point with some "stylistically horrible" prose.

In particular, Hart discusses "role-responsibility" [212] which we must differentiate the notion of de facto responsibility.

In an institution or organization, a person has a role, a job, or some set of specified tasks the individual is supposed to perform. That is the person's role-responsibilities. The individual would be "deserving" of certain "merits" or "demerits" depending on whether the person fulfilled or fell short of fulfilling his or her "responsibilities."

These institutionally-defined role responsibilities should not be confused with the notion of de facto responsibility as used in the juridical principle of imputation, i.e., in the labor theory of property. A group of people acting jointly are de facto responsible for the differences they deliberately make–in comparison with what would have occurred had they not acted. For the assignment of de facto responsibility for what they did, it does not matter if the joint action was the group's "responsibility" or task in some institutional setting.

It should also be noted that the question of de facto responsibility is backward-looking or retrospective. The question is "Who did it?"–not what was one supposed to do in an institutional role.

The labor theory of property is often thought to be a theory of merit or desert; actions deserve certain rewards or punishments. But the attempt to shoe-horn the labor theory into the mould of a merit theory leads to more confusion than clarity.

For instance, it would be confusing to depict LTP as holding that a person should be given the fruits of his labor as a "reward" for producing them. That smacks of a utilitarian explanation whereas LTP is a non-utilitarian deontological theory. The merit theory seems to envision some ethically authoritative measure of the "worth" or "value" of actions; the valuable actions are to be "rewarded" while the value-reducing actions are to be punished. That would require interpersonal comparisons of "value" or "utility." Yet LTP provides no such comparisons and is not based on any such comparisons.

Welfare economics based on an imagined "social welfare function" [see Samuelson 1972b] or "social preference ordering" tries to extend the idea of a utility function or preference ordering from the individual to the group or society as if there were a group-mind or social-mind. Such a social-welfare function is clearly incompatible with the autonomy and dignity of individuals, i.e., with treating people as ends-in-themselves [see Nozick 1974 for an excellent contrast between rights theories and utilitarian theories where the latter might occur as an "end-result principle," e.g., the "bliss point" of welfare economics, and see Hayek 1976].

This idea of LTP as a "merit theory" may arise from confusing de facto responsibility with a person's role responsibilities in setting of an institution or organization [see Hayek 1973 on organizations]. An institution might have a reasonably well-defined objective function. Fulfilling one's assigned role responsibility would favorably affect the objectives of the institution so role fulfillment would carry with it certain rewards or merits, while falling short would bring various demerits, penalties, or punishments.

LTP is not such a merit/demerit theory; it is not based on maximizing some value-measure of the consequences of actions. The rationale is not to "reward" people with the positive fruits of their labor or to "punish" them with the negative fruits of their labor. LTP is not a consequentialist theory in the sense that it does not try to justify giving people the fruits of their labor because of the desirable social consequences. As a deontological theory, LTP assets that people ought to legally appropriate the fruits of their labor because they are de facto responsible for those fruits, not because it may encourage or discourage certain socially approved or disapproved actions.

LTP also provides no measure of the "value" of the positive or negative fruits of one's labor. If one is de facto responsible for producing a widget or for using up or destroying a widget, the theory only implies that one should legally appropriate the produced widget or be legally liable for the used-up widget. It does not determine what those assets or liabilities are "worth."

The analysis of institutions requires the prior conceptual differentiation between institutional and non-institutional realities. In economics, an efficient allocation of resources ("Pareto optimality") is specified in non-institutional terms so that various institutional outcomes ("equilibrium in a competitive price system") can then be evaluated. Earlier philosophers used the artifice of the "state of nature" not to invoke a return to primativism but to consider a state of affairs independently of institutional specifications. For example, the critical analysis of slavery presupposed the understanding that a slave could be a de facto person (e.g., in a "state of nature") while being a de jure non-person within the institutional setting of slavery.

By far the most common form of "happy consciousness" (the uncritical acceptance of the ambient institutions) is simply to accept the institutional realities as the basic underlying reality (e.g., to accept slaves as de facto "non-persons" since that is their legal role).

Property theory, like any other form of institutional analysis, requires a separation of the institutional and non-institutional realities. The "fruits of people's labor" is a non-institutional concept. A particular set of property institutions may or may not secure to people the fruits of their labor. The standard form of happy consciousness in our society is simply to legalistically interpret whatever accrues to an individual in a legal institutional role as being the de facto "fruits of his labor."

Whatever the employer legally appropriates (within the institutional context of the employment contract and laissez-faire appropriation) is the "fruits of his labor." By virtue of the employment contract operating within the market mechanism of appropriation, the shareholders–no matter how absentee–still legally appropriate the whole product of an enterprise. Therefore, by this view, the whole product is in fact "the fruits of the labor" of the absentee shareholders since they are the natural persons who are the members of a corporation. Also by virtue of the employment contract, the employees get their wages or salaries so those payments are viewed as "the fruits of their labor."

This view that whatever a person "gets" is "the fruits of their labor" illustrates above all else a reluctance to analyze the effects of institutions in contrast to the non-institutional social realities. This "legalistic" view takes the legal norms as the ultimate reality. Positive law defines morality. If the Law declares that a person is guilty of a crime then that is the end of the matter. There is no additional question of whether the person was in fact guilty.

Many of the arguments about the productive contribution of land-owners and capital-owners suffer from a lack of differentiating institutional and non-institutional realities. The question of a person's de facto responsibility for a certain product is a question about non-institutional realities. A person's managerial labor may be necessary for the success of a project and the person's signature (consent) may be necessary to rent the land or capital needed for the project. The two actions are quite different. The managerial work would survive in a non-institutional description of the project, while the necessity of a property owner's consent is only an institutional requirement. Landlords and capital-owners are not factors of production.

Institutional analysis is not easy. Our purpose is only to call attention to the legalistic view that confounds the distinction between the legal institution and the underlying non-institutional reality. Some activities are so institutionally mediated, e.g., allocating financial capital, that it is very difficult to isolate and describe the underlying non-institutional activity being carried out. Our intent is not to supply some algorithm to decide all grey-area questions about differentiating institutions from underlying non-institutional realities. Nor is that always necessary. The legalistic view results less from any genuine analytical difficulty than from a desire to remove the ambient institutions from the arena of criticism. The best apology is not to defend an institution but to present it as part of the given unquestioned furniture of the universe. Whatever people get through an institution is what they "deserve" to get. Whatever is, is optimal. If the employment system is accepted as part of the taken-for-granted structure of social reality, then whatever the employer gets is the "fruits of his labor."