Bush pronounces that yes, they can “cost less” than free labor. It’s not 100% clear what he means by this. But suppose that there was a large difference between the cost of an average slave and his productivity. Then it would pay current slave owners to sell and resell their slaves at higher prices until equilibrium were reached, and the discounted capitalized value of a slave would equal his productivity over his lifetime.
If, on the other hand, free workers demanded wages than were unjustified by their marginal value product, the competition between them would bid down the prices.
The purchase of a slave would yield no more profit to the owner than the hiring of a free man.
A slave regime might, however, enable the profession of slave hunters who would roam the realm profitably for themselves enslaving and selling free people.
The theoretical inefficiency of slave labor lies in the lack of incentives to the slave to improve his skills and accumulate his human capital: knowledge and experience with various tech and compatibility with complex capital goods. Bush himself writes that “slaves had their own devices for remedying the gross imbalance of advantage created by the slave-master relationship, notably feigned stupidity, working within limits and only to order, abiding by custom, malingering, petty theft, and so on.” (17)
A free man is far more likely to “feign intelligence” than stupidity in order to convince an employer to hire him, as is obvious from every self-glorifying resume!
Bush replies by pointing out that “masters could combat this array of negativity by dispensing rewards…” But insofar as there were rewards, the slave-based economy was no longer pure but blessed with some aspects of tax serfdom, a far superior system.
Thus, Mises argues that we the liberals
attack involuntary servitude, not in spite of the fact that it is advantageous to the “masters,” but because we are convinced that, in the last analysis, it hurts the interests of all members of human society, including the “masters.”
If mankind had adhered to the practice of keeping the whole or even a part of the labor force in bondage, the magnificent economic developments of the last hundred and fifty years would not have been possible. We would have no railroads, no automobiles, no airplanes, no steamships, no electric light and power, no chemical industry, just as the ancient Greeks and Romans, with all their genius, were without these things. (Liberalism, 22)