(1) What is your opinion on intellectual property? (I expect some interesting answers to this one, especially from true anarchists, who surely can't be in favor of the status quo)
(2) What is the 'free market' case against corporations?
Please feel free to write the long and nuanced answer to either or both questions--I'll be reading it all (and asking questions).
JimmyJazz:(1) What is your opinion on intellectual property? (I expect some interesting answers to this one, especially from true anarchists, who surely can't be in favor of the status quo)
There is a thread about this subject at least once a month, if not more.
My answer is that there is no such thing as "intellectual property". Patents, copyrights, and trademarks are all blatant monopolies.
At most, I think only 5% of the adult population would need to stop cooperating to have real change.
1. It's artificial scarcity, artificial monopoly, and is unjustifiable.
2. Corporations AS THEY ARE NOW, or corporations qua corporations. Yes, there is a difference.
Roderick Long, Kevin Carson, and many others have written the long & nuanced response to your second question. You might want to check out their blogs...
============================
David Z
"The issue is always the same, the government or the market. There is no third solution."
david_z:Roderick Long, Kevin Carson, and many others have written the long & nuanced response to your second question. You might want to check out their blogs...
Ugh.
Long and Carson conflate corporations with large firms.
An individual can incorporate. Long and Carson don't carefully make that distinction.
I'd also advise (if the OP wants an Austro-Libertarian/Ancap perspective) reading Stephan Kinsella, Walter Block-J.H. Huebert and Peter Klein's responses.
JimmyJazz:What is your opinion on intellectual property? (I expect some interesting answers to this one, especially from true anarchists, who surely can't be in favor of the status quo)
It is not property.
If you use the forum search, there are several large debate threads on it. Generally anarchists do not recognize it as property, minarchists and objectivists may sympathize with the status quo.
Jeffrey Tucker, the mises.org webmaster is a big fan of "Against Intellectual Monopoly" by Boldrine and Levine, and Stephan Kinsella, the author of "Against Intellectual Property" is one of the Mises Economics blog contributors. But not every Austrian is an anarchist, and not every LvMI associate is an anarchist or against IP.
liberty student:Generally anarchists do not recognize it as property, minarchists and objectivists may sympathize with the status quo.
That's what I would have guessed.
OK, so I guess I care more about the second one.
Knight_of_BAAWA:2. Corporations AS THEY ARE NOW, or corporations qua corporations. Yes, there is a difference.
I don't know what the 'free market' position is on either, or what the difference.
Thanks.
JimmyJazz:(2) What is the 'free market' case against corporations?
There isn't one, as they are voluntary associations.
Peace
When he speaks of corporations I think he is meaning it in the sense of large firms that are monopolies due to discriminatory state treatment.
JimmyJazz:I don't know what the 'free market' position is on either, or what the difference.
Knight_of_BAAWA:Corporations as they are now are creatures of the state.
Right, this is what I am referring to. This is a claim I've heard repeated often by libertarians, and I wonder what exactly they mean by it. I'm vaguely aware of a claim that Green/left-liberal types frequently make, which is that some landmark court case(s) extended the constitutional (thirteenth amendment, iirc) rights of a "person" to corporate entities. All the ramifications of this through American history, I'm not really sure. Anyway, I was wondering if this perspective is shared by free marketers, and also whether they have additional criticisms of the way the state treats corporations.
Basically, what things does the government do for corporations that you would have them stop doing tomorrow if you had your way. Besides those related to intellectual 'property'.
edit: besides bailouts and subsidies, obviously; those only go to certain corporations, even if a rather large number. It's also not a criticism of corporations per se, since some small American farmers also get state subsidies.
liberty student:It is not property. If you use the forum search, there are several large debate threads on it. Generally anarchists do not recognize it as property, minarchists and objectivists may sympathize with the status quo.
Interesting threads, I might add (though sometimes they go in circles). I started out with some pretty Randian views on copyright (though not patents), and following some of the threads and then my own mental conclusions convinced me of its folly.
Life and reality are neither logical nor illogical; they are simply given. But logic is the only tool available to man for the comprehension of both.—Ludwig von Mises
Life and reality are neither logical nor illogical; they are simply given. But logic is the only tool available to man for the comprehension of both.
JimmyJazz:Basically, what things does the government do for corporations that you would have them stop doing tomorrow if you had your way. Besides those related to intellectual 'property'. edit: besides bailouts and subsidies, obviously; those only go to certain corporations, even if a rather large number. It's also not a criticism of corporations per se, since some small American farmers also get state subsidies.
The government underwrites a legal regime which allows for corporate personhood.
It is important to understand corporations in the first place. A corporation as we understand it under the state, is a legal fiction (like IP) which allows for personhood for the business entity that is separate from its owners (shareholders) and shields those owners from being 100% accountable for the actions of the firm.
Typically, capitalists will incorporate when their business has become established, and they want to separate their personal finances and assets from the business. As a sole proprietor, an individual could be sued for his business dealings, and his non-business assets are fair game.
Corporate personhood creates "limited liability" which insulates the owner/shareholder personal non-business assets.
Now in a market economy a corporation is a reasonable natural development, for many small investors to pool their capital to start a larger enterprise. Even the notion of limited liability is a reasonable idea, provided that in a free market, all parties interacting with the corporation, agree that there are limits on compensation if they sell a bad product, or if they don't pay their bills. This may create a competitive disadvantage for a free market corporation, but we can't honestly know, so for now, I maintain they are possible and we'll have to wait and see if they could be viable.
So putting all of the anti-capitalist nonsense aside, I don't have a particular issue with corporations. I think the state is a much bigger problem, and I am trying to avoid working with the state. Avoiding corporations (if one is predisposed to do so) is a lot easier.
As far as the Long/Carson left libertarian deal, they have a hardon because they are anti-capitalists. Neither was able to make a particularly good argument against corporations, except to conflate them with large firms, which is not the case, as incorporation is not related to the size of the ownership group or capital base, but rather the necessity to protect non-business assets when taking excessive risks. Do corporations get subsidies? Sure. As you mentioned, so does everyone else.
One popular strawman of the Austrian, and particularly Misesian position (lovingly referred to by our unsuccessful friends as Misoids) is that austro-libertarians think that a free market will have the same institutions, but just no state. This is absolute nonsense. What I have seen, is that austro-libertarians are careful not to make false objective [sic] claims about free market outcomes on the level that our anti-capitalist and left anarchist friends tend to do.
Are you asking about the case against corporations qua corporations (limited liability, legal personhood, etc.), or large firms (which are generally corporations, but this is mostly irrelevant)? The two are often conflated.
Market anarchist, Linux geek, aspiring Perl hacker, and student of the neo-Aristotelians, the classical individualist anarchists, and the Austrian school.
Ah, should've known LS would beat me to the punch
liberty student: david_z:Roderick Long, Kevin Carson, and many others have written the long & nuanced response to your second question. You might want to check out their blogs... Ugh. Long and Carson conflate corporations with large firms.
Without turning this into another "Conflation" debate, I understand their thesis to be something like: large firms are a byproduct of the state, without which they would be significantly less prevalent.
IMO, the distinction between "corporation" and "large firms" is kind of a false dichotomy; yes there are small "corporations" and sole proprietorships which have incorporated, but they take advantage of the state subsidy which is corporate personhood (etc.) because it is to their advantage to exploit the system in such a manner. Without the state, many of these organizations would (or at least could) still survive as family businesses. Without the state, however, it is absolutely infuckingconceivable that an organization the size of Coca-Cola or General Motors could last very long at all.
Distilled, the LL argument is that sans State interference, organizations simply can't get that big, because bigness requires profits (and lots of them) the existence of which encourages potential competitors to get off their arses and open up shop across town, thus driving prices (and profits) down... etc.
But yes, Kinsella et. al have responded, and those are worthwhile rejoinders for anyone interested in the topic.
david_z:Without turning this into another "Conflation" debate, I understand their thesis to be something like: large firms are a byproduct of the state, without which they would be significantly less prevalent.
Right. Which is not what Jimmy Jazz asked about, and is not a critique of corporations (which they failed miserably at).
david_z:Without the state, however, it is absolutely infuckingconceivable that an organization the size of Coca-Cola or General Motors could last very long at all.
I think you're making a leap you cannot prove. To be able to make that claim, you would have to be able to prove you know the maximum possible size of a firm in a free market.
This is my problem with leftoids (yourself typically excluded). An assumption of knowledge they cannot have. It was my issue with the conflation debate, that with my very poor layman's knowledge, was immediately able to point out gaping holes in the reasoning of Long in particular.
david_z:Distilled, the LL argument is that sans State interference, organizations simply can't get that big, because bigness requires profits (and lots of them) the existence of which encourages potential competitors to get off their arses and open up shop across town, thus driving prices (and profits) down... etc.
Right. And it is based on a narrow understanding of commerce. When I purchase in bulk, I get discounts. When I have multiple outlets, I can rotate larger amounts of stock in and out faster than small firms that try to match my purchasing volume. And so on. I know there are costs (informational costs) to operating a large firm, but that alone is not a proof that those costs can't be lowered over time through efficiency. Such an argument (that informational costs are static, or cannot be tamed) flies in the face of what we know about competition.
The argument against corporations is that they receive massive direct and indirect State subsidies.
If I want to borrow $1M to start a business, I can't borrow at all or I'll pay extortionate interest rates.
If a CEO of a large corporation wants to borrow $1B, he can borrow on very favorable terms. This distorts the market in favor of large corporations.
Regulations also subsidize large corporations. The cost of regulation compliance is usually fixed rather than per-unit. Suppose it costs $1M to comply with a regulation. If I sell 1000 units, my regulation cost is $1000 each. If I sell 10M units, my regulation cost is $0.10 each.
It'd be very hard to have a business larger than 100-200 without State restriction of the market.
Suppose that someone is a brilliant manager and can oversee a 100 person factory. Why should he work for a large corporation? Instead, he should raise capital and start his own factory.
In a free market, anyone who's a really good worker would be able to start his own competing business, rather than work for a large corporation.
In order to have large corporations, you need State restriction of the capital market, making it hard for individuals to start new businesses. You need State regulations, which impose extra costs on small business owners.
As another example, suppose a small business owner has $100k in revenue. He probably has to spend $5k on accountants, just to make sure he's in compliance with the tax laws. That's effectively a tax of 5%. A large corporation with $10B in revenue might spend $10M on accountants. That's a tax of only 0.1%.
I have my own blog at FSK's Guide to Reality. Let me know if you like it.
"Without turning this into another 'conflation' debate..."
I have no intention of debating the merits of either position, in this thread. My intent was only to summarize the idea (as best as I understand them) in response to the OP's inquiry.
david_z:I have no intention of debating the merits of either position, in this thread. My intent was only to summarize the idea (as best as I understand them) in response to the OP's inquiry.
Ok, fair enough. My bad for interpreting it otherwise.
fsk:If a CEO of a large corporation wants to borrow $1B, he can borrow on very favorable terms.
Why? Is there a corporation discount rate at the banks?
fsk:Regulations also subsidize large corporations. The cost of regulation compliance is usually fixed rather than per-unit. Suppose it costs $1M to comply with a regulation. If I sell 1000 units, my regulation cost is $1000 each. If I sell 10M units, my regulation cost is $0.10 each.
How does this apply to small corporations?
fsk:It'd be very hard to have a business larger than 100-200 without State restriction of the market.
Are you saying that in a free market the upper limit on firm size, regardless of capital, structure, and industry would be around 200 employees?
fsk:Suppose that someone is a brilliant manager and can oversee a 100 person factory. Why should he work for a large corporation? Instead, he should raise capital and start his own factory.
Then he would probably create a small corporation, to insulate his personal holdings against losses. There is also the issue of TP. Some people want to live for and be paid today. The mutualist myth is that entrepreneurship is for everyone. It really isn't. Most people only work as a means to an end (housing, clothes, food, entertainment). For them, wage labour makes sense. They can consume now, and forego capital accumulation. They are also insulated from moderate risk if the firm isn't as profitable as expected.
fsk:In a free market, anyone who's a really good worker would be able to start his own competing business, rather than work for a large corporation.
I agree, with one caveat. If they can acquire capital. Otherwise, they might starve. Very few businesses are profitable in the short run. That is the weeding out process, which makes the rise of a Walmart from mom and pop status all that much more amazing, even if it is now a statist collaborator.
fsk: In order to have large corporations, you need State restriction of the capital market, making it hard for individuals to start new businesses. You need State regulations, which impose extra costs on small business owners. As another example, suppose a small business owner has $100k in revenue. He probably has to spend $5k on accountants, just to make sure he's in compliance with the tax laws. That's effectively a tax of 5%. A large corporation with $10B in revenue might spend $10M on accountants. That's a tax of only 0.1%.
Your criticism of big business is fairly reasonable. Your criticism of corporations is based on conflation with big business.
Corporations != big business.
Justin Spahr-Summers:Interesting threads, I might add (though sometimes they go in circles). I started out with some pretty Randian views on copyright (though not patents), and following some of the threads and then my own mental conclusions convinced me of its folly.
IP freedom is not intuitive. I was already a pretty radical anarchist before I considered it, which made it easier for me, because I saw the state involved, and its arbitrary terms, and knew it could not be a natural order of things.
liberty student:Ok, fair enough. My bad for interpreting it otherwise.
No worries - I just didn't want to give the impression that my lack of response was a concession of any sort... :)
david_z:No worries - I just didn't want to give the impression that my lack of response was a concession of any sort... :)
I knew you weren't conceding because as you said, you never posted your POV.
I seem to recall hearing about research in the past that tends to vindicate the "100-200 persons" as the upper-limit to organizational efficiency. I don't think it's a novel idea. Of course, I'm shooting from the hip here, maybe I'll look into the topic...
[FWIW, however, an such research obviously took place in the context of state-distorted economies. Perhaps there are fewer org. constraints in a market that is more free. Perhaps, though, this is something of a constant.]
If you look at most corporations, each "division" is only 20-50 people. For example, the "core search" group at Google is around 20-30 people.
Instead of having one huge corporation with many divisions, you'd have a lot of small businesses.
Consider car manfacturing. One business would make carbeurators. Another business would make engines. Another business would make the transmission. You'd have a bunch of small businesses working together, rather than a monolithic corporation.
Once you get past 100-200 people, the incentive would be to split it into two smaller businesses or have someone leave and start their own business.
some synopses of past research, here.
david_z: I seem to recall hearing about research in the past that tends to vindicate the "100-200 persons" as the upper-limit to organizational efficiency. I don't think it's a novel idea. Of course, I'm shooting from the hip here, maybe I'll look into the topic... [FWIW, however, an such research obviously took place in the context of state-distorted economies. Perhaps there are fewer org. constraints in a market that is more free. Perhaps, though, this is something of a constant.]
It seems to me that if our mutual friend Cork were reading this, he might dip into his bag of developed arguments, and pull out the division of labour as an example of massive hierarchies that get more efficient as they scale out, rather than less efficient. Granted, I am not comparing a firm directly to the division of labour, only making the point that even spontaneous order is capable of efficiently organizing numbers exceeding 200, 2,000 or even 2 million. In fact, spontaneity may be the key and firms do not tend to spontaneity under the state.
I don't think I will live to see the free market, but I wish I could. If only to participate in it for a week, and drink in the ambrosia of its wonder with my eyes.
fsk:If you look at most corporations, each "division" is only 20-50 people. For example, the "core search" group at Google is around 20-30 people.
That is not a constant for all corporations. Again, not all corporations are big businesses.
fsk:Instead of having one huge corporation with many divisions, you'd have a lot of small businesses.
Lots of corporations are small businesses.
fsk:Consider car manfacturing. One business would make carbeurators. Another business would make engines. Another business would make the transmission. You'd have a bunch of small businesses working together, rather than a monolithic corporation.
That is already what happens. I worked for over a decade in automative. The actual manufacturer only does design and final assembly. Very little else is done in house. Most of it is bid out to 3rd party firms.
fsk:Once you get past 100-200 people, the incentive would be to split it into two smaller businesses or have someone leave and start their own business.
Why?
fsk: The argument against corporations is that they receive massive direct and indirect State subsidies. If I want to borrow $1M to start a business, I can't borrow at all or I'll pay extortionate interest rates. If a CEO of a large corporation wants to borrow $1B, he can borrow on very favorable terms. This distorts the market in favor of large corporations.
Bogus. A large corporation can borrow because it has collateral, where you do not.
liberty student: thanks for all your posts in this thread.
JonBostwick: fsk: The argument against corporations is that they receive massive direct and indirect State subsidies. If I want to borrow $1M to start a business, I can't borrow at all or I'll pay extortionate interest rates. If a CEO of a large corporation wants to borrow $1B, he can borrow on very favorable terms. This distorts the market in favor of large corporations. Bogus. A large corporation can borrow because it has collateral, where you do not.
You beat me to the punch with this objection.
JimmyJazz: JonBostwick: fsk: The argument against corporations is that they receive massive direct and indirect State subsidies. If I want to borrow $1M to start a business, I can't borrow at all or I'll pay extortionate interest rates. If a CEO of a large corporation wants to borrow $1B, he can borrow on very favorable terms. This distorts the market in favor of large corporations. Bogus. A large corporation can borrow because it has collateral, where you do not. You beat me to the punch with this objection.
Back to square one (How did the corporation get so big to begin with?), I see.
entrepenurial skill?
Where there is no property there is no justice; a proposition as certain as any demonstration in Euclid
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david_z:Back to square one (How did the corporation get so big to begin with?), I see.
The corporate form allows firms to combine capital from multiple sources in varying amounts, because personal liability is mitigated.
So we can say, that the corporate form provides an opportunity for greater capital accumulation (and this may be unfair) however we can't criticize a firm for starting off with more capital if it is invested voluntarily. There is nothing per se wrong with a group of people pooling resources for a common investment goal, and this is why I believe that voluntary corporations or some similar form of limited liability will arise in the free market. It might not thrive because it has a disadvantage by contracting liability restrictions with its trade partners, however how great a problem that will be remains to be seen.
Right, the whole point of a corporation is to reduce transaction costs. There's nothing unfair about providing opportunities for greater capital accumulation, in fact, I'm not even sure what the word "unfair" means in this context. If we're talking in value-free terms, all the word unfair" can be taken to mean is that it is a better business model (in a free market).
The fact of the matter is that some sorts of business are very capital intensive and require large amounts of money to operate. The corporation allows them this to happen and secondary markets in stocks facilitates this even further. The notion of, say, an aeroplane manufacturer being run as a cooperative is ridiculous on its face. On the other hand, cheese production could (and is) run on a cooperative basis.
Unless of course, you want to invoke bossism, but...
"You don't need a weatherman to know which way the wind blows"
Bob Dylan
JimmyJazz: (2) What is the 'free market' case against corporations? Please feel free to write the long and nuanced answer to either or both questions--I'll be reading it all (and asking questions).
Hi Jimmy.
The following short piece on corporate criminal liability may constitute a free-market or libertarian case against the corporation. I wrote this in reply to the following article: http://www.pointoflaw.com/feature/archives/2009/07/end-dont-mend-corporate-crimin.php
****
Regarding this passage:
"When a corporation is fined, it is the owners, i.e., the shareholders, who pay the fine. But the defining characteristic of modern corporation is the separation of ownership and control. The shareholders, who own the corporation, have no control over the actions of the employees who commit the offense. Hence, inflicting punishment on a corporation's shareholders (and its other employees who had no hand in the wrongdoing but may nevertheless lose their jobs) is punishing the innocent. Punishing those who are innocent of wrongdoing cannot be justified on retributivist grounds."
A subtle point that I haven't seen discussed, and which people may find interesting or useful:
If specific individuals commit what is determined by the legal system to be a crime (civil, criminal, whatever....), and the legal system determines a specific fine to be the appropriate remedy, and this fine is levied against the corporation as an entity (the shareholders), then there are formal/logical implications.
What this outcome means, and must necessarily mean, is that the individuals who actually committed the acts in question did not have to pay the entire amount that the legal system determines is the appropriate penalty. This means that this particular "crime" (whatever it may be) has been indirectly or unintentionally subsidized by corporate liability laws, by spreading the cost of the crime (the penalty) among the shareholders, and taking the brunt of the penalty off the shoulders of the perpetrators.
This subsidization of the specific crime is not an intentional outcome of corporate liability, but is a "constitutive" outcome of it. This means that necessarily, when the legal or societal determination is that a specific crime requires a certain penalty, and that penalty is spread among many shareholders rather than falling entirely on the perpetrators, then this constitutes a subsidization of the crime, in that the cost to the perpetrator of committing it necessarily has been lowered by spreading the cost among the shareholders. (necessarily, because by our original assumptions, the amount that the crime is supposed to "cost" to commit (the penalty) is X. And the amount the individual perpetrator pays is some amount less than X)
Regarding the future then, corporate actors can survey the corporate and legal landscape, and find the specific crimes where they can gain the most personally (income, stock options, etc...), and where the penalty for the crime will be most widely spread among shareholders. They can do this by general or intuitive knowledge, or by shrewd calculation and research.
In this atmosphere, we would expect that where the spread is largest (where corporate actors stand to gain the most, and where it is most likely for the cost of crimes committed by corporate actors to be spread among shareholders) that is where most crimes will occur.
The argument I'm making depends on no particular knowledge of criminal or civil law. It depends only on the assumptions that: there is agreement on a specific penalty, that a crime of whatever kind has been committed by a corporate actor which crime is subject to this penalty, and that the cost of committing that penalty is lowered by some type of legal mechanism which allows or requires the cost of the penalty to be spread among various designated individuals.
If these conditions are met, then to this extent this particular crime is subsidized relative to other crimes that could possibly be committed but which are not similarly subsidized.
This argument does not depend on the intent of the legal system. It is an argument about the unintended effects of the legal system.
As far as I can see, this is entirely a "formal" argument, that is correct simply by definition. And it is an argument that correctly describes the situation to which it is applied, if the situation fits the assumptions of the argument.
My take is that corporate liability laws may cause an "imbalance" of crime in society by unintentionally subsidizing various crimes, based on the case history of penalties for specific corporate crimes committed in the past. A person familiar with the case history, or familiar with the general state of corporate law, could easily find those corporate forms, companies, and activities, where the personal gain he might accrue by pursuing criminal activity would be most highly subsidized by spreading the cost of committing the crimes among shareholders via the corporate liability laws.
This argument may exist somewhere already. I don't claim that it is original. But I do believe it is a powerful argument that needs greater attention.
"It would be preposterous to assert apodictically that science will never succeed in developing a praxeological aprioristic doctrine of political organization..." (Mises, UF, p.98)
my case is fairly simple against current corporations. most people don't like large corporations because they pay off the state to subsidize them and cripple their competitors. regulatory bureaucracies are not elected and have a sufficient amount of job security. they create statutes that carry the power of law. these statutes are immensely more complex than any single human could consistently comprehend. they are also vague and plentiful. thus, the regulatory apparatus can be used to supervise nearly any business, find or create some statute that can be construed to prohibit that firm's behavior, then impose costs or burdens on them until they fail. Large corporations for the most part escape the same regulations, with the exception of anti-trust. Thus, it becomes popular to have 2-3 big corporations dominate any field.
Check my blog, if you're a loser
liberty student:The corporate form allows firms to combine capital from multiple sources in varying amounts, because personal liability is mitigated.
I'm not convinced by that standard explanation; that the state sanctioned it and thus it came into being. It seems to me that it happened the other way around, that people pooled their capital then it was necessary to determine liability. The standard explanation hints at the belief that human interaction is enabled by the state, rather than the other way around. Its as believable as the statement, the state offered marriage licenses so people began to enter into marriages.
There is a distinction between a stock holder and a manager that deserves a difference in liability.
JonBostwick: There is a distinction between a stock holder and a manager that deserves a difference in liability.
Perhaps, but as Adam Knott and meambobbo argue above, perhaps not. Currently, the managers (and especially the silent shareholders) bear practically zero criminal liability, the net result of which is that some amount of crime goes unpunished.
Because the moral hazard of "distributed costs and concentrated benefits" is well-enough known (or ought to be), where a tort is caused by a "corporation" through one or more of its agents/employees/etc., (in these cases costs are borne almost entirely by the victims), the ex ante knowledge of the organization's potentially obscuring structure is reason enough to question the motive of any group of persons entering into such an arrangement.
What I'm saying is: As long as there are no torts, then do whatever you want. But if there is a tort claim against the corporation, we have to presume that the managers/shareholders/etc., were aware of the agency/responsibility problem, and therefore they ought to be liable, too. If this "cost" is too much of a burden for them, I don't give a damn: let them make other use of their investments, capital, etc.
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