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Source link: http://archive.mises.org/9033/more-on-the-corporation/

More on the Corporation

November 30, 2008 by

Roderick Long has kindly responded to my critique of his essay on corporatism. I don’t find Roderick’s reply very convincing, however. I don’t have posting privileges on Cato Unbound so I’ll offer a brief response here.

My basic critique of Roderick’s position is two-fold. First, on substance: Roderick’s arguments strike me as a form of what Harold Demsetz called the Nirvana fallacy. Essentially, Roderick identifies various inefficiencies associated with large, hierarchically organized corporations and concludes that smaller, “flatter” firms, such as worker-owned cooperatives, must be better. But all feasible forms of organization are imperfect. All real-world firms are plagued by inefficiencies — agency and information problems, coordination failures, various kinds of transaction costs, and the like. A sweeping claim that the corporate form is per se inefficient, and that therefore it can only have survived because of state privilege, requires a comparative assessment of the strengths and weaknesses of alternative forms of organization, and this Roderick does not provide. Nowhere in his original post, nor in his reply to my comment, does he address the organizational drawbacks of proprietorships, partnerships, and patron-owned enterprises (more commonly known as “cooperatives,” though I dislike that term, for reasons explained by Mises).

Second, the form of Roderick’s argument is deeply unsatisfactory. As I pointed out in my post, there are substantial technical literatures in economics, organizational sociology, and business law on the benefits and costs of alternative organizational forms, and Roderick does not grapple with these literatures at all, either in the original post or in the reply. He relies heavily on Kevin Carson’s work to justify the superiority of workers’ self-management. With no disrespect to Kevin, however, whose work I admire, what would Roderick think if I offered a radical new interpretation of, say, Aristotelian ethics, offering as my primary sources a self-published book and a some articles from the Freeman? I imagine Roderick would dismiss me as a crank. And yet, he freely discourses on economic organization without demonstrating any familiarity with the relevant technical literature.As to Roderick’s specific claims in his reply:

1. Roderick says the fact that large firms lobby heavily for trade barriers, war, and state education shows that they are the prime beneficiaries of these policies. But here Roderick confuses marginal and total effects. Firms of all types lobby up to the point where the marginal benefits of further lobbying are equal to the marginal costs. If large firms lobby more heavily than small firms, this indicates only that large firms perceive a higher marginal net benefit from lobbying than do small firms. One possible explanation is that small firms are already receiving high levels of state benefits, such that there is little gain from marginal expenditures on political influence. State-granted privileges and penalties for large firms may also be more sensitive to political influence than those affecting small firms (this is certainly true of antitrust and regulatory policy, as Fred McChesney has argued). Large firms might also find themselves in a kind of prisoners-dilemma game against other large firms, with each lobbying for benefits to avoid being at a strategic disadvantage relative to rivals, who are lobbying for similar benefits, even though all firms are rose off when all lobby. In short, the fact that large firms actively seek state support does not indicate that they, alone, receive it. To gauge the net effect of state intervention on firm size and organizational form we need to estimate the quantitative magnitudes of the effects of various interventions. We would also want to track lobbying expenditures by firm type over time, and must deal with the fact that lobbying expenditures, relative to GDP, have not risen appreciably over the last century, despite the rise of the large firm and the corporate hierarchy. It is a complex issue, one that a few simple assertions cannot resolve.

2. Roderick concedes that small firms also benefit from state intervention, but argues that “the small firms that benefit from government assistance are those that are seen; the ones that are most harmed by government action are those that are unseen because they are prevented from coming into business in the first place.” But the same argument applies to large firms. We see those that benefit from government action, but we don’t see those that are harmed — the small firms that would have become large, the large firms that would have become larger or more diversified or more hierarchical or whatever, were it not for the predator state. Imagine the large, highly efficient firms we might see in a truly free market! Roderick goes on to state that “[t]he assistance that small firms receive comes largely at the expense, not of larger firms, but of still smaller firms — or of those who would start such smaller firms if they could.” Again, this is assertion, not argument or evidence. When small-business subsidies and benefits are financed by taxation, including taxes on corporate income and on the incomes of large partnerships and proprietorships, they come at the expense of large firms. Large-firm subsidies and benefits also come at the expense of other large firms. Large firms may seek benefits not to benefit large firms as a class, but to punish specific (and equally) large rivals. Why assume that the larger firm always exploits the smaller?

3. Roderick has misunderstood my point about vaguely-defined property rights. I suspect he has not yet had a chance to consult the literature I cited, because this literature has nothing to do with limited liability, which Roderick discusses extensively in his reply, but deals instead with the organizational disadvantages faced by firms whose ownership claims are not alienable assets that trade on secondary markets. Patron-owned firms, as described in this literature, suffer from two kinds of free-rider problems, a horizon problem, a portfolio problem, a control problem, and an influence costs problem. You can read the details by following the link above. When ownership of the firm is tied to patronage — as an employee, consumer, or producer, owners face multiple and frequently conflicting interests in their joint capacities as owners and patrons. Different patrons also have different objectives: full-time employees and part-time employees disagree about how the firm should be run; farmers close to retirement want the buying cooperative to focus on short-term earnings, while younger farmers want it to invest now in anticipation of future returns; a consumer with a large house and a consumer with a small house disagree about what prices the community-owned electric cooperative should charge; and so on. In a corporation, dissatisfied owners hold liquid assets and can exercise their dissatisfaction through exit. When ownership is tied to patronage, exit is much costlier, and such conflicts are typically settled through voice – a highly inefficient mechanism. Moreover, when equity claims are not tradable, owners do not share the gains from increases in the capital value of the firm, and have reduced incentives to purse long-term objectives. These problems are well-known in the literature on cooperatives. Roderick refers several times to principal-agent problems in corporations but seems unaware that all multi-person organizations suffer from potential principal-agent problems.

4. Finally, Roderick confesses that he has an ethical aversion to “corporate hierarchies,” based on “an opposition to seeing people pushed around, even in ways that don’t violate libertarian rights.” If “pushed around” means treated rudely, asked to do things beyond what should be required, used as means to someone else’s end, then, sadly, people are equally “pushed around” in proprietorships, partnerships, and patron-owned firms — indeed, in all forms of social cooperation. Unless Roderick has a way to create a New Cooperative Man, I see no reason why people should behave any more ethically under workers’ self-management. Later he says that people who have worked in corporate hierarchies “know from their own experience how completely clueless the highly paid upper managers tend to be about what is actually happening, and how much of the firm’s success depends on workers simply ignoring the insane directives from above and doing what needs to be done.” This kind of statement may tell us something about Roderick’s personal preferences, and maybe experiences, but tells us nothing about the nature of the firm.

{ 36 comments }

James Jaeger November 30, 2008 at 8:00 pm

>But all feasible forms of organization are imperfect. All real-world firms are plagued by inefficiencies — agency and information problems, coordination failures, various kinds of transaction costs, and the like. A sweeping claim that the corporate form is per se inefficient, and that therefore it can only have survived because of state privilege, requires a comparative assessment of the strengths and weaknesses of alternative forms of organization, … proprietorships, partnerships, and patron-owned enterprises …

A proprietorship, partnership or corporation are NOT management entities, they are OWNERSHIP entities. The terms, management, business, company, corporation are often misconstrtued.

It makes no difference what kind of ownership entity a company is founded as, all that matters is that entity’s organizational pattern (Org Board), the posts defined, the products of each post, department and division and the actual hats that comprise each post in every division and department. An organization is thus “efficient” or not, “viable” or not, “profitable” or not in accordance with the activity of the MANAGEMENT entity, NOT the BUSINESS entity delieating mere OWNERSHIP.

For more information see THE MOVIE MOGUL MANUAL at http://www.mecfilms.com/moviepubs/bk0004.htm

James Jaeger

jeffrey November 30, 2008 at 8:06 pm

Wonderful reply, Peter, and highly informative.

Bruce Koerber November 30, 2008 at 9:26 pm

I think it is safe to say there is not one absolutely perfect ‘economic organization.’ Just because a firm organizes itself it does not follow that imperfect knowledge and uncertainty disappear.

I am sure of one thing: if the firm is able to be organized in a condition where there exists private property then it has the potential to meet some market conditions – optimally – somewhere.

Who is it that values having knowledge of and access to all the various types of economic organizations? Those entrepreneurs and business persons involved.

What is the purpose of ivory tower debate? To educate people about the possibilities.

Claiming one to be right and one to be wrong (unless it cannot exist in a private property economy) is just an idle fancy.

Brian Gladish November 30, 2008 at 11:18 pm

It would appear to me that the problem with corporations is that their structure is state-ordained and state-supported. In a free society, companies would be free to organize in any way the participants saw fit, and we could expect that superior forms of organization would be found and be more widely adopted. Hayek’s “Competition as a Discovery Procedure” clearly points in this direction.

P.M.Lawrence December 1, 2008 at 12:38 am

‘Essentially, Roderick identifies various inefficiencies associated with large, hierarchically organized corporations and concludes that smaller, “flatter” firms, such as worker-owned cooperatives, must be better’.

He makes no such claim. Essentially – to borrow that word – that is back to front. Roderick Long notes – that is, observes, not concludes – that there are various assists that the current distorted markets give to those forms; he concludes that what we currently have is at levels greater than a true free market would encourage. What the various inefficiencies of size tell him is that there must be some optimum size, but that isn’t what tells him that smaller, flatter forms must be better; he gets that from seeing that what is being achieved now is with the help that bigger sizes are – observably – receiving.

So “A sweeping claim that the corporate form is per se inefficient, and that therefore [emphasis added] it can only have survived because of state privilege, requires a comparative assessment of the strengths and weaknesses of alternative forms of organization, and this Roderick does not provide” is irrelevant, because that is not what he is presenting or arguing. He sees state privilege; to demonstrate that only needs observation, not any “comparative assessment of the strengths and weaknesses of alternative forms”. He sees that inefficiencies mean there must be some optimum size; you can take that as self evident or you can argue it. But the key argument is that that privileging must have led to more size and hierarchy than is genuinely optimal. Hey, we bloody well know from history that the corporate form only ever occurred in special cases, unless state privileges gave it a boost – but Roderick Long concedes that a true free market could well have some large firms. There’s simply no need for argument or inference on that point.

“…Roderick [Long] does not grapple with these literatures at all, either in the original post or in the reply. He relies heavily on Kevin Carson’s work to justify the superiority of workers’ self-management.”

Again, this is missing the point. Carson’s stuff is not used to “justify” anything, only to illustrate it. On the parts where Roderick Long is not getting all technical, it’s because those parts are not arguments that need technical tools, those are things that are needed to put people in possession of the background – and there, the less jargon the better. There are a lot of people around whose only knowledge of real corporate forms is from what they see around them; these people slip naturally into supposing that there is something natural about them. They need to be told that things aren’t like that, outside times and places with distorted markets that favour those things. It’s not a subject for inference, it’s empirical background.

“If large firms lobby more heavily than small firms, this indicates only that large firms perceive a higher marginal net benefit from lobbying than do small firms” – isn’t that just precisely what you would get from an institutional environment that paid off more for size? And so on.

“In short, the fact that large firms actively seek state support does not indicate that they, alone, receive it” – but that wasn’t the issue. The issue was whether they could flourish as much as they do without today’s kind of thumb on the scales. History suggests otherwise, although of course we cannot quite conclude that their being unable to grow big without a state assist in the first place means that they could not persist if it were taken away – they might be able to keep going on the back of accumulated benefits of past privilege, at least for a while.

“But the same argument applies to large firms. We see those that benefit from government action, but we don’t see those that are harmed — the small firms that would have become large, the large firms that would have become larger or more diversified or more hierarchical or whatever, were it not for the predator state. Imagine the large, highly efficient firms we might see in a truly free market!”

That’s completely wrong. We don’t have to imagine it, we can go and look at the historical record. The only large corporations in the British Industrial Revolution were special cases that had arranged special privileges! They just didn’t happen without those privileges, and it is indeed imagination to think otherwise.

“Again, this is assertion, not argument or evidence”.

Of bloody course it’s assertion – it’s summarising what we already know. It doesn’t have to be argued, you are being reminded of what you should already bloody know. If you don’t know, by all means ask, but don’t just jump in with wild imaginings that, as a matter of actual historical fact, don’t square with the record. But anyone who has followed earlier threads on this matter has already been cited chapter and verse, so I won’t repeat the effort for anyone who just won’t look.

ktibuk December 1, 2008 at 5:32 am

P.M.Lawrence,

You and Roderick Long are missing a part of the big picture.

Yes at first glance, it may seem that the state is generally on the side of the big corporations now and historically but you must not forget that big corps are also the biggest preys to the state.

In most place small companies are more efficient in a lot of ways because they are off the radar of the state. They are many and it is not cost effective for the state to actively pursue to regulate and rob them. They even engage in agorism in part if not in whole.

Also one must recognize that every big corp was once a small company and inherently every company is based on the principle of serving the customer. States nature is coercive but that is not the case with the corporation.

They may start using the state coercion to their advantage after one point but when you consider their inherent nature you must give the benefit of the doubt to them and assume they are on the defensive. Because the moment they partner up with the state is the exact moment they appear on the radar and present themselves as juicy prey.

Also the history is clear on this. Rockefellers, JP Morgans, Carnegies all became big and powerful through market means. But they eventually got in the bed with the state.

This means if there wasn’t a state they wouldn’t get into bed with it, not that they couldn’t have been big corporations.

This is also true of all the privileged corporations of the past. The state used every big company or corp to extract taxes and tariffs for it and make them creditors when in war, etc. But the big corps were always the victims that were being used.

There is a hint of Marxist paradigm in this hate against corporations and seeing them beneficiaries of the state but not the victims. I am sensing a subtle anti capitalist mentality and I find it totally unwarranted.

Matthew Pearson December 1, 2008 at 5:33 am

Yes corporate entities become inefficient, this is part of a cycle of conquest. It occurs in nature, in man, in companies, nations and in empires. Birth and infancy relies on a consumption of a small amount of resources, adolescence marks the turn towards efficiently leveraged resources delivering power; adulthood is where we hit our stride, and the empire or corporate entity is established and fulfilling its purpose. Then comes the bloated, inefficiency of aging, and little by little the consumption of resources delivers less and less power until the organisation is replaced by a younger, more efficient model. Stars die this way. Would you replace stars with gas lanterns because you can control the parts of the lantern with greater ease than you can a star? Overly simplistic and extreme, I agree, but I say take every idea to the extreme to test it.

So… where government gets involved, fearing change and keeping giant companies on life support long after they should have been devoured by the market, their parts acquired to make up the bodies of new companies, where this occurs in the form of lobbying, we have a major problem in the socialised market.

Monopolies are the highest goal of capitalist corporatism. I believe that if you sanction an ideal, you cannot disallow its aims. Allowing lobbying of government allows dying companies to entrench themselves in law and to bar the way forward for younger companies.

In an unregulated market, monopoly occurs, but these are monopolies not of force but of merit. As soon as the guy in his garage comes up with a better vacuum cleaner, he gets his turn at the top.

So inefficiency occurs as companies age. Do not outlaw companies; outlaw life support.

Matthew Pearson December 1, 2008 at 5:38 am

Looks like you’re a kindred spirit ktibuk.

ktibuk December 1, 2008 at 5:43 am

Also about the bail outs Matthew Pearson mentioned,

Of course the state shouldn’t never bail out a failing company but there is also another side to the story. These companies that are being bailed out never operated in a free market.

This means, yes they may have gotten privileges but also it means they fell prey to the state many times in the past.

In the case of GM for example.

How much in taxes has GM paid over the years? How much robbery it has endured? And who is responsible for those union laws that crippled the company?

And you can’t say, every company endured the same because if you are big, you pay more and you are regulated more. All those years mom&pop stores weren’t robbed by the state and didn’t have to worry about unions.

Every big corporation pays because it is big and this may also mean if there weren’t a state there would be more and bigger corporations.

Matthew Pearson December 1, 2008 at 6:08 am

… And it therefore follows more jobs, more income for the nation.

I think to sum up our arguments ktibuk:

No privileges; no penalization.

QB December 1, 2008 at 9:50 am

Are cooperative (non-corporate) forms of organization banned in the United States? If not, why is it that Sam Walton successfully founded Wal-Mart using state-run roads, and that the Proudhon Workers Retail Collective and Tucker-Mart didn’t succeed despite having the exact same access to said roads?

Nick Bradley December 1, 2008 at 11:07 am

It is not the form of the firm per se, but its size. Fractional Reserve Banking, the tax code, infrastructure subsidies, and regulatory barriers (safety standards, etc.) all favor larger firms over smaller firms.

- The corporate income tax structure allows firms to deduct debt interest payments from their taxable income, which encourages (1) mergers & acquisitions and (2) expansion. This encourages currently-existing firms to grow larger than they would normally. The tax structure also encourages vertical integration.

- With an artificially-expanded credit supply under fractional reserve banking, there is more credit for firms to borrow (and write off) to expand and merge/acquire other companies. Furthermore, access to credit seems to have a positive correlation with income level/economic size. As a result, larger firms have access to more credit sources than smaller firms.

- Infrastructure subsidies favor firms that operate over a larger geographic area. Since larger firms are more likely to operate over a larger geographic area, infrastructure subsidies favor larger firms.

Víctor L. December 1, 2008 at 11:21 am

Klein, you probably know all of the mutualist arguments around this matter. Then, you should know how the State supported large corporation between patents, tariffs, subsidies… The State’s damages against corporations which you says haven been created A POSTERIORI. The privilege was before.

Stephan Kinsella December 1, 2008 at 1:42 pm

A friend wrote me the following, regarding Klein’s and others’ (e.g. Caplan 1, 2, 3):

Long is taking some haymakers right on the chin. I don’t see how he makes an effective rebuttal. He should throw in the towel.

Klein’s response is what I was waiting for. A truly devastating dissection of Roderick’s argument, which now lies in shambles.

I think Klein’s argument could be bolstered further from some considerations raised by Thomas Ferguson in his book Golden Rule. For instance, Ferguson shows that “big business” is not some monolithic interest group out to squelch small business; instead, the relatively capital-intensive industries actively vie against the relatively labor-intensive industries for political favors, and this division cuts across the “big business” sector. Furthermore, Ferguson shows, at least in passing, that business has not used goon squads only, or primarily, against the workforce — business has used its goon squads against suppliers and competitors, too. This is further evidence that Johnson and Long are off-base with their pseudo-Marxist idea that the primary axis of class conflict is between owners and workers.

Someone mentioned that “the recent controversy with Long and corporations is a quintessential example of Rothbard’s Law in action.” I.e., that Long is great on most topics, but is now devoting inordinate time and energy to his weak area — leftish anti-corporatism.

There’s something to this. Long is obviously smart; he is, unlike many libertarians, broadly familiar with philosophical ideas outside the Austro-libertarian niche; he writes well and generally develops a nuanced position; and he has a knack for taking a minority viewpoint and making a decent argument for it. But he is also a leftwinger with unabashed sympathy for leftwing values and pet causes. In my eyes, this leads him to take incorrect positions and it generally detracts from the value of his scholarship. I give him credit for kickstarting a very welcome conversation on the corporation. Caplan is right — this conversation has been ridiculously lively. But as the conversation continues, Long’s contribution is getting more and more demolished. That’s not surprising. Long’s anti-corporate view relies heavily on Carson, and many of Carson’s positions can’t stand up to serious scholarly scrutiny. When Long presided over a symposium issue of JLS on Carson’s work, it was obvious that he sympathizes with it, but he played it safe by criticizing a relatively minor mistake by Carson. Now that he has openly defended one of Carson’s more central claims, he is getting the same pummelling that Carson would take if his scholarship ever received more mainstream attention.

Víctor L. December 1, 2008 at 2:59 pm

Kinsella, you are a trouble-maker, but you can’t prove why Long or Carson are mistaken, and Klein is still trying It.

Don’t interrumpt, please. This is an interesting debate for a many readers like me. Thanks.

Bill December 1, 2008 at 3:49 pm

That answer to this whole debate is very simple.

Let’s get rid of the state and see where the chips fall.

Li December 1, 2008 at 6:08 pm

># Bill
>
>That answer to this whole debate is very simple.
>
>Let’s get rid of the state and see where the chips fall.

Exactly. Why waste time on hypotheticals of what we all agree the market can and should decide?

P.M.Lawrence December 1, 2008 at 7:25 pm

In a Lew Rockwell blog entry Klein writes “Roderick Long thinks… that a pure market economy would be dominated by small, worker-owned cooperatives”.

That is sheer misrepresentation. He thinks that it would be dominated by smaller firms than we have now. Small, worker-owned cooperatives are possibilities he mentions, but there are other possibilities too; he doesn’t claim that those would dominate.

No, ktibuk, Roderick Long and I are not missing a part of the big picture. Quite simply, the things you bring up are about whether the state preys on larger corporations, as compared with “small companies [which] are more efficient in a lot of ways because they are off the radar of the state”. But that’s not the point at all! Both of those are corporations. It’s like watching Jurassic Park and wondering whether the Velociraptors are more efficient than the Tyrannosaurus Rex, without ever realising that both are artificial additions to the ecology. So, of course “one must recognize that every big corp was once a small company” – but that has nothing to do with whether companies or not, only with which companies. And it’s not a question of whether companies serve their customers but with whether – given their assists – they crowd out other ways of doing those things, done by other people organised in other ways. Things not seen, the forgotten man, and that.

“There is a hint of Marxist paradigm in this hate against corporations and seeing them beneficiaries of the state but not the victims. I am sensing a subtle anti capitalist mentality and I find it totally unwarranted.”

Then you shouldn’t let that sort of figment of your imagination prey on you.

ktibuk December 2, 2008 at 1:09 am

“He thinks that it would be dominated by smaller firms than we have now.”

This is a cop out. Yes if there wasnt any state, and thus any taxes, accounting departments of every firm would be marginally smaller. But I dont think that is the point Long is making. Reduction of the work force of a firm from 10000 to 9000 is not the situation Long is talking about. He is talking about a whole new structure of production.

And the rest of your answers make no sense at all. You dont argue but keep asserting you and Long are all misunderstood while making no effort in clearifying your position. This of course strengthens my feelings about the motives here.

jjackson December 2, 2008 at 2:51 am

Wonderful Discussion!

Question: If you look at the size of companies providing all of the goods and services to an economy as a statistical distribution, would the current US economy or a free-market economy have a larger standard deviation?

It seems to me that a free market would lead to a larger diversity in the size of business entities, and thus a larger standard deviation in the question above. I say this because it seems that compliance with government regulations for operating a business (eg, accounting and tax requirements) constitutes a fixed cost which may be a relatively small cost for medium and large businesses but can be onerous for small companies. In other words, larger companies have the advantage of economy of scale in complying with government requirements.

One minor point, the small company I work at competes for SBIR grants, and these benefit big companies as much as small ones. The end goal of the SBIR program is to “commercialize” a new technology, typically by transferring it to a large, market-established company. This effectively turns the SBIR program into outsourced R&D for large companies, but paid for on the government dime.

P.M.Lawrence December 2, 2008 at 2:56 am

Ktibuk, did you even look at Long’s essay? Here is some of what he wrote:-

“In a free market, firms would be smaller and less hierarchical, more local and more numerous (and many would probably be employee-owned)”.

Long is not talking about a whole new structure of production but rather an updated version of an old one, the sort that was common during the Industrial Revolution. There were a lot of businesses of different kinds then, sole proprietorships, partnerships, trusts, mutual societies like building societies, and even a few limited liability companies that had arranged to have special legislation or charters (but not very many of those at all). Many were quite small.

What you wrote is just a straw man, though I’m sure you’re only telling it the way you see it. I think what is going on is something I’ve seen a lot of in threads around here, that many people are so blocked off by tunnel vision that they literally do not see what they are being told but instead fumble for the closest thing they are reminded of. You, for instance, can only imagine the same firms with smaller accounting departments, and when you don’t see the plain words “smaller firms” but instead hear meaninglessness or perhaps “small companies” – when “firm” is not just another way of saying company but you literally cannot conceive of a firm that is not a company – you put it down to the teller and start in with suspicions.

Nathan Shepperd December 2, 2008 at 9:53 am

What is starting to bother me about this discussion, fascinating though it is, is the faint whiff of ad hominem pokes at “leftist” contaimination of the “correct” views. It is a bit presumptuous for those on the “right” side of the debate to claim the high ground, as if there is any lack of ideological bias in the conservative camp.

“When Long presided over a symposium issue of JLS on Carson’s work, it was obvious that he sympathizes with it, but he played it safe by criticizing a relatively minor mistake by Carson.”

It seems a bit odd to cite the JLS simposium where only Robert Murphy provided a considerate response. Reisman’s critiques, in comparison, were quite embarrasing to read, just from the tone of the writing and the regular accusations that Carson was a “Marxist”. Did Mises spend so long arguing against polylogism in vain?

I guess the left-right friction needs a lot more resolving over time, but it certainly fractures the libertarian world.

TB December 2, 2008 at 9:59 am

I wonder if Roderick Long or Kevin Carson have ever worked in the for-profit sector. It’s a fair question, and would help put things in context.

I also get the sense this is backdoor socialism…e.g. every business is built on “exploitation,” every person who ever used state-run roads, anyone whose ancestors held slaves, every dollar of capital which was “exploited” from workers, all the land “stolen” from Native Americans…all of us, you, me, them,,,guilty of this “original sin.”

Of course, the only solution for this “original sin” is to collectivize. We are all guilty, so we must all pay. Am I wrong, or do others get this sense?

Mike December 2, 2008 at 11:20 am

First, I agree with Nathan Shepperd.

Second, Dr. Klein’s replies to Roderick have been excellent and respectful, but several others here (and elsewhere) have totally missed the point. It’s incorrect (and disrespectful) to claim that Roderick is “taking it on the chin.” Klein’s contribution may give us reason to doubt one of Roderick’s claims, but there is much more to Roderick’s original analysis that has not been effectively disputed. For example, Charles Johnson and Dr. Long have, I think, effectively refuted the criticisms of Kinsella. Also, Walter Block and J.H. Huebert’s response was at best a complete misunderstanding of Roderick’s essay or at worst a blatant misrepresentation.

DMajor December 2, 2008 at 2:59 pm

To TB:

Yes, Long has worked in the for-profit sector, read his review of “Nickel and Dimed” where he mentions that fact in passing.

As for Carson, I believe he still works in the for-profit sector- I think in healthcare, or something like that.

Also, you would get the sense “this is backward socialism” only if you have not attempted to understand their arguments, and/or you are ignoring the various defintitions and nuances regarding socialism. I wish I had time to say more…but I really don’t know if I could add anything of great value to the discussion.

Eduardo December 2, 2008 at 7:31 pm

A friend wrote me the following, regarding Klein’s and others’

Kinsella, when you say a friend do you mean yourself? Cause that’s what it looks.

Dan Mahoney December 4, 2008 at 3:03 pm

P.M. Lawrence is offering up quotations selectively. Here’s the full passage from Long’s essay:

“In a free market, firms would be smaller and less hierarchical, more local and more numerous (and many would probably be employee-owned); prices would be lower and wages higher; and corporate power would be in shambles. Small wonder that big business, despite often paying lip service to free market ideals, tends to systematically oppose them in practice.”

In addition to some sweeping, unsubstantiated claims, it should be pretty obvious from this passage that Long does not simply believe firms will be *smaller* absent state intervention (itself debatable, since Long’s premise is not simply that state action has made firms different than they otherwise would be, but in fact bigger than they othewise would be), but that they will be *small*. “ktibuk” is right to wonder about motivations here.

Dan Mahoney December 4, 2008 at 7:58 pm

This too is a hoot (from Long’s reply):

“Incidentally, I offered the comic strip Dilbert not as evidence of the irrationality of corporate hierarchies but as a reminder of it. Those who have worked in such environments know from their own experience how completely clueless the highly paid upper managers tend to be about what is actually happening, and how much of the firm’s success depends on workers simply ignoring the insane directives from above and doing what needs to be done.”

He offers no examples of people who have actually worked in corporations seconding his views; he just assures us that they exist. And he continues to offer up a satire (Dilbert) as having some relevance to this discussion! Can he not fathom that the reason this comic strip is popular (I find it amusing) is precisly because it takes situations with *some* basis in reality, and exaggerates them to the point of humor? Does he seriously think Dilbert offers an accurate picture of corporate life? Let me assure him, it does not. I cannot believe Long has ever held a job outside of academia.

P.M.Lawrence December 4, 2008 at 9:25 pm

Dan Mahoney believes that I am “offering up quotations selectively”.

No, I simply quoted Long’s “In a free market, firms would be smaller and less hierarchical, more local and more numerous (and many would probably be employee-owned)” because it was sufficient to back up my earlier “He thinks that it would be dominated by smaller firms than we have now” and address Ktibuk’s idea that it could only mean “Yes if there wasnt any state, and thus any taxes, accounting departments of every firm would be marginally smaller”. As it happens, it also refutes Klein’s misrepresentation “Roderick Long thinks… that a pure market economy would be dominated by small, worker-owned cooperatives”.

Certainly, if motivations had been the subject of that particular point, we would need more background – in fact, the whole article and possibly other works of Long’s.

But let’s look at your stuff:-

“In addition to some sweeping, unsubstantiated claims, it should be pretty obvious from this passage that Long does not simply believe firms will be *smaller* absent state intervention (itself debatable, since Long’s premise is not simply that state action has made firms different than they otherwise would be, but in fact bigger than they othewise would be), but that they will be *small*”.

Well, if you only look at a short passage and don’t follow up the other stuff Long mentions or cites, naturally it won’t stand by itself. But you are setting up a straw man if you wilfully, recklessly or negligently read that much more into what he wrote. He simply didn’t make that claim, at any rate in that article, any more than he ruled it out.

As for ‘”ktibuk” is right to wonder about motivations here’ – well, if I were that interested, by now I would wonder about everybody’s motivations around here. But I’m more interested in chasing down what the research means and keeping it properly presented.

Dan Mahoney December 4, 2008 at 9:35 pm

As has been noted, P.M. Lawrence is quite adept at offering up explanations that make no sense.

P.M.Lawrence December 4, 2008 at 11:33 pm

Can you be more specific so that I can try to work out where the obstacle is and how to breach the communications barrier, or was that just broad abuse?

Dan Mahoney December 5, 2008 at 7:14 am

To clarify:

P.M. Lawrence makes no sense because he continues to obfuscate and deny that Long is taking positions that he quite plainly is, and then whines that his opponents are straw-man bashing. (A good case in point is his claim that Long does not envision a whole-new structure of production, “only” a return to organizational forms common during the industrial revolution.)

Hopefully that wasn’t abusive, although P.M. Lawrence richly deserves it.

P.M.Lawrence December 5, 2008 at 7:57 pm

Hey, hang on, just which “positions that [Long] quite plainly is [taking]“? You give one that you state is an example, but you don’t specify any others.

As for that one, go and bloody look. I did not ‘claim that Long does not envision a whole-new structure of production, “only” a return to organizational forms common during the industrial revolution’. I claimed that “Long is not talking about a whole new structure of production but rather an updated version [emphasis added] of an old one, the sort that was common during the Industrial Revolution”. That’s not a return, rather a back track and go forward again – but that’s not “whole new”, which was the point of that claim.

Long’s claim is “In a free market, firms would be smaller and less hierarchical, more local and more numerous (and many would probably be employee-owned)”. Have a look at what was typical during the Industrial Revolution, and see how close a match it is. Then see if the differences amount to an update.

ThorsMitersaw December 5, 2008 at 10:38 pm

Gotta love ‘private’ enterprise:
http://www.bartleby.com/65/ch/chartere.html

Being anti-corporate seems to me to be perfectly inline with a hardcore free market stance.

Stephan Kinsella December 10, 2008 at 2:22 pm

Eduardo:

“‘A friend wrote me the following, regarding Klein’s and others’

“Kinsella, when you say a friend do you mean yourself? Cause that’s what it looks.”

“Eduardo,” do I seem like a guy who is afraid to state his own opinions and put his name to them?

Patri Friedman June 6, 2009 at 12:57 pm

“Let’s get rid of the state and see where the chips fall.”

Exactly! While I do find this particular theoretical discussion somewhat interesting, to me it is a perfect example of the constant intellectual masturbation that economists and libertarian intellectuals waste their time with. Musing about how things will work in a system which will never happen if all we do is muse about what it will accomplish.

If you actually want to live in freedom, devote your time to thinking about how to increase freedom. If you want to daydream about freedom, then by all means, continue spending your intellectual efforts trying to determine a priori what the free market will quickly tell us if we ever get one.

No wonder libertarians never get anywhere in the real world.

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