Consumer surplus, the neoclassical theory of exploitation
There is an argument in classical political economy that employers exploit employees because all things that can be used to produce commodities, and the commodities themselves, are entirely the product of the labor of employees, therefore if the employers end up owning any things that can produce commodities, or consume commodities, without providing any labor, that can only because because they confiscate labor from employees, by paying their labor with a wage that allows the employees to buy commodities that took less labor to make than the ones they sold for their wages.
This argument has a very close equivalent in the rival approach of neoclassical Economics based on the concept of "consumer surplus":
Every commodity in "the markets" has both a price and an utility to potential buyers, including money and labor.
Participants in "the markets" buy a commodity if its utility to them is greater or equal to the utility of the money that the buyer has to pay for it (if the buyer has enough money).
In the case where the utility of a commodity than that of the money needed to cover its price, the gap measured in money between its price and the highest price that the buyer would be willing to pay is the "consumer surplus".
An alternative definition is that the "consumer surplus" is the gap measured in utility between the utility of the money that the buyer pays and the utility of the commodity the buyer gets.
Consider the example of a someone who has not been able to eat for many days and then being able to have a meal for $10: they might have been willing to pay $1,000 for that meal, and then $990 would be their "consumer surplus" in money terms.
The money definition and the utility definitions look similar but are very different because:
With the money definition the "consumer surplus" gain is purely notional, because the buyer does not actually get that money, but it is measured in a sort of objective unit like money, so it looks "real".
With the utility definition, the "consumer surplus" gain is actual, because the buyer does get that utility, but it is measured in a subjective unit like utility, so it looks "imaginary".
There is a beautiful illustration of the abuses of the concept of "consumer surplus" in the argument that the living standards, measured in utility, of working-class people are actually very high, thanks to the low price of web services:
“our use of search engines, email and other products like social media and digital maps should cost as much as $25,700 (£19,560) a year”
Given that is the typical after-tax income of a working-class person, web services would double their living standards, which is ridiculous.
The point is that when buying commodities like internet services the "consumer surplus" is not an actual gain in income for the buyer, even if the utility they gain is an actual gain in utility, and in any case the argument disregards the point that if web services did cost £19,560 a year not many working-class people would buy them: the "consumer surplus" is the gap with the maximum price that the buyer would be willing to pay.
Manifestly the "consumer surplus" happens in most transactions, because the case where someone buys something at a price that is the maximum they would be willing to pay is quite rare.
The concept of "consumer surplus" happens obviously and necessarily in employment: employers as a rule don't pay their employees the maximum wage that they would be willing to pay, because that is the wage at which they would be breaking even, making no profit.
The difference between the wage they pay to an employee and that which would make them break even is the "consumer surplus" of employers, and it has the important property that it is actual money income rather than a notional one as for the "consumer surplus" of the buyers of commodities for consumption. That is because instead of buying it to consume it and enjoy directly its utility, employers buy the labor ot employees to resell it for money, embedded in the commodities that are produced by the employees.
Therefore in neoclassical Economics the "consumer surplus" from buying the labor of employees, measured in money, that is the profit of employers, could be called "exploitation", but in neoclassical Economics buying low and selling high and profiting from the difference is regarded as the very aim of all participants in "the markets", rather than adding value by producing something, which happens, when it happens, only as a side effect of that aim.
