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Common Versus Government Property
A central contribution of Elinor Ostrom, which earned her a share of the 2009 Nobel Prize in economics, was to reclaim the commons as a legitimate form of property. (For more detail, see Peter Boettke’s December 2009 Freeman article.) Organization theorist Dick Langlois always makes it a practice in his European economic history class to reiterate Ostrom’s point that, as he puts it, “the medieval open fields were not an example of the tragedy of the commons and were not over grazed.”
Ostrom also denied that there was anything inherently unstable about commons and argued that they were actually well governed by traditional regulations that specified individual grazing rights. (Garrett Hardin himself later expressed regret that he had not titled his famous essay “The Tragedy of the Unmanaged Commons” and repudiated much of the use that had been made of it.)
As economist Joseph Stiglitz put it, “Conservatives used the tragedy of the commons to argue for property rights, and efficiency was achieved as people were thrown off the commons. But the effects of throwing a lot of people out of their livelihood were enormous. What Ostrom has demonstrated is the existence of social control mechanisms that regulate the use of commons without having to resort to property rights.”
But in fact–a fact ignored by those on both the left and right who equate “private property” to individual property and contrast “property” with the commons–the commons were a form of property rights. And the eviction of peasants from the commons was not simply an efficiency loss; it was a case of the State expropriating property rights.
Libertarian scholar Roderick Long of Auburn University has argued that public (as opposed
to government) property is entirely legitimate:
Consider a village near a lake. It is common for the villagers to walk down to the lake to go fishing. In the early days of the community it’s hard to get to the lake because of all the bushes and fallen branches in the way. But over time, the way is cleared and a path forms–not through any centrally coordinated effort, but simply as a result of all the individuals walking that way day after day.
The cleared path is the product of labor–not any individual’s labor, but all of them together. If one villager decided to take advantage of the now-created path by setting up a gate and charging tolls, he would be violating the collective property right that the villagers together have earned.
Ostrom’s contributions, and Stiglitz’s attempted summary of them, point to an unfortunate tendency among many libertarians: the tendency to conflate the individual-commons distinction with the private-State distinction, and to equate common property to State property.
A good example of this tendency is the received version of the early settlement of Plymouth Plantation, as recounted by Governor Bradford. In the received version the Puritans, motivated by a misguided idealism, initially set out to restore the primitive Christian communism of the Book of Acts, “holding all things in common.” When the obvious incentive problems entailed in this practice led to starvation, the settlers accommodated themselves to reality and divided up the land and worked it individually. Output skyrocketed, starvation was averted, and everybody was happy.
Unfortunately, in the words of a recurring feature in this magazine, the received version “just ain’t so”–or at least it’s incomplete.
Richard Curl’s recent history of cooperatives in America, For All the People, fills in some missing details that change the meaning of the story entirely. Curl supplements Bradford’s history with material from J. A. Doyle’s English Colonies. According to Doyle, the agreement between the Pilgrim Separatists and the Merchant Adventurers corporation provided that
[a]ll settlers . . . were to receive their necessaries out of the common stock. For seven years there was to be no individual property or trade, but the labor of the colony was to be organized according to the different capacities of the settlers. At the end of the seven years the company was to be dissolved and the whole stock divided.
Two reservations were inserted, one entitling the settlers to separate plots of land about their houses, and the other allowing them two days in the week for cultivation of such holdings. The London partners, however, refused to grant these concessions, and the agents of the emigrants withdrew them rather than give up the scheme.
In the conventional narrative the apostolic zeal of the Pilgrims, who desire to recreate the communism of the early Church, is confronted by hard reality. But according to Curl, relations between the Puritan settlers and the Merchant Adventurers make more sense in light of an entirely different subtext–the English peasantry’s relations with the landed classes in the Old Country: “The colonists, most of them tenant farmers in the open fields of an old manorial hunting park in Nottinghamshire, considered that the investors’ demand essentially reduced them to serfdom. The settlers were asking for no more than was normal under England’s manorial system in effect since the Middle Ages. Peasants worked in the lord’s fields but also had time to work with individual plots for their household needs.”
Soviet Parallel
The Plymouth story is sometimes treated in parallel with that of agriculture in the last days of the Soviet Union, where the majority of food consumed came from private family plots–essentially kitchen gardens with some small livestock thrown in. Had the entire Soviet population been forced to subsist on the output of the State and collective farms alone, the result would have been mass starvation–exactly like that of the Plymouth settlers. This parallel is entirely accurate. What the received version of the Plymouth story leaves out, however, is that the role of the “collective farm” in the little drama is played not by the naive Puritan zealots seeking to “hold all things in common” but by a private corporation.
As Curl describes it, the system of private plots adopted after the rebellion against the Merchant Adventurers wasn’t much like modern fee simple ideas of “private property.” It sounds a bit like the open-field system, which we already saw the settlers had experienced in Nottinghamshire: The family plots were ad hoc and not subject to inheritance. And the open-field system as it existed in Europe had had significant elements of private family possession: Individuals worked plots individually (although doing some work in common, like plowing, that was impracticable on one narrow strip of land at a time) and harvested the full crop produced by a year’s labor, but redivided the plots as changes in population made it necessary.
“Privatizing” by Expropriation
Until a few centuries ago the village commune persisted in most areas in a form much like before the rise of the State, but with a parasitic apparatus of State bureaucrats and feudal landlords superimposed on it.
And historically most attempts to “privatize” the common lands have in fact been expropriations by privileged landed classes. Common lands were simply handed over to nobles and everyone else was locked out. The conflict between the plebeians, with their demands for traditional rights of access to the public lands, and the patricians who had taken advantage of their control of the State to “privatize” those lands in violation of the peasantry’s legitimate property rights, is the main theme of Livy’s history of the early Roman Republic. The central focus of every popular movement in the Republic was a demand to “tear down the enclosures” and open up vacant land to be worked by land-poor peasants. That’s essentially what happened with the enclosure of the open-field system and the Parliamentary Enclosures of commons in England. In India under British rule, village headmen were transformed into land-owning “gentlemen” on the European pattern, and the villagers from common owners into tenants, so the headmen could be made responsible for collecting rents on behalf of the British authorities. We see it today with corrupt village leaders in China acting in collusion with the central government and foreign corporations to transform village common property into industrial parks.
The reflexive tendency on much of the right to equate all de jure individual property with “private property,” without regard to questions of just acquisition, and to view communal property as something tainted or unnatural and to be grudgingly tolerated at best, is quite dangerous. To see why, we need only compare the rhetoric used to defend the “efficiency” of enclosures with that used today to defend eminent domain in cases like Kelo vs. New London.
The Trouble With Muddy Waters
Unmuddying the waters with regard to the tendency to confuse the individual-communal distinction with the private-State distinction may also add clarity to some other questions. This is especially true in the field of organization theory. Genuine collective or communal property, in which the governance system ties reward to effort and knowledge, may be better at addressing Hayekian issues of tacit knowledge than the kinds of “private” property in which corporate hierarchies divorce effort from responsibility.
Take, for example, the shareholder model of corporate ownership. Despite their theoretical status as “owners” of the corporation, shareholders have little genuine control over management. In fact, management’s responsibility to shareholders is a legitimizing myth comparable to the claim of the State industrial bureaucracy in the old Soviet Union to represent “the people” or “the workers.” The management of most large corporations is actually a self-perpetuating oligarchy in control of a mass of unowned capital. But their claimed status as representatives of the shareholders, as little basis as it has in fact, serves a useful purpose in insulating management from internal political challenges–especially from internal stakeholders.
As organization theorist Luigi Zingales has pointed out, the main source of corporate book value is shifting increasingly from physical capital to human capital. That means that an increasing share of profit and equity results from the contributions of the workforce–specifically, their tacit, job-specific knowledge and skills. Whether workers are willing fully to invest these skills and knowledge in the firm depends, to a large extent, on whether the governance system recognizes their stakeholder status and rewards them for their contribution to the bottom line. Without contractually defined stakeholder claims to the revenue stream that reflect their contribution to value, workers know it’s quite likely that in a mixed economy with State impediments to free competition, management will expropriate whatever productivity gains result from their special situational knowledge and skills via management bonuses, downsizing, or both. Consequently they are likely to keep to themselves any knowledge that might increase efficiency.
On the other hand, the typical worker cooperative requires about a quarter of the front-line supervisors as a traditional hierarchical firm. The reason is that the workers do not exist in a zero-sum relationship with management and they are confident that their contributions to productivity will be internalized in their own personal bottom lines.
A worker at a plywood cooperative in the Pacific Northwest illustrated this when he told Edward Greenberg:
If the people grading off the end of the dryer do not use reasonable prudence and they start mixing the grades too much, I get hold of somebody and I say, now look, this came over to me as face stock and it wouldn’t even make decent back. What the hell’s goin’ on here?
[Interviewer: That wouldn't happen if it were a regular mill?]
That wouldn’t happen. [In a regular mill] . . . he has absolutely no money invested in the product that’s being manufactured. Any knowledge he has on the side, he is not committed or he is not required to share that.
So ironically, management’s professed status as representatives of shareholders, by blocking the creation of corporate governance systems that reflect the real sources of value added, actually works against the interests of both workers and shareholders.
The central lesson of Ostrom’s work–that there is a rich variety of property forms and governance mechanisms, and not just a choice between the self-aggrandizing central State and the large corporate enterprise–is one we can all benefit from. Karl Hess put it aptly 40 years ago:
Libertarianism is a people’s movement and a liberation movement. It seeks the sort of open, noncoercive society in which the people, the living, free, distinct people, may voluntarily associate, disassociate, and, as they see fit, participate in the decisions affecting their lives. This means a truly free market in everything from ideas to idiosyncrasies. It means people free collectively to organize the resources of their immediate community or individualistically to organize them; . . . Liberty means the right to shape your own institutions. It opposes the right of those institutions to shape you simply because of accreted power or gerontological status.
Amen.
Pingback by The Libertarian Dialectic and Social Dilemma « Little Alex in Wonderland on 25 April 2010:
[...] EDIT: Kevin Carson just wrote a great piece for the May 2010 issue of The Freeman titled, “Common Versus Government Property”. Read it here. [...]
Pingback by Communism in the FREEMAN! | Austro-Athenian Empire on 25 April 2010:
[...] Hey, I’m quoted again! This time in Kevin Carson’s excellent Freeman article “Common versus Government Property.” [...]
Comment by P.M.Lawrence on 25 April 2010:
“…although doing some work in common, like plowing [sic], that was impracticable on one narrow strip of land at a time”.
Not only was it practicable, for a long time it was the only way to do it! Some background…
In northern Europe, until towards the end of the Roman Empire, comparatively light ploughs were used. Unfortunately, only thin soils that didn’t have lots of tree roots in them could be ploughed; these fields were usually square and were ploughed twice, at right angles, to do it properly, and there was only a small proportion of suitable land.
This land ran out as population grew, and heavy duty ploughs that needed heavy duty ox teams replaced the earlier sort, working newly cleared land (this may have come in with the barbarians from Germany). These ploughs couldn’t easily be turned around at the end of a furrow, so it made sense to plough long, narrow strips to minimise that – and to have neighbours holding adjacent strips so that weeds and undergrowth wouldn’t infiltrate strips from the sides as much (plus, it was easier to clear the land that way). Neighbours could and did share ploughs and oxen, but those could still only work in one place at a time. Each strip did need to be ploughed individually, precisely because there was only one set of equipment and oxen!
Later still, after many generations, tree roots had rotted down enough that the same fields could be ploughed practically with lighter but faster and more sophisticated horse drawn ploughs, which came in around the 18th century and made the land productive enough (labour productivity, not land productivity) for that generation’s expropriators to take over efficiently. However, particularly in Canada, there was a resurgence of the old technology, and in Australia the stump jump plough was invented for light and generally open terrain that had nevertheless had well spaced trees that left frequent root systems behind once they were cleared.
Reminder: “commons” is plural, and refers to all the different commons, each of which had its own commoners with their own rights over their particular common. Using it as a singular wrongly gives the idea of one vast pool, which is precisely what there wasn’t. See also “Lammas Lands”, an intermediate form which in some seasons provided common grazing right and in others were individually used for crops, and “Thistle Rents”, which were paid to feudal masters by outsiders (cattle drovers) to get grazing rights for their droves as they passed through on the way to markets in prosperous towns (often once there was little but thistles left, hence the name).
Comment by Jim Henley on 26 April 2010:
Very late in the game it occurs to me that the fact that the Soviet collective farms were organized for the purposes of theft surely has material weight in evaluating why they failed. Stalin wasn’t just obliterating freehold tenure for the sake of it; he was doing it to make it easier to expropriate rural production for the cities. (“Primitive socialist accumulation.”) Now, the kholkoz was also an imposed institution, not one chosen by the farmers themselves. But the impact of those two features plus “Oh noez! Collectivism!” all have to be considered in assessing the failure of the kholkozes, and the Neoliberal Version only considers the last.
Also, James C. Scott in Seeing Like a State is very good on the amazing variety of functional property rights seen outside the reach of the state system, though I believe he is a disciple of Ostrom. The bottom of page 33 and top of page 34 were particularly eye-opening for me: http://goo.gl/jeIV.
The other “vulgar-lib’n” mindfuck in Seeing Like a State is its historical account of the actual driver of fee-simple property rights being a state construction to simplify the collection of taxes! Actually, that was a double mindfuck . . .
Comment by P.M.Lawrence on 27 April 2010:
“Now, the kholkoz was also an imposed institution, not one chosen by the farmers themselves”.
Actually, no. It was more like some of the Penal Laws in Ireland that deformed existing customary practice and misapplied it (there, the custom of dividing land between children was deformed into enforcing the division of land between Catholic heirs, unless there was one who had turned Protestant, in which case he got the lot). In Russia there had been a long standing co-operative/collective tradition, the Artel (from Routledge’s Dictionary of Economic Terms of around 1905, ‘The Russian gangs of workmen who undertake a job collectively. The modern forms of “Artel” are somewhat similar, however, to Trade Unions, with greater collective responsibility.’)
So it was not a simple imposition but a deformation of a previously existing customary approach.
Comment by P. F. Schaefer on 27 April 2010:
I am a little confused by one premise of this article though it makes solid points on substance. I have read about the transformation of Plymouth and Jamestown for decades. Both were chartered by the same company with essentially the same terms and conditions, ie. 7 years of of collective work. And both failed to prosper and were converted to private property after 3 years thus saving the effort and the surviving settlers. Indeed, this pattern really began the settling of a continent essentially by a continuation of squatting in all its various forms.
After years of working in the property rights area I have yet to read a serious analysis suggesting that the collective or communal efforts in Plymouth and Jamestown were anything more than the result of a corporate business plan. Read Tom Bethell’s “The Noblest Triumph” and later David Boaz’s little monograph on Jamestown (http://www.cato.org/pub_display.php?pub_id=8236).
In fact the point about misguided Christianity made in this article seems to be refuted by J.A. Doyle’s text supplied to support the shakey case. The settlers according to Curl, had orginally sought a private plot and several days to work their own private land. It was denied by the corporation not Christian doctrine.
Nevertheless, within a few years the settlers “petitioned” for such land rights and Bradford granted them. Their concerns? Unequal work for equal pay. New arrivals sharing the food. Not very Christian contrary to what the author suggests. As Bradford writes:
“The failure of this experiement of communal service which was tried for several years, and by good honest men proves the emptiness of the theory of Plato and other ancients…that the taking away of private property, and the possession of it in community…..would make a state happy and flourishing; as it if were wiser than God.” Seems they were not quite as confused by their desire to “recreate the communism of the early church” as the author suggests. My intent is not to defend the church but those of us fighting the property rights battles don’t need to create a straw man to make a case that political and corporate authorities abuse their power.
Comment by DD on 29 April 2010:
Sheldon, what’s next? An article about the Kibbutz as a 3rd alternative? I can’t believe you approved this Syndicalist propaganda?
“the tendency to conflate the individual-commons distinction with the private-State distinction,”
This is not true! We don’t conflate, but realize that all such common ownership schemes are inefficient and if one actually attempted to implement this on a large scale, we end up with syndicalism, which has been throughly refuted and shown to be even more absurd then State socialism. Unbelievable!
Comment by Kevin Carson on 29 April 2010:
Jim: It’s been some time since I read Scott all the way through, so thanks for pointing out. It stands to reason that a simplified fee simple scheme, in which piece of property had one identifiable owner and there was the least possible disaggregation of the bundle of rights attached to a parcel of land, would be very much in the interest of a state taxing authority. It would also uncomplicate the issue of seizing land for unpaid taxes, compared to the difficulties attendant on a society like Israel under the Judges where land was ultimately inalienable and residual ownership vested in common.
I also recall Hernando de Soto and Elizabeth Anderson complaining about the inefficiency of a wide range of local informal property systems, so that real estate was difficult to commodity or use as a backing for investment capital in the larger system. What they complained of coincided almost exactly with what Scott would have called “opaque” local property systems, and the kinds of reforms they advocated amounted to making the systems legible to a centralized legal system.
PML: Can you describe the relationship between traditional collectives like the Mir and the Soviet kolkhozes? Was there significant continuity between them as entities, with the main change being governance? Or was the latter simply built on the general cultural practice of the former?
DD: It seems to me that you are the one who is preoccupied with the syndicalist ideology. What do you make of the extended accounts by writers like Ostrom and James Scott of the wide variety of diverse common property systems that were not simply reducible to our allodial/fee simple standard? Or to Scott’s claim cited by Jim Henley, that fee simple ownership tended to be imposed by states for the same reason they imposed standard family surnames? The whole point of such traditional systems was that they weren’t done on a “large scale,” in the sense of being imposed by some rationalizing central authority, but existed in many local, idiosyncratic forms.
I’m surprised you didn’t capitalize “Syndicalism,” because like Mises you’ve elevated it into some capital-letter archtype that trumps actual history. I repeat, the commons were an existing, traditional institution in England. It wasn’t a question of implementing them on a large scale, but of forcibly suppressing them from above and stealing the rightful property rights in them. In actual history, common ownership of property has been quite, um, common, and its breakup and “privatization” has been the work of states and landed oligarchies remaking peasant societies.
For that matter, how about the “efficient” corporate form? The equity share is individually held and transferrable, but the courts have held that the shareholders severally are not the owners in any real legal sense. The corporation’s assets are the property of an artificial person, governed collectively by the management. The shareholder buys and sells a theoretical share in control, but how much this control amounts to in the real world is indicated by the failure of proxy fights, the radical decline of hostile takeovers after a brief surge resulting from the introduction of junk bonds, the practice of internal finance from retained profits, stock buybacks, etc. In fact the typical large corporation is very much an example of the Lange-Taylor model of market socialism, which Mises dismissed as “playing capitalist” because management was gambling money it had never invested from its own savings and was not subject to control by the people the money came from.
Comment by DD on 29 April 2010:
Kevin,
The fact that such commons existed does not somehow prove that there is a 3rd way to own property, anymore then the existence of the Kibbutz proves it (or more appropriately, disproves it). There are many economic absurdities about such systems that this article simply does not address or attempt to disprove. What exactly did this article prove except that such commons existed? The Kibbutz also existed for quite a few decades and one can write about it in nostalgy and avoid the principle economic fallacies behind its idea. But it would be more interesting and informative to write about how it managed to survive, and just like the former Soviet Union, it wasn’t due to its adherence to its ideology but on the contrary, to its deviations from it.
I am simply appalled by your comparison of joint stock companies to Lange-Taylor model of market socialism. This is unbelievable! You are comparing a system where people are bidding their own wealth and property for ownership titles over real factors of production, to a system where people bid no property of their own. I originally thought that I may have misunderstood the article because I couldn’t believe what I was reading on FEE, but after this comparison, it is clear to me that I am sane, and that FEE just published an article on how “Libertarian socialism” can perhaps be a 3rd alternative.
Comment by Kevin Carson on 29 April 2010:
Ostrom does not show just that various forms of common property existed, but also how effectively they worked. And in a large number of cases, they ceased to exist because they were actively suppressed. I would submit that the private property of villagers in a common was a hell of a lot more legtimate than the “individual property” it became after it was expropriated.
The fact that you’re characterizing commons as a “3rd way to own property” shows that you DO, in fact, conflate the public/private and common/individual distinction, treating common property as somehow morally suspect and not “really” private property in the full sense.
I am not, in fact, “comparing a system where people are bidding their own wealth and property for ownership titles over real factors of production, to a system where people bid no property of their own.” I am, rather, comparing two systems where “people bid no property of their own.” I specifically SAID, in the comment above, that the management of the corporation is not risking its own property.
You really should be more careful to read what I actually wrote before you fly off and comment on how unbelievable and appalling it is.
I have a sinking suspicion as to how this is going to go from here. You’re going to quote Mises chapter and verse on how the entrepreneur gives orders to the manager through the magic of double entry book-keeping. Then in response I’m going to point you to my comment above specifically arguing that the managers are in de facto control of the corporation. Then you’ll probably bring up the market for corporate control. And then I’ll point you, once again, to the material above on proxy fights, the decline of hostile takeovers, and internal financing of investment. And so on, and so on. So maybe we can just say we did it already.
Comment by P.M.Lawrence on 30 April 2010:
KC, as far as I know, while the USSR certainly did co-opt existing structures where they were compatible with it (e.g. the soviets themselves somewhat preceded the October Revolution), there weren’t many actual collectives in place to be co-opted. That means that – as in the Irish analogy I presented – it was more a case that new (here, collective) practices and institutions could be introduced more readily on the back of a pre-existing cultural familiarity with that general sort of thing. But this is a matter of inference, and would have to be checked; if you like, and if I remember to do it, I can ask a Russian studies expert I know.
Comment by Kevin Carson on 30 April 2010:
Thanks for the explanation, PML. If it’s ever convenient to ask, I’d be interested in knowing.
Comment by DD on 30 April 2010:
“I specifically SAID, in the comment above, that the management of the corporation is not risking its own property.”
Which is why management are not the owners but employees. And the stock holders are the ones doing the buying and selling. Now for you to deny that this works, and would work even more smoothly in the absent of State interference, and to contend that your Kibbutz is a viable alternative, you would have to reject all of the basic achievements of subjectivist economics.
“Ostrom does not show just that various forms of common property existed, but also how effectively they worked. ”
I’m not familiar with Ostorm’s work so I can’t comment about that. However, your article doesn’t show anything of that nature.
Again with the fallacy of “it worked in the past”. Public roads work too then. So do public schools. Should I write about how they work? Taxes, politics, unions, etc….. Does this mean they are a viable alternative to private property?
Can such “common” ownership Islands survive in theory on a broad scale as an economic system? And I don’t mean as a few scattered primitive tribes running around naked all day hunting and fishing with their hands, with a child mortality rate above 50% and average life expectancy of 20 years. Sure, by this logic, you have about 1 million years of history for homosapiens to talk about how people did exist, after all, prior to the industrial revolution.
If such information about how such a system can develop into a modern industrial economy was presented by Ostorm, why did you waste all that scarce resource of magazine space and NOT enlighten us on this breakthrough in revolutionized economics that would finally put Mises “Socialism” to rest? I think the answer is clear.
Comment by DixieFlatline on 30 April 2010:
DD, I read your post at Mises. You have got it right.
Comment by P.M.Lawrence on 30 April 2010:
OK, KC, I’ll check with Ian Cummins when I remember. Meanwhile, this post (found via a comment on Mencius Moldbug’s site) may be of interest.
DD, it is not generally the case that “the stock holders are the ones doing the buying and selling” – that’s the whole point of the agency costs problem, that while those things are being done in their name, in actual fact they are being done by the managers in accordance with their understanding of what should be done. As for whether that “works”, that depends on whether you simply mean that it happens or whether you mean that it actually succeeds in vicariously expressing shareholders’ wishes. As for whether that “would work even more smoothly in the absent [sic] of State interference”, that depends on whether you consider that such state mandated corporations could exist at all (in which case it wouldn’t work at all) or whether they could continue independent of that – in which case there would be no mechanism to keep them subordinate to absentee shareholders rather than consolidating the control of the management on the spot (much as the end of Roman Catholic control with the Reformation led to the Teutonic Order of Knights transferring its possessions and authority to the former knights); that was indeed smoother, but wasn’t control by the former nominal owners.
Comment by Kevin Carson on 1 May 2010:
> Which is why management are not the owners but employees. And the stock holders are the ones doing the buying and selling.
>
I refer you back to my statement in the comment to which you are responding:
“I have a sinking suspicion as to how this is going to go from here. You’re going to quote Mises chapter and verse on how the entrepreneur gives orders to the manager through the magic of double entry book-keeping. Then in response I’m going to point you to my comment above specifically arguing that the managers are in de facto control of the corporation. Then you’ll probably bring up the market for corporate control. And then I’ll point you, once again, to the material above on proxy fights, the decline of hostile takeovers, and internal financing of investment. And so on, and so on. So maybe we can just say we did it already.”
In your post at Mises community forums, you mention that this article is “getting you mad.” It’s a good thing your inattention is acting as a damping rod for your anger. If you thoroughly read what you’re critiquing the first time, instead of having to make three or four runs at it and raising arguments I’d already explictly answered, you’d really be mad.
> Now for you to deny that this works, and would work even more smoothly in the absent of State interference, and to contend that your Kibbutz is a viable alternative, you would have to reject all of the basic achievements of subjectivist economics.
>
Huh? How, exactly, is a statement of fact about the effectiveness of a particular kind of corporate governance a rejection of any achievement of subjectivist economics? The question of whether shareholders exert any effective control over corporate management is an empirical question, not a praxeological one; and as far as I can tell, the empirical arguments are all on my side and you’re making appeals to authority.
And you’re the only person here who’s mentioned the Kibbutz.
> I’m not familiar with Ostorm’s work so I can’t comment about that. However, your article doesn’t show anything of that nature.
>
I quote: “Ostrom also denied that there was anything inherently unstable about commons and argued that they were actually well governed by traditional regulations that specified individual grazing rights.”
> If such information about how such a system can develop into a modern industrial economy was presented by Ostorm…
>
Since the first major industrial revolution took place in an environment where common property had been expropriated, I also think the answer is clear. The actual form of the labor market in the industrial revolution, and the resulting bargaining position of labor in that period, reflect the expropriation of the commons and other traditional land tenure rights, and the creation of a landless class of wage workers. What form industrialism would have taken without such theft and exploitation, I don’t know. If you’re making a consequentialist argument that the robbery of peasants in their right of common was necessary for successful industrialization, I’m waiting for your endorsement of Kelo.
> …this breakthrough in revolutionized economics that would finally put Mises “Socialism” to rest?
>
I’m not sure what about it you think would put Mises calculation argument to rest. My arguments on internal governance of the corporation are heavily influenced by Mises calculation argument:
http://www.thefreemanonline.org/featured/economic-calculation-in-the-corporate-commonwealth/
Comment by Hoppe'sHomeBoy on 1 May 2010:
All you commies need to go read some Hoppe.
http://www.lewrockwell.com/blog/lewrw/archives/39366.html
In fact, burn everything that isn’t related to Hoppe through his juices or intellect.
Comment by Kevin Carson on 2 May 2010:
I don't know whether the incongruous mixing of metaphors or the disturbing "juices" imagery is more jarring.
Comment by Hoppe'sCloset on 2 May 2010:
That is immaterial. What needs to be known is that Hoppe is always a priori correct. This is a logical deduction, so any insolence will catch you in a performative contradiction.
Fun Fact: Did you know that Hoppe has a priori perfect knowledge of medicine? He would have been a doctor, but he refused to inhale the AMA propaganda center known as medical school.
Yes Dr. Hoppe, I'll take my pants off.
Comment by Stephan Kinsella on 4 May 2010:
Kevin, re corporations: .. so what, really? So what if the courts don't recognize shareholders as "real owners"? Ownership is the right to control a given resource. It can be divided contractually. A google shareholder can't go use the corporate jet or boardroom. His rights of control are indirect. The managers have more immediate control–ownership–but this can be chagned by established procedures, by the Board, etc.
The state should not grant limited liability. I agree. It should also not propagate the absurd notion that without the grant and corporate charter, corporations could not exist. And we libertarians should not accept this propaganda. Without the state, firms could arise contractually with similar features to modern corporations, including "limited liability"–since this is just a consequence of the passive role played by shareholders who don't do anything to give them vicarious liability for the actions of employees hired by the managers who are appointed by the directors who are elected by vote of the shareholders. we don't have to call them corporations. We can just call them Hessens.
But basically, I agree: the state should get out of it. You think the state's role distorts the situation more than I do. Fine. Let's get it out, and see what would arise.
Comment by Sheldon Richman on 4 May 2010:
DD writes: "Sheldon, what's next?"
DD, did you miss the news about Nobel laureate Elinor Ostrom and her hero status among George Mason University economists? It is entirely consist for freedom advocates to acknowledge that traditional private parcel ownership is not the only form of voluntary, nonstate control of land. Are you also suspicious of mutual-aid societies and lodges? They weren't for-profit corporations.
Comment by Kevin Carson on 4 May 2010:
You're using "labor theory of value" so broadly as to be meaningless. Although I've defended the classical labor theory of value elsewhere, there's absolutely nothing in my comments above that requires a labor theory of value. My argument is that in industries where human capital is the source of a major part of revenue stream and book value, giving the creators of that value stakeholder status increases economic efficiency. Perhaps you believe an argument that labor creates ANY value is tantamount to a "labor theory of value"?
I also believe the argument that property rights are more efficient when they are defined to reward the creators of value is very much compatible with a "systematic scientific method to analyze and study human action."
As for Chomsky, why not–when he's right? Do you think Chomsky has never been right about anything, or have you even read him?
Most of your arguments here, to my view, display little in the way of "systematic scientific method," and much in the way of parroting second-hand talking points and viscerally rejecting arguments because of what they "sound like" or because they remind you of something you don't like. You seem to regard Mises less as a source of systematic scientific arguments to be used, than as a source of authority like a Scholastic making glosses on The Philosopher.
Comment by Sheldon Richman on 4 May 2010:
DD writes" "FEE just published an article on how 'Libertarian socialism' can perhaps be a 3rd alternative."
DD, please read the article again. There was no defense of what you would define socialism, that is, coercive collectivism. There was a defense of voluntary cooperative association, which can take a variety of forms depending on local circumstances. FEE was never committed to a single vision of voluntary social cooperation. Leonard Read's best-known book was titled Anything That's Peaceful.
Comment by Sheldon Richman on 4 May 2010:
DD writes, "The fact that such commons existed does not somehow prove that there is a 3rd way to own property,"
DD, have you read any of Ostrom's work? How about Pete Boettke's work about Ostrom? Oh, that’s right. You say you have not.
Comment by Sheldon Richman on 4 May 2010:
It's not a matter of insisting. It's a matter of writing something useful and interesting to advocates of freedom and voluntary social cooperation. FEE is steadfastly in favor of "the idea that there is a systematic scientific method to analyze and study human action." That's why published this article by Kevin Carson, a good combination of historical and praxeological analysis. What implications of that article don't you like? Noam Chomsky is free to submit an article. It will be subject to the same criteria as anyone else's. (By the way, I used to help edit a libertarian magazine, Inquiry, that published Chomsky's critiques of U.S. foreign policy. Other contributors included Murray Rothbard)
Comment by Kevin Carson on 4 May 2010:
You're using "labor theory of value" so broadly as to be meaningless. Although I've defended the classical labor theory of value elsewhere, there's absolutely nothing in my comments above that requires a labor theory of value. My argument is that in industries where human capital is the source of a major part of revenue stream and book value, giving the creators of that value stakeholder status increases economic efficiency. Perhaps you believe an argument that labor creates ANY value is tantamount to a "labor theory of value"?
I also believe the argument that property rights are more efficient when they are defined to reward the creators of value is very much compatible with a "systematic scientific method to analyze and study human action."
As for Chomsky, why not–when he's right? Do you think Chomsky has never been right about anything, or have you even read him?
Most of your arguments here, to my view, display little in the way of "systematic scientific method," and much in the way of parroting second-hand talking points and viscerally rejecting arguments because of what they "sound like" or because they remind you of something you don't like. You seem to regard Mises less as a source of systematic scientific arguments to be used, than as a source of authority like a Scholastic making glosses on The Philosopher.
Comment by DD_ on 4 May 2010:
Carson: "I'm not sure what about it you think would put Mises calculation argument to rest. My arguments on internal governance of the corporation are heavily influenced by Mises calculation argument: " http://www.thefreemanonline.org/featured/economic…
You have completely misunderstood the calculation argument, as well as the knowledge problem. You are totally confused. I have read some of your writings now and you seem to be very consistent and persistent when it comes to rejecting certain aspects of economic theory. In other words, the intellectual and theoretical tools at your disposal are making you misinterpret and misunderstand everything you read about economic theory. It's really quite painful to watch.
Comment by DD_ on 4 May 2010:
Carson: "I'm not sure what about it you think would put Mises calculation argument to rest. My arguments on internal governance of the corporation are heavily influenced by Mises calculation argument: " http://www.thefreemanonline.org/featured/economic…
You have completely misunderstood the calculation argument, as well as the knowledge problem. You are totally confused. I have read some of your writings now and you seem to be very consistent and persistent when it comes to rejecting certain aspects of economic theory. In other words, the intellectual and theoretical tools at your disposal are making you misinterpret and misunderstand everything you read about economic theory. It's really quite painful to watch.
Comment by P.M.Lawrence on 4 May 2010:
SK, there is nothing absurd about the “notion that without the grant and corporate charter, corporations could not exist”. We have ample empirical evidence that they never have existed without it, apart from special cases like monasteries with an internal dynamic holding them together (and empirical evidence that, when that fails as it did with the Teutonic Knights after the Reformation, they come apart). We also have theoretical reasons for doubting that they could come together without that support initially and/or persist without that support later, i.e. the same logic as applies to cartels breaking up.
Your mere repetition of your assertion is no argument; neither is the assertion that ‘[w]ithout the state, firms could arise contractually with similar features to modern corporations, including “limited liability”–since this is just a consequence of the passive role played by shareholders who don’t do anything to give them vicarious liability for the actions of employees hired by the managers who are appointed by the directors who are elected by vote of the shareholders’, since this utterly fails to address the issue of what if anything keeps the managers obedient to the shareholders and how if anyhow the shareholders and managers can escape moral or practical liability for what they owe to others by agreeing among themselves that they should not be liable (remember, “nemo dat quod non habet”, nobody gives what he does not have).
To my mind, anonymous partners (say, holders of unregistered bearer shares) can escape liability in practice by lying low, though by doing so they lose any remaining practical control over managers – but the partnership remains, and active partners and managers cannot do this, and both morally and practically such a partnership remains accessible in other respects.
As for “So what if the courts don’t recognize shareholders as “real owners”? Ownership is the right to control a given resource. It can be divided contractually. A google shareholder can’t go use the corporate jet or boardroom. His rights of control are indirect. The managers have more immediate control–ownership–but this can be chagned by established procedures, by the Board, etc.”, by that reasoning all the assets and resources of Warsaw Pact era “People’s Democratic Republics” truly were there for the people of those countries. It’s a vacuous thing, true in name only.
Comment by DD_ on 4 May 2010:
"The article has nothing to do with the labor theory of value"
I didn't say it did. I just thought that it may have an impact on one's ability to correctly analyze and criticize different systems of social cooperation. I guess you don't agree.
" Do you really know a priori what forms of social cooperation might be suitable for all forms of production?"
No, and I've pointed out in my comments that there are, and were, other forms of social cooperation. But it is a tremendous leap from acknowledging just that and even describing how they work, to implying that such systems can systematically substitute private ownership for the means of production in a complex industrial society. This is what the article attempts to do from beginning to end. From the fallacious description of libertarian view on property to comparing common ownerships to stock owned companies. If there was any doubt about his intentions, he clearly clarified his position in his comments.
"Try coming up with a serious criticism of the article."
It has already been said a million times before. As I said, the author is advocating, although in a very subtle and sneaky manner, for syndicalism (although he seems not to like the term). The fallacies of such systems have already been criticized.
It's Marxist from beginning to end! It also has a sense of dishonesty. As if someone is trying to smuggle a few ideas through without getting caught or noticed.
Comment by Sheldon Richman on 5 May 2010:
DD: “implying that such systems can systematically substitute private ownership for the means of production in a complex industrial society.”
No one implied such a thing.
“It’s Marxist from beginning to end! It also has a sense of dishonesty. As if someone is trying to smuggle a few ideas through without getting caught or noticed.”
I’ll ask that you maintain civility here by not questioning people’s motives or making absurd accusations. Marx wanted to abolish the market. Is that what you’re accusing Kevin of? Ridiculous! I suppose Benjamin Tucker was a Marxist too. Oh, and Bohm-Bawerk, because he thought “costs” can determine prices.
Comment by Kevin Carson on 5 May 2010:
DD: You’ve repeatedly referred to things I fail to understand, and asserted that this or that point of mine demonstrates a lack of understanding of (e.g.) the calculation argument or the knowledge problem. But you’ve yet to make an actual argument demonstrating exactly *how* I misinterpret them. You simply continue to make the assertions without giving me any reason to believe *you* understand any of these things beyond regurgitating buzzwords and appealing to authority. *That* is really quite painful to watch. Before you accuse me of failing to understand something, perhaps you should demonstrate at least *some* understanding of it yourself.
It’s also odd that you simultaneously accuse me of “syndicalism” (a word you’re apparently familiar with only through Mises, with no outside historical context), and of being “Marxist from beginning to end.” Are you perhaps also one of the Tea Partiers who accuse Obama of simultaneously being a socialist, a Marxist, a fascist and a closet Muslim?
Comment by BeFreer on 5 May 2010:
Long was cited as writing:
“The cleared path is the product of labor–not any individual’s labor, but all of them together. If one villager decided to take advantage of the now-created path by setting up a gate and charging tolls, he would be violating the collective property right that the villagers together have earned.”
But here Long is guilty of conflating the same common rights (which are individual EQUAL rights) that Kevin is trying to draw a distinction to from collective rights (which are joint rights).
In order to draw the proper distinction Kevin would have to focus on exactly who and exactly how one can act in the use of the collectively created path that contains a common right of way.
The joint owners (collectively) who expended the labor to create the path could (via pure consensus) set-up a toll to charge others who did not expend the labor to create the path BUT they would be violating the common right of way contained within the path that is an individual equal right of everyone else .
Comment by DD on 5 May 2010:
Sheldon: “No one implied such a thing.”
You can call me uncivil or impolite, or whatever… but now you’re trying to discredit me by insulting my intelligence.
Here are just a few quotes among others. Those quotes have absolutely nothing to do with Ostorm’s work! They are nothing but trash economics. There is not a single statement in those quotes that is true.
(1)
“Genuine collective or communal property, in which the governance system ties reward to effort and knowledge, may be better at addressing Hayekian issues of tacit knowledge than the kinds of “private” property in which corporate hierarchies divorce effort from responsibility.”
(2)
“In fact, management’s responsibility to shareholders is a legitimizing myth comparable to the claim of the State industrial bureaucracy in the old Soviet Union to represent “the people” or “the workers.”
(3)
“That means that an increasing share of profit and equity results from the contributions of the workforce–specifically, their tacit, job-specific knowledge and skills. ”
(4)
“On the other hand, the typical worker cooperative requires about a quarter of the front-line supervisors as a traditional hierarchical firm. The reason is that the workers do not exist in a zero-sum relationship with management and they are confident that their contributions to productivity will be internalized in their own personal bottom lines.”
He closes by:
(5)
“The central lesson of Ostrom’s work–that there is a rich variety of property forms and governance mechanisms, ……”
What is the implication of (5) when taken in the context of the above and the rest of the article? What?
And as for Noam Chomsky, Brilliant linguist and fascinating intellectual, but no better economist then Barak Obama. So are you going to publish Chomsky as an economist now also?
Comment by Sheldon Richman on 6 May 2010:
DD: I doubt if I would publish Chomsky on an economic topic, given what I know of his views in that area. So what?
I see Carson saying essentially what Ostrom is saying: There are circumstances in which nonstate common ownership by a specific group of people can solve problems efficiently. Your (1) sounds like it’s right out of Ostrom.
Let me assure you I would never insult your intelligence.
Comment by DD on 6 May 2010:
Sheldon” “I see Carson saying essentially what Ostrom is saying”
Actually, Carson just claimed that with respect to joint stock companies:
1. Executives are a separate class from the “workers”.
2. and they are accountable to no one.
3. They are no more responsible and represent the “share holders” then the Soviet State bureaucracy represented the “people”
4. Corporate executives seem to be exploiting everyone: workers, shareholders, etc….
5. Workers exist in a typical zero-sum game with management
6. Just asserts that ” the typical worker cooperative…” is more efficient then “a traditional hierarchical firm”, whatever that means.
Now, is the above “essentially what Ostorm is saying?” Just curious.
But regardless of what Ostorm has said, every single one of the above assertions is false. He conflates management with entrepreneurship, or ignores entrepreneurship altogether, ignores the roll of capital, rejects imputation theory, and I can go on and on to try to identify the reasons for why one can make such absurd assertions.
Comment by Kevin Carson on 6 May 2010:
DD: I don’t conflate entrepreneurship with management. The question is how those two distinct concepts are to be applied in a concrete case. Whether corporate management is, in fact, subject to real control by shareholders is an empirical question to be determined by observing them in action–not a priori from definitions. That you think Mises’ definitions of entrepreneurship and management, and his ex cathedra pronouncements about the entrepreneur controlling the manager through the miracle of double-entry bookkeeping trump real-world observation, are just evidence that a little learning is a dangerous thing.
“There is not a single statement in those quotes that is true.” “…every single one of the above assertions is false.”
Perhaps, but you’ve done nothing to disprove any of them. You’ve shown yourself to be quite capable of making assertions that I’m wrong about this or that, but you’ve yet to demonstrate any ability to make a coherent argument to that effect. Assertion is one thing, proof is another.
In particular, I’d like to know your grounds for saying item no. 3 in your first list is false. You really think it’s controversial to argue that, in capital-intensive industries where the cost of capital goods is falling, human capital is the source of an increasing share of total equity?
Comment by DD on 6 May 2010:
Kevin Carson,
You are obviously way more obsessed with Mises then I am. You had mentioned him first, and numerous times, while I have just mentioned him once, and in response to the fact that you had brought him up.
Empirical evidence does not support your assertions, but regardless or that, it is silly to claim that logic can be just thrown out the window. Even if you do have some interesting empirical data, it alone is worthless for the support of your case. I insist that it is logically impossible for your assertions to be correct, no matter what data you bring forward. It is impossible for you to infer any cause and effect from mere empirical data. Especially data of complex social systems where scientifically controlled experiments cannot be conducted.
Definitions are not sacred. You don’t have to agree with the precise definition for entrepreneur. But in the context of how Austrians usually refer to such concepts as uncertainty, economic calculation, knowledge problem, etc.. the definition is, I believe, quite accurate and useful. I don’t deny that others may have a different view of what an entrepreneur is. I am strictly applying the term with the above concepts in mind.
If the executives of a firm do not employ the capital at their disposal in an efficient manner, that is, in a way in which the consumers approve, they will suffer losses(or not as much gains as other firms). The above is irrefutable. Regardless of your doubts regarding the use of “double-entry bookkeeping” to keep executives accountable, it is a simple exercise of arithmetic that if the proceeds do not exceed the costs, the firm cannot maintain its current capital structure. It is FORCED by the reality of scarcity to scale back for it has no sufficient funds to finance its previous expenditures. I assure you that the above cannot be hidden from the true owners, the stock holders, and neither from other future potential investors.
” You really think it’s controversial to argue that, in capital-intensive industries where the cost of capital goods is falling, human capital is the source of an increasing share of total equity?”
There is a lot of inaccurate statements in the full context of the above [not quote] but paraphrase. And “Human Capital” is the source of all wealth, no? But you are implying that the employee is not getting his share. This is false.
Comment by Kevin Carson on 6 May 2010:
DD: My reference to Mises comes from your own repeated assertion that I ignore or contradict various doctrines of Austrian economics. The doctrines you appeal to, like the relationship between the entrepreneur and manager, come from Mises–whether you explicitly name him or not.
Let me get this straight: it is *logically impossible* for shareholders to display greater or lesser degrees of control over corporate management, and empirical data is useless in determining whether or not they do so?
“If the executives of a firm do not employ the capital at their disposal in an efficient manner, that is, in a way in which the consumers approve, they will suffer losses(or not as much gains as other firms).”
At least this is an actual argument, rather than an appeal to authority. I give you credit for trying something new. But it doesn’t work. Whether a particular form of behavior affects competitive advantage vis a vis other firms depends on whether all the firms in an industry share the same organizational culture. The size of the firm, in many cases, precludes an accurate estimate of what’s efficient and what’s not. And for the reasons I raised in “Economic Calculation in the Corporate Commonwealth,” corporations’ transfer prices reflect actual market prices in an extremely distorted fashion.
Your argument describes what *would* happen in a free market, not what actually does happen under state-cartelized corporate capitalism.
“The above is irrefutable. Regardless of your doubts regarding the use of ‘double-entry bookkeeping’ to keep executives accountable, it is a simple exercise of arithmetic that if the proceeds do not exceed the costs, the firm cannot maintain its current capital structure.”
But there are many possible corporate accounting systems. The dominant one, the Sloanist system developed by Donaldson Brown at Du Pont and GM, uses very poor measures of costs and proceeds (see William Waddell and Norman Bodek, The Rebirth of American Industry, for a lean manufacturing critique of Sloanist management accounting).
My remarks about human capital as a source of equity and profit have nothing to do with the labor theory of value. It’s perfectly compatible with the stipulation of normal rates of return on investment capital. As for whether it is “false” that “the employee is not getting his fair share,” are you seriously denying that a property rights regime can be more or less badly designed in terms of how it compensates production inputs?
I repeat: You are not defending the *arguments* of Austrian economists, or making an argument as to how their ideas are best to be applied. You are appealing to them as authorities, in the same way a Scholastic would appeal to Aristotle’s Physics to “prove” that heavy objects fall faster than light ones, while arguing that empirical data like the results of Galileo’s experiment is useless.
Comment by DD on 7 May 2010:
Kevin Carson: “Let me get this straight: it is *logically impossible* for shareholders to display greater or lesser degrees of control over corporate management, and empirical data is useless in determining whether or not they do so?”
As long as shareholders can dispose of their shares according to their own “free will”; buy and sell them freely, executives of the firm, or any other employees of the firm, are not free to do as they please. And as long as the reality of scarcity persists, they are forced to make profits in order to cover their costs. Logically, you cannot refute this anymore then you can refute that 4 minus 5 results in a negative 1. You cannot bring forward data that says otherwise. Profits must exceed costs and prospects of raising further capital in addition to any accumulated profits, relies on current appraisals and past performance of the capital value of the firm. Now obviously, the State can corrupt this process, but I assume that you are intelligent enough (and honest) not to conflate the instances of when this process does get corrupted by the State with the general principle of the joint stock company. In the article, you took issue with the principle behind joint stock companies, and not some faction of it that has gotten too corrupt.
You also seem to have in mind that control necessarily must mean access to micro management. By the same token, this would mean that mangers don’t have any control over their subordinate engineers, for example. Or that when you hire a contractor to build a house, you are hopelessly at the mercy of the contractor, as he can now dispose of the capital in his possession, that is now financed by you, in any way he pleases. This is of course all nonsense. Likewise, the function of “capitalists” or investors is a totally separate economic function from management (although not always necessarily distinct people), and there is no reason for the Capitalist to involve himself in the specific details of the operations of the firm. His only task is to supply his savings. He will supply it to those firms that earn the highest profit. I don’t know what you have in mind when you think of “control”, but it seems that the share holder has all the control that he needs and wants. He could have more if he wanted it. Nobody is forcing him into supplying his funds. But why would he want more control? Is he prepared to invest the time necessary to acquire the knowledge and expertise in making more managerial decisions? Is it even practical? I think you’ve missed the whole point and virtue behind this market innovation.
“The size of the firm, in many cases, precludes an accurate estimate of what’s efficient and what’s not. And for the reasons I raised in “Economic Calculation in the Corporate Commonwealth,” corporations’ transfer prices reflect actual market prices in an extremely distorted fashion.”
I don’t see how the fact that money calculations are not perfect somehow makes your case against joint stock companies in general, and also now, the new complaint about large firms. Large firms have a lot of advantages and disadvantages. In the absent of State privileges, the consumers ultimately determine if the advantages outweigh the disadvantages and vice versa. The same goes for the appraisals of their shares. But this doesn’t somehow prove that there is no accountability.
“Your argument describes what *would* happen in a free market, not what actually does happen under state-cartelized corporate capitalism.”
Well, if your entire complaints in the article was about State-cartelized corporate systems, then the article was rather dishonest, and misleading.
“But there are many possible corporate accounting systems. The dominant one, the Sloanist system developed by Donaldson Brown at Du Pont and GM, uses very poor measures of costs and proceeds ”
But this is a different argument. It’s one thing to talk about the efficiency of different accounting systems, and another to simply assert that there is no accountability of firms to anybody. As I’ve said above, there is the ultimate check on any firm and that is the truth of scarcity. No accounting scheme can ever hide the truth about the true performance indefinitely. It just so happens that it is State regulations that constantly hamper the market’s ability to reflect the true state of matters in a quicker and more efficient manner. As for accounting schemes, it is really no different then other any other conduct by the firm. Share holders can demand other accounting schemes. But you know perfectly well that most shareholders, at this point, just don’t care!
Lack of interest on the part of the shareholder in not equivalent to lack of control. The share holder is a “consumer” of the share. He can demand other accounting schemes just like the consumer demands FM/AM radio in his car.
“As for whether it is “false” that “the employee is not getting his fair share,” are you seriously denying that a property rights regime can be more or less badly designed in terms of how it compensates production inputs?”
No, certainly it can and is designed poorly whenever private property rights are not upheld. The value of you labor is what someone else is willing to pay for it. There really is nothing more to it as long as you support the social system based on voluntary cooperation. In the complex economy, there is always a tendency for the worker to get the full value of his product. This means that in reality, when the economy is always in a state of flux, at any given moment in time, some will earn above that value and some will earn below. There is no way for anybody to objectively analyze the system from outside and say that he makes too little or he makes too much. The system constantly works to minimize any discrepancies.
Comment by Kevin Carson on 8 May 2010:
“As long as shareholders can dispose of their shares according to their own “free will”; buy and sell them freely, executives of the firm, or any other employees of the firm, are not free to do as they please. And as long as the reality of scarcity persists, they are forced to make profits in order to cover their costs. Logically, you cannot refute this anymore then you can refute that 4 minus 5 results in a negative 1.”
This is exactly what I mean about your arguing from dogma with absolutely no critical view of how empirical facts affect its application to a particular case. Your argument is a syllogism with an unstated premise: that buying and selling stock is a control on management, and that sales of stock are the primary source of capital investment for a corporation. But that unstated premise is a matter to be determined empirically, not by an argument from the definitions of “entrepreneur” and “manager.”
“Well, if your entire complaints in the article was about State-cartelized corporate systems, then the article was rather dishonest, and misleading. ”
How so? You yourself seem to have an unstated assumption about the extent to which the present system is state-cartelized, and to which large corporations would exist without such cartelization.
Considering the extent to which I’ve had to restate the same arguments over and over, using the simplest baby steps, I suggest your lack of comprehension has less to do with any “dishonesty” and “misleading” on my part than with cluelessness and obtuseness on yours.
This is the second time you’ve questioned my motives, with absolutely no evidence for making such a scurrilous accusation beyond your own inability to grasp the point of an argument even if it’s covered with velcro. So you’ve got the last word. I leave it to anyone else reading this comment thread to judge whether you’re worth arguing with.
Arguing that buying and selling stock from other people is a meaningful control on a corporation is like arguing that buying or selling a car from a used car dealer is a control on GM management. Only a very miniscule share of total investment funds come from issues of new stock. See also my above comments on the finance of most new investment from retained earnings, the failure of most proxy battles, the deep decline in successful hostile takeovers since the invention of counter-measures like poison pills, the fact that most takeovers are friendly, etc.
I repeat–you argue from dogma with no concrete understanding of how it is to be applied.
Comment by DD on 10 May 2010:
“Your argument is a syllogism with an unstated premise: that buying and selling stock is a control on management, and that sales of stock are the primary source of capital investment for a corporation. ”
No, as I’ve said above in the opening paragraph of the previous post:
‘And as long as the reality of scarcity persists, they are forced to make profits in order to cover their costs.’
Implying that excess of proceeds over costs supplies the firm with fresh capital to reinvest and vice versa.
Your entire argument is silly. It doesn’t support your overall thesis about joint stock companies. You can call me dogmatic for adhering to sound economic principles. What are your principles? That you are free to interpret data in anyway that suits your taste?, I see.
Comment by Dan Sullivan on 15 May 2010:
This article touches on the same conceptual distinction as my essay, “Common Rights vs. Collective Rights.”
http://geolib.com/sullivan.dan/commonrights.html
The idea that all property must be either private property or collective property is Marx’s own creation, and is one of many half-truths on which Marxism is based. The Austrian school, which was founded largely in opposition to Marxism, took the directly opposite view of Marx. But since Marx was based on half-truths, absolutely opposite views were also only half true. In this case, Austrians argued against collectivizing all property by arguing for privatizing all property. This actually supported Marx’s underlying presupposition that there could only be two kinds of property.
Marx was big on mixing truth with lie. He coined the word “capitalism” and defined it as a system of exploitation. However, he never defended capital, and frequently conflated genuine capital with capitalized privileges. That way anyone who defended private ownership of capital was, to Marxists, also defending privileges, and anyone who defended capitalism was, by Marx’s originating definition of the word, defending exploitation of the workers.
The problem with Marx’s half-truths is that, while they are seriously wrong, deadly wrong, and even apocalyptically wrong, they are none the less half true. Quite often, anti-Marxists go through tortured logic to show that Marx was completely wrong instead of picking out the more obvious flaws.
The result is that anti-Marxists happily denounce the obvious errors of the Marxists and Marxists happily denounce the overstated criticisms of the anti-Marxists. In so doing, neither side sees the full truth in classical liberalism that Marx set out to obliterate.
Comment by Dan Sullivan on 15 May 2010:
Oops. That should have read, “he never *defined* capital.”
Pingback by Anarchy Road on 13 July 2010:
[...] as much as they could with no incentive to preserve the commons – has been shown to be false. As Elinor Ostrom and others have noted, individuals are capable of spontaneously developing rules for usage and [...]
Comment by Tim on 8 August 2010:
I think Belloc and the distributists were here first.
Pingback by Obamarchy | Agreeable Anarchism on 29 July 2011:
[...] My friend Tomas reminded me to include Elinor Ostrom’s work here. Here are a few articles that summarize her work. First: http://www.cooperationcommons.com/node/361 and in less dense form: http://www.thefreemanonline.org/featured/why-those-who-value-liberty-should-rejoice-elinor-ostroms-nobel-prize/ The latter is by a market economist, but should be easily digested by social anarchists. See also this piece by Kevin Carson: http://www.thefreemanonline.org/featured/common-versus-government-property/ [...]
Pingback by Obamarchy | Agreeable Anarchism on 29 July 2011:
[...] My friend Tomas reminded me to include Elinor Ostrom’s work here. Here are a few articles that summarize her work. First: http://www.cooperationcommons.com/node/361 and in less dense form: http://www.thefreemanonline.org/featured/why-those-who-value-liberty-should-rejoice-elinor-ostroms-nobel-prize/ The latter is by a market economist, but should be easily digested by social anarchists. See also this piece by Kevin Carson: http://www.thefreemanonline.org/featured/common-versus-government-property/ [...]
Pingback by The impetus to open source software | Riding with the King on 9 September 2011:
[...] impetus to open source software Take, for example, the shareholder model of corporate ownership. Despite their theoretical status as “owners” of the corporation, shareholders have little [...]
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