This post was submitted by Herman Daly on 6 May 2017
The capitalistic profit-maximizing rule of wage equal to marginal product of labor is only feasible under certain combinations of population and total productivity. Specifically, the production function must be such that, for the given population of workers, marginal product of labor must be equal to or greater than subsistence.
Historically this was not the case in the time of feudalism. Productivity was low and population was relatively large. Marginal product of labor would be less than subsistence if the whole population were to be employed and supported. The capitalist w = MPL rule would require starvation of part of the population. But under feudalism the laborer was paid the average product of labor, or some portion of APL greater than subsistence, leaving a surplus for the lord of the fiefdom. This allowed a larger population to survive than would the capitalist rule, and also allowed maximization of total product by employing labor all the way to where MPL = 0, not just to where it equaled subsistence. Feudalism had room for gleaners, capitalism does not. (See N. Georgescu-Roegen, "Economic Theory and Agrarian Economics", Oxford Economic Papers, 1960)
By contrast consider a modern capitalistic economy with highly automated and highly productive technology, and also a relatively large population. The total product of labor curve would rise almost vertically to a very high level and then rapidly level off becoming flat. Thus, MPL would fall from very high to 0 with only a minority of the population employed. Like in feudalism the solution (other than starvation) would be to pay the worker the APL, or some portion of it greater than subsistence. Only now, with very high total product and very high APL the "wage" could be much greater than subsistence for the given population (as long as it is not exceedingly large).
Universal basic income (UBI) is a way of paying a wage (income) determined by APL rather than capitalistic profit-maximizing MPL, as a way of adapting to new combinations of population and technical productivity of labor for which MPL would be less than subsistence. Automated post-capitalism may need to borrow this feature from feudalism, a feature that looks like a universal basic income.