Rothbard on Organizations
In my exchange with Roderick Long on government and the corporation I made two basic points. First, the corporate form of organization is indeed imperfect, as "left-libertarians" point out, but so are all forms of organization, including networks of independent contractors, worker-owned cooperatives, household production, and so on. Each has benefits and costs which vary according to circumstances. Second, all organizational types, large and small, hierarchical and flat, corporate and "agorist," receive particular benefits from state intervention, and some harm as well; it is impossible to say which types would tend to proliferate on the purely free market.
I happened to come across a passage from Rothbard's critique of Samuel Konkin's New Libertarian Manifesto that makes the first point far more succinctly than I did:
Organizations of course create problems, and it is really pointless to go on about them. If more than three or four people wish to engage in a joint task, then some people will override the wishes of others (e.g. should we paint the office blue or beige?), and there are bound to be power struggles, faction fights, and all the rest. Even corporations, which have to meet a continuing profit test, have these problems, and the difficulties are bound to increase in nonprofit organizations, where there is no instant profit-and-loss feedback.
So organizations create problems; so what? So does life itself, or friendships, romantic relationships, or whatever. Most people think the drawbacks are worth it, and are more than compensated by the benefits of working for and achieving joint goals. But if not, they can always drop out and not belong to an organization; in a free society, they have that privilege. And of course, we are talking here about voluntary organizations.
I suspect Mr. Konkin and his colleagues don't like to join organizations. So be it. But those of us who wish to accomplish various goals will continue to do so. And it seems to me we are at least entitled to the acknowledgement that there is nothing in the slightest unlibertarian about organization, hierarchy, leaders and followers, etc., so long as these are done voluntarily. If the Konkinians fail to acknowledge this primordial libertarian point, then their libertarian bona fides would come into serious question.
Comments (63)
Former Agorist
But....if libertarians appeal to worker-collectives, unions, cooperatives, etc. -- while bashing corporations -- then leftists will suddenly like us?
Right?
Published: April 6, 2009 3:13 PM
DixieFlatline
This was a timely article to post.
It certainly undermines "rothbard cover" that so many left libertarians/mutualists and anarchists tend to employ.
Published: April 6, 2009 3:43 PM
Scott Bieser
I don't think the agorist objection to corporations is based on any general rejection of organizations or hierarchy. It is based on a granting of state privilege to a certain organizational form -- specifically immunity of the organization's owners from torts committed by that organization's officers or employees. (Not to be confused with immunity to debts beyond the owners' investment.) It is because of this that corporations as we know them cannot really exist in a genuinely stateless society.
Published: April 6, 2009 4:42 PM
Michael A. Clem
But....if libertarians appeal to worker-collectives, unions, cooperatives, etc. -- while bashing corporations -- then leftists will suddenly like us?
Ha! I doubt it. And Scott, while the corporation as we know wouldn't exist in a stateless society, there could still be the hierarchy of employer/employee relationships, and it is this hierarchy, even if it's voluntary, that radical leftists are against.
Published: April 6, 2009 5:21 PM
Matthew Dawson
I fail to see where in NLM Konkin is opposed to organizations, especially given that a large part of the book is dedicated to describing the establishment of organizations like the Movement of the Libertarian Left.
Published: April 6, 2009 5:42 PM
zuzu
"there could still be the hierarchy of employer/employee relationships, and it is this hierarchy, even if it's voluntary, that radical leftists are against."
But that's not a hierarchy; that's a peer-to-peer mutually beneficial exchange.
Two points of interest:
1.) Iron law of oligarchy
2.) Transaction costs
Of course, telecommunications and computation technologies are driving many transactions costs to zero, which is why once useful hierarchal organizational structures (ala Ronald Coase's Nature of the Firm) are becoming obsolete like steam power and inventory warehousing have become obsolete. Markets are increasingly efficient at ever finer granularities of scale as they increase in sophistication of communication / signaling.
c.f. Thomas W. Malone's The Future of Work
Published: April 6, 2009 7:38 PM
whittaker
@Mr. Bieser
Well said. I would add that, besides the exemption from tort liability, there are insidious problems associated with the legal concept of "corporate personhood".
I saw a car recently with the bumper sticker "Corporations are People Too!" Do you agree?
The problem is this: The death, injury, or misfortune of a natural person is usually considered a bad thing, something we should all be upset about and try to prevent. But the death of a corporation may well be a great thing for the economy, punishing incompetent management and freeing employees for more productive tasks.
The confusion of corporate and individual identities leads to the mistaken notion that society/government should do all it can to help corporations, even when they richly deserve to decline and die. Thus corporations are able to obtain monopolies and distort the free market in their favor.
Published: April 6, 2009 8:46 PM
P.M.Lawrence
Oh, dear. Quite a bit has been blurred, and some people have got hold of the wrong end of the stick.
'First, the corporate form of organization is indeed imperfect, as "left-libertarians" point out, but so are all forms of organization, including networks of independent contractors, worker-owned cooperatives, household production, and so on. Each has benefits and costs which vary according to circumstances'.
This is like saying that a cold is less than perfect health, and so is flu, and so is pneumonia. It omits any question of which is worse and - more seriously - which are only nuisances and which are serious threats.
'Second, all organizational types, large and small, hierarchical and flat, corporate and "agorist," receive particular benefits from state intervention, and some harm as well; it is impossible to say which types would tend to proliferate on the purely free market'. But that is again the wrong question (as Scott Bieser realised). The right ones are, which actually need that support and which tend to support the state structures in their turn. So we can see that those which actually need state structures wouldn't be there on the purely free market, though we can't see just which of the remainder would proliferate, and we can see which of them are actually harmful by supporting other harms. The argument that was put, which has been left out here, was that nearly all corporations both need state structures and reinforce them harmfully. Now, you may agree or disagree with that - I won't repeat the argument - but the formulation in this article simply brushes the whole issue aside without addressing it.
Michael A. Clem supposes that "...in a stateless society, there could still be the hierarchy of employer/employee relationships, and it is this hierarchy, even if it's voluntary, that radical leftists are against".
Well, there may be some like that for all I know, but I have certainly encountered a different viewpoint: people who object to being driven under such systems so that the structures can become arbitrarily rigid and cannot be escaped, but who have no problem with (say) the structures being there in a voluntary club, where they are naturally limited because people have the realistic option of walking out if things go too far in that direction (this is implied in zuzu's remarks).
Published: April 6, 2009 8:46 PM
Bruce Koerber
Classical Liberalism Protection
Monday, April 6, 2009
What Is The 'Perfect' Business 'Organization?'
There are two steps towards resolving all of the problems with 'organizations.'
1. Define property rights: this is a lost art and science in these Dark Ages of economics.
2. Refine property rights: this is what will allow continual adjustment to meet the unforeseen circumstances of the future in what can be described as an ever-advancing civilization.
Published: April 6, 2009 9:36 PM
Mike Stahl
I'm new here, and am frankly glad to discover such a site, but I have to say that this seems somewhat overstated on both sides of the issue. It seems to me that Rothbard's last bit is(as I'm rapidly becoming accustomed to with him) most compelling-
"And it seems to me we are at least entitled to the acknowledgement that there is nothing in the slightest unlibertarian about organization, hierarchy, leaders and followers, etc., so long as these are done voluntarily. If the Konkinians fail to acknowledge this primordial libertarian point, then their libertarian bona fides would come into serious question."
There it is-if you claim to reject coercive force, you cannot also reject voluntary organization without engaging in a near theatrical contradiction.
That said, near as I can tell, it is virtually impossible to determine the scope of government force in business organizations, and as such it is likely a practice better left to writers of fiction to envision the form of truly voluntary business organizations.
Personally, I agree with Scott Bieser in essence(though I'm not sure why investment amount should limit liability amount), but I would say that it is not only the liability boon of modern corporations, but the entry limitations imposed by license laws also create force inspired organizations.
Common surnames in English are Baker and Miller, why? Because feudal lords collected taxes in kind, it was more feasible to license a single miller, or baker, and fine or scare the crap out of anyone else, than to attempt collect piecemeal meal. Yet the truth be told, EVERYONE can bake bread, and milling grain is something less than rocket science as well. Therefore was the organizational employer-employee(or apprenticeship) hierarchy that developed around millers and bakers voluntary? How many other businesses have this characteristic of force at their core? I certainly don't pretend to know.
I do wonder though, if the centralization of wealth created by sanguinoid monopolies had not occurred, if the feudal lords might not have endured? I find the thought encouraging at least.
Published: April 6, 2009 10:55 PM
newson
...and labour unions use which legal structure? please tell me that they eschew the corporate form.
Published: April 6, 2009 11:03 PM
DixieFlatline
Scott, as I have pointed out on the forums, the corporate form cannot be written off because the state is involved. If capital holders can organize voluntarily, and set up a firm with limited liability stipulations made clear to clients and suppliers up front, and all transactions with them are voluntary, and thus totally reasonable and permissible in a free market society.
You've failed to prove otherwise.
I'll give an example. We have a free market amusement park, operated by the Smith family, a father 2 sisters and a male cousin. They have a corporate charter of their own design, specifying stock allocations, voting rights etc.
When you go to the park, they ask you to sign a limited liability waiver before you can go on the roller coaster or enter the haunted house.
You sign, and have a wonderful afternoon in the amusement park.
Now why is this structure ok, without any state involvement because the limited liability is accepted voluntarily, but if a retailer like WalMart did the same thing in the free market, sans state, mutualists would be frothing at the mouth over it?
I also wanted to add, statist unions operate just like statist corporations, and free market unions will operate just like free market corporations. That is, they will have to operate voluntarily, and both unions and corporations seek to cartelize their capital, with a corporation, it is capital goods, with unions, labour capital.
Anyone who doesn't think that unions seek to protect workers the same way corporations seek to protect shareholders is very, very naive.
Published: April 7, 2009 1:31 AM
newson
df says:
"Anyone who doesn't think that unions seek to protect workers the same way corporations seek to protect shareholders is very, very naive."
- only workers in the union, to the detriment of those not. zero-sum game.
Published: April 7, 2009 4:07 AM
P.M.Lawrence
Mike Stahl wrote "Common surnames in English are Baker and Miller, why? Because feudal lords collected taxes in kind, it was more feasible to license a single miller, or baker, and fine or scare the crap out of anyone else, than to attempt collect piecemeal meal. Yet the truth be told, EVERYONE can bake bread, and milling grain is something less than rocket science as well."
Actually, there really was a division of labour gain by having separate millers and bakers. Hand grinding is harder work than with water or wind power, and one big pair of millstones takes less effort to make than several smaller ones with the same total capacity. And it's easier to have bread etc. ready for breakfast if only one or two people have to stay up all night keeping ovens at the right temperature, and so on.
Of course, since there was a tendency for these activities to concentrate anyway, that made them easier targets for taxers to aim at - but that's another story, as is why the name Baxter is common in Scotland instead of Baker.
Newson wonders "...and labour unions use which legal structure? please tell me that they eschew the corporate form."
They do use it since it is there, of course, but the early history of the Trades Union movement shows that they can operate not only without assistance from state structures but also even when the efforts of the state are directed against them, e.g. the Tolpuddle Martyrs.
DixieFlatline asserts "Scott, as I have pointed out on the forums, the corporate form cannot be written off because the state is involved. If capital holders can organize voluntarily, and set up a firm with limited liability stipulations made clear to clients and suppliers up front, and all transactions with them are voluntary, and thus totally reasonable and permissible in a free market society. You've failed to prove otherwise."
But, but, but... there are no examples of corporations without a state framework whatsoever, apart from things like monasteries with their own internal dynamic. Surely, then, the burden of proof lies the other way?
"I'll give an example. We have a free market amusement park, operated by the Smith family, a father 2 sisters and a male cousin. They have a corporate charter of their own design, specifying stock allocations, voting rights etc."
However, this is not an example of doing it without the state - not if they have a corporate charter, all legal and official (if they don't, it's not a corporation at all, but a partnership - without any enduring separate identity or privileges as against the world at large, beyond those it had struck deals with for immunity one by one).
"Now why is this structure ok, without any state involvement because the limited liability is accepted voluntarily, but if a retailer like WalMart did the same thing in the free market, sans state, mutualists would be frothing at the mouth over it?"
But that's putting words in other people's mouths. For instance, Kevin Carson objects to them the way they are now, with state support, and confidently expects that there wouldn't be any corporation of that name without it, just some person called Walton and whoever he could work with without the help of legal privileges.
"I also wanted to add, statist unions operate just like statist corporations, and free market unions will operate just like free market corporations. That is, they will have to operate voluntarily, and both unions and corporations seek to cartelize their capital, with a corporation, it is capital goods, with unions, labour capital. Anyone who doesn't think that unions seek to protect workers the same way corporations seek to protect shareholders is very, very naive."
But nobody - as far as I know - has suggested getting rid of special privileges for business corporations while keeping them for union structures.
Published: April 7, 2009 4:16 AM
Alexander S. Peak
Writes Rothbard, "And it seems to me we are at least entitled to the acknowledgement that there is nothing in the slightest unlibertarian about organization, hierarchy, leaders and followers, etc., so long as these are done voluntarily."
I think this depends upon how exactly we're defining "hierarchy."
If we define only coercive hierarchies as actual hierarchies, and if we define voluntary "hierarchies" as not actually being truly hierarchical at all, then we can safely say that libertarianism is solidly opposed to hierarchy.
In February, I wrote that "aggression (the initiation of force) is inherently anti-egalitarian and hierarchical, even when allegedly used for achieving egalitarian results." By this I meant that acts such as forcing a wealthy man (assuming he has achieved his wealth through libertarian means) to surrender his wealth to a poor person (such as myself) is in fact anti-egalitarian because the aggressor in this scenario is placing himself on a pedistal above his victim, creating a coercive hierarchy instead of a system of equality before the law. The act of aggression, even if purpetrated in the name of so-called equality, is actually right-wing in nature. Only through restoring the wealth to its just acquirer do we de-establish the hierarchy created and restore true equality.
In this sense of the term "hierarchy," no firm in a truly free market would be hierarchical for the simple reason that no business owners in the truly free market would be in any position of coercive power over her workers. The workers, being free to secede from their voluntary leaders and even to go into competition therewith, could thus be described as having obtained a position of true equality with their employers.
Therefore, I have no problem describing hierarchy as being unlibertarian, so long as we understand the the voluntary following of a person by another does not under this definition constitute hierarchy.
Mr. Clem writes, "And Scott, while the corporation as we know wouldn't exist in a stateless society, there could still be the hierarchy of employer/employee relationships, and it is this hierarchy, even if it's voluntary, that radical leftists are against."
That wouldn't be hierarchy in the sense that I have used the term throughout this post.
Conversely, when person A uses force to stop person B from voluntarily following person C, that is an example of hierarchy, of person A imposing himself upon person B, effectively labeling B inferior to A before the law.
Mr. Dawson writes, "I fail to see where in NLM Konkin is opposed to organizations, especially given that a large part of the book is dedicated to describing the establishment of organizations like the Movement of the Libertarian Left."
If I recall correctly, it was Rothbard's goal to attack Konkin's attack on the use and potential benefit of fighting the system from the inside using the structure of a political party. Konkin saw parties as being an extension of the state, while Rothbard saw them as a legitimate and useful tool in the smashing of the state.
In Konkin's reply to Rothbard, Konkin wrote the following:
"New Libertarianism does have an organizational preference. Other forms of organization might then be considered non-New Libertarian but not necessarily 'unlibertarian' or non-agorist. What the New Libertarian Strategy seeks is to optimalize action to lead to a New Libertarian society as quickly and cleanly as possible. Activities that lead to authoritarian dependency and passive acceptance of the State are sub-optimal and frowned on; action that is individualistic, entrepreneurial and market-organized are seen as optimal.
"With that constantly in the reader’s awareness (pages 54-60 of NLM are a long disclaimer to this very point!), it is obvious that there are no moral (other than individual self-worth) questions involved in organization and hierarchy. ...
"Nowhere have I ever opposed joint-stock companies (see page 56 again where they are specifically affirmed). ... I assume we both continue to oppose the statist perversion of joint-stock companies into limited-liability corporations.
"I have never suggested 'floating affinity groups,' ...
"I see fewer problems in organization than Rothbard does and can easily see some organizations not haying any.
"There is a bit or irony in Rothbard’s spirited defense of the 'Kochtopus' since his own defection but I’ll let that pass. I have to mention his secession from and opposition to it because that, effectively, ends my major objection to it and I find it relatively harmless and conceivably needing my defense in the near future as the chorus of opposition swells. ..." (pp. 108-109, emphasis added).
For some months, I've been in the rather slow process of uploading Konkin's reply to Rothbard here, having already uploaded Rothbard's critique here. Unfortunately, the portion I have just quoted is not yet available on my site.
whittaker concludes his post by saying, "Thus corporations are able to obtain monopolies and distort the free market in their favor."
Businesses are able to obtain statist privileges, but it's not the free market they're distorting, since there is no free market there to be distorted when they receive statist privilege. The market they're distorting cannot be said to be the free market, except insofar as we associate "distort" with "totally abandon."
Mr. Lawrence writes, "The argument that was put, which has been left out here, was that nearly all corporations both need state structures and reinforce them harmfully."
I'd have to wonder how you are defining "corporation." If you are merely defining it as "any business needing or promoting statist privilege," then I could possibly see your point. But if you are using some other definition, then I'd have to ask precisely what it is about corporations that in your opinion make them inconsistent with a stateless society, and what separates those firms that are consistent with a stateless society from "corporations."
DixieFlatline writes, "Now why is this structure ok, without any state involvement because the limited liability is accepted voluntarily, but if a retailer like WalMart did the same thing in the free market, sans state, mutualists would be frothing at the mouth over it?"
Before we assume that mutualists would froth at the mouth over this, we should probably ask them what they'd think. I haven't read very much of Carson's work, but if I had to make a blind guess, it would be that Carson would have no problem with this, so long as Wal-Mart acquired ownership over its land and stores and products through just means.
But has Wal-Mart? This is a question we as libertarians can debate. Even Mr. Rockwell has pointed out Wal-Mart's willingness to align itself with the state in an effort to push out competition. Does this injustice on the part of Wal-Mart mean it's lost all legitimacy to the title of any property? Probably not, but it's still an injustice that ought to be punished in some form.
Rothbard advocated turning ownership of firms over to their employees when that firm has acquired in excess of 50% of its wealth from the state (Libertarian Forum, vol. 1.6, 15 June 1969). Seems to me that Rothbard was using Blocks two-teeth-for-a-tooth argument, and that he would probably support handing over 50% of the firms assets to the workers if said firm made 25% of its profits from statist privilege. I really can't say just how much Wal-Mart has profited from the coervice minimum wage laws, but certainly at least some of its assets ought to be surrendered to its workers as a result of the firm's open advocacy of higher minimum wage laws.
If we had a truly free market, where no minimum wage laws or other statist privileges existed to help firms, then I would suspect that the mutualists would have no problem with Wal-Mart doing what you describe.
Ultimately, I agree with you that "statist unions operate just like statist corporations, and free market unions will operate just like free market corporations."
Regards,
Alex Peak
Published: April 7, 2009 5:36 AM
Curt Howland
I've never understood the left's antagonism against "worker/employer".
If they don't like it, then go run a business they way they want to run it. If it is so much more efficient, it should soon be the dominant organizational form.
But no, it turns out that the scum that rises to the top in a "labor union" is just as likely to be corrupt as any other.
As for the "corporation" stockholder format, where the "owners" are legally insulated, I see no reason why the same functionality for the vast majority of "stockholders" cannot be achieved by the company selling bonds.
Most investors are not interested in controlling the company by voting their shares. They are investors, not "owners", looking for a return through dividends (or rising value). So sell limited numbers of bonds, pay dividends on those bonds, and the company can raise money exactly the same way as they do now with stock but without the danger of losing control of their company.
Of course this would also eliminate the beneficial side effects of corporate raiders and hostile takeovers, making more efficient use of resources, but I'm sure someone will figure out how to do that without publicly traded stocks, too.
Published: April 7, 2009 6:53 AM
Former Agorist
"immunity of the organization's owners from torts committed by that organization's officers or employees"
So what?
Why should the owner be held accountable for crimes committed by other people? If other people are on the hook, why not also shift the blame to suppliers, creditors, customers, etc.?
That "owners are not held accountable for crimes they didn't commit" is often asserted as a "problem" by left-libertarians, but I don't understand why.
Those who did the crime, do the time. What's so hard to understand?
Secondly: Where did this whole idea come from that "shareholders incorporate to get out of crimes" originate? The idea of limited liability is to protect ones assets from CREDITORS. Note that these creditors voluntarily make this arrangement with the owner by lending money to the corporation. It's all voluntary agreements between consenting adults, the same voluntary limited liability applies to employees, customers, landlords, vendors, etc.
The idea that the Monopoly Man or Dr. Evil are creating corporations to poison rivers and murder workers is a strange idea for "libertarians" to hold.
Published: April 7, 2009 8:56 AM
Former Agorist
"I haven't read very much of Carson's work, but if I had to make a blind guess, it would be that Carson would have no problem with this, so long as Wal-Mart acquired ownership over its land and stores and products through just means."
The problem with mutualists is they apply an "unclean hands" to those they don't like -- capitalists, bankers, large corporations, Wal-Mart.
But they give a pass to those they like -- unions, unskilled workers, etc.
The worker at Wal-Mart drives on a state-subsidized road to get to work. How is the worker any less guilty than Wal-Mart using its trucks to transport product?
"but certainly at least some of its assets ought to be surrendered to its workers as a result of the firm's open advocacy of higher minimum wage laws."
Why should it go to the workers? Perhaps some of these workers benefited from getting higher minimum wages at some point in their life.
If the mutualists want to apply the "unclean hands" fallacy to Wal-Mart, they must be consistent and apply it to others in society that they hold dear.
Published: April 7, 2009 9:02 AM
Alexander S. Peak
Former Agorist,
You write, "The worker at Wal-Mart drives on a state-subsidized road to get to work. How is the worker any less guilty than Wal-Mart using its trucks to transport product?"
I don't see either as guilty in this regard for two reasons. First, neither requested the government to steal the money requisit to build the roads.
Secondly, under libertarian theory, those roads cannot be legitimately owned by the state. Through the homesteading principle, the people who make use of a given unowned resource become its legitimate owners. Thus, I would argue that the people who use Road X, whether they be workers or business owners, all own a legitimate and equal share of the road.
Thus, the workers and the business owners are doing nothing more than using a resource they own and thus have every right to use--that is, so long as neither or them have requested that the state (or any other criminal gang) steal from some innocent person so as to fund the construction or maintenance of the given road.
"Why should it go to the workers? Perhaps some of these workers benefited from getting higher minimum wages at some point in their life."
The point for me is not about benefit per se. As Mr. Klein writes above, everyone "receive[s] particular benefits from state intervention, and some harm as well." The point for me is whether or not the person has actually petitioned the state (or any other criminal gang) for privileges based on aggression.
If firm A has never petitioned the state for bailouts, for more regulations, for government contracts, &c. while firm B has, which firm should we as libertarians prefer? Clearly A and not B. Why? Because A is asking a criminal gang to grant it special favours while B has shown no sign of willingness to support aggression.
A while back, I had sent a piece actually defending Chevron, after a piece Spangler had written attacking Chevron. You can read my piece, which I sent to Mr. Spangler, here. As you can see in the piece, I made it clear that had Chevron petitioned the Burmese military dictatorship to enslave people, then Chevron would have been quite deserving of losing all ownership over its possessions. But if it has come into the picture only after the rights violations, without condoning the rights violations, to use the pipeline that we all can agree the Burmese military dictatorship has no rightful ownership over, then Chevron hasn't actually done anything wrong.
I haven't read the piece since writing it, so I can't say if I'd still agree with everything I'd written at the time. But I certainly still agee that the willingness of a given firm, union, &c. to petition for aggression (or to use it directly) is the determining factor in the matter.
I have held minimum wage jobs in my life, but I haven't advocated for the existence of minimum wage in years, and I've never asked a player within the Establishment to raise or even keep the regulation in effect. Wal-Mart, on the other hand, has.
As a side-note, I'll add that it's not enough to merely not petition for aggression; one must also turn down statist privilege if the option is available. Big Businesses, even those that don't advocate the minimum wage laws from which they so greatly benefit, cannot actually turn them down. So, I can't hold them accountable for that unless they actually petition for the regulation. Publishing companies, on the other hand, can turn down the statist copyright privileges they receive from the state by merely refusing to sue those that copy their material. The Mises Institute would never sue me for re-publishing its materials--in fact, the Mises Institute would be delighted if I did so. But a publishing company that does sue someone for copyright infringment is using statist privilege for profit, and should thus be held accountable for this crime. The tricky question is then: just how much have they profited from statist intervention, and how much of their profits were justly received? The same applies to computer companies (such as Microsoft) as it applies to publishing companies. I'd be curious as to what Rothbard would say about this were he still alive (assuming he would have been convinced by Kinsella's arguements, as Block supposes he would).
Anywho, I think I went off on a tangent. I'll end here.
Sincerely,
Alex Peak
Published: April 7, 2009 9:35 AM
Former Agorist
"I've never asked a player within the Establishment to raise or even keep the regulation in effect. Wal-Mart, on the other hand, has."
But so have unions.
And voters vote for these regulations, including Wal-Mart workers. Shoppers, including workers, support Wal-Mart by buying product. Many workers own shares of Wal-Mart, and hence guilty.
And that's precisely my point. It isn't a simple matter to "unscramble an egg." And that is precisely Rothbard's point in the essay linked here.
Published: April 7, 2009 9:46 AM
Alexander S. Peak
Former Agorist,
You write, "But so have unions."
And those unions that have should be held accountable.
You write, "And voters vote for these regulations, including Wal-Mart workers."
No, I cannot accept that. I adhere to the Spoonerian view that no vote can ever be inferred to mean support for government, and thus no vote can be inferred to mean support for any specific governmental interventions, either. No vote can be inferred as having been offered as a show of support for minimum wage. The most we can objectively infer from any vote is that the voter is attempting to keep someone else out of power for some reason.
"Shoppers, including workers, support Wal-Mart by buying product."
So?
Look, I'm not saying that Wal-Mart, through its advocacy of higher minimum wage has lost all right to its property, that the workers should seize everything. I readily admit that I don't know how to measure exactly how much they have profited from the minimum wage they openly support. But let us for sake of argument pretend we can determine objectively that it has derived five percent of its profits from the minimum wage regulations--in this scenario, five percent of Wal-Mart's assets should be justly surrendered to its workers in the form of shares. Now, if a shopper decides to shop at Wal-Mart, she's committing no crime; but if Wal-Mart refuses to surrender that which is justly owned by its workers, then it has committed a crime.
But again, I don't know how to determine just how much profit Wal-Mart has derived from statist privilege, so it's not something I can solve.
Yours,
Alex Peak
Published: April 7, 2009 9:58 AM
Former Agorist
"But again, I don't know how to determine just how much profit Wal-Mart has derived from statist privilege, so it's not something I can solve."
Fair enough.
The danger is the mutualists, etc. pretend they have this solution. This is dangerous...and dishonest.
Published: April 7, 2009 10:01 AM
DNA
Former Agorist,
The points you raise are quite valid, and have been brought up on this blog a countless number of times. The Carsonites just refuse to comprehend. You're wasting your time, I'm afraid.
Published: April 7, 2009 10:38 AM
Former Agorist
DNA:
Indeed, given the Rothbard essay from the past.
It's just so strange for me...if somehow Rothbard's "magic button" was pressed and libertopia broke out...
Some libertarians would start their own retail firms to compete.
Other "libertarians" would apparently loot the local Wal-Mart.
Published: April 7, 2009 10:46 AM
Richard Garner
Former Agorist,
You wrote,
Isn't the mutualist solution the libertarian solution? "Mutualists, etc." hold that profits and incomes of some people (profits that have been and are reinvested) are higher than they would be in a free market, and these are both the cause and the outcome of exploitation enabled by state intervention sheltering some against competition, and externalising costs. The solution that "mutualists, etc." propose, then, is to have completely free markets: "Free trade, everywhere an always; competition the universal rule", to quote Benjamin R. Tucker.
Now, why do you oppose this solution? Is there something unlibertarian about free markets, free trade everywhere and always, and competition the universal rule?
Published: April 7, 2009 11:14 AM
DixieFlatline
Why do you need a burden of proof? If it passes the libertarian voluntary sniff test, it doesn't matter if there is an example or not.
Again, as I have also written on the forums, anyone who thinks they can predict the outcome of a free market (Long/Carson - flatter economy) is a kook. They are selling snakeoil. If we knew the results of a free market, we could skip competition and go direct to outcomes. Why even bother with a market then? We just need to find the best planner, and let him tell us how things should be ordered based on the moral code.
You're nit-picking where there are no nits. There is nothing a corporation does in it's organization that cannot be voluntarily contracted.But what you avoided comment on was their voluntary limited liability, which facilitates their operation just as a state corporation would. However, in this model, limited liability, as specified by the corporate entity (meaning, it's unlikely the customer will negotiate, they will either participate or not) completely conforms to the NAP.
No it's really not putting word's in other people's mouths. I see you all over the net. Frothing at this stuff. Although you seem to have run out of froth as the irrational positions of Carson continue to be exposed. If Carson confidently expects anything, he's a kook/planner/ideologue. I don't like it when Carson/Long do it, because they PRETEND to have perfect (or at least, superior) market knowledge they cannot possible have, and it's misleading at best. Nor did I mention that, but thank you for the strawman just the same. Free market unions and free market corporations, statist unions and statist corporations are the same. The only difference is what manner of capital they are formed around, capital goods or capital labour. In all other respects, there is no meaningful difference. So anyone who is for free market unions, in my opinion, has to be for free market corporations, that is unless they are an anti-capitalist, in which case, they aren't really for the free market in the first place.Rothbard was terrible on this. His notion of what was a legitimate transfer of property titles to reflect justice is outrageous in my opinion.
But then most of these guys, Long, Rothbard, Carson have/had limited experience in the commercial sphere as a wage earner, or a capital investing proprietor. And it shows.
Published: April 7, 2009 11:18 AM
Former Agorist
"Isn't the mutualist solution the libertarian solution?"
Not from what I have read. Otherwise they would simply call themselves "libertarians."
Looting Wal-mart is different than eliminating statist restrictions. Preventing consenting adults from forming joint stock companies is different than ending state intervention into the market.
Obviously as a libertarian I support free markets. But is that really the only thing so-called "mutualists" are proposing?
Published: April 7, 2009 12:05 PM
Former Agorist
"Rothbard was terrible on this. His notion of what was a legitimate transfer of property titles to reflect justice is outrageous in my opinion."
We also have to distinguish between Rothbard the economist/philosopher and Rothbard the politician.
I just noticed the date of Peak's citation (1969), wasn't this when Rothbard was aggressively promoting his Left-Right, socialist-libertarian alliance?
Maybe it would been a political appeal in 1969 to show how it's "libertarian" for workers overthrow the "bosses" in the revolution and take over certain firms? Perhaps this might sway leftists to join the libertarian political cause?
50% seems like a political compromise, as where else could he have pulled this number from?
Published: April 7, 2009 12:14 PM
Matthew Dawson
@Former Agorist: the left-libertarian argument involving road subsidies isn't a moral one, it's an economic one. Everyone is forced to use the state's roads, obviously, and no one (except the real nuts) have any problem with that. The left-libertarian argument is that Wal-Mart's business model is subsidized by the socialization of roads in a way that wouldn't exist in a free market.
Published: April 7, 2009 12:18 PM
Former Agorist
"The left-libertarian argument is that Wal-Mart's business model is subsidized by the socialization of roads in a way that wouldn't exist in a free market."
As DixieFlatline indicates, you really can't prove this. Further, where is the evidence that Worker-Collective-Mart would rise in its place?
So why single out Wal-Mart in the first place? It smacks of crude populism.
Libertarians already oppose state-run roads, for many good moral and economic reasons. Do we need fantasies about looting Wal-mart and worker-owned retail co-ops too?
Published: April 7, 2009 12:25 PM
DixieFlatline
@MD
What do you think would happen to WalMart and small firms if there were no state roads? Do you think the WalMart mega franchise model might have the capital and necessity to construct it's own infrastructure?
Do you think a small firm could do the same?
Who is really getting a subsidy here? I've never seen any serious modeling to prove the road assertion.
And I'm curious what you mean by WalMart business model. What model is that?
Published: April 7, 2009 12:48 PM
Richard Garner
Former Agorist,
They do call themselves libertarians.
Firstly, this is not an issue about mutualism. It is an issue about libertarianism, just entitlement to property, and what happens to holdings that are presently unjust according to that standard, and whether any of Wal-Mart's holdings are unjust. [b]Any[/b] libertarian can ask if Wal-Mart is entitled to what it owns, and if not, who is, and should they be able to take it back? And if not, then does this mean nobody justly owns it, so it is ripe for homesteading? Personally, I am of the opinion that this is too hard to tell for WalMart, but pretty easy to tell for companies within the military-industrial complex. Meanwhile, people like Kevin Carson, and Roderick Long (who is not a mutualist) have never said people should go out and loot Wal-Mart.
Of course it is. But preventing consenting people from forming a joint stock company is a) not the same as preventing people from forming a corporation, since a joint stock company need not be a corporation, and b) not something any of these people have advocated. Neither have they advocated preventing consenting people from forming corporations, for that matter (if memory serves, actually, Carson has said he leans toward's Hessen's argument that the corporate form can be reproduced, to a degree, in the market).
I have no idea, since I don't know to whom you refering when you say "so called 'mutualists'," instead of just "mutualists."
Those mutualists who see themselves as part of Benjamin Tucker's tradition, sure, that is what they are proposing.
Of course, no libertarian is really just proposing free markets, are they? Ensuring, to some degree, that property holdings are just, is also part of the picture, too, since no libertarian would, for instance, be happy with a free market in slaves. They would be perfectly happy with slaves looting slave holders of themselves, and probably taking the plantation, too.
Published: April 7, 2009 1:41 PM
Former Agoris
"Any libertarian can ask if Wal-Mart is entitled to what it owns, and if not, who is, and should they be able to take it back?"
As I noted, the same logic can apply to what "workers" own, should they/we be able to take it back?
"Neither have they advocated preventing consenting people from forming corporations, for that matter."
It strange then to see all the hoopla from mutualists, who invade these boards every time the issue of incorporation is brought up.
"Ensuring, to some degree, that property holdings are just, is also part of the picture, too"
And this seems to be main sticking point, as I have seen comments from "left-libertarians" and the like talking about "stolen capital" and such, as well as advocating the smashing of windows of department stores as "restitution."
Again, I'm not sure how one can unscramble the egg of "ensuring, current property holdings are just" without serious violations of the NAP.
Published: April 7, 2009 1:56 PM
DixieFlatline
Of course not. Workers are the victims. Don't you know your Marx? ;)
Published: April 7, 2009 2:19 PM
Brad Spangler
@DixieFlatline -- It's a big jump to go from noting Marx's incorrect understanding of exploitation to asserting that exploitation does not exist, considering that an alternative understanding of it is in the mainstream of Rothbardian theory.
If the State exists to transfer wealth from the producers to political class parasites, then you're going to see a significant overlap between producers and those who don't have much wealth on the one hand and (on the other) between political class parasites and the holders of wealth.
The libertarian only differs from the Marxist on this matter IN ONLY ONE WAY -- the amount of wealth held is itself not the issue, but rather its means of acquisition is. The results of that differing analysis do not justify some sort of mirror image anti-Marxist pro-elite class loyalties where the richer someone is the more virtuous they are -- because a great deal of privately held wealth in today's society is crony capitalist stolen loot. Rather, libertarians ought to see themselves as close to the Marxists in this regard because Marx very nearly got that part right.
Published: April 7, 2009 4:41 PM
Brad Spangler
BTW, I noticed that Per Bylund's Mises.org blog post "Reply to Klein and Rothbard on Agorist Organization" has been removed from its original URL here:
http://blog.mises.org/archives/009752.asp
...presumably for Bylund to better edit and extend his remarks. I look forward to it being reposted, as well as the text of Konkin's reply to Rothbard, found here:
http://www.anthonyflood.com/konkinreplytorothbard.htm
Published: April 7, 2009 4:52 PM
Richard Garner
Former Agorist,
Indeed, you are absolutely correct.
I have never seen any mutualist come here and complain about consenting people forming corporations. They have said that corporations are not contractual associations, but creations of the state. They have said that such creations of the state are bad because they allow owners of resources to avoid liability for wrongs or harms committed with those resources. But never have they said that consenting people should be prevented from forming corporations.
You should also keep an eye on the stirling efforts this Institute is doing to bring Hayek to a wider audience, because perhaps you may well catch a glimpse of him making precisely the same complaints about corporate identity.
You should take note that the A, in NAP, "Aggression," is used in an idiosyncratic way by libertarians. The way they use it, "aggression" means "rights violations," so all rights violations are called aggression. But that is precisely what the issue here is: Who has rights to what?
Published: April 7, 2009 5:09 PM
DNA
Brad Spangler:
OK; so what?
Published: April 7, 2009 5:15 PM
DixieFlatline
It is a big jump. Who did that?I prefer the Austro-Libertarian class theory, that doesn't divide human capital against capital goods, but rather net tax losers from net tax winners. Of course, that doesn't play well with some.
Generalization. That might play on the C4SS blog, but it won't play here.
Indeed, but it is an effective strawman for you, Carson and Long to point at and proclaim "vulgar libertarianism!".
Hoppe got class theory correct. We don't have to pal around with Marxists when as Austro-Libertarians, we already have a rational and intelligent class theory consistent with libertarian ethics.
The problem with Marxists is that they reject market based pricing and private property ownership. The problem with Mutualists is that they favour market potential (human capital) over market results (capital as profit). It's just another circumvention of the pricing and competitive process and has to lead to calculation problems.
Published: April 7, 2009 5:46 PM
DNA
DixieFlatline:
Very well said. That's the problem with the left-libertarians: they think they invented the stuff Rothbard, Hoppe, and others have already talked about, when all they've really done is to take some of those insights and then over-generalize about certain organizational structures under state capitalist conditions.
Published: April 7, 2009 6:07 PM
DNA
Not to mention that they (left-libertarians) also freely discourse on technical legal issues they clearly misapprehend (limited liability, respondeat superior, etc)
Published: April 7, 2009 6:28 PM
Rafael Hotz
I'd like an answer from the partyarch libertarians...Which organization has been responsible from mantaining more wealth in the private sector in the recent years?
a) The Libertarian Party
b) The Green Party
c) The Republican Party
d) The Democratic Party
e) Tax Resisters/Avoiders and Black Marketeers
Published: April 7, 2009 8:16 PM
Rafael Hotz
*for maintaining
Published: April 7, 2009 8:21 PM
DixieFlatline
Rafael, good luck finding many (or any) partyarchs here.
Published: April 7, 2009 8:39 PM
P.M.Lawrence
Alexander S. Peak asks of my "The argument that was put, which has been left out here, was that nearly all corporations both need state structures and reinforce them harmfully", 'I'd have to wonder how you are defining "corporation." If you are merely defining it as "any business needing or promoting statist privilege," then I could possibly see your point. But if you are using some other definition, then I'd have to ask precisely what it is about corporations that in your opinion make them inconsistent with a stateless society, and what separates those firms that are consistent with a stateless society from "corporations."'
It would have been clearer if you had had a chance to follow previous related discussions, but it is present in my remarks here. A corporation is an enduring entity with a life of its own, separate from the people who work for it and so on. Very few naturally occurring instutions have this of their own nature (I mentioned monasteries with their own internal dynamic). The rest get it from state structures. Further, they often have legal privileges like limited liability against all, not just against those they deal with where they could negotiate it (it has been asserted - though this begs the question of the thumb on the scale they get even with these). These privileges are also provided through state machinery. Quite simply, none of this would be available without the state, though possibly a corporation that was previously set up might persist for a while even without it. I would expect that managers would become partners in short order, taking over their corporations' assets and resources, while outsiders and workers would be more reluctant to deal with a claimed corporation than with competing individuals and partnerships etc. who they could connect with physically if they had to follow things up. Like trying to hold sand, things would dribble away.
DixieFlatline asks "Why do you need a burden of proof? If it passes the libertarian voluntary sniff test, it doesn't matter if there is an example or not."
You yourself raised this, asking for proof with "Scott, as I have pointed out on the forums, the corporate form cannot be written off because the state is involved. If capital holders can organize voluntarily, and set up a firm with limited liability stipulations made clear to clients and suppliers up front, and all transactions with them are voluntary, and thus totally reasonable and permissible in a free market society. You've failed to prove otherwise." You are the one who came up with all those "ifs".
Of my "However, this is not an example of doing it without the state - not if they have a corporate charter, all legal and official (if they don't, it's not a corporation at all, but a partnership - without any enduring separate identity or privileges as against the world at large, beyond those it had struck deals with for immunity one by one)", you assert "You're nit-picking where there are no nits. There is nothing a corporation does in it's organization that cannot be voluntarily contracted."
But that's what I was trying to bring out:-
- (a.), it isn't true that "[t]here is nothing a corporation does in it's organization that cannot be voluntarily contracted", which I clarified further for Alexander S. Peak just above; and
- (b.), there's more to a corporation than that, as I also clarified there.
It's plain not true that an institution to voluntarily arrange limited liabilty, say, with people who have not negotiated that with it. But we don't even need to consider this (which is why I didn't go into detail on that particular privilege among the others). It's plain not true that it can endure on its own without continued support from its people unless it has its own internal dynamic to summon that up or it has state machinery to do so. A corporation can always get more support from people it directs, if it has those features, but if it hasn't it's some other kind of institution like a partnership that only keeps going so long as the partners choose to keep using it.
"No it's really not putting word's in other people's mouths. I see you all over the net. Frothing at this stuff. Although you seem to have run out of froth as the irrational positions of Carson continue to be exposed. If Carson confidently expects anything, he's a kook/planner/ideologue. I don't like it when Carson/Long do it, because they PRETEND to have perfect (or at least, superior) market knowledge they cannot possible have, and it's misleading at best."
If that itself isn't another example of that sort of thing, just as "if a retailer like WalMart did the same thing in the free market, sans state, mutualists would be frothing at the mouth over it" is a claim about what mutualists would do, what is it?
Of my "But nobody - as far as I know - has suggested getting rid of special privileges for business corporations while keeping them for union structures", you assert "Nor did I mention that, but thank you for the strawman just the same". What straw man? What is "Anyone who doesn't think that unions seek to protect workers the same way corporations seek to protect shareholders is very, very naive" [emphasis added] but a claim that unions would use just precisely the same state supported machinery?
Former Agorist wrote "Preventing consenting adults from forming joint stock companies is different than ending state intervention into the market".
However, it isn't a matter of preventing, it's a matter of not enabling. Without state enabling, the furthest they could go in that direction would be a partnership that issued shares and that they called a joint stock company. It would be that, but it wouldn't be either limited liability or a corporation. But Richard Garner already told you a lot of this.
"So why single out Wal-Mart in the first place? It smacks of crude populism."
Well, on this thread, it was the pro-corporation types who pulled it out as an example. Elsewhere, I have seen Kevin Carson do it, but from his writings that clearly has a lot to do with it being right on his doorstep in Arkansas, where he can see a lot of the lobbying for eminent domain it gets through, and so on. For him, it's a case he can easily get at.
"It strange then to see all the hoopla from mutualists, who invade these boards every time the issue of incorporation is brought up". Ah, but, they don't. At least, I haven't spotted any on this thread before that remark. The most you've got before Brad Spangler's comments are people like me who see a lot in it but still have open minds and reservations on some points that haven't been fully fleshed out yet. Unless, of course, you are going to define as a mutualist anybody who comes along and points things out that don't square with corporations...
Oh, DNA, do you really have to reassure yourself like that? Don't Kevin Carson et al freely admit what they got from Rothbard and Hoppe just as much as what they got from Spooner and Tucker and so on? (My own early influences were Stirner on individualist anarchism and Ganshof on feudalism, followed by Chesterton and Belloc on the early distributism that doesn't have the statism that some of their later followers let in, plus critiques from a range of sources without their recommendations.) How can you say people misapprehend their stuff, when they have actually done their homework? If it's that they don't reach the same conclusions as you either from reaching different ones or (as in my case) reaching only tentative but different ones, then that's a circular argument and you should have the intellectual humility to recognise that just maybe you haven't got a full correct answer yourself.
Published: April 7, 2009 9:29 PM
DixieFlatline
PM Lawrence,
But not separate from it's shareholders. I am unaware of any corporation that has outlived ownership and became it's own independent entity.
Re: burden of proof, Scott made an assertion and shifted the burden of proof, demanding a contrasting example. This is poor form in debate and a fallacious tactic. I made clear that corporations can pass the only test that matters (as also indicated by Klein and Rothbard) which is voluntary consent of all parties involved. This statement is a priori true.
This is a strawman. We're talking about voluntary consent from all sides, as has been clearly laid out by several parties, including myself.
This is an assertion. Upon what does this assertion rest?
Do statist unions use the same or similar means as statist corporations? Absolutely. Will post-state unions operate like post-state corporations? They will have to if they don't want to be deemed illegit.
I have already differentiated between unions and corporations as human capital (potential) versus capital goods (real). My point was clearly that unions seek to protect their members from legal recourse by the cartel structure, exactly as corporations seek to protect their shareholders by the cartel structure. The difference is only in the nature of the capital being protected, not the ends.
As an aside, I find it quite funny that Carson, Spangler et al like to cast Misesians as paleo-conservatives or Misoids, but the reality is there is far more anti-state radicalism, gender and ethnic diversity etc. here, and far more cliquish anachronism and dogmatic repetition over at the C4SS.
Published: April 8, 2009 1:52 AM
Alexander S. Peak
Former Agorist writes, "The danger is the mutualists, etc. pretend they have this solution. This is dangerous...and dishonest."
I'll decide whether their solution is "dishonest" when I find out what it is. I don't really care whether or not their views are considered "dangerous"; many already consider our views "dangerous."
What do mutualists ("etc.") say is the solution? How do they calculate how much profits are derived from petitioned state interventions other than direct handouts (which I think we can all easily calculate)?
There's too much here to read in the short amount of time I have right now, but I'll be back to read the rest and ask more questions or make more comments.
Regards,
Alex Peak
Published: April 8, 2009 7:17 AM
Former Agorist
"They have said that corporations are not contractual associations, but creations of the state."
Then they are incorrect.
Look, the fact the State gives me a marriage certificate and registers the contract does NOT make my marriage "a creation of the state."
Published: April 8, 2009 8:04 AM
Former Agorist
"They have said that such creations of the state are bad because they allow owners of resources to avoid liability for wrongs or harms committed with those resources."
Wait...who caused the harm or wrong again?
"Resources" caused harm?
Owners are somehow responsible for "resources causing harm"?
Published: April 8, 2009 8:07 AM
Former Agorist
"How can you say people misapprehend their stuff, when they have actually done their homework? "
I've read Carson's book. Yes, it has footnotes citing "Man, Economy & State." But it's pretentious to cite Rothbard, but then disregard the rest of Rothbard's arguments and conclusions, and then somehow cite yourself as "improving" Rothbard's theories because you had footnotes.
Shame on me for taking a self-published e-book seriously.
Published: April 8, 2009 8:13 AM
Neverfox
Actually, there is some confusion here. The key attributes of corporate form all depend, directly or indirectly, on the legal identity of corporations as distinct persons apart from their shareholders and directors (and State corporation statutes presently establish this identity). For this reason (and part of what makes a corporation different from other forms of business organization) is that it is not subject to automatic dissolution and distribution and thus can exist beyond and apart from the composition of its shareholders. It will continue to exist even after the death of the last shareholder, unless it is dissolved by legal force, which under the State, can be due to simply not fulfilling filing and meeting requirements.
Published: April 9, 2009 2:40 AM
Alexander S. Peak
Former Agorist,
You write, "It's just so strange for me...if somehow Rothbard's 'magic button' was pressed and libertopia broke out... Some libertarians would start their own retail firms to compete. Other 'libertarians' would apparently loot the local Wal-Mart."
Are you saying that mutualists would support looting Wal-Mart?
Again, I cannot say I know the mutualist perspective on the matter, but I would suspect from what little I do know that this is not what they'd advocate, and that they'd instead support, as I do, handing over some of Wal-Mart's assets over to its workers.
I notice you did not answer my question as to what precise means mutualists would use to calculate what portion of assets should be claimed, unfortunately. I was hoping for an answer to that question as such an answer may help me to clarify my own view--even if I ultimately reject the mutualist position on the question.
Perhaps I should ask a self-described mutualist, since it's clear that neither you nor I are one, and it appears that you are as uninformed about their views as I am. (This is not meant to be an attack upon you, of course.)
My main area of disagreement with mutualists--at least of which I'm actively aware--is their view on property. As far as I'm concerned, once one has homesteaded something, the property claim remains legitimate until sale, gift, death, or surrender of the property, whereas I believe mutualists hold that the property holder must continue to use the property for the claim to be legitimate. This latter view seems arbitrary.
DixieFlatline writes, "anyone who thinks they can predict the outcome of a free market (Long/Carson - flatter economy) is a kook."
Don't we all make guesses as to what the free society will look like? Rothbard did it, Block does it, the Tannehills did it, we all do it. And I think we all admit, even Long, that none of us are positive as to what things will look like, we merely have good guesses based on what we know. In fact, I know Long has stated this on Angela Keaton's radio programme.
I'm sorry, I need to go again. Hopefully I'll find the time to finish making responses before the end of the night. No guarantees, though.
Respectfully,
Alex Peak
Published: April 9, 2009 6:52 PM
Alexander S. Peak
I'm back.
DixieFlatline,
You write, "If we knew the results of a free market, we could skip competition and go direct to outcomes. Why even bother with a market then? We just need to find the best planner, and let him tell us how things should be ordered based on the moral code."
I can't help but to suspect that this is a straw-man.
You continue, "If Carson confidently expects anything, he's a kook/planner/ideologue."
I think it's a jump to say that. I confidently expect that a stateless society will be more productive than one hampered by a state. Does that make me a kook or a planner?
I confidently expect that people will organise private, voluntary institutions to replace the functions of the state--institutions such as private protection agencies, insurance providers, private arbitration firms, and the like--all without them being forced to create such institutions. I confidently expect this because it would be in their self-interest to do so. Even if it turns out that I'm wrong, even if it turns out that society (i.e. the market) comes up with something a million times better, something that no libertarian theorist has yet even imagined, something that works far more efficiently and cheaply than the alternative institutions I've just listed, I still don't think it'd make me a kook or a planner to have had some level of confidence on the matter.
None of us can "know" how a free society (i.e. the free market) will handle anything, but we all have guesses. We wouldn't be libertarians if we didn't; we'd be centrists with no actual views about anything. Can you truly say that you have no opinion at all as to the likely structures of the free society, that you have zero expectations, let alone any confident expectations?
In response to my statement about Rothbard advocating that mercantilist businesses be handed over to their workers, you write, "Rothbard was terrible on this. His notion of what was a legitimate transfer of property titles to reflect justice is outrageous in my opinion."
What is "terrible" about it? If your business is an arm of the state, as Halliburton is, then it cannot be described as private, and the executives thereof can only be said to be in collusion with criminals (i.e. the state). If you base your profits off of criminal activity, then you are a criminal, and have no rights to the property you acquire through criminal means.
My only problem with Rothbard is that he's adopting the Blockian perspective of two-teeth-for-a-tooth, which I have recently come to reject. I would say that if a given firm makes 50% of its profits from the state, then only 50% of its assets should be surrendered to its workers.
As for his view on title transfers, he adopts Williamson M. Evers's title transfer theory of contracts (see chapter 19 of his The Ethics of Liberty). I find his arguments quite convincing on this front.
You write, "But then most of these guys, Long, Rothbard, Carson have/had limited experience in the commercial sphere as a wage earner, or a capital investing proprietor. And it shows."
That's not a reason to reject someone's system of ethics. That's like a state communist suggesting that all capital-based property be surrendered to the state because "these guys, Peak, Flatline, etc. have/had limited experience as wage-slaves." A rational system of ethics is not made more or less rational by its creator's direct experiences.
Former Agorist,
In response to the question, "Isn't the mutualist solution the libertarian solution?," you write, "Not from what I have read. Otherwise they would simply call themselves 'libertarians.'"
Lots of people call themselves other things in addition to "libertarian." This argument seems to me just as shallow (again, no offense) as the argument put forward by social anarchists who say, when rejecting anarcho-capitalism, that "if anarcho-capitalists really held anarchistic views, they would simply call themselves 'anarchists.'"
You write, "Preventing consenting adults from forming joint stock companies is different than ending state intervention into the market."
Have mutualists proposed preventing the formation of joint stock companies?
You write, "50% seems like a political compromise, as where else could he have pulled this number from?"
I'm convinced he got the number from Block.
According to chapter thirteen of his The Ethics of Liberty, he writes,
"It should be evident that our theory of proportional punishment—that people may be punished by losing their rights to the extent that they have invaded the rights of others—is frankly a retributive theory of punishment, a 'tooth (or two teeth) for a tooth' theory. Retribution is in bad repute among philosophers, who generally dismiss the concept quickly as 'primitive' or 'barbaric' and then race on to a discussion of the two other major theories of punishment: deterrence and rehabilitation. But simply to dismiss a concept as 'barbaric' can hardly suffice; after all, it is possible that in this case, the 'barbarians' hit on a concept that was superior to the more modern creeds."
A little before this, in the same chapter, he writes,
"But restitution, while the first consideration in punishment, can hardly serve as the complete and sufficient criterion. For one thing, if one man assaults another, and there is no theft of property, there is obviously no way for the criminal to make restitution. In ancient forms of law, there were often set schedules for monetary recompense that the criminal would have to pay the victim: so much money for an assault, so much more for mutilation, etc. But such schedules are clearly wholly arbitrary, and bear no relation to the nature of the crime itself. We must therefore fall back upon the view that the criterion must be: loss of rights by the criminal to the same extent as he has taken away.
"But how are we to gauge the nature of the extent? Let us return to the theft of the $15,000. Even here, simple restitution of the $15,000 is scarcely sufficient to cover the crime (even if we add damages, costs, interest, etc.). For one thing, mere loss of the money stolen obviously fails to function in any sense as a deterrent to future such crime (although we will see below that deterrence itself is a faulty criterion for gauging punishment). If, then, we are to say that the criminal loses rights to the extent that he deprives the victim, then we must say that the criminal should not only have to return the $15,000, but that he must be forced to pay the victim another $15,000, so that he, in turn, loses those rights (to $15,000 worth of property) which he had taken from the victim. In the case of theft, then, we may say that the criminal must pay double the extent of theft: once, for restitution of the amount stolen, and once again for loss of what he had deprived another."
To this he gives the following footnote: "This principle of libertarian double punishment has been pithily described by Professor Walter Block as the principle of 'two teeth for a tooth.'"
I asked Dr. Block in person if it was he or Rothbard that came up with two-teeth-for-a-tooth, and Block responded by saying it's hard to remember precisely who came up with it, but he did think that it was he himself (i.e. Walter Block) that came up with it.
It would thus seem to me that if Rothbard were to be asked how much of a firm should be surrendered to the workers if only 33% of said firm's profits came from state intervention, he would likely say 66%. I, however, has ceased believing Block's two-teeth axiom to be representative of justice, so I personally would respond to such a question by saying, "33%."
Mr. Dawson,
You write, "@Former Agorist: the left-libertarian argument involving road subsidies isn't a moral one, it's an economic one. Everyone is forced to use the state's roads, obviously, and no one (except the real nuts) have any problem with that. The left-libertarian argument is that Wal-Mart's business model is subsidized by the socialization of roads in a way that wouldn't exist in a free market."
I consider myself a left-libertarian. (I consider all libertarians, in fact, left-libertarians. I consider the term "right-libertarian" to be an oxymoron.)
But I cannot find myself agreeing with anyone who says that socialisation of the roads benefits Wal-Mart any more highly than it benefits anyone else in society. Wal-Mart, at the end of the day, is nothing more than a bunch of individuals working in corporation with one another. These individuals, from workers to executives, all use the same roads as the workers and executives from any other corner of society.
Further, since these roads cannot be legitimately owned by the state, these individuals who use the roads are its legitimate owners, including those who work for Wal-Mart.
As long as Wal-Mart is not advocating the existence of socialised roads, it cannot be said that it is doing anything wrong in allowing its employees to use this unowned (or popularly-owned) resource.
Now, if Wal-Mart were openly supporting socialisation of roads, requesting the government to grant additional funding to roads, that would be another story altogether.
Mr. Gardner,
You write, "But preventing consenting people from forming a joint stock company is a) not the same as preventing people from forming a corporation, since a joint stock company need not be a corporation, and b) not something any of these people have advocated."
This is probably a dumb question, but I'm still unclear as to what exactly a corporation is. I think I asked this question earlier and didn't receive an answer. If you could share one, I'd certainly appreciate it.
You also write, "Of course, no libertarian is really just proposing free markets, are they? Ensuring, to some degree, that property holdings are just, is also part of the picture, too, since no libertarian would, for instance, be happy with a free market in slaves. They would be perfectly happy with slaves looting slave holders of themselves, and probably taking the plantation, too."
I think this is an important point, one that must be stressed. Thanks for making it.
Back to Former Agorist,
You write, "And this seems to be main sticking point, as I have seen comments from 'left-libertarians' and the like talking about 'stolen capital' and such, as well as advocating the smashing of windows of department stores as 'restitution.'"
Let's discuss the breaking of the Macy's window, then, the most recent example of a window broken in protest of which I'm aware. The brick was thrown by a self-described market anarchist.
I asked the gentleman (via the Internet) why he had thrown the brick, but I never received a satisfactory answer. It can only be theoretically just to throw the brick if the property is unowned (which it could be possibly argued it was IF Macy's had derived excessive profits from state intervention). But the gentleman provided me with no actual example of Macy's requesting or voluntarily accepting statist intervention, so as far as I could ascertain, Macy's was simply a victim in this case.
Now I find it strange that you're quick to indict left-libertarians here. As Prof. Long had pointed out on his blog, even if it could be concluded that Macy's had employed for its own profit statist intervention, that doesn't make the property that had been broken "unowned." By means of the homesteading principle, the window would have been owned by the workers, and thus either way, the brick would have been breaking property that has a just owner.
I honestly believe, although I admit I could be wrong in this regard, that the self-described market anarchist who threw this brick was simply trying to suck up to the so-called "left"-anarchists who appear to monopolise the anarchist movement, as if to say, "See? We market anarchists are not lap-dogs of Big Business after all." I do believe this is a point we need to stress (i.e. that we are not apologists for big business), but I'm inclined to say that the method employed by this self-described market anarchist was highly flawed and most likely patently unethical.
In any event, I think there's a lesson to be learned in this for all of us. Although I have no objection to teaming up with anarchists of other stripes, whether in marches or via other avenues of activism, we should never get so cozy that we're willing to adopt tactics we know or at least have reason to believe are unethical.
As far as I'm concerned, Prof. Long's position on the matter was the most rational one. If Macy's had been cozy with the state, as the kid claimed, then the window was the property of the workers, and what the kid did was commit theft and aggression. If Macy's had not been cozy with the state, then what the kid did was still theft and aggression. Either way, what the kid did was both theft and aggression.
Further, since I believe one is innocent until proven guilty, I'll have to assume that Macy's is not cozy with the state until some evidence is provided to the contrary. Perhaps some evidence exists and I've merely not yet come across it, and if anybody here wishes to present such evidence to me, I'll happily consider it.
Mr. Spangler writes, "The libertarian only differs from the Marxist on this matter IN ONLY ONE WAY -- the amount of wealth held is itself not the issue, but rather its means of acquisition is. The results of that differing analysis do not justify some sort of mirror image anti-Marxist pro-elite class loyalties where the richer someone is the more virtuous they are -- because a great deal of privately held wealth in today's society is crony capitalist stolen loot."
I have to agree with this entirely. In fact, I recently got finished reading Hamilton's Curse by Thomas J. DiLorenzo, where he devoted an entire chapter (chapter five) to what he called "crony capitalism." (I'm currently "live"-blogging the book over at LastFreeVoice.com.)
Even conservative writer Jonah Goldberg, in a recent National Review, wrote an article about this phenomenon, quoting Gabriel Kolko and Prof. Roderick Long. Goldberg got a few things wrong, naturally, but it was overall a good piece. (He also quotes Kolko in his book Liberal Fascism which I have yet to read.)
Just acquisition is what it's all about. The famous "Philosophy of Liberty" flash page clearly uses the phrase "justly-acquired property" instead of simply "property," and it seems to me that any serious libertarian must admit the central role that acquisition plays.
DNA,
You write, "Very well said. That's the problem with the left-libertarians: they think they invented the stuff Rothbard, Hoppe, and others have already talked about, when all they've really done is to take some of those insights and then over-generalize about certain organizational structures under state capitalist conditions."
First, I wish to re-stress that all libertarians are leftists, as Rothbard correctly points out. Mao, by contrast, was a rightist.
Second, I don't think any modern left-libertarian (sorry for being redundant here) claims to have invented such things as libertarian class theory. In fact, pre-Marxist classical liberals were the first to come up with class theory. Franz Oppenheimer also came up with a libertarian class theory, considering the divide as being between the political class that exploits and the economic class that produces.
I admit that I haven't yet read Agorist Class Theory, but I suspect that it follows a similar conception.
DixieFlatline again,
You write, "Rafael, good luck finding many (or any) partyarchs here."
I'm still an LP supporter. I haven't given up hope for them just yet, despite their 2008 nomination of a non-libertarian for the office of president, and their 2006 platform slashing.
Mr. Lawrence,
First, many thanks for answering my question.
You write, "A corporation is an enduring entity with a life of its own, separate from the people who work for it and so on. Very few naturally occurring instutions have this of their own nature (I mentioned monasteries with their own internal dynamic). The rest get it from state structures. Further, they often have legal privileges like limited liability against all, not just against those they deal with where they could negotiate it (it has been asserted - though this begs the question of the thumb on the scale they get even with these). These privileges are also provided through state machinery. Quite simply, none of this would be available without the state, though possibly a corporation that was previously set up might persist for a while even without it. I would expect that managers would become partners in short order, taking over their corporations' assets and resources, while outsiders and workers would be more reluctant to deal with a claimed corporation than with competing individuals and partnerships etc. who they could connect with physically if they had to follow things up. Like trying to hold sand, things would dribble away."
The term "an enduring entity with a life of its own, separate from the people who work for it and so on" seems a bit vague. I certainly don't see businesses as possessing an independent "life." Businesses, it would seem to me, are nothing more than conglomerations of free individuals (at least under the best conditions) working together for a common goal (viz. profit), possessing no more or less rights than the voluntary individuals that comprise them. In other words, if every individual in a given firm has free speech, then the firm does as well, being a voluntary organisation rather than a compulsory one.
As for limited liability, I believe (as Rothbard did) that a private, free-market firm could potentially contractually agree to have liability of stock holders (or workers, etc.) be limited, but I believe you bring up an important point that I had not considered previously: the limited liability could only, at most, apply (in the free society) to those who have contracted with the firm. Thus, if the firm pollutes my stream and I have no contract with the firm, I see no reason why liability should be limited in that scenario. If the state artificially limits liability even in such scenarios, then that is a legitimate problem.
Do I understand you correctly that corporations are (or may be) entities that, as a firm, owns property independently of its employees/executives/share-holders? I presume such an organisation could be formed on the free market, since I don't see it as a violation of the nonaggression axiom. (Would they survive easily in a truly free market? I don't know, nor do I much care, so long as there are no aggressions permitted.)
Thus, it seems the main objection here is that the state grants to firms a limit on liability even when dealing with persons with whom they have made no contractual arrangements. Do I read this correctly?
If this characteristic is what defines a "corporation" as being different from voluntary free-market firms, then I, too, can reject "corporations" on this ground. But if the term "corporation" can be applied to firms that could be formed on the free market without this characteristic, to firms that do not violate the nonaggression axiom (regardless of whether such firms long survive), then I would find much difficulty in rejecting "corporations" per se, finding it instead much easier to reject what we would otherwise call "statist corporations."
You write, "A corporation can always get more support from people it directs, if it has those features, but if it hasn't it's some other kind of institution like a partnership that only keeps going so long as the partners choose to keep using it."
Is this to say that, even if everyone decided to quit Target, including its execs, an empty, employeeless entity known as "Target" would continue to exist under our current state of statism?
I can't even grasp what the point of such a state regulation would be, how it would benefit (or harm, or even affect) anyone. It would seem more pointless than banning the bringing of elephants to grocery stores on Sundays. Hence, I suspect I'm misunderstanding you. Yet I can see no other way to interpret what you've just said.
You write, "However, it isn't a matter of preventing, it's a matter of not enabling. Without state enabling, the furthest they could go in that direction would be a partnership that issued shares and that they called a joint stock company. It would be that, but it wouldn't be either limited liability or a corporation. But Richard Garner already told you a lot of this."
Are you merely arguing that contractual limited-liability firms that form on the free market (and thus have limited liability for only those individuals that have contracted with it, and for no one else) would be likely unsuccessful competing against full-liability firms, and thus would go out of business; or are you arguing, as it appears you are, that such businesses wouldn't even be able to form in the first place; and, if you are arguing the latter, then why wouldn't they be able to form in the first place.
(I hope you don't mind all these questions.)
You write, "Well, on this thread, it was the pro-corporation types who pulled [Wal-Mart] out as an example."
I believe I was the first to bring up Wal-Mart. But if we're dealing with the first person to bring up Wal-Mart's relation to the socialised roads we all use, that was brought up by Mr. Matthew Dawson.
Back to DixieFlatline,
In response to Mr. Lawrence, who wrote, "It's plain not true that an institution to voluntarily arrange limited liabilty, say, with people who have not negotiated that with it," you respond, "This is a strawman. We're talking about voluntary consent from all sides, as has been clearly laid out by several parties, including myself."
I believe, if Mr. Lawrence defined a corporation as an entity that necessarily has universal limited liability (as opposed to merely a limited liability with those with whom they've contracted), then by definition all libertarians (including you) would be opposed to that entity Mr. Lawrence is defining as a "corporation."
If, however, a corporation, to actually constitute a "corporation," needs not have universal limited liability (as you seem to be defining the corporation as not needing), then all libertarians (including Mr. Lawrence) would hold no opposition to that entity you define as a "corporation."
In other words, I think we're getting tangled up on the definition of the term. Perhaps, in fact, you and Mr. Lawrence are supporting substantially the same thing. Or, perhaps I'm misreading one or both of you. I admit that's certainly possible.
And back to Former Agorist,
You write, "Owners are somehow responsible for 'resources causing harm'?"
If I own a dog, and this dog jumps the fence and bites your daughter, severly hurting her, I should be required to pay for all resulting medical bills, no? The reason I should is because it was my property that caused the damage. Had I placed a leash on my property, or kept it inside, or trained it to respect humans better, I could have avoided the repercussions.
If, however, I had the dog tied up and someone comes onto my property and releases him, then the trespasser should be the one held responsible.
If I stand atop a tall building and start randomly throwing the bricks I own off said building, and one should land on your head providing you a concussion, surely I should be held responsible.
If, however, someone steals my bricks and does the same, it is then the thief should be held responsible.
If I sell a radioactive product, and ten years later it turns out that this product has caused thousands to contract cancer, then I should be held responsible.
If, however, I inform the customers in advance of the risk of contracting cancer, then they make that purchase at their own risk and should take responsibility for their own purchasing choices.
Does this seem rational to everyone?
Finally, Neverfox writes, "For this reason (and part of what makes a corporation different from other forms of business organization) is that it is not subject to automatic dissolution and distribution and thus can exist beyond and apart from the composition of its shareholders. It will continue to exist even after the death of the last shareholder, unless it is dissolved by legal force, which under the State, can be due to simply not fulfilling filing and meeting requirements."
I'm still confused by this. Are we saying the empty shell that is left exists with all property intact? Are we saying that this property can be homesteaded by anyone who comes along?
I have to think that, in a truly free market, if all employees, execs, and share-holders of a specific firm happen to die (let's assume we're dealing death by with natural causes, and that the shares have not been left to anyone in their wills), someone can homestead the property, appropriate it from the state of nature, and can even run the firm under the same name under which it was previously ran. Any disagreement here?
So I still fail to see what possible reason the state could have for this regulation. What benefit (or harm, or affect) does it have?
Sincerely,
Alex Peak
Published: April 9, 2009 11:04 PM
Neverfox
Alex,
Wow, that's quite a reply to everyone! But kudos on your patient and thoughtful effort.
Re: Mutualists and looting Wal-Mart
We mutualists are lying thieves. In the immortal words of Dave Chappelle, "Yes, they deserve to die and I hope they burn in hell!"
Or at least this is what you might expect me to say given the broad brush that is used to paint mutualism in this thread. It seems to me that it has become quite the bugaboo or stand in term for anything unlibertarian, as if their weren't actual enemies of freedom worth attacking. I suspect, though I can't prove, that most of these types of attacks on mutualism are bandwagon attacks with no actual understanding behind them.
No, I don't support looting. No, I don't have a blueprint for assessing the status of present property rights.
Re: Mutualist property theory
I'm curious to know why you think it more arbitrary than what you describe but this could be a big discussion that is outside the scope of this thread. Perhaps, we can discuss it in a different setting so as not to hijack?
Re: Your replies to DixieFlatline
I couldn't have put it all better myself. Thank you. DF and FA are arguing mostly with logical non-sequiturs, IMO.
Re: Corporations
It is part of the basic concept of a coporation that it involves limited liability for torts and contracts. The chief attributes of the corporate form are generally listed as 1) limited liability for investors; 2) free transferability of investor interests; 3) legal personality (entity-attributable powers, indefinite life span, and purpose); and 4) centralized management.
Re: Perpetual existence
Yes, it is my understanding that in most current legal systems, "the empty shell that is left exists with all property intact". This is a natural outflow the attributes I listed above. The corporation owns the assets, not the shareholders (they own only shares of the corporate entity, a mere abstraction of their rights to hure directors, receive dividends, dissolve corporation etc.). However, in practice, the corporate charter can contain instructions to dissolve the corporation voluntarily in the event of it being orphaned or the State will step in and do it (sometimes acquiring the property for itself). Of course, most shareholders leave their shares to their estate and heirs so the link is never broken; there would need to be no possible link to any eligible shareholder or heir, a rare thing. And, obviously, it also depends on the specific laws in place. So, "yes" to your Target question (though it would be rather dumb since you have the right to dissolve the corporation properly such that you reap the dividends from "directing" the corporation to sell its assets). If it did happen, the State would likely take the property for itself since Target the "corporation" was a filing entity of the State. It's not going to complain about being gutted.
Re: why wouldn't they be able to form in the first place
They might technically be able to "form" as far as the participants were concerned but I think that he means form in the sense of being contractually valid should said libertarian society reject limited liability. Once something loses the protection of the legal options available, it's not likely to be popular.
Published: April 10, 2009 3:56 AM
newson
neverfox says:
"However, in practice, the corporate charter can contain instructions to dissolve the corporation voluntarily in the event of it being orphaned or the State will step in and do it (sometimes acquiring the property for itself)."
could you give examples of the latter acquisition? i can think of no law enabling such a thing.
i can't even see how a company could be orphaned, given the state's requirements regarding directors' duties, regular filing of accounts and so forth; deregistration swiftly follows non-compliance.
Published: April 10, 2009 5:31 AM
Neverfox
newsom,
The legal concept is called escheat. Again, as I emphasized, I imagine it is rare because few cases arise where there is no heir to lay claim to the share. For some examples, see the list of court cases here.
You are correct about filing requirements being one way a corporation can die without the express need for shareholders. In this sense the perpetuity is only theoretical in the State framework. In my first comment, I said, "unless it is dissolved by legal force, which under the State, can be due to simply not fulfilling filing and meeting requirements."
Published: April 10, 2009 2:42 PM
Scott Bieser
Not sure where I "shifted the burden of proof," as DixieFLatline asserts, but perhaps I wasn't clear in what I was trying to say. Let's use her amusement park example to illustrate what I mean:
Let's imagine an amusement park owned by Happy Joy-Joy Inc., a company with several hundred stockholders. The park is situated on a major road outside a major city and abuts an apple orchard.
HJ-J Park derives its power from an on-site power plant fueled by liquid propane brought in by truck. One sad day, the propane storage tank ignites, causing a horrendous fire which destroys most of the park, along with one of the propane delivery trucks owned by the propane company, and kills a dozen park visitors. The fire quickly spreads outside the park boundaries and consumes several hundred acres of apple orchard before it is finally extinguished by fire-fighters.
The fire is investigated and the cause is determined to be from squirrels having recently chewed through some critical wiring located near a propane feed line. A magistrate rules that HJ-J Inc. is liable for the fire, although in this situation no particular individual employee, manager or contractor can be reasonably held to account. Damages are awarded to the families of the deceased guests, the propane company, and the owner of the apple orchard, in a total amount which exceeds the remaining assets of the corporation and its insurance coverage.
Now, imagine firstly that HJ-J Inc. is a state-chartered corporation of the common form today. What are the limits of its workers', managers', directors', and shareholders' liabilities for that fire?
Unless some worker can be shown to have been negligent in causing the fire, the most any HJ-J worker should lose is his job.
Ditto for the corporation's managers.
Claimants might attempt to go after the directors and executives but they would have to prove that defendants could be reasonably expected to have anticipated and taken action to prevent the squirrel-chewing which resulted in the catastrophic fire.
This leaves the shareholders. In our present system, they would be exempt from liability beyond the money paid for their shares.
But suppose now that all this happens in a state-less environment?
HJ-J Joint-Stock-Company could contract with the propane company, and with its paying guests, to shield itself from any tort arising from the normal operation of the amusement park. So as far as those claimants go, nothing changes.
But the apple-orchard owner is another matter. She has never contracted with HJ-J JSC with regard to any liability issue. And so under the principle that if your property damages my property, you must pay, the orchard owner could go after the joint-stockholders, and a reasonable court would grant her awards from each shareholder proportionate to the amount of the company owned.
Joint-stockholders could, of course, purchase insurance against such an eventuality. But they would have to bear the cost of that insurance and hope it is sufficient to cover a worst-case-scenario should it occur.
I believe this arrangement would strongly discourage the kind of detached attitude most owners of public corporation stocks presently have towards their investments. Fewer people would be willing to make this sort of investment, and those who do would take a much more active interest in the companies they own. It would, I believe, fundamentally change the character of "corporate" culture and stock trading. They might still be called "corporations," but they would look and behave differently -- I think and would hope, more responsibly -- than the publicly-held corporations we know.
Published: April 10, 2009 3:11 PM
Neverfox
newson, Sorry for the misspelling of your name. Fat fingers...
Scott,
I think you have pointed out the basic problem and the ramifications of a change in what it means for investing and risk. Because I think it addresses this concept well and because I can't find a simple link, I'd like to quote at length from Hansmann & Kraakman, The Uneasy Case for Limiting
Shareholder Liability for Corporate Torts, 100 YALE LAW JOURNAL 1879 (1991). The last paragraph in particular echoes yours and it's a good summary of the case against limited liability from at least a consequentialist viewpoint.
I think then that it will need to be shown, and perhaps it has been (I haven't read everything at Mises on limited liability) how it cannot be considered a violation of rights to limit the claims on judgments in favor of tort creditors without it being unlibertarian. I think the burden of proof is implied in the very term "limited liability" as liabilities are an inherent feature of protecting property rights and to "limit" its application seems to require a defense.
---------------------------------------------
"I. Closely-Held Corporations
A. Corporations with a Single Shareholder
Consider first the situation in which a single person forms a corporation, of which she is the sole shareholder and manager, to exploit an investment opportunity. The shareholder in this case could be an individual or -- more realistically and more importantly -- another firm of which the corporation in question is a wholly-owned subsidiary. Suppose that undertaking the investment creates a risk of tort liability exceeding the corporation's net value. ... The most familiar inefficiency created by limited liability is the incentive it provides for the shareholder to direct the corporation to spend too little on precautions to avoid [such liability]. In contrast, a rule of unlimited liability induces the socially efficient level of expenditure on precautions by making the shareholder personally liable for any tort damages that the corporation cannot pay.
Further, limited liability encourages overinvestment in hazardous industries. Since limited liability permits cost externalization, a corporation engaged in highly risky activities can have positive value for its shareholder, and thus can be an attractive investment, even when its net present value to society as a whole is negative. Consequently, limited liability encourages excessive entry and aggregate overinvestment in unusually hazardous industries.
Finally, limited liability may induce the shareholder either to overinvest or to underinvest in her individual firm -- that is, to pick either too large or too small a scale for the firm. This scale effect is ambiguous because investing in the firm under limited liability has two different consequences for potential tort liability that operate in opposite directions. On the one hand, limited liability partially externalizes the marginal increase in tort damages caused by expansion of the firm and thus creates an incentive for excessive investment. On the other hand, increased investment increases the value of the firm, and hence the amount that is available to pay damages to all tort claimants, including those who would have been injured even without the new investment. Consequently, limited liability also creates an incentive to minimize investment in order to reduce the exposure of the firm's owner to tort damages. Although in most cases the second effect is likely to dominate the first, and hence lead to too small a scale for the firm, there may also be situations in which the reverse is true. ...
II. Publicly-Traded Corporations
Limited liability gives the managers of publicly-traded corporations an incentive to assume too much risk, just as it does the shareholders of closely-held firms. However, the public corporation adds several novel elements to the comparison of liability regimes. In addition to a new class of hired managers, these include: (1) large numbers of passive shareholders; (2) a market for freely-trading stock; (3) substantial assets; and (4) potential tort liability that may not only exceed the firm's assets but that may not be fully insurable at any premium. The traditional view is that these elements -- and especially the need to maintain an efficient market for shares -- make unlimited liability even less appropriate for public firms than for closely-held firms. The merits of this view turn principally on three issues. The first is the feasibility of administering unlimited liability when shareholders are numerous and trade frequently. The second is the potential burden that unlimited liability might impose on the securities market. And the third is whether unlimited liability imposed on public shareholders can improve the incentives of the managers who actually determine firm policy. ...
[One] inquiry bearing on the feasibility of unlimited liability is whether recovering from numerous public shareholders would be prohibitively costly even in the absence of opportunistic efforts to disperse share ownership. Very large collection costs would make unlimited liability less attractive not only because they would be wasteful, but also because they would lower settlement values and hence reduce the deterrent effect of tort rules. We believe that collection costs are unlikely to be prohibitive in this sense.
One reason is that shareholders would rarely be forced into insolvency. Equity holdings today are already highly concentrated in the hands of wealthy institutions and individuals. Beyond this, assessments against shareholders would seldom exceed the assets of even a modest investor. It seems unlikely that even a catastrophic liability judgment would impose costs exceeding a publicly-traded firm's value by more than, say, a multiple of five. Thus, an unlucky small shareholder who had placed 5% of a $100,000 portfolio in the stock of such a firm would stand to lose $25,000, or 25% of her portfolio's value, in a worst case scenario. A large institution with 0.2% of its assets invested in the same stock would lose 1% of its asset value. Although such losses would be serious, they would hardly be beyond the pale of ordinary market fluctuations.
Given that shareholders would be able to pay, the mechanics of collection need not be excessively costly. A court could clearly administer the collection effort: bankruptcy trustees already collect accounts receivable from hundreds or thousands of debtors of bankrupt firms. Since share ownership on the liability dates would presumably be the chief legal issue in most collection efforts, few shareholders could successfully contest their assessments. Wealthy individuals and institutions would have little to gain from litigating separately to contest their assessments because they would be pursued in any event. Moreover, even small shareholders might be induced to cooperate simply by adding collection costs to the assessment bill of shareholders who unsuccessfully sought to contest their assessments. ...
Even more than the purported difficulties of designing an administrative regime of unlimited liability for public corporations, the decisive objection to unlimited liability, in the view of many commentators, has always been the burden that unlimited liability might impose on the cost of equity for public firms. Thus the next step in comparing limited and unlimited liability is to assess this burden.
There is no doubt that unlimited liability, as we have described it, would increase the cost of equity. Indeed, the purpose of unlimited liability is to make share prices reflect tort costs. Yet the literature suggests that, beyond internalizing tort losses, unlimited liability might generate additional costs by (1) impairing the market's capacity to diversify risk and to value shares, (2) altering the identities and investment strategies of shareholders, and (3) inducing market participants to monitor excessively. The magnitude of these additional costs, however, turns chiefly on the choice between a joint and several or a pro rata liability rule. ... The claim that unlimited liability might distort share prices or prevent shareholders from diversifying risk is persuasive only under a joint and several liability rule. Under a pro rata rule, shares would have the same expected value for all shareholders. Although individual stocks would be riskier under such a rule, the additional risk would be no more difficult to diversify than the risk of tort liability is today. It would simply be larger in absolute terms, which would increase the number of stocks in an optimally diversified portfolio as well as the risk of taking a large position in a single firm. Given that a pro rata rule would leave shares with the same expected value for all investors and also permit full diversification of tort risks, it should not affect the efficiency of market pricing. Risk-averse small investors with too little capital to diversify fully under an unlimited liability regime could shift their investments at very little cost to mutual funds or corporate debt. Moreover, the infrequency of catastrophic torts suggests that a pro rata rule would impose relatively small expected costs, even on undiversified investors, except when corporate activities are relatively risky -- which is precisely when an unlimited liability regime is needed to prevent corporations from externalizing large costs.
It is sometimes argued that, regardless of how remote the probability of a substantial judgement against them, the mere prospect of unlimited personal liability would cause many individual stockholders to abandon equity markets entirely in favor of fixed-return securities, with the arguable consequence of impairing the liquidity of the markets. But such behavior seems as unlikely as it would be irrational. For example, under current laws, every time a person drives an automobile she exposes herself to unlimited tort liability. Yet nearly all adults regularly drive automobiles, and casual empiricism suggests that few individuals feel it worthwhile to purchase liability insurance that has exceptionally high coverage limits."
Published: April 10, 2009 4:15 PM
Vincent Cook
Rothbard, in drawing an analogy between accepting a beneficial interest in the state's activities (using a government street, etc.) and voting, misses a crucial point. From the standpoint of a libertarian legal code, selecting someone to act on your behalf (however marginal your vote may in fact be) means that the winner of the election is your agent, and thus you assume liability for winner's subsequent misdeeds. Voting for a losing (though more principled) candidate doesn't let you off the hook; the point being that mere participation in the election (assuming it is voluntary) ratifies the winner's role as your agent.
A further difficulty of voting is that one is implicitly endorsing a supercession of individual rights by the majority. From a libertarian point of view, the majority of the electorate has no authority whatsoever, as the democratic state is a not a voluntary association. Why should one then act otherwise? Once we reject the fallacy of assuming that the individual voter actually controls the election outcome, we are obliged to acknowledge the anti-libertarian basis for any exercise of democratic authority. Practically speaking, the choice one faces is not between voting for or against liberty; the real choice is between participating in or scorning a state-legitimization ritual.
None of this, by the way, implies that Konkin offers a realistic alternative for liberation. It may well be the case that nothing is going to bring about a libertarian transformation of society, in which case the individual is better off making the best of a bad situation by how one manages one's relationships, etc. The optimal strategy may be to practice personal virtue, not engage in political action.
Published: April 10, 2009 7:46 PM
Neverfox
Vincent,
There are a few problems with your assessment, I think. First of all, I'm not certain that participation in an election that will have a result no matter what you do (by decree of law) can be considered a principal-agent contract. If you and 10 other people got together and hired a President, who otherwise wouldn't be a President, then you might have something. Also, are they universal agents, general agents or limited special agents? Furthermore, a principal can often terminate the relationship with an agent.
To quote Jan-Erik Lane:
Published: April 10, 2009 8:55 PM
P.M.Lawrence
DixieFlatline asserts of my "A corporation is an enduring entity with a life of its own, separate from the people who work for it and so on", "But not separate from it's shareholders. I am unaware of any corporation that has outlived ownership and became it's own independent entity."
Yes, separate from its shareholders. The original ones are necessary for its founding, but not for its continuing thereafter. They could all die or be replaced by corporate shareholders or whatever, or the shares could be anonymous bearer shares that got mislaid - and the corporation would persist, awaiting owners. And from this, all corporations are their own independent entities, even though all commercial ones have least notional owners (but some oddities aren't commercial and don't have any). That is, they keep going as independent entities regardless of their owners.
"Re: burden of proof, Scott made an assertion and shifted the burden of proof, demanding a contrasting example. This is poor form in debate and a fallacious tactic."
No to the first sentence (he didn't demand a contrasting example). Yes to the second - but that's what you did with "If capital holders can organize voluntarily, and set up a firm with limited liability stipulations made clear to clients and suppliers up front, and all transactions with them are voluntary, and thus totally reasonable and permissible in a free market society. You've failed to prove otherwise." You provided a whole load of "ifs" and demanded that he refute them. But it's a red herring; a firm like that isn't a corporation but a partnership.
Of my "It's plain not true that an institution to voluntarily arrange limited liabilty, say, with people who have not negotiated that with it", DixieFlatline claims that "This is a strawman. We're talking about voluntary consent from all sides, as has been clearly laid out by several parties, including myself."
No, it's not a straw man, it's an attempt to avoid a bait and switch. Precisely because that sort of thing is not a corporation, and this whole thread is about corporations, which are like that, I was pulling the focus back to the subject area.
Of my "It's plain not true that it can endure on its own without continued support from its people unless it has its own internal dynamic to summon that up or it has state machinery to do so", DixieFlatline supposes that "This is an assertion. Upon what does this assertion rest?"
It's no assertion, it's an argument that is trivially true. Where there is an internal dynamic, the entity will persist. Where there isn't any, it will vanish when its supporters do, just as in a partnership - unless something outside supplies the dynamic. But something outside, enforcing things, is what a state is.
"Will post-state unions operate like post-state corporations? They will have to if they don't want to be deemed illegit."
The first sentence begs the whole point at issue, that "post-state corporations" could even exist. The second ignores or supposes illegitimate other forms of association like clubs, partnerships, etc.
"The difference is only in the nature of the capital being protected, not the ends" - again, no, because the most serious issues are with the means employed, what with their side effects and all.
Former Agorist applies a faulty analogy to "They have said that corporations are not contractual associations, but creations of the state", asserting 'Then they are incorrect. Look, the fact the State gives me a marriage certificate and registers the contract does NOT make my marriage "a creation of the state."'
The analogy only applies to the rare corporations like monasteries that have their own internal dynamic (as a marriage also has) and can exist free standing. Those, like marriages, the state co-opts as much as it can. The others simply don't have an identity distinct from the people involved, so by definition they are not corporations but things in the partnership spectrum.
Former Agorist also asks 'Wait...who caused the harm or wrong again? "Resources" caused harm? Owners are somehow responsible for "resources causing harm"?'
He has not picked up on what was written: "They have said that such creations of the state are bad because they allow owners of resources to avoid liability for wrongs or harms committed with those resources" [emphasis added]. The fuller original, omitted from this quotation, made it clear what was being referred to: "They have said that corporations are not contractual associations, but creations of the state".
Alexander S. Peak is unclear about some of what I wrote:-
- 'The term "an enduring entity with a life of its own, separate from the people who work for it and so on" seems a bit vague. I certainly don't see businesses as possessing an independent "life."' But - contrary to DixieFlatline's no doubt inadvertent bait and switch - this isn't about "businesses", it's about entities that have been set up with the corporate form (some of those aren't even businesses). It shouldn't be vague, once you've seen some examples like monasteries or the Dutch East India Company, and some examples of businesses like Boulton & Watt that weren't corporate. Or you can follow up the literature.
- "I believe you bring up an important point that I had not considered previously: the limited liability could only, at most, apply (in the free society) to those who have contracted with the firm. Thus, if the firm pollutes my stream and I have no contract with the firm, I see no reason why liability should be limited in that scenario. If the state artificially limits liability even in such scenarios, then that is a legitimate problem." As I have made clear elsewhere, it's possible to arrange a certain kind of complete limited liability even with the partnership form. Some partners can be anonymous, with unregistered bearer shares. These partners can always lie low and get away from claims - but not all partners could be like that, or the partnership wouldn't work. Effectively, the active partners would be indemnifying the others, and outside claimants would always have someone to chase. The risk premium for active partners - a sort of insurance premium - would soon make most well enough off to meet most claims.
- "Do I understand you correctly that corporations are (or may be) entities that, as a firm, owns property independently of its employees/executives/share-holders? I presume such an organisation could be formed on the free market, since I don't see it as a violation of the nonaggression axiom." Not only do they own property that way, but they conduct all sorts of operations that have impacts on others. But in general they can't be formed on the free market (I mentioned the exception category), not in the sense that "Libertarians can't endorse them" but in the sense that "there is no outside mechanism, i.e. state machinery, to cause them to endure independently, so anything that can be formed isn't corporate". It's a logical impossibility. But they do actually cause harm to others, by crowding out the opportunities that natural persons would have had - and used to have, when corporations didn't roam the Earth. Andy Carnegie got his enterprises together using a partnership structure - and sold out to a corporate one, kicking the ladder away without realising it.
- 'But if the term "corporation" can be applied to firms that could be formed on the free market without this characteristic, to firms that do not violate the nonaggression axiom (regardless of whether such firms long survive), then I would find much difficulty in rejecting "corporations" per se, finding it instead much easier to reject what we would otherwise call "statist corporations."' That's the bait and switch. See the article that started this thread, and the earlier discussions it follows from. "Corporation" is not another word for firm, and the discussion is using normal received technical definitions of corporation.
- 'Is this to say that, even if everyone decided to quit Target, including its execs, an empty, employeeless entity known as "Target" would continue to exist under our current state of statism?' Yes. Those are called "shell corporations". Like an empty balloon, they can be reinflated - and often are. With Target, they would be fixed up by new people buying up shares from old owners or their estates, or from states that seized them for taxes. Then old title claims might be rvived, loans floated, employees hired - and there they are again, like zombies that won't die.
- 'Are you merely arguing that contractual limited-liability firms that form on the free market (and thus have limited liability for only those individuals that have contracted with it, and for no one else) would be likely unsuccessful competing against full-liability firms, and thus would go out of business; or are you arguing, as it appears you are, that such businesses wouldn't even be able to form in the first place; and, if you are arguing the latter, then why wouldn't they be able to form in the first place.' I'm not arguing either, though I suspect from historical precedent that they wouldn't be worth the effort (even now, some managers and directors of corporations waive their personal limited liability by guaranteeing loans to their corporations). No, I'm saying that a firm of this sort wouldn't be a corporation, by definition.
In response to DixieFlatline, Alexander S. Peak muses 'If, however, a corporation, to actually constitute a "corporation," needs not have universal limited liability (as you seem to be defining the corporation as not needing), then all libertarians (including Mr. Lawrence) would hold no opposition to that entity you define as a "corporation."'
There are some things to clear up. It's not the limited liability that makes a corporation. That's a legal privilege at other people's expense, and to be deplored for that reason if no other. But some things have that and are not corporations - like limited liability partnerships, where the state gives that privilege to all partners - and some corporations, historically, have not had that privilege but still been harmful as a side effect of their enduring character and ability to crowd out others (because they can keep on getting resources indefinitely, since they never die). Back in the Middle Ages abbeys did this, so when King Edward I of England found it got in his way too he passed laws like the Statutes of Mortmain to curtail it. So, even corporations that aren't state creations/emanations can have this down side.
Published: April 11, 2009 2:36 AM
Neverfox
P.M. FTW.
Published: April 11, 2009 5:41 PM
ThorsMitersaw
The following is Konkin's reply:
http://www.anthonyflood.com/konkinreplytorothbard.htm
You know, the reason some of us love Konkin is because we also love Rothbard.
Published: April 20, 2009 12:47 PM