Over at Mutualist Blog, Kevin Carson replies to, inter alia, Peter Klein’s response to Roderick Long. I replied at length in the comments, but let me just note here a few of the comments, expressions, and assumptions that caught my eye as being problematic from a libertarian and Austrian point of view. First there is the repeated complaining about “vagueness of ownership rights in the corporation,” and “the ambiguous division of control between management and shareholders.” There is a “pretense that management represents shareholders or that the latter are the owners in any real sense“. “Corporate management, in fact, is a self-perpetuating oligarchy in control of a free-floating mass of unowned capital.” “It uses its purported representation of shareholders as a legitimizing ideology to insulate it from accountability to internal stakeholders.” “More generally, hierarchy and the separation of labor from residual claimancy are inherently prone to incentive and agency problems.” And finally, corporations “expropriate” the “efforts” of “internal stakeholders” “because of the vaguely defined property rights in the organization. … much of the value created by internal stakeholders is expropriated by management.”
Carson also relies on “Rothbard’s threshold of calculational chaos“–to argue that “the predominant oligopoly firms in the existing manufacturing sector” must be artificially large since they “are already demonstrably above” this threshold.(He goes on: “Rothbard argued, specifically, that rational calculation becomes impossible whenever no external market exists for an intermediate good. Since, in fact, the majority of intermediate goods used by the typical manufacturing corporation are firm-specific, their transfer prices must be assigned internally rather than based on outside markets.”)
One hardly knows where to begin in responding to such reasoning. But as I noted in my response–libertarianism does not require any “pretense” that “management represents shareholders or that the latter are the owners in any real sense.” It only requires respect for property rights and not interfering in capitalist acts between consenting adults. That is, if you can somehow show that “management” does not “represent” shareholders, or that they are not “the owners” in “any real sense”–so what? Whose rights are being violated? If you don’t like the way a firm is organized, don’t work there; don’t invest in it.
Beyond that: in a libertarian society we need only identify who has the right to control a given resource; and who is responsible for the commission of various torts or crimes. If a collection of people (shareholders, directors, managers, creditors) whatever all agree to some complicated internal set of rules that specify their right to control a set of private assets, then *their* rights are not violated (they all agreed to it), and outsiders have no business complaining, any more than they would have a right to complain about the “messiness” of ownership claims within a neighborhood that has an ambiguously drawn set of restrictive covenants. For example if I buy a share of Wal-Mart stock I am in some sense an owner, but only in specified ways–I don’t have the right to use the Wal-Mart HQ for a picnic etc. I have agreed to a contractual set of rules that divide control–day-to-day control is given to managers; and a set of procedures determines how changes to the rules or to the decision-makers is made. From the perspective of an outsider, Wal-mart property is owned by a set of people (shareholders plus directors plus managers).
In response to Carson’s claim that corporate property is “a free-floating mass of unowned capital”–hogwash. Walmart’s inventory and factories and stores are not unowned by any stretch of the imagination. Just because some anti-market or anti-capitalist types don’t like the messiness and complexity of the internal rules governing rights of control (ownership) of these assets is utterly irrelevant. You don’t have to work for them, or invest in them. This “unowned” comments has a whiff of Georgism about it.
As for yammering about “stakeholders” — this leftist concept is routinely used by governments to justify infringing property rights. Again: in libertarianism, the corporation does not need to justify anything–so it does not need to pretend it “represents” anyone. If a group of people agree to pool their money and become shareholders, this just means they have agreed to collectively purchase some things with their money, and to have specified rights of control and rights to gain or dividends, that is their business. The consent of the parties is all that is needed to justify it.
As for “stakeholders,” it depends on who this means. For people that are employed by, or contract with, or invest in, or sell to or buy from the company–their rights are defined by contract already. The only other people left would be those who have torts committed against them by employees of the company. A libertarian theory of causation (as I noted here) is what is needed here, to determine who should be vicariously responsible for the actions committed by employees–should anyone else be? Should the corporation as a whole? The managers? Executives? Directors? Shareholders? Creditor? Vendors? Customers? Consultants? Contractors? “Stakeholders”? Whoever it should be, they should of course not be exempted from liability. But most people, including bad-lefties and libertarian lefties (and most libertarians in general) seem to simply assume that vicarious liability and respondeat superior are valid, and that absent state law, shareholders ought to be liable for torts committed by employees. But to my knowledge no one has shown that they should be. This has has to be established before one can bluster in outrage at the failure of the state to hold shareholders personally liable for such torts.
As for the comments about management “expropriating” the “efforts” of “stakeholders”–here we have what appears to me to be Marxian reasoning: the “expropriation of efforts”? What? I’d like to see exactly whose “labor” is being “stolen”? An employee? Hey, he isn’t compelled to work for them. The comments indicate that the value of the stakeholders’ effort is stolen from them–but you can’t “expropriate” value. People do now own value. There is no property right in value. Workers do not have any ownership claim to a company they have worked for–they have a claim to whatever they have contractually agreed to, that’s all.
As for the complaints about the separation of labor from “residual claimancy.” Libertarianism does not require labor to not be “separated” from XYZ; it does not base property rights on whether there are or are not “incentive” or “agency” “problems”. If incentive or agency problems that arise when using a given firm structure, presumably people over time will invest in or employ more efficient structures. If they don’t–hey, it’s their money.