Suppose you and I live in adjacent apartments. Now consider the following ways in which we might satisfy two of our needs: food and a clean habitat.
In scenario B, you pay me to cook your meals, and I pay you to clean my bathroom.
In scenario C, I pay you to cook for me and clean my bathroom, and you pay me to cook your meals and clean your bathroom… What might make each of these three scenarios desirable?
The advantage of scenario A is that each of us has maximal control over our labor and our lives. I cook and clean when I choose, I eat just what I like, and I will do just enough cleaning to ensure that the bathroom meets my standards of cleanliness.
The advantage of scenario B is that it might be more efficient, if each of us has what economists call “comparative advantage” in one of the tasks. If I’m a better cook, but you’re better at cleaning, then each of us ends up with overall better meals and cleaner bathrooms than we would have had otherwise. The downside, however, is that each of us has now partly alienated our labor to some degree. I have to monitor you to make sure that you’re doing a complete job of cleaning, and you can boss me around if you dislike my food or I don’t have dinner ready on time. What’s more, the only way for this exchange to be fair to both of us is in the unlikely event that you enjoy cleaning the bathroom just as much as I like cooking. In the more likely case that both of us find cleaning much less pleasant than cooking, you get a raw deal.
Scenario C would seem to combine the worst elements of the other two scenarios. There is no efficiency gain, since we are both performing both tasks. And our labor is maximally alienated, since we are doing all our cooking and cleaning at someone else’s command rather than for ourselves.
What is really nice about this explanation, I think, is the clarity with which it brings out the trade-off between economic efficiency and alienation, and the existence of situations which are far from optimal in both dimensions.