Marx and Sen on incentives and justice: Implications for innovation and development

Abstract

The most crucial obstacle to equitable innovation and development is the tension between profit incentives and social justice. In the egalitarian tradition of social and political thought, there have been a number of theorists preoccupied with this tension. Among them Marx and Sen stand out as the most influential figures. This article evaluates their approaches and examines implications for technological innovation and economic development. The argument is that Marx’s needs-based approach is relational and therefore provides a radical resolution to the incentives–justice tension. By contrast, Sen’s approach is informational and therefore provides a policy solution to this tension. Both approaches imply that innovation and development can become more equitable through public action. However, in the case of Marx, public action assumes conflict between social classes; it aims at changing capitalist social relations and eliminating unjust exploitation. In the case of Sen, public action assumes consent between individuals; it aims at reforming public policy and eliminating capability deprivation.

Keywords

Marx Sen incentives justice innovation development needs capabilities public action politics neoliberalism

I Introduction

In his 2014 book Capital in the Twenty-first Century, Thomas Piketty reaffirmed that unequal distribution of the fruits of innovation and development poses a primary challenge to sustainable prosperity of the globalizing world. To put it in his own words, the contemporary trend of dramatic rise of inequality and accumulation of material wealth ‘… are potentially threatening to democratic societies and to the values of social justice on which they are based’ (Piketty, 2014: 571). Probably, the most crucial obstacle to equitable innovation and development is the theoretical and practical tension between profit incentives and social justice. Although this tension has been identified in previous works (Arocena and Sutz, 2003; Cozzens, 2007; Dosi et al., 2006; Papaioannou, 2011), it has not been properly analyzed, let alone been resolved. The tension can be summarized by paraphrasing the so-called incentives argument (Cohen, 2008): when innovative people take home socially just pay, they innovate less than otherwise might and as a result, economic development is slow and poor people are worse off than they are when the activity of innovation is rewarded. In the egalitarian tradition of social and political thought, there have been a number of theorists preoccupied with the incentives–justice tension. Among them, Marx (2000a) and Sen (1992, 2009) stand out as the most influential figures. The former proposes revolutionary change of the capitalist mode of production, justifying a needs principle of social distribution. By contrast, the latter advances a non-institutional approach to social justice, justifying equalization of human capabilities.

This article builds upon previous work, evaluating both approaches in terms of their resolution to the incentives–justice tension. In addition, the article examines their implications for technological innovation and economic development in today’s globalizing neoliberal capitalism. The latter is a class project (Harvey, 2011) that not only reproduces the incentives–justice tension, centralizing innovation-led wealth and power in privileged classes (mainly in the global north) at the expense of underdevelopment of less privileged classes (mainly in the global south), but also imposes social barriers in alternative models of innovation and development. Bearing in mind the contemporary context of neoliberal capitalism (Jessop, 2002), this article insists that Marx’s needs-based approach is relational and provides a radical resolution to the incentives– justice tension. By contrast, Sen’s capabilities -based approach is informational and provides a policy solution to this tension. Both approaches imply that innovation and development can become more equitable through public action. However, in the case of Marx, public action assumes conflict between social classes; it aims at changing capitalist social relations and eliminating unjust exploitation. In the case of Sen, public action assumes consent between individuals; it aims at reforming public policy and eliminating capability deprivation.

This article is divided into five sections. Section II analyzes the incentives–justice tension with focus on innovation and development within neoliberal capitalism. Section III contrasts Marx’s needs-based approach with Sen’s capabilities-based approach, identifying crucial differences. Section IV examines the implications of both approaches for innovation and development in today’s globalizing neoliberal capitalism. Section V concludes by stressing the importance of radical public action for achieving equitable innovation and development in the 21st century.

II The Tension between Incentives and Justice

The tension between profit incentives and justice is clear in the areas of technological innovation and economic development. To be motivated to innovate means to be moved to create something (a product or a process) that is new to the market or new to the world. A person who feels no motivation to innovate can be regarded as unmotivated, whereas someone who is mobilized towards resolving a technical problem or an innovation end can be considered as motivated. Although research on human motivation has been mainly carried out in the area of education (Bènabou and Tirole, 2003, 2006; Cameron and Pierce, 1994; Ryan and Deci, 2000), some of its analytical distinctions are relevant here. Specifically, profit can be regarded as an incentive that affects extrinsic motivation, that is, ‘… doing something because it leads to a separable outcome’ (Ryan and Deci, 2000: 55). This can be distinguished from intrinsic motivation, that is, ‘… doing something because it is inherently interesting or enjoyable …’ (ibid.). As Dosi et al. (2006: 1110) stress ‘[t]hat profit-motivated innovators are fundamental drivers of the “unbound Prometheus” of modern capitalism has been well appreciated since Smith, Marx and, later, Schumpeter. For a long time such an acknowledgement has come as an almost self-evident “stylised fact”.’ This fact is reflected in contemporary regulatory regimes such as intellectual property rights (IPRs) and tax measures for research and development (R&D). Here, we only concentrate on IPRs due to lack of space. High degree of appropriability of knowledge is considered to be an important profit incentive to innovation within neoliberal capitalism. For this reason, a number of regulatory changes, including the Bayh–Dole Act of 1980 and the Orphan Drug Act of 1983, enabled high profit rewards for investing in R&D areas such as health related biotechnology (Lazonick and Tulum, 2009; Sampat, 2006). Such regulatory changes made possible patenting and licensing of discoveries, resulting from publically funded research. In addition, the Orphan Drug Act provided generous tax credits and funding to companies and labs making orphan (genetic or rare) diseases discoveries (Vallas et al., 2011).

The trend towards stronger protection of IPRs as a better incentive to innovation ‘… has extended from developed to developing countries, affecting even pharmaceutical and medical devices where, for several decades, many developing countries had imposed restrictions on patenting or simply refused to allow it’ (ibid.: 808). The Uruguay Round of the General Agreement of Tariffs and Trade (GATT) that led to the 1994 agreement on trade-related aspects of intellectual property rights (TRIPS) was the main mechanism for formalizing this extension. TRIPS can be seen as ‘… one of the most important neo-liberal developments in global economic regulation’ (Tyfield, 2010: 60). It required the standardization of Intellectual Property (IP) law among all World Trade Organization (WTO) members by 1 January 2005. As Westerhaus and Castro (2006: 1230) point out, this raised the immediate concern that ‘… the TRIPS agreement would constrain the protection of public health in low-and-middle income countries’. Indeed, TRIPS would force developing countries to accept extension of patents to 20 years, restriction of compulsory licensing conditions and convergence of criteria for non-obviousness and utility testing (Forero - Pineda, 2006: 813). To avoid major health crisis, on 14 November 2001, WTO delegates gathered in Doha, Qatar, issuing the so-called Doha Declaration (2001) according to which the least developed countries were not obliged to implement TRIPS for pharmaceuticals until 1 January 2016 and had the option of compulsory licensing of drugs (Westerhaus and Castro, 2006). Notwithstanding this Declaration, WTO rules have failed to improve global health. Developing countries such as Brazil which introduced regulations for the grant of compulsory licences were accused by developed countries such as the United States (US) for violation of TRIPS. Other developing countries such as South Africa which implemented TRIPS-compatible measures were legally challenged by multinational companies (Correa and Matthews, 2011).

Within the context of globalizing neoliberal capitalism and in the name of profit incentives for risky and long-term investments in innovation, the above neoliberal changes in the global regime of IPRs had negative impact on pharmaceutical products of developing countries with crucial consequences for the poor (Ryan, 2009). Drugs have become more expensive as a consequence of courts’ enforcement of TRIPS (Mèdecins San Frontiéres, 2011). The restriction of reverse engineering of drugs under patents on the one hand and the inevitable cost of essential medicines (i.e., medicines which satisfy core health needs of the majority of population) on the other hand brought several developing countries, including Brazil and India, close to health crisis (Correa and Matthews, 2011; Shishir et al., 2010).

The negative consequences of TRIPS for global health are not only an issue for international politics to address but also an issue for global ethics: profit incentives of innovation are in tension with the idea of justice. Certainly, as Buchanan et al. (2009: 309) remind us ‘[t]heorising about justice is notoriously afflicted … with both disagreement and uncertainty’. Nevertheless, within specific traditions of justice such as egalitarianism, there seems to be convergence on the belief that what might be called extreme disadvantage or deprivation is unjust at least when it is a consequence of brute luck and thus morally undeserved. For improving the lives of extremely disadvantaged or deprived people, technological innovation is crucial (Juma et al., 2001). This is not only because novel products and processes can eliminate the impact of brute luck and reduce unjust advantages that some people enjoy (Papaioannou, 2011) but also because they can empower people and contribute to equalizing social relations. As Anderson (1999: 288–89) points out ‘[t]he proper negative aim of egalitarian justice is … to end oppression, which by definition is socially imposed. It’s proper positive aim is … to create a community in which people stand in relations of equality to others’. Some innovations, for example, new drugs and cell phones, have the potential to achieve (or at least contribute towards achieving) both the negative and positive aims of egalitarian justice (Buchanan et al., 2009).

Notwithstanding the justice potential of these innovations, in today’s globalizing neoliberal capitalism, it can be safely predicted that they are unlikely to succeed in ending oppression and equalizing social relations. The fundamental problem is that their generation and distribution are extrinsically incentivized by profits. Profit incentives for innovation not only reward the fortunate and the talented, but also express unequal respect and concern for all citizens. This is because they overemphasize the role of individual innovators in improving the position of extremely disadvantaged or deprived. Some liberal egalitarians accept that inequality in terms of rewards can be justified provided it benefits the worst off. For example, Rawlsian thinkers (Beitz, 2008; Pogge, 2002) apply the so-called ‘difference principle’ to profit incentives mechanism of the basic structure of society. Therefore, they explicitly endorse neoliberal institutions like IPRs in order to supposedly boost innovation in areas such as global health.

It might be said that there are three important objections to Rawlsians’ endorsement of profit incentives for innovation and development. The first one is philosophical; it has been raised by Cohen who argues that

… the idea that an inequality is justified if, through the familiar incentive mechanism, it benefits the badly off is more problematic than Rawlsians suppose; that (at least) when the incentive consideration is isolated from all relevance to desert or entitlement, it generates an argument for inequality that requires a model society in breach of an elementary condition of community. (Cohen, 2008: 32)

This elementary condition of community is about ties of friendship and mutual trust. According to Rawls (1999: 104), ‘[t]he generation of feelings of friendship and mutual trust tends to reinforce the scheme of co-operation’. However, profit incentives for technological innovation tend to destroy cooperation because, as Cohen (2008: 45) puts it, they do not ‘… supply “a public basis in the light of which citizens can justify to one another their common institutions” and that the justification is therefore incompatible with what Rawls calls “ties of civic friendship”’. When innovators endorse the incentive argument they accept an unequal society where interpersonal relations lack communal character.

The second objection to Rawlsians’ endorsement of profit incentives for innovation derives from the empirical fact that not all innovators are the same in terms of motivations for introducing novel products and processes. Only some innovators are extrinsically motivated by financial profits. As early research by Riggs and Hippel (1993) indicates, scientists only seek recognition or reward in the sense of scientific accomplishment. Their demands for recognition are mainly addressed to their peers and society. This implies intrinsic or reputational motivations of scientists for innovation. In contrast, industrial users and manufacturers of scientific innovations are extrinsically motivated by rewards in the form of financial profit. Their concern is to maximize profit through the market-based diffusion of novel products and services.

The third objection to Rawlsians is also empirical and it has been raised by evolutionary economists, including Dosi et al. (2006), who demonstrate that incentives such as IPRs have sometimes the opposite effect: they discourage innovation. This is mainly because of the so-called ‘tragedy of anti-commons’, that is when

… the IP regime gives too many subjects the right to exclude others from using fragmented and overlapping pieces of knowledge with no one having ultimately the effective privilege of use … the proliferation of patents might turn out to have the effect of discouraging innovation. (ibid., 2006: 1117)

One example here is the patentability of genes that can result in substantial delays and risks associated with research activities. Such activities can no longer be undertaken by small biotech companies and/or laboratories if they have to pay royalties in order to access basic ‘upstream’ knowledge (Heller and Eisenberg, 1998; Rai, 2001). As Coriat and Orsi (2002) point out, recent research in the field of innovation has established that the generous granting of patents and tightening of IPR regimes can hinder the innovation process. In the case of health innovation for the poor, patents ‘… do not necessarily create financial incentives for the development of desperately needed drugs, such as a malaria vaccine, in poor countries’ (Westerhaus and Castro, 2006: 1232). On the contrary, as Light and Lexchin (2012) demonstrate, a number of big pharmaceutical companies appear to have a hidden business model for pharmaceutical research that depends on exploiting government protections against the normal free market competition.

III Marx’s Needs-based Approach versus Sen’s Capabilities-based Approach

The current debate on the tension between profit incentives and social justice appears to be deadlocked. In the areas of innovation and development, egalitarian theorists (Cozzens, 2007; Cozzens and Kaplinsky, 2009; Srinivas and Sutz, 2008; Sutz and Arocena, 2006; Wetmore, 2007; Woodhouse and Sarewitz, 2007) argue for proactive equality or pro-poor innovation without solving this tension. Therefore, in order to unlock the current debate, we might draw on more fundamental approaches, that is, Marx and Sen.

1 Marx

Marx is not a contemporary thinker but his view of incentives, presented in his 1875 Critique of the Gotha Programme, is relevant to the current debate. Although the question of whether he condemns capitalism in general and capitalist innovation in particular as unjust remains open (Geras, 1989; Husami, 1980; Kain, 1991; Lukes, 1987; Wood, 1980), one might follow Buchanan (1982) in insisting that there is a Marxian approach to justice focused on each society’s mode of production. The latter is not separated from the process of distribution. This is the reason why Marx asks: ‘What is “a fair distribution”? Do not the bourgeois assert that the present-day distribution is fair? And is it not, in fact, the only “fair” distribution on the basis of the present-day mode of production’ (Marx, 2000a: 612).

Marx’s position is that capitalist distribution is consistent with capitalist production. This does not imply that capitalism is morally acceptable. Capitalism is a dialectical system of relations that, on the one hand, is consistent with the mode of production based on private ownership of productive forces and on the other hand is exploitative. To put it another way, no other form of distribution can be possible on the basis of capitalist production (Kain, 1991). Capitalist relations of exploitation create circumstances of scarcity that lead to the generation of economic and social divisions. The most fundamental of these divisions is the social division of labour. Marx conceives labour as the basis of development of any society (Negri, 1992). For this reason, Marx considers the division of labour to be historically significant for understanding capitalist mode of production. As Avineri (1970: 122) points out, Marx ‘… maintains the division of labour creates different capacities in different human individuals … Not only does that division of labour separate spiritual from physical labour … it also destroys man’s capacity to develop towards universal production’. The lack of universal production results in the emergence of class antagonism. This antagonism is primarily for scarce resources. ‘Man’s universe is reduced to his endeavour to secure for himself the physical means of his subsistence’ (ibid.: 123).

The reduction of human beings into reproduction of their material existence is against their essence as species–beings. For Marx (1975: 327), ‘Man is a species–being, not only because he practically and theoretically makes the species—both his own and those of other things—his object but also … because he looks upon himself as a universal and therefore free being’. This universality and freedom are impossible within capitalist relations of production. Such social relations are divisive, separating individuals and making it impossible for them to form a community within which the human essence can be realized. In this sense, it might be said that even if Marx did not primarily criticize capitalism for its unjust distribution, he did think that the elimination of social divisions and scarcity conditions requires radical transition to a new society. More importantly, he considered this transition to be inevitable because, in his theory, social divisions and scarcity eventually stagnate the further expansion of productive forces which result essential human needs to remain unfulfilled. For Marx, the emergence of a new society is a historical necessity in order for human beings to satisfy their material needs.

Distribution in the new society ought to be governed by principles of justice. These principles are embodied in Marx’s theory of exploitation in Capital and his later account of distribution in Critique of the Gotha Programme. They constitute the axiological dimension of his materialist theory and therefore should not be dismissed as inconsistent with his early writings. Marx’s principles of justice are not developed as formal philosophical principles in abstraction from a concrete historical context (Wood, 1980). For Marx, distributive justice as such depends on the particular mode of production of which it is a part (ibid.). As he says, ‘[a]ny distribution whatever of the means of consumption is only consequence of the distribution of the conditions of production themselves’ (Marx, 2000a: 616). Thus, the particular mode of production of a communist society that just emerges from a capitalist society implies different principles of distributive justice from those of a fully emergent communist society. According to Marx, in the early phase,

What we have to deal with … is a communist society, not as it has developed on its own foundations, but, on the contrary, just as it emerges from capitalist society; which is thus in every respect, economically, morally and intellectually, still stamped with the birthmarks of the old society from whose womb it emerges. (Marx, 2000a: 614)

Marx’s dialectical approach to radical change implies that in an emerging new society, there still exist division of labour and social separations between individuals. What does not exist is the high level of exploitation in the labour process. The amount of unpaid surplus labour that is pumped out of direct producers is substantially decreased. To put it another way, in an emerging new society, there is less expropriation of the product of social cooperation.

It might be argued that the most important problem of distribution in this early phase of radical change is to maintain incentives for further expansion of productive forces so that material abundance and equal social relations can be progressively achieved. Although Marx is not clear about whether the transition from this early phase to the higher phase is caused by historical materialism, we have to assume so. Otherwise, we would have to accept Moore’s argument that Marx contradicts his principles of historical materialism, providing moral (instead of scientific) reasons for that transition (Moore, 1980). If our assumption is correct, then the question that arises is this: How can technological innovation be incentivized to continue ‘revolutionising the instruments of production’ in conditions of justice appropriate to early phase of the new society? As an answer to this question, Marx proposes the so-called ‘contribution principle’ that can be formulated as follows:

Distribution in (Phase I) the New Society Ought to be from Society to Each According to His/Her Contribution.

This principle of justice incentivizes individual producers by recognizing the value of their work and by distributing back to them the resources they invested in technological innovation regardless of the market success of their product. This is in essence a principle of ‘justice as fair exchange’ and is compatible with ideas of desert. It suggests that individual producers ought to be rewarded in proportion to their contribution. From this it follows, individuals who are unable to contribute or prefer leisure ought to receive less than those who are able to contribute and prefer to put greater work effort. Desert is attached to effort and not necessarily to achievement. However, it is an extrinsic incentive of innovation in phase I of the new society. As Marx (2000a: 614) says, ‘… the individual producer receives back from society—after deductions have been made—exactly what he gives to it’. Deductions of the so-called ‘proceeds of labour’ not only ‘cover for replacement of the means of production’ and ‘reserve or insurance funds to provide against accidents’ but also ‘for expansion of production’ (ibid.: 613). The latter might be thought as a deduction for the sake of technological innovation and/or an incentive for individual producers. Marx calculates each individual producer’s desert in terms of his/ her hours of work, that is, the individual labour time. This implies that producers exchange their amount of labour in the form of innovations for an equal amount of labour in the form of other resources.

It might be said that although Marx’s contribution principle reduces the tension between profit incentives and justice, it does not resolve it. Talented producers might spend the same individual labour time as untalented producers but contribute more innovations to society. Thus, when the former takes home just pay (according to the contribution principle), they still innovate less than they otherwise might. As a result of it, the expansion of productive forces slows down and the transition to phase II of the new society is delayed. Marx recognizes that individuals are unequal in terms of their endowments and productive capacity. Therefore, he argues that the application of an equal right of fair distribution to unequal individual producers is in fact unjust. Notwithstanding, he insists that this is an inevitable defect of phase I of the new society. Marx clearly believes that in phase II of the new society there will be no unresolved issues of distributive justice. This is because there will be no separations emanating from the social division of labour (social division of labour will be replaced by social cooperation that leads to universal humanity) or circumstances of scarcity based on exploitative relations of production. In Marx’s hierarchical theory of justice, the principle that will govern distribution in phase II of the new society is the so-called ‘needs principle’. This principle can be formulated as follows:

Distribution in (Phase II) the New Society Ought to be from Each According to His/Her Ability to Each According to His/Her Needs.

The preconditions of the needs principle are both material and social. Material preconditions include further expansion of productive forces; and social preconditions include elimination of the social division of labour. These preconditions can be thought as essential foundations of equal social relations. But are they realistic? The preconditions of the needs principle can only be achieved through revolutionary change of the capitalist mode of production. Indeed, this may not be a realistic scenario in the 21st century. In any case, in phase II of the new society, Marx assumes complete and irreversible break from the old society. The new society’s just conditions of production lead to just distribution governed by the needs principle. The question is whether this advanced principle eventually resolves the incentives–justice tension.

It might be argued that the answer is in the positive, provided that one takes on board the preconditions of the needs principle. One of these preconditions is social cooperation. Cooperation replaces the social division of labour, promoting non-exploitative social relations and therefore universality in production. Innovation depends on social cooperation of individuals with different (and/or complementary) abilities and talents. The only incentive here is achieving relationships of mutuality and universality. There is no antagonism for profit. The capitalist mechanism of profit incentives no longer exists. Therefore, individuals can only be intrinsically motivated to innovate, satisfying human needs. The needs principle extends social cooperation and mutuality from production to distribution. The relationship between the two processes ceases to be antinomic. Satisfying human needs becomes the ultimate objective of cooperative innovation. This is consistent with social justice. Talented producers do not innovate alone but in cooperation with others. Thus, when the former takes home just pay (according to the needs principle), they innovate more for satisfying human needs than they otherwise might and as a result, development of productive forces is in accordance with human needs. In Marx’s theory, essential human needs are universalizable. In other words, they are so basic needs that all human beings have them in common.

Marx’s resolution of the incentives–justice tension through social cooperation presupposes radical change of social relations of production. In his theory, this change can only be achieved through revolutionary public action. For Marx (2000b: 246), ‘[t]he history all hitherto existing society is the history of class struggles’. This implies that conflict is in the heart of Marxian public action for change. Capitalism is inherently unstable because of social conflict (Holloway, 1992). Change is inevitable in the stage of total contradiction between material productive forces and existing social relations of production. Whether this Marxian prediction has been refuted is a different discussion altogether. What is important to keep in mind is that Marx provides the vision of a new society in which the incentives–justice tension is replaced by social cooperation.

2 Sen

Sen is a contemporary thinker who has been preoccupied with Marx’s economic and political writings for a long time. Thus, it is not surprising that he clearly appreciates the difficulty of resolving the fundamental tension between profit incentives and distributive justice. In his view, ‘Marx saw no escape from it in the early phase of socialism …’ (Sen, 1973: 94). Indeed, Sen argues that Marx’s sharp distinction between desert-based and needs-based principles of distributive justice aims at dealing with the problem of profit incentives in different historical phases of socialist development. However, he stresses that Marx’s acceptance of the ultimate superiority of the needs principle does not succeed in resolving the tension between profit incentives and justice. By drawing on historical experiences of the early Soviet and Chinese socialist systems of rewards and incentive payments, Sen argues that needs cannot be objectively defined, let alone be converted into well-being and social welfare. In addition, needs imply material incentives although in the case of China, there was a move towards reliance on ‘non-material incentives’ (ibid.: 96).

Although Sen identifies two serious defects of Marx’s needs-based approach to distributive justice (i.e., lack of the end of well-being and emphasis on materialism), he fails to acknowledge the importance of social cooperation as a fundamental precondition of the application of the needs principle of distribution. Without social cooperation in place, the application of Marx’s needs principle of distribution is impossible and therefore the incentives–justice tension remains unresolved. Sen’s critique of Marx aims at introducing an alternative approach to the incentives–justice tension. That is the so-called capability approach is focused on distribution of equal capabilities. Sen (1999: 18) insists that persons should be equally capable to ‘… lead the kind of life they value—and have reason to value’. This means that persons should have the equal freedom to choose different functionings. The distinction between functionings and capabilities is thus a distinction between achievements or outcomes and capacities to achieve such functionings (Walby, 2012). Capability is freedom or the ability to achieve (Sen, 2009).

Sen stresses that his capability approach shares the same point of departure with that of Marx. However, the way that the former proposes to resolve the tension between profit incentives and justice is different from the latter. First of all, Sen focuses on individual people and not on collectivities as Marx does. Although Sen does not rule out the possibility of thinking about capabilities of groups, in his book The Idea of Justice he clearly argues that ‘[c]apabilities are seen primarily as attributes of people, not of collectivities such as communities’ (Sen, 2009: 244). This argument brings Sen close to methodological individualism despite the fact that his capability approach assumes social influences both in terms of what individuals value and what influences operate on their values (ibid.). This assumption sends out the message that it is important to appreciate ‘… the deep and pervasive influence of society on our “thinking, choosing and doing”’. However, it does not necessarily put social relations in the centre of Sen’s capability approach. In this sense, the latter is fundamentally different from the Marxian approach to profit incentives and justice.

Second, and not surprisingly, Sen defines incentives in terms of efficiency. He argues that promotion of equality itself along with other objectives raises issues of efficiency that need to be addressed. This argument implies that Sen accepts an Okunian trade-off between equality and efficiency, namely; achieving greater equality entails sacrificing efficiency (Okun, 1975). Although this trade -off is not empirically verified (Kenworthy, 1995), Sen (1992: 140) points out that ‘[t]he incentive argument, applied to individuals, deals with the need to provide motivation and encouragement to individuals so that their choices and actions are conducive to the promotion of overall objectives. These goals could be purely aggregative, or include distributive goals as well.’

As is well known, the incentives argument has been often used by neoliberals to dismiss egalitarian claims of distributive justice as hinders of innovation and economic growth. Inequality as such may be an important incentive for encouraging enterprise and development of new products and processes. Sen accepts that ‘[a]ny pure transfer—the redistribution of income or the free provision of a public service—can potentially have effect on the incentives mechanism of the economy’ (Sen, 1999: 130). This line of argument has also been used by Rawls (1972) and Nozick (1974) to defend principles of distributive justice (e.g., the difference principle and the principle of acquisition) which maintain or reinforce individual incentives for innovation and economic development. Nevertheless, Sen clearly believes that although the profit incentives–justice tension is hard to overcome completely, ‘[t]he focus on functionings and capabilities … tends to reduce the difficulties of incentive comparability’ (Sen, 1999: 132). This means that people such as innovators might choose not to contribute to deprivation of basic capabilities for the sake of high financial rewards. According to Sen (ibid.) ‘… people may typically be reluctant to refuse education, foster influences or cultivate undernourishment on purely tactical grounds. The priorities of reasoning and choice tend to militate against deliberately promoting these elementary deprivations.’ Of course, Sen may be right in arguing so but he overlooks that elementary deprivations can also be promoted through innovations generated on non-tactical grounds.

Sen’s most powerful argument against material incentives is that people, including innovators, ‘… tend to pay more attention to functionings and capabilities achieved … than to just earning money …’ (ibid.: 133). This implies that, in his theory, achievement of functionings and capabilities becomes the most important incentive for innovation. Material incentives such as money cannot be easily converted by every person into well-being and therefore cease to be the main incentive for innovation. Indeed, as Walby (2012: 102) observes, ‘Sen wishes to go beyond money as an end in itself, to valuing human life, and takes as his route to this the path of capabilities, opportunities and choice.’ In Sen’s non-materialist theory, it seems that when innovative people are given the opportunity to achieve the functionings and capabilities they value, they tend to innovate more than otherwise and as a result not only economic development but also human development is fast and poor people are better off than they are when the activity of innovation is incentivized with money.

It might be argued that Sen’s replacement of material incentives with functionings and capabilities for the sake of freedom does not fully resolve the incentives–justice tension. First of all, innovative people might not necessarily introduce pro-poor products and processes. Especially the choices of innovators in the north might be much more ambitious than the choices of innovators in the south. As has been argued elsewhere (Kaplinsky et al., 2009), there is a growing innovation gap between high-income and low-income economies. In the context of the latter, one might identify less ambitious ‘below the radar’ innovations which promote the ability of poor people to achieve different functionings from those of rich people. But even within each different economic and social camp, people have different perceptions of good life. Therefore, demand for innovations varies in terms of quality and quantity. Second, equalization of functionings and capabilities above the baseline that Sen calls ‘capability deprivation’ might disincentivize those innovators who choose to achieve more and different (non-essential) functionings than others through development of new products and processes. Such products and processes are just means for each person to achieve what he/she values. Disincentivizing innovators might in turn have devastating impact on efficiency. Sen argues that ‘[t]here are good reasons, instead, for recording significant inequalities in capabilities, examining whether they can or cannot be justified by efficiency arguments’ (Sen, 1992: 147). Thus, he leaves open the possibility for efficiency-based inequalities above the baseline of ‘capability deprivation’. Sen appears to believe that there are two kinds of inequality. First, there is ‘good’ inequality that is efficiency based. Second, there is ‘bad’ inequality that is inefficiency-based. In Sen’s theory, it seems that achievement of certain functionings above the capability baseline depends on efficiency.

In order to bring people above capability deprivation, public action is required. Sen pays particular attention to ‘… both the importance of agency (seeing people as agents rather than as patients) and the informational focus on capability deprivation (rather than only on income poverty)’ (Sen, 1999: 137). Agency is about acting and facilitating change. Achievements can be only judged in terms of what people value as free agents (Northover, 2012, 2014). In Sen’s theory, public action is not radical but consensual. People need to act together in order to reach an agreement about what should be included in the index of capabilities. On the basis of information about each person’s capabilities, people should also establish consensus about what public policy needs to be reformed in order for people to be brought above the baseline. Sen (1999: 141) argues that ‘… the making of public policy … has to give real priority to eliminating the capability deprivation …’. This implies that if agents agree that factors such as lack of innovation incentives entail capability deprivation then they might propose specific policy decisions to tackle the problem. In addition, they might put political pressure for state intervention in times of capability failure (Clark, 2006). Sen clearly stresses that ‘[t]he capability perspective does point to central relevance of the inequality of capabilities in the assessment of social disparities, but it does not, on its own, propose any formula for policy decisions’ (Sen, 2009: 232).

IV Implications for Innovation and Development

So far this article has argued that Marx and Sen propose different resolutions to the fundamental tension between profit incentives and justice. The former, through his needs-based approach, proposes social cooperation as a way of generating innovations for satisfying human needs. By contrast, the latter, through his capability-based approach, proposes achievement of functionings as a way of incentivizing innovations for well-being without compromising efficiency. The question that arises is what does each approach imply for innovation and development in today’s globalizing neoliberal capitalism? Does either Marx or Sen lead us anywhere from a policy formulation and implementation perspective? After all, a theory is only as good as its implementation (or implementability).¹

1 Implications of the Marxian Approach

To begin with the Marxian approach, implications concern the possibility of non-profit motivated innovators as fundamental drivers of a radical system of social relations based on social cooperation and not on private property and the social division of labour. This possibility excludes neoliberal IPR incentives in areas such as health and other innovation-intensive sectors. Instead of profit rewards through regulatory regimes such as the Bayh–Dole Act and the Orphan Drug Act, the Marxian approach approves of the norms of an ‘open science’, that is, a system of knowledge sharing through conferences and journal publications (Merton, 1973) that does not distinguish between basic and applied research. In a non-profit system, research as such is driven by scientific interest, curiosity and joy. Motivation for creativity and innovation is intrinsic, boosted by mechanisms of social recognition and reputation. This can enable global partnerships which can bring together researchers from different countries to overcome scientific, ethical and practical challenges to innovating for the poor. Interactive learning is encouraged through social cooperation and allocation of public funds to research. The latter can take the form of prizes and public awards and targeted funding. The objective of innovation is no longer increasing profits through reduction of labour-power value² but satisfying human needs (and primarily the needs of the poor and marginalized people).

Certainly, human needs are different in different historical periods. In this sense, needs are dynamic and their content changes in relation to technological and economic development. In his Economic and Philosophical Manuscripts of 1844, Marx recognized that ‘… it is precisely because total production rises that needs, desires and claims also increase in the same measure as production rises; relative poverty can therefore grow while absolute diminishes’ (Marx, 1975: 290). In every successive stage of technological and economic development, there is creation of more sophisticated needs. In the 21st century, the world experiences unprecedented production rises because of technological innovation. This century is widely recognized among economists and political scientists as the age of plenty in terms of productive forces and capacities. There is both technological and material abundance (Juma, 2013). Therefore, global poverty and injustice are shameful.

The Marxian needs principle does not only demand justice in the generation of knowledge and innovation but also in their diffusion to ameliorate extreme disadvantage or deprivation. Thus, for example, many infectious diseases can no longer be neglected because of poor market size and inadequate purchasing power of people in low income countries. The needs principle demands the establishment of health systems that can redistribute resources from able innovators to needy patients regardless of IP and the market size. Empirical cases of this kind of health systems are difficult to find within today’s neoliberal capitalism. This does not imply that the Marxian needs principle leads us nowhere from a policy perspective. Despite the forces of neoliberal globalization, there are governments which engage in radical reformulation of policies towards achieving social justice. The single health system in Brazil and the integrated health system in Cuba are two examples of such policies (Papaioannou, 2011). In both countries, health systems deal with the tension between profit incentives and social justice through developing social relations of cooperation and taking essential human needs seriously (Gárdenas, 2009; Sutz and Arocena, 2006).

The implementation (or implementability) of the needs principle in innovation and development can also be seen in a limited number of grassroots innovation movements, for example, the Honey Bee Network (HBN) in India and the Social Technologies Network (RTS) in Brazil, where the generation and diffusion of knowledge are driven by basic needs of local communities. Openness, cooperation and social justice are fundamental principles, guiding grassroots innovation movements. This implies a normative and political agenda, rejecting control and hierarchies in the generation of innovative products and promoting the creativity of both producers and consumers (Bhaduri and Hemant, 2009; Smith et al., 2012).

Although these cases by no means suggest that a fundamental restructuring of the current mode of global production is likely, they demonstrate that there are alternatives to neoliberal processes of profit-incentivized innovation. Such alternatives are not only socially just but also potentially disruptive of global innovation and development hierarchies (Chataway et al., 2013; Kaplinsky et al., 2009; Srinivas and Sutch, 2008). The active involvement of the third sector, for example, non-governmental organizations (NGOs) and other civil society groups (CSGs) is crucial for promoting such alternatives from below. Given that the top-down neoliberal model is in crisis for failing to meet basic needs of the poor, alternative models of innovation and development might scale up. As Harvey (2011: 216) points out ‘[c]rises are moments of paradox and possibility out of which all manner of alternatives, including socialist and anti-capitalist ones, can spring’. In fact, socialist and anti-capitalist alternatives can range from ‘class-less co-operatives’ to ‘liberation theology’ movements, depending on social context and region, for example, Latin America, Africa, etc. (Dawsey, 2003; Dodson, 1979). What is important is the extent to which such alternatives promote new models of innovation and development that can meet basic needs through social cooperation.

2 Implications of the Senian Approach

Moving on to the Senian approach, implications concern the possibility of capability motivated innovators as fundamental drivers of a society that is based on the achievement of basic functionings. This possibility does not exclude neoliberal IPR incentives in areas such as health. In Sen’s theory, it seems that as long as people are brought above the baseline of capability deprivation, people including innovators, can use different means for achieving non-essential functionings. Given Sen’s focus on freedom to achieve valuable functionings, his concern is not just primarily capitalist private property relations such as IPRs but to what extent these relations enable people achieving the different functionings they value. The objective of innovation is not to increase profit through IPRs or satisfy human needs but to make people capable of achieving certain functionings. In this sense, it might be said that Sen puts innovation and development in the service of each individual’s freedom to achieve valuable functionings. In his book Development as Freedom (1999), he clearly argues that achievements in terms of technological innovation and economic development could never be good in the absence of individual freedom. However, freedom of innovators to restrict the commercial use of some health innovations through IPRs might result in coercion of patients who are unable to purchase them in high prices. Even if patients are above the baseline of capability deprivation, they are likely to be disadvantaged.

It might be argued that the most crucial difference between the Marxian and the Senian approaches to the incentives–justice tension is their vision of social change. In the case of Marx, this vision is based on equalization of social relations, including relations in the generation and distribution of new products and processes. Innovation ought not to be incentivized by oppressive social relations such as IPRs but be based on social cooperation for satisfying essential human needs. In the case of Sen, the vision of social change is based on the equalization of capabilities in the generation and distribution of innovation. The problem, however, is that equal capabilities do not necessarily eliminate oppressive social relations. It might be maintained that within neoliberal capitalism even if people were equally capable to achieve valuable functionings, incentivizing innovation, the relations between them could still be unequal, oppressive and exploitative. Equality of capability does not necessarily threaten the actual practices of neoliberal capitalism and therefore it does not automatically imply equality of social relations. That is the reason why, for instance, in Sen’s theory IPRs cannot be completely eliminated as incentives for innovation.

In both the Marxian and the Senian approaches, social change, that either resolves or reduces the tension between profit incentives and social justice, depends on public action. This has implications for just innovation and development. In the case of Marx, revolutionary agency involves struggle for taking the means of innovative products and processes to social ownership, promoting social cooperation and gradual elimination of the social division of labour (Marx, 2000a). The conflictual aspect of Marxism is clear. The task of public action is not to achieve reforms at the level of policy but rather to transform radically the material conditions of society and the social relations founded upon these conditions.

In the Senian approach, instead of conflict, public action involves consensus-building between free individual agents. To put it another way, paraphrasing Young (2001), if Marx implies that people who care about promoting justice in innovation and development should engage in radical oppositional activity to neoliberal capitalism, Sen implies that people should come to agreement with those who accept existing power structures. Sen places particular importance on agency freedom. According to him, this is ‘… one’s ability to promote goals that one has reasons to promote’ (Sen, 1992: 60). Accordingly, he distinguishes between agency freedom and well-being freedom. The latter ‘… is one’s freedom to achieve those things that are constitutive of one’s well-being’ (ibid.: 57). Agency freedom to promote innovation for equalizing capabilities can bring together different people who are prepared to accept decline in their well-being for the sake of achieving their goal. These people can influence and/or reform neoliberal public policy without transforming its capitalist material conditions and social foundations. In Sen’s theory, public policy is an important instrument of freedom. According to him ‘… people would choose to avoid epidemics, pestilence, famines, chronic hunger. The elimination of these unloved things through public policy aimed at giving people what they would want, can be seen as an enhancement of people’s real freedom’ (ibid.: 66).

V Conclusion

This article has sought to evaluate Marx’s and Sen’s approaches to the tension between profit incentives and social justice. In addition, it has examined their implications for innovation and development in today’s globalizing neoliberal capitalism. The latter constitutes a major determinant of inequality and underdevelopment in the 21st century. Thus, any resolution to the incentives–justice tension means that there is alternative to neoliberal capitalism.

The argument of the article has been that Marx’s needs-based approach is relational and replaces profit incentives for innovation with social cooperation. The latter provides motivation and encouragement to individual producers so that they can develop partnerships for new knowledge generation. Therefore, social justice is achieved through innovation and development oriented towards satisfying essential needs. If Marx puts innovation and development in the service of freedom to satisfy essential needs, Sen puts innovation and development in the service of freedom to achieve valuable individual functionings. Sen’s capabilities-based approach is informational; it replaces profit incentives for innovation with the ability of each individual to achieve valuable functionings. The latter triggers the development of new products and services which can enhance capabilities.

In both approaches, innovation and development are instruments for achieving either equalization of social relations (Marx) or equalization of capabilities (Sen). Equalization of social relations through a needs-based innovation and development can lead to elimination of power and oppression in the sphere of production and distribution of novel goods and services. This implies major social change against neoliberal capitalist practices and emergence of alternative models of innovation and development. By contrast, equalization of capabilities through a capabilities-based innovation and development can lead to achievement of basic individual functionings without eliminating unequal social relations of power, oppression and exploitation. This implies reform of neoliberal policies so that the current models of innovation and development can become more conducive to increasing individuals’ capabilities.

No matter how influential the Senian approach to agency is for public policy, it might be concluded that complete resolution to the incentives–justice tension can only be based on the Marxian approach to radical change of the current mode of production and its constituted social relations. Although some might regard this radicalism as utopian in the 21st century, innovation and development should not abandon the Marxian vision of social change and the set of principles it offers for social distributive justice. After all, the crisis of globalizing neoliberal capitalism is endemic, generating anti-capitalist movements and new models of innovation. The Marxian vision of social change cannot materialize in our life time but certainly can inspire these new trends with principles of equity, openness and cooperation. Although, as Harvey (2011: 226–27) says, ‘… there is no resolute and sufficiently unified anti-capitalist movement that can adequately challenge the reproduction of the capitalist class and the perpetuation of its power on the world stage … [t]here is, however, a vague sense that … another world [is] possible’. Outlining alternatives of innovation and development based on non-profit incentives is consistent with this possibility. It is not overoptimistic to expect such alternatives to scale up over the next decades given the crisis of neoliberal capitalism. To conclude this article in the same manner, we started it with Piketty, the following might be said: if it is true that ‘The history of inequality is shaped by the way economic, social and political actors view what is just and what is not …’ (Piketty, 2014: 20), then it must be also true that innovation and development can become more equal through radical public action that eliminates profit incentives for the sake of social justice.

Footnotes

Acknowledgements

I am grateful to Alex Koutsogiannis of the politics department of the University of Crete and two anonymous reviewers of Progress in Development Studies for their insightful comments and suggestions on early drafts of this article.

Notes

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