My Musings on Corporations Will Be Graded
Posted on March 18, 2011 Posted by John Scalzi 136 Comments
Stephen Bainbridge, a Whatever reader and also the William D. Warren Distinguished Professor of Law at UCLA, where he teaches business associations, advanced corporation law and a seminar on corporate governance, takes a look at my recent discussion of corporations, and adds his own commentary. How does he think I did? You’ll need to click that link to find out. But if you found my thoughts on the subject interesting, you should find his commentary equally so.
My, but he uses big words. Clearly he is not a fiction writer.
And the writer uses ‘egregious’ too often.
Actually, his thoughts aren’t really remotely interesting, being as everything he seems to say on the subject is filtered through a patently pro-corporate ideology. He makes numerous claims about the wrongness of corporate critics and the rightness of corporate ethics without actually backing much of his ethical or moral claims up with reasonably sound arguments. It boils down to “profit is good, so nyah nyah nyah”. That’s not particularly interesting or useful.
I think your average Joe who lived through the early part of the 1900s would quibble with “Because tyranny is far more likely to come from the public sector than the private…”
Stephen A. Watkins:
I would suggest you take those up with him, then, in his comment space. That should be an interesting conversation.
Indeed, in a general sense, comments to his article are best there, not here.
Professor Bainbridge and I are not perfectly aligned politically, but I find his commentary interesting and we have several philosophical points of agreement re: corporations.
Stephen @ #2: Yes. This.
I was going to write more, but everything I typed didn’t pass the Mallet Test, so I’ll leave it at that.
Doubtful. His livelihood is tied up in his support of the existence of corporatations and of corporate personhood (i.e. he’s a corporate law professor). It is unlikely, therefore, that he’s amenable to an actual conversation where he doesn’t come away gloating because he feels like he schooled a plebian on his ignorance. And I’m not interested in helping him stroke his ego.
Stephen A. Watkins:
Nice to know you have him all figured out, Stephen. Mind you, your estimation of him doesn’t bear any relationship to any of the interactions I’ve had with him over the years, despite his and my manifest political and philosophical points of disagreement. On the other hand, I do suspect that if you come into the discussion not actually being able to defend your points and assertions, then yes, he’ll probably school you pretty hard. I can see how you might wish to avoid that.
@John #7
He mentions several times throughout his article that those who disagree with him are wrong – and not only wrong but “egregiously” wrong, as was above pointed out. That strongly suggests he’s already made up his mind on the issue, and he doesn’t think the question bears discussion or disagreement. Ergo, no, I don’t think a conversation with him would be particularly useful or noteworthy. He already thinks I’m egregiously wrong. What can I say that could possibly sway his opinion?
Stephen @6
I wouldn’t go that far, but I will admit to being intimidated by that wall of text, and the fact that I don’t think I understood all of it. He references quite a few things that seem like they may not be obvious if you’re not an economics student (or maybe even one of his economics students seeing as how different schools can lead with different philosophies and assumptions.)
I might point out that I’m not rabidly anti-corporate… I agree with the general argument that corporations have been useful to society with regard to economic development. I’m just not of a mind that those goods are all-encompassing, nor do they warrant giving corporations a free pass, nor do they make up for the ills of society that are also perpetuated by corporations.
Stephen A. Watkins:
What? Someone expressing a very certain opinion on his own site, and doing so in strong, nay, uncompromising terms? Why, that almost never happens!
As for what you could say that could possibly sway his opinion: That’s not my job, that’s yours. That said, I think you forget — or elsewise might not know — that one of the primary reasons to enter into a discussion online is not to change the mind of someone with whom you are debating, but to offer an intelligent, defensible point of view for others following the discussion, who might not otherwise read that point of view.
Beyond that, are you not being more than a little hypocritical decrying his (supposed) inability to hear your points when you’ve already declared that “his thoughts aren’t really remotely interesting, being as everything he seems to say on the subject is filtered through a patently pro-corporate ideology”? You’ve dismissed any point he might make simply because his ideology isn’t yours. Mote, beam, etc, Stephen.
my $0.02 :
corporations should not the same rights/ protections that ‘real’ people do. they are not subject to the same punishments (how do you imprision a corporation? sentence one to death?) or have the same responibilities. People cannot be sold, dissolved or merged. The corporation is a convienient fiction to facilitate a group of individuals to do business. Since corporations are not people but comprised of people- I fail to see the logic behind the recent SCOTUS ruling that allows corps vast leeway in donating to political campaigns/politicians. Nothing is stopping the individuals that make up a corporation from donating, why should corporations be allowed to contribute at all? after all they don’t get to vote. ( I realize the same arguments apply to other organizations, unions, associations etc- I think thier contributions should be tightly regulated also)
Just a comment — at first read it appears the Professor is describing how things *should* work, ideally, while John is commenting on observed (or at least recently, past 10 years or so) corporate behavior. The gap between the two is where all the discussion and reference lie (as well as where the lack of more robust economic stimulus lie) — something that I hope to research thsi weekend… interesting perspectives, though, like looking in each side of a spyglass…
And John, if this winds up being the “duh” moment on the thread, so be it. I know as far as I’m concerned, this week the corporation I work for sank to new lows of stupidity, and the market loved them for it. Now for a martini, maybe several…
@John
I’ll agree that my ideology is not his ideology. My point is that his ideology is also specifically wrapped up in his personal livelihood, vis-a-vis he being a corporate law professor. It’s his job to teach about how great corporations are. My own personal livelihood is also somewhat tied up in the fate of corporations as I gain some marginal benefit from their ongoing business (i.e. I am employed by a corporation). But that doesn’t blind me to the dual nature and the controversiality of corporations.
I will admit that based on his use of language I’ve made some assumptions about his character. That was probably unfair, and I’ll concede I’m probably wrong with regards to his character, or at least that I can’t draw any meaningful conclusions from that single article. So I retract any aspersions I may have cast in that regard.
Still, I’m not dismissing his thoughts on the subject merely because of his ideology nor my disagreement with it – it’s partly the way he says it. Maybe this is just me reading into it, but there is something of a sneering attitude in the words that he writes – the numerous references to the “egregious wrongness” of those who disagree with him being one example; the suggestion that corporate leaders have, in many cases, better ethics than everybody else being another slightly offensive example… Little things like that add up over the course of the article to paint an unflattering picture. Again, I concede, a picture which very well may be wrong.
So maybe it’s a little hypocritical of me to suggest that I don’t think there’s anything valuable for me to learn from him, though as I’ve pointed out I don’t dismiss everything he has to say outright based on ideology alone (as I generally agree that the economic improvement and productivity fostered by corporations can have net positive benefits for society, and that the market structure is superior to command-and-control at efficiently allocating most economic resources, though that’s a separate question of whether those resources are fairly or equitably allocated). I’d rather I weren’t being hypocritical, but I still fail to see how offering a conflicting opinion on his own site which the esteemed professor considers egregiously wrong will be of benefit either to myself (there I go, acting in my economic self-interest) or to others who may visit his blog… On one hand if my reading of his sneering attitude is accurate, then I would imagine he’d savage my thusly shared thoughts with accademic pedantry of the highest order. On the other, if my reading is wrong and he’s gracious and accomodating and respectful of alternative viewpoints then we’re at a gentleman’s stalemate wherein we “agree to disagree”… and at that point I’m just not sure what was accomplished. Either way, I’ve already learned what his position and view on the matter is, he’s made it clear what it is, and I suspect he’s already well-versed on what the contrary opinion is as well (or else how could he know the contrary opinion was “egregiously wrong”?)
Thanks, Stephen; that makes better sense to me.
@ Stephen #15: FWIW, you’re coming in on the middle of a long professional argument between myself and several other corporate governance theorists about the nature of corporate personhood. The folks I refer to as “others” know who they are and know they are being tweaked. They will doubtless-as they have often done before–tweak back. I should have remembered, however, that new visitors to the site like yourself would not get the context. Nor would you be familiar with the snarky and sarcastic tone that my blogging persona regards as humorous. In any case, you are right about one thing, I’ve devoted 20+ years of my life to thinking about this problem and have engaged in reasoned discourse–as well as discourse lubricated by adult beverages–on it at conferences, in law review debates, and the blogosphere. So we’d just have to agree to disagree, because I’m pretty well convinced on this one.
Prof. Bainbridge: Thank you for clarifying the tone of the article.
It goes without saying that I think you are wrong in your belief that corporate personhood as currently practiced (particularly re: recent SCOTUS decisions) is a desireable situation for society. So while I agree that we’ll have to agree to disagree, you’ll forgive me if I express a fervent hope that such bad law and bad policy are in the near future vacated.
But what grade did he give you??
Goodness gracious, a civil discussion that touches on business and politics? Thanks, Stephens, for raising my estimation of US discourse a couple of notches.
@ Stephen #18. Think carefully before you leap. In the Progressive era, progressives (as I assume you are) were of two minds about corporate personhood. What Gerald Berk calls denaturalizers “condemned the corporate person as a cancer in the body politic. Drawing on classical republicanism, they worried it created unassailable privilege, corrupted democratic government, and locked the poor into permanent servitude. Corporate power was a political construct, insisted the denaturalizers; therefore, it could be reshaped to the republican ends of equality, virtuous citizenship, and a state devoted to the public good.” OTOH, reifiers thought the idea of corporate personhood was great because it “delegitimated the legal and cultural authority of nineteenth century individualism, which had become an obstacle to equality. … [Labor leaders, in particular,] applauded judges who naturalized corporate enterprise, because they undermined the foundations of the conspiracy doctrine and opened the door to legal naturalization for other groups. Should the courts apply the same logic to unions they applied to corporations, the labor movement could begin to redress organized business power through economic action.” (53 Buffalo Law Review 1419) This was not a right-left split, but a split within the Progressive movement itself. My point is that one’s position on corporate personhood is not easily mapped to one’s ideological preferences. So are you sure you’re a denaturalizer?
Anyway, I’ve intruded too much on John’s patience and bandwidth. Further comments will be made over at my place.
To those not here not in favor of corporate personhood, I ask a simple question:
If I buy stock in a corporation governed by your ideals, am I personally liable for corporate malfeasance? Did the action of buying stock in Prog Corp expose my personal assets to plaintiff recovery?
I hope Stephen W does not take up officially writing fiction. His characters would be wind-up dolls, their views entirely explained by their livelihoods.
Personally, I have worked for the government, non-profits and am now a small business person. I found the experiences educational, but my broad views have not changed all that much: I remain a person of broadly classically liberal views (Americans would say ‘libertarian’ but that is not quite right) but with a lot more nuance and knowledge to back them up.
Here’s an idea: why not engage with people’s ideas instead of starting your analysis with motives? If you notice a persistent refusal to engage with certain facts that a relevant and significant, then one can ferret around for explanations.
One thing I notice: people tend to want to migrate from countries where corporations are thin on the ground to where they are thick on the ground. Might be a wild coincidence, but perhaps not.
I submit that the corporate veil should be pierced to the extent of holding C-level executives and board members responsible for corporate malfeasance committed while they were in their positions; this does not have to extend to common stockholders, whose punishment should be limited to their stock value decreasing.
Interesting – I was going to post something like this on the original post but didn’t so I’m going to use this opportunity to post it here: “Unless you are prepared to say that some substantial majority of corporate America’s leaders are all sociopaths, ” – I am quite prepared to say exactly that or, rather, that a substantial number of corporate (and political) American leaders exhibit many of the characteristics of and are quite likely diagnosable as having Anti-Social Personality Disorder and/or Narcissistic Personality Disorder (Leona Helmsley being a good example). People who have ASPD and NPD and who are not particularly violent (so they don’t end up in jail) and who are smart often become both corporate and political leaders. In my opinion, both GW Bush and WJ Clinton had personality disorders. Without the criminal and irresponsible behavior, a lot of ASPD and NPD characteristics are actually highly valued in American culture. It royally sucks to work for those people (I know from personal experience as well as graduate training in Psychology).
I think a lot of the disconnect between theory and people’s on-the-ground feelings is the perception that corporations “get away with things” that flesh and blood people would get thrown in jail for. Vompanies like Union Carbide kill lots people through negligence, and no one seems to go to jail for it for very long, whereas if I get drunk and run someone over, I go to jail for quite some time.
Despite the validity structure of the laws (which Bainbridge knows far better than I do), I still feel like there’s a level of justice that’s not really visited on corporations, or their employees, or their owners, or their management, for some of the most egregious things they do.
The sense of an imbalance of justice arising from events like the Bhopal disaster from which (I think) creates a mistrust, and in some cases, hatred of corporations and capitalism. It’s not exactly helping to alleviate that when people who suggest more regulation and responsibility are dismissed as fools. On the other hand, statements like “corporations are sociopaths” aren’t helping the side that’s trying to address that imbalance.
We should be pointing at specific instances, and specific injustices, and saying that if we don’t figure out what’s wrong here and fix it, or even admit something is deeply wrong, we’re going to incubate the idea that, since corporations can get away with negligent homicide, there’s no reason why, say, Somali pirates ought to be judged negatively.
This was not a right-left split, but a split within the Progressive movement itself. My point is that one’s position on corporate personhood is not easily mapped to one’s ideological preferences. So are you sure you’re a denaturalizer?
That’s a very strange argument. It’s possible for S. Watkins to hold his opinion without being concerned about whether it maps perfectly to a left/right split, and it doesn’t invalidate his thoughts if he could be labeled a denaturalizer. Or even a thespian.
@Josh Jasper:
Yes, precisely. Why aren’t any bank executives facing criminal charges over “robo-signing” of foreclosure paperwork? I’d be for Club Fed if I committed fraud on that level.
@David # 27: You miss my point. My point is simply that Stephen W ought to assess whether whether his views on corporate personhood are more or less important than his views on the various policy outcomes to which he refers. If the former, then he’s obviously free to be a denaturalizer Of course, as a matter of logical internal consistency, he then has to accept that denying corporate personhood may sometimes lead to policy outcomes he’ll dislike. On the other hand, however, perhaps he’ll view his policy preferences as more important than his position on corporate personhood. In that case, he needs to figure out whether being a denaturalizer or a reifier is more likely to lead to his preferred policy outcomes over a range of issues.
My guess is that for most people other than corporate law/governance academics like myself, a position on corporate personhood is not part of their normative priors. Instead, if they think about it, they’ll realize that their normative priors are driving their views on the personhood question. If that’s right, then my point is simply that they need to realize that it’s not obvious that, for example, progressive priors inevitably lead to the denaturalizer side of the personhood debate. Lots of people with progressive priors have decided that they prefer the reifier side because they think that conception does a better job of advancing their preferences.
My point is that his ideology is also specifically wrapped up in his personal livelihood, vis-a-vis he being a corporate law professor.
Hey, if he was CEO of a corporation, or even worked for a corporation, you might have a point. But to accuse professors of bias because of what they study – that’s, well to put it very politely, misguided. You might as well accuse people who study China of being pro-China (since it’s “specifically wrapped up in their personal livelihood”); people who study crime of being pro-crime, etc.
Perhaps a professor who spends his life studying corporations and how they work, might have something interesting to say about the topic?
No – because as you declared earlier, his opinion differs from yours; thus proving he has ‘ideological bias’; thus proving that his opinion is worthless. Therefore no point in listening to him.
You miss my point. My point is simply that Stephen W ought to assess whether whether his views on corporate personhood are more or less important than his views on the various policy outcomes to which he refers. If the former, then he’s obviously free to be a denaturalizer Of course, as a matter of logical internal consistency, he then has to accept that denying corporate personhood may sometimes lead to policy outcomes he’ll dislike.
No, I understood the point, I was simply remarking that you are assuming a consistency that is not necessarily required. The insistence on that consistency is a particularly lawyerly one, and does not allow for the complexity of human societies. “I’d like things to be this way, except here and here and here” is entirely inconsistent and nonetheless very human.
By the way, it’s a subtle but not particularly impressive form of argumentation to slide into jargon. “Normative priors,” indeed. And, no, your posts on your own blog are not so laden.
I used to think the way he did. He’s wrong of course. Not massively. But it is far too simplistic and black and white of a theory to account for a great variety of useful and non-useful corporations. Many of those non-useful corporations have been terribly good at making money. Corporations are good at making some decisions. Bureaucracies are good at making some decisions. Both are needed in different amounts depending on the industry characteristics. Ironically government bureaucracies often seems to get involved in those industries needing the least amount of involvement. In other words they behave well, create value, have low risk, and are naturally self-regulating. There are many industries that don’t behave like that and require curbs to avoid the likelihood of extreme negative effects. Ironically this can often be the place of little government involvement. Mainly because those industries are good at keeping regulations out of their industry.
What it (corporations as being the only beneficial force of livelihood) all boils down to is greed, self-interest and the belief that people, thus society, cannot fully prosper without this set up.
What corporationhood does, in fact, is dehumanize and separate. Bainbridge even admits as much in his article when he says that sometime people tend to find a better connection with their co-workers than with their own families, or something to that effect.
Really, people were able to live valued, comfortable and prosperous lives looooong before corporations came into existence. What have they really given us of any real value, except maybe toilet paper?
I really hope you’re kidding on that part.
Without corporations there would be no third-world countries because there would be no first-world.
From the linked article: But how can a legal fiction be a sociopath? If’s the dumbest form of reification.
Oh. My. God. This has got to be the dumbest form of a logical argument I’ve heard in a long time.
When I say “The NRA opposes gun control” I understand that linguistically treating the “NRA” as an entity unto itself is as much a linguistic fiction as the corporation is a legal fiction.
But it simplifies the conversation so I don’t have to say “board of directors of the NRA, whcih is a 501(c) corporation, in support of its subscribing members” everytime I want to refer to the “NRA” as an entity itself.
And if anyone is doing the logical fallacy known as “reification” it is Bainbridge. I refer people to a typical definition and example of the logical fallacy of reifciation that exists here:
http://www.infidels.org/library/modern/mathew/logic.html#reification
Reification occurs when an abstract concept is treated as a concrete thing.
“I noticed you described him as ‘evil.’ Where does this ‘evil’ exist within the brain? You can’t show it to me, so I claim it doesn’t exist, and no man is ‘evil.'”
That exmaple of reification fallacy is almost identical to what Bainbridge is trying to do. The example says “Where is this “evil” you talk about? Since you can’t show it to me, it doesn’t exist”. What does Bainbridge do? “Where is this “corporation” that you talk about? It is a legal fiction. Since it doesn’t exist, corporations cannot be sociopathic.”
Bainbridge’s argument boils down to the most basic and fundamental example of a reification fallacy that one can find. Corporations don’t exist, therefore they can’t be evil. Or sociopaths. Or mean. Or careless. Or reckless.
Well, Mr. Bainbridge, when I say “Phillip Morris”, I understand that they are a legal fiction, that they are a corporation containing a board of directors, president, CEO, employees, and shareholders. And I am linguistically adept enough to realize that when I say “Phillip Morris” that it is a simplification of the legal fiction. But I also get that when I say “Phillip Morris selling products for years knowing it caused cancer is sociopathic behavior” that those words speak truth.
And no. I can’t put “truth” on a scale and measure how much truth weighs. But if you wnat to say I am reifying the truth, becaue “truth” is some kind of linguistic fiction, then you Sir are bonkers.
I see the primary issue is the fallacy of composition (I use that in the technical sense). For instance, because a corporation is made up of mostly ethical people, does the corporation behave ethically? Indeed, we see several examples (‘mob mentality’, for instance, and the many examples of culture changing the behavior of individuals from their expressed values, ‘groupthink’, etc) where groups do not behave ethically.
I think you can reverse this as well : by maximizing the value for shareholders, does the corporation avoid causing harm to individuals (stakeholders in the corporate body or in the societal sense)? In fact, I think we can say that there is no guarantee that they will.
I’m often drawn to the Milgram experiments when I think of the corporate hierarchy. If someone in authority tells you that it is important to do something, even if your personal values would tell you not to (in the Milgram experiments, people continued to increase electronic shocks – simulated ones, although they didn’t know that – when told to, and despite apparent pain of the subject). Fallacy of composition comes in as follows: if a person makes a policy that is intended to be good but has unintended consequences, that policy may be carried out despite harm because the person enacting the policy is not the person who created it. Like ones who shock, they may use the voice of authority as their justification, even though the authority didn’t intend harm (and might stop them if they knew).
Finally, I worry about desperation. In anyone’s ethos, survival is often the most important value. When the board of a corporation learns a set of facts that indicate it is likely to die (go out of business), the good intentions seem to no longer apply; rather, survival becomes the primary goal – no matter who or what needs to suffer on account of their struggle. I often think of Monster Cable in this light – many people consider their legal antics to be largely harmful to the consumers, and, I think it can be argued, ultimately to their stakeholders, since they try to have a chilling effect on competition through an unsustainable defense of their patents.
CaptainNed@22: To those not here not in favor of corporate personhood,
I think corporate personhood is an abomination, so….
I ask a simple question: If I buy stock in a corporation governed by your ideals, am I personally liable for corporate malfeasance? Did the action of buying stock in Prog Corp expose my personal assets to plaintiff recovery?
No. But I’m not sure I understand what that has to do with corporate personhood. If XYZ Corp says they have a right to free speech and a right to vote and a right to bear arms, then those are arguments of corporate personhood: XYZ corporation has exactly the same rights as a person has.
XYZ Corp does not yet have the right to vote in presidential elections. But you as a shareholder have that right. The corporation itself does not need the same rights as people to do its business. One can regulate the corporation without restricting teh rights of the people who own or operate it.
liability limitation is a different matter. If you buy stock in a company, and that company goes belly up, without the “corporate veil”, lenders could go after you if they can’t get their money from teh corporation itself. Therefore, people wouldn’t invest in a corporation without wanting a lot of control over how the corporation acts.
By limiting the shareholder liability to the amount they spent to buy the shares, it gives people more incentive to invest in business. They know their liability is limited to teh money they already put in. They know someone won’t come after their house because the corporation went belly up adn couldn’t pay its debts.
I don’t ahve a problem with the idea of a corporation being used for liability limitations. It works. It stimulates investmetn which stimulates the economy. It can create a net positive effect.
But corporate personhood, giving the corporation the same rights as a human being, is just nuts.
@39 Greg:
I raised that because, at least here in New England, the anti-corporate types truly believe that corporate liability should be personal stockholder liablilty. To them that’s not a bug, but a feature.
some people would not buy stock in a company like Blackwater Corp, now known as Xe, because they see it as supporting an immoral bunch of murderous bastards.
I dont think every ‘anti corporate type’ would go so far as to say shareholders of Xe should be brought up on war crimes. In fact I think casting everyone who favors regulating corporations as wanting to bring shareholders up on warcrims
… is a bit of a hasty generalization
Just a note: I tried to comment on his page, and was unable to do so by any means. Weird. It’s like he doesn’t want comments from us lumpen-proles.
I think his idea that corporations are ethical because they MAY take ethics into consideration when doing business is pathetic, quite honestly. I suspect that Hannibal Lector routinely takes ethics into consideration, especially those of his victims.
Oh, that’s right, Hannibal Lector is neither evil nor a psychopath because he’s a fictional construct. Like Satan (in some formulations). My bad.
Since corporations are not people, they can be bound to more stringent legal standards. Personally, I’d be happier if corporate law said that all corporations MUST take ethics into account during ALL business proceedings. Obviously, such logic does not preclude corporations from acting unethically, it only asks them to do it rationally and after consideration, rather than unthinkingly. The sad thing is, that would be an improvement over current accepted practice.
Well said Greg. Pretty much sums my opinion up.
more nuggets from Bainbridge:
Corporate actions thus will reflect the ethos of those who work for it.
Concepts such as “diffusion of responsibility” say this is a baseless assersion.
Because tyranny is far more likely to come from the public sector than the private,
I feel like channeling the inverse Scrooge. Are there no Robber Barrons? Are there no Military Industrial Complexes? Are there no corporations “too big to fail”??? Are there no Monopolies?
the corporation is the “most important organisation in the world.”
You know what I think is teh most important organization in teh world? Constitutional Democracy. I know it doens’t make “profit”, but hey, call me sentimental. Its better than corporate dictatorship. Oh, wait, I think Bainbridge likes that idea. Either that or he thinks corporate tyrranny is just simply impossible.
If markets are even remotely efficient, the current market price will reflect the equilibrium beliefs of all investors as to the present discounted value of the stream of income the stock will generate in the future:
Right because if that were false, then we’d have all sorts of crazy, wonky market fluctuations, crashs, bubbles, corrections, and so on. And the last century has been nothing but smooth stock market sailing.
the limited liability corporation provided an essential vehicle for vast industrial enterprises that produced the goods and services that we now take for granted in modern life
No mention of corporate involvement driving the slave trade, indentured servitude, the gross monopolization, the corporate towns, child labor, 16 hour work days, robber barrons, the “Concrete Jungle”. I dunno, maybe Bainbridge wished we lived back in the day where I could buy sausage and know I had a pretty good chance of getting a bit of worker-meat in it too. Oh look, part of someone’s toe.
By this article, it’s all roses for corporations.
Actually, this is probably the bigger grip about Bainbridge’s 2,700 word pro-corporation propaganda rag: it makes absolutely no attempt to mention the negative effects of corporations in proportion to the problems they create.
Just as a screaming example, you will not find the word “monopoly” anywhere in his article. 2,700 words praising the virtues of corporations, and not one mention, even in passing, that sometimes corporations become monopolistic and have to be regulated or dealt with. But Bainbridge makes a point to say “tyranny is far more likely to come from the public sector than the private”. Give me a break.
This article is just ludicrous, like Fox News would chuckle at it being so one-sided, in its presentation of corporations.
Another Bainbridge nugget: That’s Adam Smith’s point, isn’t it? Set up the rules of the game so that people’s incentives direct them towards desirable ends. I happen to believe that the market does a better job of doing so than do government bureaucrats. I am right in so believing,
I know Bainbridge is right in everything he says, so what I’m about to say is complete rubbish. And I also get that anyone who disagrees with Bainbridge is not only wrong, but egregiously wrong, on every count.
And yet, given all that, in my egegariously wrong opinion, the above line is completely indistinguishable from Laissez Faire capitalism. And I’m pretty sure believing in Laissez Faire capitalism is like believing in spontaneous generation creating maggots from moldy cheese.
Some days I feel like I woke up to Dawn of the Objectivist Dead. It’s like Ayn Rand zombies shambling around trying to take over the world and eat people’s brains, creating more Ayn Rand zombies.
Thanks for point this guy out to me, it was a very good read and I thought that he brought up some very interesting points and references. One of the ones I liked was
“It is not from the benevolence of the butcher the brewer, or the baker that we expect our dinner, but from their regard to their own interest. We address ourselves, not to their humanity, but to their self-love, and never talk to them of our own necessities, but of their advantages”. – Adam Smith
A very good description of what it means to do, and be in buisness, that of self interest. All in all, I think you did pretty well since he both agreed with and disagreed with some of the points you made.
So far, my favorite quote form the comments, I have read here is;
“Doubtful. His livelihood is tied up in his support of the existence of corporatations and of corporate personhood (i.e. he’s a corporate law professor). It is unlikely, therefore, that he’s amenable to an actual conversation where he doesn’t come away gloating because he feels like he schooled a plebian on his ignorance. And I’m not interested in helping him stroke his ego”. – Stephen A. Watkins
I like this one, because is he a teacher, whose job it is, to engage the ignorant in schooling, but he unlikely to have a coversation with anyone, who refuses to even talk to him.
Anyways thanks for pointing this part of the internet out to me, I now have another person I can follow and herass on the internet, (at least for now), other than you.
Bainbridge on Andrew Klaven video about Public Unions: “Unfair in spots and polemical throughout, but also funny and basically accurate”
What did Andrew say: unions in the private sector “can demand higher and higher pay and benefits until the employer goes out of business and it thus taught an important lesson in being nice while all his unemployed workers enjoy a laugh at his discomfort.”
Yeah, because unions are organized to put companies out of business so workers can collect unemployment.
Public unions: “The public sector unions you pay for are so effective that not only do their workers have greater job security than you, their salary and benefits are also much higher.”
This is so much bullshit that it just boggles the mind.
http://www.professorbainbridge.com/professorbainbridgecom/2011/03/andrew-klavan-on-public-unions.html
Oh, and who is Andrew Klavan? Wikipedia says he is an author, and says that “In July 2008, he likened George W. Bush to Batman in The Dark Knight, starting with their public vilification”.
http://en.wikipedia.org/wiki/Andrew_Klavan#Political_philosophy
Remember, the more know….
Greg: “And I’m pretty sure believing in Laissez Faire capitalism is like believing in spontaneous generation creating maggots from moldy cheese.”
This is a silly thing to say.
Laissez Faire was and is a request that government leave business alone; surely that’s possible, and thus believable. Capitalism refers to the private ownership of the means of production for profit and that mostly the case in the Western world.
I gather you don’t think Laissez Faire is a desirable condition and are using over-inflamed rhetoric to attack a way of life we have, to a significant degree, already achieved. And that anyone who prefers it must be an unthinking zombie because you can’t understand how anyone could have an opinion outside your own.
Of course, I would like less restricted trade then we now enjoy. Personal and political freedom is impossible without economic freedom. I suppose you’d favor even greater restrictions on voluntary human interactions.
Laissez Faire was and is a request that government leave business alone; surely that’s possible
Sure. The Robber Barrons of a century ago will tell you Laissez Faire is completely possible.
Laissez Faire capitalism means zero market regulation. It is from the french phrase “let do”. as in let the free market do what it wants. whatever it wants. It suggests that the invisible hand of capitalism, like an all seeing, all knowing benevolent god, will magically punish wrongdoers and reward the righteous.
It is economic science on par with alchemists trying to turn lead into gold. It is based on mythologizing (i.e. lying) about the past and calling them the “good old days” while ignoring what Free Market America really looked like. i.e. child labor was only ended because of government regulation. Your free market wanted no part of that.
If you acknowledge the market needs regulations because the Free Market, the Unregulated Laissez Faire market cannot correct every bad behavior, then we are simply arguing over how much regulation. But Laissez Faire specifically refers to absolutely positively no regulations whatsoever, and the invisible hand will play benevolent deity. As in XYZ Corporation should be able to sell unlabeled food that contains botulism. I actually had someone tell me in all seriousness that a person ought to have the right to buy food with botulism in it, and if you didnt want it, the store’s reputation would steer you to the right place.
No. that’s magical thinking through and through.
I suppose you’d favor even greater restrictions on voluntary human interactions
It has been argued that child labor is voluntary. If your child doesn’t want to work, they don’t have to.
And hey, if I’m black and some white store owner doesn’t want to serve me food, why, who is the governmetn to force that store owner to do something involuntarily? RIght?
Because taht’s what determines whether market regulation is fair and just and right or not, right???: whether it is voluntary???
Ah yes, the mating call of the wild, untamed, crosseyed libertarian:
The government cant morally force anyone to do anything they don’t want. EVER.
No, sorry, life is far more complicated than that. Child labor is wrong. And it took government regulation to force businesses against their will to stop that practice. Racism and segregation is wrong and it took governmetn regulation to force businesses agaisnt their will to stop that practice. Sellin snake oil as a cure for cancer and it took government regulation to stop that. The laissez faire market has no natural correction for these kinds of behaviors, so regulation is needed.
Dr. Bainbridge’s arguments seem to lean heavily on this quote from the American Law Institute’s Corporate Principles (I don’t know how binding these principles are on actual corporations, but regardless):
“[e]ven if corporate profit and shareholder gain are not thereby enhanced, the corporation, in the conduct of its business: (1) Is obliged, to the same extent as a natural person, to act within the boundaries set by law; (2) May take into account ethical considerations that are reasonably regarded as appropriate to the responsible conduct of business; and (3) May devote a reasonable amount of resources to public welfare, humanitarian, educational, and philanthropic purposes.”
So, corporations must follow the law, and may behave ethically or generously if decisionmakers wish. The argument now comes down to specific, individual laws, and which ones are good or bad for… whoever or whatever the laws are supposed to protect or support.
Just as a screaming example, you will not find the word “monopoly” anywhere in his article.
Monopoly is the dream of every businessman, but it comes rarely and usually fleetingly, unless with government help of one kind or another.
Child labor is wrong.
Okay, I’m going to stir the pot here (although I do actually hold this opinion so it’s not really trolling). Child labor isn’t always wrong. Some simple examples: a kid with a small weekend lawn-mowing business, mowing the neighbours lawns for a bit of pocket money. Babysitters. Kids helping out at dad’s shop. Kids doing work on the parents’ farm. Child labor happens in these situations, and it’s okay. Of course, sending a child down a coal mine or a factory for 16 hour shifts is appalling and unconscionable. There’s no doubt that children have been exploited in the past.
…so I would agree with the statement that “Child exploitation is wrong.”
DA: Sure, because when we talk about child labor laws, the thing we’re really trying to prevent is kids selling lemonade for a quarter behind a cardboard box or mowing the neighbor’s lawn.
We have a whole other set of laws to prevent child exploitation, but most folks don’t really care about those…..
@ Greg
I don’t think anyone is actaully saying that all buisness is good or that all government is bad; Laissez Faire economics does not require government to stop existing, it is simply a philisophical perspective from which to approach the regualation (ie government power) over the economy. When we speak of free markets we are talking about freedom of choice and the ability of individuals to choose what to do with there time and money. So when we are advacating for a more Laissez Faire appraoch to governance, we are not asking for anarchy but we are asking the government to try and maximize the amount of individual freedom it allows within its governance. That is what the Constitution is all about, the maximization of indiviual freedom by forming a government whose power over the indivual is limited by that same founding document. Government is not the only solution out there, there is also the indiviual solution of choice; people can choose who they decide to do buisness with. Ultimatly indiviual freedom is tied to economic freedom; so do we perfer to have power held by a few or to be held by many.
I don’t think anyone is actaully saying that all buisness is good or that all government is bad;
Have you heard some of the recent libertarian candidates these days? Rand Paul said racial segregation laws forcing a business to serve someoen they didn’t voluntarily want to serve was wrong. He also said child labor laws might be restricting children who want to work (16 hour days, on a mill).
Laissez Faire economics does not require government to stop existing
Sure, so long as Government doesn’t do a gorram thing to try and tell anyone what to do as far as anything voluntary, then that’s what Laissez Faire will accept as Government’s role. i.e. nothing. Oh, except enforcing laws prohibiting violent force, because we can force people to accept those laws.
it is simply a philisophical perspective from which to approach the regualation (ie government power) over the economy.
Any attempt to candy coat what Laissez Faire is other than complete and total free market with absolutely zero government regulation, will be met with snark.
And so. I snark in your general direction.
When we speak of free markets we are talking about freedom of choice and the ability of individuals to choose what to do with there time and money.
Do I get to choose whether I serve black people in my diner? Do I get to choose whether I get to sell some snake oil? Do I get to choose whether I get to own an entire industry and make it economicially impossible fore compititors to enter the market?
Anyone who uses choice or voluntary is advocating a set of principles which can be invoked every time the government wants to regulate something because no regulation is ever voluntary or by choice. You think racists chose to accept segregation? Or snake oil salesmen chose to have their products meet certain statndards?
“choice” is a useless principle for determining when market regulation is appropriate, because regulation NO MATTER HOW RIGHT IT IS is always against someones choice.
So when we are advacating for a more Laissez Faire appraoch to governance, we are not asking for anarchy but we are asking the government to try and maximize the amount of individual freedom it allows within its governance.
Again, this is a useless measuring stick because “regulation” no matter how morally right is always against someones “freedom”. Racists wanted the “freedom” to segregate their diners. They didn’t want government trying to restrict their “freedom”.
Any proposal to limit Gordon Gecko’s most destructive behaviors on the stock market would have to, by definition, restrict Gordon’s freedom to make money certain ways, because those ways were found to be damaging to the market and beneficial to few peopel beyond Gordon and his friends.
So, again, laissez faire is little more than “only if I want to and you cant make me” and you’re going to have to come up with a slightly more sophisticated set of principles.
For one, it has to be falsifiable. The principle you come up with has to have some things that clearly says, yes, this sort of thing would deserve regulation. No, freedom, choice, whatever, is not as important as the damage it does to the public good as a whole. If the principle is so generic that one can always invoke it to deny any regulation, then it is useless to everyone except those who want absolutely no market regulation.
That is what the Constitution is all about, the maximization of indiviual freedom by forming a government whose power over the indivual is limited by that same founding document.
The phrase “Congress shall have the power to regulate Commerce” is also in the Constitution. That phrase is meaningless if “freedom” always overrides it.
So, tell me at what point I can regulate commerce? Give me some generic principles that I could aply to different things and see if they get to be regulated or not.
I don’t want anecdotal evidence like “child exploitation is wrong”, I want some principle that isn’t specific to coal mining or sweat shops, but describes a basic measuring tool I can apply to all kinds of businesses and determine whether or not that principle will allow me to regulate the market. If the principle always says “no regulation”, then it is unfalsifiable and useless.
Government is not the only solution out there, there is also the indiviual solution of choice; people can choose who they decide to do buisness with.
And people can shoose that they don’t want to serve black people. Your worship of the idea of “choice” doesn’t give me any direction as to when I CAN regulate. Any regulation will violate someones “choice”. So, you need a better yardstick.
Ultimatly indiviual freedom is tied to economic freedom;
But Congress shall have the power to regulate Commerce. The right to economic freedom is like the right to free speech. You don’t have the right to shout “fire” in a crowded theater when there is no fire. You don’t have unfettered rights to any and all economic transactions. Some are like shouting “fire” in a theater. Some are more damaging to the public than any good they produce.
so do we perfer to have power held by a few or to be held by many
If “fewer” is “better” then the “best” would be no government at all or what we call Anarchy. If you say you aren’t advocating for anarchy, then your principles have to be more sophisticated thatn advocating for anarchy in a round about way.
My experience has been that every time I have a conversation liek this with a libertarian or ultra conservative, they can never come up with any principles beyond “choice” and “small governmetn is beautiful”. But “choice” means racists dont have to serve black people. And if small governmetn is beautiful, then no governmetn at all is downright orgasmic.
My basic principle for when market regulation is acceptable is when an unregulated market contains no natural correction for some bad behavior.
The problem with this is that libertarians and ultra conservatives worship the all knowing, wise, and benevolant god called the Invisible Hand of Capitalism, and followers of the Church of IHC believe their God punishes all the bad people and rewards all the good people. If you work hard, you go to corporate heaven with 42 virgins. If you are a bad man, you always go out of business, and if that doesnt happen, IHC turns them into a pillar of salt.
So, to them, there is no problem in the unregulated market that doesn’t get punished by the Invisible God of Capitalism. So nothing ever needs regulation.
So, give me some principle that justifies when and when not to regulate. I told you mine, when an unregulated market cannot solve some problem of people tryign to maximize profit and it is a situatino such as a Tragedy of the Commons, or Prisoners Dillemma, or something like that. Use that, or come up with your own.
But don’t tell me “choice” and “small governmetn” because that means no regulation is ever allowed because someone will always oppose it, and because no government is bttter than small government.
regulation NO MATTER HOW RIGHT IT IS is always against someones choice.
Exactly. And therefore, in a very literal sense, all regulation restricts freedom. But some regulation is necessary! It is possible to have too much and also too little, and although in your rigid black-and-white world it’s easy to see the boundary between “too little” and “too much”, this balance is actually difficult to get right.
@ Greg
Individual Liberty, is my priciple Greg, I stand by what I believe to benefit that princible and attempt to minimize that which I view degrades that principle; I’ts no more complicated than that.
I’m afraid there is a terrbile misunderstanding on your part on what libertarians and ultra conservatives want; they no more interested in anarchy than you are, they accept the limitations that civilization, aka government, puts upon them as being just and neccessary, and that a certain degree of freedom must be sacrafised inorder to gain the benefits of civilization. However from that point on we move into governance and how we perfer to be governed, it not therefor a choice of whether or not be governed because that choice has already been made, when we joined or entered in to civilization. The American revolution did not disband government and replace it with anarchy; it disbanded one form of governance and replaced it with another, one that focused upon the freedom of the indiviual.
So what we are really talking about is how we want to be governed, not whether or not we are governed, and generally that can be split along two choices (or atleast, that is how I choose to look at it); that of the individual or the group (the collective). Do we focus upon the rights/needs/wants of the individual or that of the group and how do we govern to the benefit of those two parties. I personally choose that of the indivual, not only because it is impossible to protect the rights of a group, but the individual is the smalles minority, and in a democracy (majority rule) the indivual and their rights, need to be protected and thus I advacate for limited government and indivual prosperty; life, liberty, and happiness.
When it comes to economic models and regualation I perfer to live within a society that practices capatalism (with a focus on the indivual), rather than in one that does not. The maximize of indivual power for good or ill, is always preferencial to tyranny of the collective. And capatalism and free markets flourishes when the government is not trying to tell the indivual how to run his or her business; which does not mean that there is no place for regualaiton.
i dont misunderstand libertarians and conservatives. people who say governnt can either rule by the individual or the group arent looking at the basic problems shown by game theory. the prisoners dilemma has both individuals trying to maximize their benefit and minimize their punishment. but the way the system works they end up betraying each other and both end up with the worst possible outcome. same goes for tragedy of the commons.
so in a commons scenario if the government rwgulates the commons and establishes penalties for overuse, then that removes the incwntive for individuals to destroy the commons.
but that creates a benefit for everyone. and every individual. because every individual gets the benefit of the commons being sustained indefi.tely. if you let individual users decide they overuse it and the commons is destroyed.
fishing caps are an example of regulation to avoid tragedy of overfishing the commons. if you allow overfishing then the fish population dies and no one gets fish. if you regulate it” you might make it sustainable.
are you saying that a selfish fisherman would never overfish and therefore limits are nevrr needed? that the regulation cuts into his induvidual freedom to fish more than that limit?
in just about every interaction i have with libertarians and ultra conservatives, they make it clear that they dont understand game theory, that they dont understand the tragedy of the commons and the prisoners dilemma, because they think that two selfish individuals will alwayz work out the best solution. and the whole point of these larticular games is that they show that selfish people in those scenarios do NOT reach the best outcome.
that choice and selfishness magically find the rigbt solution.
i dont misunderstand libertarians and conservatives
Yes you do. You’ve written embarrassingly naive summaries of beliefs of conservatives and libertarians (which you routinely lump together) on this very thread. Therefore, there is evidence beyond reasonable doubt that you don’t understand libertarians or conservatives.
I simply don’t believe this. Please quote someone on this thread demonstrating that they don’t understand the “prisoners dilemma.”
By the way, one way to solve the tragedy of the commons – which I’m sure your professors forgot to mention – is to privatise the commons. Private fisheries never get fished out. And nations that have exclusive control over fishing areas don’t fish themselves out. The only over-fishing occurs in the “commons”, the open sea, where there is no private property.
This where I pop my head in and say that I’d like to remind people not to try to stab each other in the eyeballs. Not happened yet but we’re at one of those points where it’s a probable discussion path if we’re not all careful. And then I will have to be all disciplinarian-y.
DA: how do you intend to privatize the earths atmosphere? Or a water table? Using those kinds of commons as a corporate dump is a tragedy of the commons that can only be stopped with regulation.
as for the proof you demand that most cultra conservatives and libertarians dont understand the the tragedy of the commons, all one has to do is look at the opposition to to solving the huge tragedy of the commons going on right now: climate change due to the atmosphere being used as a dumping grounds for CO2.
you cannot privatize the air we breath. you must regulate and limit how people pollute it.
Honest question: if monopolies are generally the result of state intervention, how do laissez-faire systems dismantle monopolies when left to themselves? Specifically, how do they address situations in which control of resources has become concentrated in very few hands? Wouldn’t this give owners much more leverage in setting the terms of any transactions, and also incent them to, by the terms of the transactions they offer, prevent the accumulation of such resources in any other hands? I know this is basic Marxism; I’d just like to see the argument spelled out.
So, as an example, a basic sharecropper situation: Family A owns all the seeds, land, and tools; families B, C, D, and E have to eat. Family A allows the other families to use its land, seeds and tools in exchange for a percentage of the food produced, retaining ownership of any other results of the work, like new seeds or structures or building materials, and it never sells land. If families B, C, D and E don’t make a deal, they starve; family A, if it gets its hands dirty, can survive regardless, and, right or wrong, will make no deal unless it ends with them having formal control over all lasting results of any work done. What are the lassiez-faire mechanisms that will end this scenario?
@64: The very basic idea(I don’t buy into it) is that if a steel monopoly acts in an unworthy(I don’t want to say fair since we’re working ruthless capitalism theoretically right now) manner then users(builders/railroads,etc.) will turn to a smaller outfit that can’t address their needs as well in order to starve the monopoly. The entire scenario is completely dependent on 1) People don’t need steel right away and 2) the smaller options do exist.
It rarely, if ever, happens and only then the monopoly’s behavior was corrected by a gargantuan effort on the collective part of every single builder of industrial buildings,railroads, and state and federal governments. This is impossible to do in a vertically integrated monopoly where your behavior at an earlier stage, while disgusting, is not associated with your ultimate end-product of a newspaper or a train-ride. The boycott only works when there’s an easily identifiable end-product, and end-users are affected by a company(or bus-line’s) bad behavior.
Nonsequiter: I have a friend who thinks that corporations being legal persons means that they’re being taxed illegally despite the fact that they’re not actual people. I disagree and I get called a communist by someone else, which was… interesting.
I’m a bit late to this party, so who knows if anyone will see this, but I want to say I’m with Dave @38. The “corporations are made up of people” counter argument to the “corporations as sociopaths” never addresses the fact that people in groups do not behave the same as people one on one. Increased distance, and distributed responsibility give us the ability to make decisions of questionable ethical status with less discomfort than if we were the sole decision maker delivering a verdict face to face with the person getting screwed over by our choice.
I’m not so inclined to draw any inference from the Milgram experiments as I strongly suspect the experiments and their interpretations are deeply flawed, but that’s neither here nor there.
Welcome, Daniel. As long as we’re talking it’s still a party.
Corporations can, of course, be anti-social (spell check doesn’t believe sociopathic is a word). If they harm someone there are laws and courts. If they provide a product I don’t like but is not illegal I have the option of not buying it. If I think them evil I won’t invest.
Any organization, from chess clubs to the AARP might harm someone, but I don’t think the solution is banning people organizing.
The special nature of corporations is that it allows people to invest their money without the threat of being sued. That provision is why people feel free to invest and one of the major reasons why so much wealth has accumulated over the past few centuries. If this is your objection we’ll just have to disagree.
Maybe a yardstick for if a corporate activity should be regulated should be if that activity can cause harm to anyone who could not reasonably influence the corporation’s activities. This doesn’t mean the activity is forbidden, just restricted under certain circumstances. This also covers unions, where striking is and should be the last resort, binding arbitration is often used, and police and firefighter unions are not permitted to strike under most circumstances. Of course, then you get sticky situations like WI, where a correction may be needed, but not by the Not-so-loving-and-in-fact-rather-egregious Mallet.
#30 by DA Munroe: “Hey, if he was CEO of a corporation, or even worked for a corporation, you might have a point. But to accuse professors of bias because of what they study – that’s, well to put it very politely, misguided.”
While he’s not (as far as we know) *directly* working for a corporation, I doubt very much that he’s in some sort of classic, sheltered ivory tower position, either. Academia doesn’t work that way anymore, especially in contexts that tie into the power structure. Ask a few non-US economists about what they think of US economists.
#23 by Lorenzo from Oz: “One thing I notice: people tend to want to migrate from countries where corporations are thin on the ground to where they are thick on the ground. Might be a wild coincidence, but perhaps not.”
There isn’t anyplace where corporations are thin on the ground. There are some places were fewer of them are *based*. Much of them movement you note is from places where the side effects of corporatism are more egregious to places where corporations are at least temporarily and comparatively more constrained. (And where so far a few more of the benefits are allowed to trickle down to the masses.) It’s the economic side of the joking-but-with-a-painful-kernel-of-truth about why so many people immigrate to the Land of the Free … it’s partly because if they live here, they’re less likely to be victimized by our foreign policy.
Bearpaw :”… why so many people immigrate to the Land of the Free … it’s partly because if they live here, they’re less likely to be victimized by our foreign policy.”
I wonder why so many came here before we had any significant foreign policy?
Daniel. Its called diffusion of responsibity. I mentioned it upthread. but yeah it is a real phenomenom.
of course the corporatists apologists will say the drive for profit will always prevent a corp from ever suffering from such a problem. The Invisible Fairy Queen of Capitalism would never let that happen. Just like she always makes sure corporations never succumb to the tragedy of the commons or the prisoners dillemma or anything negative like that.
It just always works out for the best for everyone involved. History proves this.
Diffusion of responsibility. Sort of like democracy.
@67
I have no objection to people organizing to accomplish things, in general that’s usually good. I do object to the idea that these organizations should have any of the same rights as an individual human being, while acknowledging that it is necessary in some contexts (mostly legal) to treat them as an individual entity. There’s a whole mess of issues with regards to compensation and short-term vs long-term interests, profits and taxes and the like that I don’t pretend to have any solutions for, but when it comes to political involvement I have to draw the line. Because in areas like this they effectively have not only more rights than human beings, but usually vastly more resources available to shape things to their will. And the vote with your wallet idea I find laughable. For one thing it’s completely impossible for a single person to keep informed about the actions of all the corporate entities they do business with even if they’re inclined to make the effort, and when they are aware of something they object to, not everyone always has the luxury of choosing to take their business elsewhere for any number of reasons. Most so-called boycots have too little impact to be significant, and in some (probably rare) cases no doubt have an effect opposite to their intentions.
The idea of corporations as a balance to government would be fine if it weren’t for the way in which our political elections operate. I’ve had people argue that a corporation should have the ability to try and convince politicians of its interest, and that’s where I like to throw the “corporations are made up of people” argument right back at them. A company with 1200 employees has 1200 people, not to mention shareholders, to argue for those interests. That we should let corporations spend as much money as they please trying to make that argument as the Supreme Court recently decided seems outrageous to me.
@72 – Walt, you’re absolutely right. Diffusion of responsibility effects all sides. That doesn’t make it good though.
DA @61: Why wouldn’t private fisheries ever get fished out? People use up their long-term resources for short-term gain all the time, particularly if they think they can get somebody else to assume or repair the damage. I understand what you’re trying to say – that if nobody really owns a resource, nobody has an interest in maintaining it – but the opposite, that private resources are always well-cared for, isn’t true.
Walt @72: Corporations provide a shield from responsibility, not a diffusion.
Also late to the party, but…
Up a ways, someone commented that Phillip Morris was acting sociopathically (or evilly, or some such) by continuing to sell cigarettes to people knowing that they cause cancer.
Phillip Morris doesn’t grow tobacco, they buy it from independent farms. One could destroy PM overnight and all of its facilities and the growing of Tobacco would not be affected at all.
The producers are smaller, often individual or family owned farms.
It’s fair to say “It is not a social or moral good that tobacco products kill and cause disease in many tobacco users”.
It’s not fair to blame a company that’s just one middleman in the total operation. Sure, advertising shares some blame for the volume of use, and companies doing that advertising are liable for that at the social and moral level. Sure, they bear some fraction of the total social and moral blame for the activity.
But they’re not forcing people to smoke. If PM and the other large companies went away, most smokers would happily find an alternative source. Even if one forbid large companies from engaging in tobacco product production or advertising, you couldn’t prevent use; people would grow it themselves, buy bundles of leaves on eBay and roll their own, set up local cooperatives, etc.
All PM does is make it relatively efficient (i.e., cheap) to buy. To the degree that cheap tobacco products encourage use, that’s bad. However, taxes on retail tobacco products now more than “make up the difference”. One would have to do a serious economic and social study to find out if the overall cost were still lower than a dispersed non-industrial tobacco economy, and what the usage effects would be, but it’s not an open and shut case to any final conclusion.
I don’t personally like or use Tobacco. I would be happy for it to go away from my society. But it’s not illegal, lots of people want to use it / are addicted to it / however you want to put it. It’s rational and reasonable to allow companies to be engaged in the tobacco trade.
I would be perfectly happy if PM were to go away. But that’s different than having some delusion that it would be a great societal good to do so. A great societal good would be minimizing tobacco use and getting people un-addicted.
But we have to be careful in forcefully imposing such goods. I don’t value tobacco – but I do value Alcohol (see Prohibition), responsible legal ownership of firearms, the right to own and drive a sports car, the right of others to own and drive fast motorcycles…
It’s a lot morally easier to simply blame the most visible actor in the chain of Tobacco use – the big companies in the middle of the total chain – than it is to address the real problem, which is that a lot of people use products that kill them and others around them, and that not everyone agrees is really OK for use (at all, or in public, or some variation thereof).
PM’s not “to blame” for tobacco use, because it’s been endemic in society for hundreds of years. PM is not blameless, but they’re not the source of the problem either, and blaming them for the problem existing is not reasonable. It exists because we don’t have an overriding societal consensus to ban it, and because lacking such consensus addicts keep using it and some new people fall into using it each year.
George @76: Why on earth can’t we “blame the middleman”, if he profits from and facilitates wrongdoing?
Why on earth can’t we blame an entity that pours millions, if not billions, of dollars into encouraging people to use a dangerous product, making that product addictive and trying to conceal and distort scientific knowledge that might affect people’s choice to use that product?
Why on earth is it OK to do something wrong because “if I didn’t, somebody else would do it anyway”? Would we let an acknowledged professional assassin go free if he explained that if he hadn’t taken the money, the bad guys would simply have hired someone else to do the killings?
All I’m getting from your argument is that you like booze and guns, and are afraid that criticism of cigarettes means somebody will go after your beer.
@76 I’ll agree with that. PM’s product does not make it a bad company. They may be doing other things that do, I dunno. But PM isn’t forcing anyone to smoke or witholding from or price-gouging anyone who needs cigarettes to live. (Drug and insurance companies… now that’s another matter :)
But then I think people should have the right to decide for themselves what they do or don’t do with their own bodies, and that pretty much trumps any issue with corporate bad behavior. (I say that as someone who has never been a smoker or indulged in recreational drugs.)
@77 – Concealing information about their products effects or doing things that increase the toxicity of those products would certainly fall into the category of bad corporate behavior. But that ship’s already sailed. No reasonable person today could say with a straight face that they don’t know smoking is bad for them.
Daniel @78: How much is that right worth if people’s decisions are based on incomplete or blatantly false information?
Let me put it this way: I spend a lot of time in the company of asbestos defense attorneys; people whose full-time job is to defend companies that, in many cases, actively lied about the asbestos in their products and how dangerous it was, companies where we have smoking guns showing that they knew but didn’t care how many people would die of cancer from using their stuff, because being honest about the dangers would have hurt sales. THOSE attorneys think tobacco-company defense attorneys are SCUM.
Walt: “Diffusion of responsibility. Sort of like democracy.”
Except… no. The opposite, even. Democracy concentrates responsibility into our elected officials. Sure, they manage to dodge any real responsibility for what they do, but nonetheless there is no diffusion of responsibility. And the whole don’t-blame-me-I-voted-for-Kodos thing isn’t diffusion either.
“Why on earth can’t we blame …”
“Why on earth is it OK…”
Nothing wrong with those thoughts but let’s not conflate these sentiments with considering new sanctions against corporations. After all, these emotions can be directed to anyone.
As has already been noted we already have laws and courts to regulate bad behavior. Behavior we merely don’t like should be outside the legal scope.
Daniel @79: “Bad for you” is such a usefully vague term, though. I mean, drinking too much coffee in one day is “bad for me”, but in the sense of it will probably make me jittery and upset my stomach. It’s not “bad for me” in the same way that, say, inhaling paint fumes at work all day would be bad for me. I don’t worry too much about overdoing the coffee a little bit. But I would certainly cut back if I knew that coffee was so addictive I would might never be able to quit if I wanted, if it was likely to destroy my normal stomach function permanently, or if I found out that coffee companies were lying about how much caffeine really was in decaf.
And of course an excellent way to get around customers’ knowledge of your products’ danger is to sell to kids, whose knowledge and judgment are generally lower than adults’, and to sell in developing nations.
Foog, responsibility also concentrates on the officers of any corporation and they can be hauled into court on any given day.
@80 Mythago: See my comment at 79. Those responsible for the lying should absolutely be held responsible. However, the mere fact that their product causes harm doesn’t make the company bad. The fact that the covered that up and lied about it does. And I’d much prefer it if the actual executives where held criminally responsible rather than just fining the company. I think the former would be much more effective in discouraging that sort of behavior in future.
@81 foog: I think there is a diffusion of responsibility in democracy at least on the voter level. One of it’s effects is so-called voter apathy. The idea that my individual vote doesn’t matter so it’s okay if I don’t vote, or don’t get around to calling/writing my representative about issue X or even bother to inform myself about issue X. I think unfortunately it’s unavoidable, and to some degree it’s useful in that not everyone can stay informed about everything, which is one reason why we elect representatives instead of having a direct democracy. But it’s a double edged sword I think.
Daniel @85: Ah, but that’s the beauty of corporations; they provide a very big shield against liability, both financial and otherwise. If you were going to sue Phillip Morris, you would sue Phillip Morris, not its CEO as an individual.
The fact that a product is dangerous does not by itself make a corporation “bad” – I’m not sure why anybody thinks that’s the point of the discussion. (Is someone really claiming that Chicago Cutlery is evil because they make sharp steak knives?) But George was making the very strange argument that a ‘middleman’ shouldn’t be blamed for its actions, and anyway if they didn’t do it somebody else would so it’s OK.
Walt @82: What new sanctions against corporations were being advocated?
@83 – Mythago: Excuse my shorthand. =) Consider “bad for you” equivalent to “it will kill you”. But here’s the thing. And this goes to your question in 80 as well. There is no, and never will be a state of “complete” information. Life is a terminal condition. Any number of decisions we make every day could be bringing that end closer, and we’ll never know. But you can’t just stay in bed your whole life waiting till it’s safe. Misleading deliberately attempting to mislead their customers about the danger of their product or conspiring to hide that information is wrong. Allowing the customer to make a “reasonably” informed choice about it is not. A “completely” informed choice is an impossibility. Did tabacco companies do bad things in the past? Absolutely. Is selling tobacco to someone today, after the danger’s well established, and anti-tabacco campaigning is rampant evil? No.
@86 – Mythago: Have you mistaken me for a defender of corporations? I pretty much despise them. I’m just saying the issue is in their behavior and not in their product. And we need to regulate them and not give them the rights of a human individual. They can’t be held accountable in the same way as a person. If an individual had done what the Tabacco companies have done in the past, they’d be in prison for life or on death row. But the corporations just hand over some cash and go about their business.
Daniel, none, I guess, except for some here decrying “corporate personhood.” I’m probably reading too much into such protests, thinking people are eager to corral and contain the legal definition of corporations.
Sorry, I should have referred to Mythago
Mythago – I should probably alter that further to replace the “danger” of tabacco with “consequences”. But I think you and I focused on very different things in George’s comment. The middle-man aspect is irrelevant as far as I’m concerned. The issue of a Tabacco company specifically brings up certain arguments for me, because I’m largely surrounded by “libertarian” and “conservative” types, but some of the few “liberals” I get to interact with on a regular basis would not hesitate to wipe out the tabacco companies because their product is “bad”. But while I tend to lean liberal on a lot of issues, telling people what they can and can’t do with their own bodies, and thus necessarily on what a business can and can not sell them is an area where I’m very much in the libertarian camp.
DA @61: Why wouldn’t private fisheries ever get fished out? People use up their long-term resources for short-term gain all the time, particularly if they think they can get somebody else to assume or repair the damage.
the key is in the last sentence.. again, if people think the government will save them, then yes! They’ll act in short term interests. The trick here is that they’ve got one eye on the long term but they know it’s taken care of.
Short term takes priority, but people do consider the long term in their decisions.
Mythago: Have you mistaken me for a defender of corporations? I pretty much despise them.
Do we need to have an us-and-them position in this?
Asbestos and tobacco- and Enron – are examples of corporations that behaved illegally. We would similarly use serial killers as evidence of the evilness of humans.
Walt@72: Diffusion of responsibility. Sort of like democracy
I think the important thing as far as it relates to the original post is that you and I both agree that when Bainbridge said “Corporate actions thus will reflect the ethos of those who work for it”, that he was in fact egregiously wrong.
A corporation as a whole can act worse than any individual member of t he corporation due to diffusion of responsibility.
If your acknowledgement of this fact was more an attempt to suggest that governing people via a Constitutional Democracy would somehow be worse than governing by some Limited Liability Corporation, well, I suppose if you want to just come out and say you’re a corporatist, that’s your choice.
Might explain some things I reckon.
Greg: in just about every interaction i have with libertarians and ultra conservatives, they make it clear that they dont understand game theory, that they dont understand the tragedy of the commons
DA@61: Please quote someone on this thread demonstrating that they don’t understand
OK. Just for example:
DA@92: if people think the government will save them, then yes! They’ll act in short term interests. The trick here is that they’ve got one eye on the long term but they know it’s taken care of.
Q.E.D.
If you think the only reason a tragedy of the commons is possible is because corporations are making the calculation that the government will bail them out, then you have just demonstrated a complete lack of understanding of the tragedy of the commons.
Coal companies dump tons of mercury, arsenic, and lead into the Commons that is the atmosphere. They do it because it is cheaper to dump it than doing the right thing and keeping the air clean. The sort term gain overwhelms any direct long term cost.
If it costs a billion dollars to capture, sequester, and store indefinitely the many tons of toxic wastes that come out of coal plant smoke stacks every year, and it costs zero dollars to do nothing and release it into the air, then the tragedy of the commons says the corporation will be driven to do nothing and keep the billion dollars.
By doing nothing, the coal company is not risking going out of business. They are not risking putting themselves “in the water” as you so often like to say in your economic morality tales. Your god that is the invisible hand of capitalism will not punish their wrong doing and turn them into pillars of salt or force them into chapter 11. The CEO and board could dump toxic wastes for one year, save a billion dollars, pocket all that money into the corporation which elevates the stock price, and then they sell all their shares, and retire.
Because of the corportists defenders present even on this thread, if a couple years later a class action lawsuit manages to collect this billion dollars a year from the corporation, by that point, the CEO and directors who made the decision to dump the toxic waste into the air have been living on a fleet of yachts for several years. That is the only way they will end up “in the water”. And because of liability limitation, they cannot be forced to pay any monetary consequences that the corporation suffers.
And so, the tragedy of the commons that is the atmosphere being used as a toxic waste dump, will continue to incentivize CEO’s and board members to dump wastes as long as possible to inflate their stock long enough for them to cash out, and retire on their yachts. Meanwhile everyone who has cancer are the ones paying the costs of their behavior.
There is no natural market correction for this because that’s the inherent problem of the tragedy of the commons. It cannot correct itself. Instead it reinforces and rewards short term destructive behavior.
External regulation is the only way to correct the issue and remove the incentive. If you fine a corporation two billion dollars for dumping their toxic waste into the atmosphere, and if it would cost them one billion dollars to install filters and store the waste, then they will filter and store the waste because thats the mores profitable short term path.
Greg: “governing people via a Constitutional Democracy would somehow be worse than governing by some Limited Liability Corporation”
The best places to live seem to be democracies so that would get my vote. That diffusion of responsibility thing is certainly worth thinking about in re corporations as it would be for any group.
Corporations can also act considerably better than any individual. They can gather capital for useful ends like building computers and selling beans. I suspect the average corporation is politer than me, especially in the morning and certainly more effective getting things done.
More and more we realize that trade is what makes us human. Sharing knowledge and tools with others and our descendants.
Come on Greg, join our zombie army….
If you think the only reason a tragedy of the commons is possible is because corporations are making the calculation that the government will bail them out, then you have just demonstrated a complete lack of understanding of the tragedy of the commons.
Luckily, that’s not what I think.
Coal companies dump tons of mercury, arsenic, and lead into the Commons that is the atmosphere. They do it because it is cheaper to dump it than doing the right thing and keeping the air clean. The sort term gain overwhelms any direct long term cost.
Everyone benefits from power stations, so it doesn’t fit the “tragedy of the commons” theme. They’re not just about greedy corporations making money. Those coal companies’ are providing electricity to you and me and everyobdy for the world to use. Sure, they cause pollution, but until we shift to thorium or invent fusion we’re stuck with coal and nukes.
Everyone benefits from power stations, so it doesn’t fit the “tragedy of the commons” theme.
The original “commons” would be grazing pastures shared between a bunch of farmers for their cows. Farmers sells the milk from the cows. Everyone buys milk. So, by extension of your same argument, everyone “benefits” from the milk produced by the cows grazing on the same land, so magically, the same shared land suddenly is no longer a “commons”.
But seriously, no. It’s still a commons.
All your doing is proving, repeatedly, that you do not understand the concept of the tragedy of the commons as presented in game theory. Or how it applies to the many real world examples in our world today.
Walt@95: Corporations can also act considerably better than any individual.
Synergy within an organization. Sort of like democracy.
That is actually the goal of the checks and balances and divisions of power in the US constitution: to have the organization that is the government be better than the worst individuals who might be part of it, and to prevent assholes from taking over.
Corporations don’t have any checks and balances built into their design. Corporations are designed for profit. The checks are external, in the form of shareholders selling their stock, and customers buying someone else’s product if its better/cheaper. So it is vitally important that the government make sure that regulations guarantee that shareholders, and the public, know what is going on inside the corporation, and the government prevent monopolization which would get rid of the corrective feature that is customers buying the competitors brand because it is better.
The corporation, being designed solely for profit, also succumbs to various traps as outlined in situations such as tragedy of the commons and prisoners dillemma, and so on. Individual actors driven by self interest in certain circumstances will end up producing the worst result for everyone involved. A constitutional democracy imposing regulations to alter the circumstances so that the worst-case outcome is avoided is about the only way to overcume the profit-only motivation of a corroation. The government can regulate the market as a whole for the public good.
No it means that the cows are also a public good, not just the commons. And you know what that proves? That the “Tragedy of the Commons” is little more than an artificial exercse for stimulating classroom discussions; but unable to explain the complexities of many real world situations.
DA Munroe@98:
Can I take your cow?
Oh, I guess it’s not a public good, then. You turned a public good – the grass on the commons – into a private good – your cow. Funny how that happened.
Now, you can argue that the grass does everyone (and not just you) more good in the form of a cow that you own and the milk that you sell than it does as grass. I note, however, that you didn’t actually ask me whether I wanted you to turn our grass into your cow. Nor did you ask whether I wanted you to pollute our atmosphere to power your electrical grid. You made a choice that affected me, and you didn’t have to ask what I wanted. That’s a consequence of laissez-faire capitalism.
On the other hand, in a democracy, I might have something to say about whether it’s okay to turn our grass into your cow, or pollute our atmosphere to create your electricity.
(Note that I don’t actually have anything to say about corporate personhood one way or the other here. But the tragedy of the commons is not in any way an academic exercise, and neither is diffusion of responsibility.)
I should more accurately have said that it’s “of public benefit”, not “public property.”
I note, however, that you didn’t actually ask me whether I wanted you to turn our grass into your cow.
“Our grass” assumes ownership, but the point of the “Tragedy of the Commons” is lack ownership.
Nor did you ask whether I wanted you to pollute our atmosphere to power your electrical grid.
No I guess you didn’t. Sorry about that.
Nor did I ask if you wanted interstates built across pristine fields, traffic noise pollution, airports, quarries, logging companies, firearms manufacturers, or Disneyland. Modern industrialized society has transformed the world and nobody’s permission was asked. It’s really quite wrong.
But it’s here now (sorry again), and I’m not sure what you want me to do about it.
the cows are a public good? a public benefit? therefore the shared pasture is not a commons?
That part where I said libertarians and super conservatives dont understand the trageddy of the commons or prisoners dilemma? You’re doing it again.
as for not being asked about building interstates…
What?!?
forget tragedy of the commons. the problem might be that people dont understand how a constitutional representational democracy works.
if the gvmt didnt ask you, they asked your father or your grandfather.
oh and “our grass” doesnt assume ownership anymore than “our atmosphere” does. coal companies are polluting *our atmosphere*.
dude. seriously, that part about not understanding the commons??? you’re doing it again.
This is the part where I stick my head in again and ask if any of this is actually going anywhere, or if you’re just having an economics 101 bull session. If it’s the latter, fine, I just want to be clear that we all know what we’re doing.
therefore the shared pasture is not a commons?
I never said that, nor did I imply it.
Greg, this is getting boring. You’re determined to prove that liber-conservata-retards are stupid and mendacious, to support what seems to be a rather brittle and limited world view. And since you’ve identified me as a “super conservative”, I’m squarely in your sights. I love boisterous debate, but I have no interest in replying so that you can scan my words for cheap ‘gotcha’ moments.
Hopefully when we meet again it will be on common ground, like, for example, a love of science fiction. You do like science fiction, right?
Oh and if you want to take me bowing out as evidence of your superiority and rightness, go for it. It’s all yours.
oops and in the meantime our gracious host made an appearance.
It’s just a bull session John, but I’m tired of it. I guess that means I lose.
John. Yeah I think I knew it had become an Econ101 thing. I am not sure how to explain examples of bad corporate behavior and why they happen without folks understanding the math, and therefore the game theory, behind it. Without specifics like math, it is fuzzy enough that people handwave the problems away and say the Invisible Hand makes it work out.
Sort of like one needs to have some specifics about atmospheric conditions to have some ability to predict basic weather patterns. Without those specifics, people might handwave it away and say the rain gods are what makes it rain. or a tornado hit because the wind gods are unhappy with our behavior.
I remember having a hard time understanding some game theory concepts when i ran into them (still do for some of them). I was willing to explain the ones I do understand if anyone wanted to have that conversation. at least to the extent that it explained some issues with corporate bad behavior. but i get it has strayed from the original limited topic.
Back to Bainbridge’s screed. It is 2700 words long. In those 2700 words, no attempt is made to present the very real issues that corporations bring to the party and have to be dealt with by the public on an ongoing basis. For example while Bainbridge goes out of his way to wax philosophical about all the progress he believes can be laid at the feet of the corporation, he never mentions the word ‘monopoly’ once. Monopolization is another example of things that are not inherently self correcting in corporations. in fact corporations drive for profit tends to drive them towards monopolization if they can manage to get there. the public as a whole and government acting on the publics behalf is the only way to correct monopolization. corps dont. competition cant if the monopoly is strong enough. regulation from the government or something like it is the only mechanism to prevent monopolization.
In his 2700 word screed about how corporations are the greatest organization of all time (more important than democracy itself), Bainbridge never once mentions the word ‘monopoly’ to acknowldge an inherent problem of corporations that the lublic as a whole has to deal with and correct.
And yet though he couldnt bring himsf to mention this problem of corporations he did find time to criticize governments. Tyranny, according to Bainbridge, is far more likely to come from the public sector, from government, than it is to come from the private sector, from his hallowed corporation.
Constitutional democracy has a better chance of morphing into tyranny before any corporation would ever become monopolistic???
the pro corporate bias (and anti government prejudice) in Bainbridges article just boggles the mind.
Reading the dear professors post reminded me of a lecture that an professor gave at a university I was at once. It’s pretty much the same outline on corporations and so on. So it’s kinda chilling to know that the professor I’m writing about was at that time the leading advisor (and personal friend) of the prime minister of my country and sat on the Central bank board. And how did that turn out you ask?
I’m from Iceland…..economy in freaking tatters and no one seems to bear responsibility because of layers and layers of llc’s and so on…
The financial sectors goal was short term profit for the shareholders and nothing else, “legal but unethical” became sort of a slogan at this time.
So consider my country as one extreme when corporate responsibility and taxes is kept at an all time low along with the regulator practicaly being in bed with them receiving donations and various perks from them.
There is a lot of times a theory of how things should work, but sometimes in practice it never works.
I’m struck by the difference in tone between John Scalzi’s original comments and Stephen Bainbridge’s response. John’s comments feel less ideological than Stephen’s in these two examples. I don’t mean that John is less ideolgical than Stephen, but it seemed to me that John made some reasonable assertions about corporations without losing track of the possibility that corporate structures have positive as well as negative affects. Stephen’s comments seem more ideological to me because they don’t seem to admit this ambiguity.
Many of the posted comments share this same tendancy to assume that corporations are either entirely bad or entirely good. Personally, I find John’s approach more persuasive, but that is just me.
“I have met a lot of corporate leaders over the years and their ethics strike me as no worse (and in many cases) better than those of any one else.”
…and there’s never any need to read anything this apoligistic piece of crap ever has to say again. Seriously, if he thinks that there’s nothing wrong withe ethics of corporate leaders, he’s either a complete imbecile or deeply confused about the definition of “ethics.” Perhaps the latter is the likeliest explanation, as the fact that he’s a professor of coporate law probably means that his own ethics are well into “sell out your gradma if there’s profit in it” territory, and he doesn’t recognize unethical behavior when he sees.
Well, this is funny. Bainbridge has closed comments on his thread.
If he wants to continue posting completely biased things like “Corporations are the most important organization in the world, but government will likely lead to tyranny.”, then it probably makes sense to disable comments.
Dave: “Many of the posted comments share this same tendancy to assume that corporations are either entirely bad or entirely good.”
I don’t think corporations are all bad or all good. But I think saying “such and such particular corporation is acting like a sociopath” can be a valid statement.
The counter argument from John seems to be summed up in comment #3 of the “Sociopathic Corporations” post here, which says: “You’re still equating corporations with real live humans, however. Corporations don’t have personalities in any sense that relates to how humans have them”
Which, to me, is odd, because John says in the original post of that thread: “Rather, I think the majority corporations act logically and rationally and in a manner consistent with the general reason for their existence.. This is giving corporations a personality as well, giving corporations their own drive and/or motivations. “logically” and “rationally” are still personality traits. One can only act rationaly if it is self actualized, self motivated.
if one can say “Corporation XYZ acts logically and rationally”, then I think one ought be able to say “Corporation PM acts like a sociopath”.
The complaint from Bainbridge goes like this: “But how can a legal fiction be a sociopath? If’s the dumbest form of reification.”
So, not only can I not say XYZ Corp acts like a sociopath, he says I’m dumb for doign so. Post number 37 of this thread explains how Bainbridge is actually misusing the term reification and committing the fallacy himself by trying to argue that since corporations are mere “legal fiction”, they don’t “really” exist, and so they can’t “really” be evil, or sociopaths, or whatever.
I never said all corporations are always sociopathic. I do however think it useful to take the phrase “the CEO, president, and board members of XYZ Corporation, acting to maximize the shareholders profits” and shorthand it to “corporation”, that treating a corporation as a single entity from a linguistic poitn of view, is accurate enough for many conversations.
And I think that if a corporation is acting in such a way as to make it clear that they are profiting by knowingly causing physical harm to others and dont care, that such behavior deserves being called sociopathic.
DA: sorry, but can’t see the comment number on my iPod. It is not correct, in most cases, that asbestos and tobacco companies “behaved illegally”. Badly, yes. Committed torts, yes, but illegally? How so?
Well, I’m one who would like to see shareholders be jointly and severally liable for what corporations do. Yes, it would destroy the current concept of investment.
But, CEO’s and other top employees do get paid, in part, in shares. People got killed because of something your corporation did? You’re liable. People who did still invest would be much more proactive in keeping an eye on corporate behavior. I’d like to see everyone down to the janitor get paid at least a little bit in shares. Motivation to keep what you’ve got is pretty good motivation to go running to the police as soon as someone else starts doing something wrong. Sell your shares, and you’re still liable for anything that the corporation did while you were a shareholder. If you want to play the investment game then you take that risk.
I don’t think it would be a perfect system. I don’t believe there is such a thing, at least not as long as people are involved. I think it would be a system in which fewer people would be harmed than the current system. I also think that it would tend to discourage large monopolistic corporations, as people would be reluctant to invest in corporations that were too large to keep an eye on.
Hey Kids-
Being so late in to this party I doubt anyone still remains to read this stuff. But WTF, right?
As a bit of background and in the interest of full disclosure, I’m a scientist who got sick of repeating my admittedly sloppy experiments, and went to law school. While I don’t practice corporate law (I mostly work to invalidate pharmaceutical company patents), I did study it with above average interest in school, and I took a fun and thought-provoking class called “Corporate Criminality” with Prof. Joseph Vining at the Univ. Michigan.
So I thought I’d chime in with a couple tidbits about sanctions and laws.
@#12- Corporations can and are punished. Sometimes it is even effective ;)
Individuals, of course, remain liable for any crimes they commit- if the CEO blows someone’s brains out- even for corporation-related reasons, I don’t think there is any legal doctrine than can protect them. (OTOH, many corporate executive contracts say the corporation will pay the lawyers and pay any fines, etc., even if the executive is at personal fault …)
But costing a corporation dollars and soiling their good name do impact corporate behavior. As do regulations and laws- really. Even near-limitless hubris among C rank executives (usually) does not overcome basic notions of right and wrong- don’t kill, don’t steal…
Corporations have been found guilty of murder, even. I don’t have the case handy, but I clearly recall an Illinois case from the late 70s or early 80s where a number of Polish immigrants died from cyanide poisoning due to plainly inadequate (ahem, criminally negligent) safety practices and warnings at a silver reclamation plant (they shred, e.g., old Xray films, soak in cyanide solution, and recover silver as the cyanide salt- still done this way for both silver and gold). The punishment was a fine that was high enough to not only bankrupt the company, but to prevent its ever being re-established (some sanctions went to the officers of the company, but I forget them). The size of the fine was objected to as being a “death sentence” for the corporation and since corporations can’t be sentenced to death, it was inappropriate. And it was, of course, a death penalty- but entirely appropriate, too. Interesting but not really relevant was that the name of the prosecuting attorney was Richard Daley (yes, the Richard Daley that recently resigned from the Mayor’s office in Chicago).
What truly interested me in the area was the notion of fiduciary duty. That is, that people owe to their business partners and investors a degree of honesty and fair dealing that is unknown in almost every other relationship dealt with in the law and is ENFORCEABLE. Lying to my spouse about what I did or arranging household responsibility to my own benefit is not a basis for legal liability, but lying to business partners or shareholders about business matters or simply pursuing something for personal gain (when it is within the realm of the business relationship or at the expense of the partner) actually is. Bizarre but true- honesty is an enforceable legal duty for persons in business together. Whodathunkit?
Sunbee, I get the desire to want to put constraints on corporations to prevent Philip Morris type behavior again in the future, but I don’t think shareholders have sufficient control over anything the company does to be liable. You pretty much can buy stock, vote for some elections, and sell stock, and that’s about it. Shareholders don’t get to vote whether to sell a lethal product and hide the lethality. They often don’t know.
Stock is sort of like a Legal Trust where you put money in and hand control over to someone else who makes the decisions about it how to handle the money. Like when some billionaire creates a trust for their kids that they get when they turn 21 or get a degree or or get married or some hurdle to jump over. Then the billionaire dies. The trust is managed by someone who is paid for their management, but the money in the trust goes to the billionaire’s kid once the kid is old enough. The manager makes all the decisions and gets some payment for his services. The kid gets the money in the trust.
Corporations are sort of like that, except whn you put money in the trust/corporation, you’re sort of creating a trust for yourself, not your kids or someone else. THe managers still manage the money and get paid for their efforts. The money in the trust/corporation still belongs to the shareholders.
The people managing the trust/corporation can’t always reveal what they are doing in exact detail to the shareholders because it becomes something the competition could use.
The thing is, though, that the people managing a trust, can be dirty rotten scoundrels sometimes. I knew someone who was supposed to recieve a trust from their parents and the trust manager screwed off with the money. lawsuits and pain and suffering and years of squabbles, and I don’t think much ever got resolved around it.
In the case of corporations, the people managing the company, making the decisions about how to convert shareholder money into more shareholder money, can equally be dirty rotten scoundrels. And I think some level of management and up should be held responsible for the actions of the corporation. But I don’t think it should apply to shareholders, or midlevel managers or employees below that, unless they have specific knowlege about wrongdoing occurring and do nothing.
Michael@115, welcome to the party! Maybe you might know the legal difference in punishments and liabilities between what would happen if an individual person were to take toxic waste and dump it into the water supply because they didn’t want to pay to dispose of it properly, versus, say, a corporation doing the exact same thing.
Would a CEO be punished the same way as an individual act?
Mythago.
Maybe not, but such behaviour should be illegal. Selling products that you know can be harmful without disclosing that fact should be illegal, for corporations and individuals. I can’t sell you an arsenic milkshake, for example, and just forget to mention that it’s laced with arsenic. Transactions need some rules enforceable by law.
DA: Maybe not, but such behaviour should be illegal.
Wait. Wait. Wait…
All this time, you’ve been defending corporations based on how you think the law should be rather than how the law is?
You know what the main problem is, DA? When progressives take something that is currently legal behavior for a corporation and propose to make it illegal, certain folks get all up in arms about how that would be government regulation, how the government is imposing tyrranny, and how the government is interferring with the Invisible Hand of Captialism and the Perfection that is the Free Market.
Most of these folks turn out to be libertarians or ultra conservatives.
Who try to explain how the typical example of the Tragedy of the Commons (cows grazing on common land) isn’t actually a Tragedy of the Commons.
Who incorrectly think monopolies most often occur because of government intervention
And who form their opinion of corporate behavior based on how they think the law should treat them rather than how the law actually treats them.
Sometimes I just have to step back and wonder in awe of how these folks are shown to be wrong on almost every level they attempt to engage on the debate with any detail, and yet they are often the most certain of theirs being the Truth. I mean, how does someone even start trying to deal with a group that is demonstrably wrong on so many levels, yet think they are so right?
Its like standing at the base of a mountain and looking up in awe at the task ahead and going “wow, that’s a long ways up”.
DA @117: Whatever it ‘should’ be, the fact is that a lot of things that are harmful and reprehensible are quite legal, and people often get those mixed up.
Michael @115: I don’t know the specific case you mean, but while a corporation can be dissolved, there’s nothing preventing the people who originally formed it from starting a new, nearly identical corporation – perhaps even purchasing the assets of the old.
@Greg #116
There are ways and situations where corporate officers are held individually liable for crimes. Go unto your favorite search engine (I use “ixquick”, alias “startpage”, which does not track your ip address) and look at “responsible corporate officer”.
Don’t know if these sites will be acceptable links here, but a couple that seem appropriate are (regarding environmental, pharmaceutical/FDA, and buidling code violations, respectively)
http://www.wolffsamson.com/news_events/26-a-corporate-officers-guide-avoiding-criminal-liability-under-environmental
and
http://www.wlf.org/publishing/publication_detail.asp?id=2153
and
http://library.findlaw.com/2004/Mar/10/133333.html
@mythago, #119
I dug the case up, and you can find a local treatment from the Chicago Reader at
http://www.chicagoreader.com/chicago/murder-in-the-air/Content?oid=875834
As I recall the end result was that a couple of the officers were finally imprisoned for involuntary manslaughter.
Another article covering this and other convictions is at
http://www.thefreelibrary.com/Criminal+prosecution+of+workplace+violence.-a020018000
So all is not hopeless, and “limited liability” is not “no liability”.
OTOH, traction is often more easily gained in lawsuits based on the betrayal of trust that is due to shareholders from the officers and/or the board. These are called “derivative suits”, and the legal construct is that a shareholder sues the officer, etc., ON THE BEHALF OF THE CORPORATION. That is, it’s like the corporation suing the officers/directors for a betrayal of trust, by doing something that either enriches the officer/director, reduces shareholder value and/or just costs the corporation lots of dollars. And activity resulting in corporate liability is just such an activity :)
(but note that no crime is necessary- just a betrayal! ) Lately there have been rulings making such suits harder to bring because they have proven relatively easy to bring (many corporate officers say too easy). Since Delaware is the home to more corporations than any other, check this out:
http://www.delawarebusinesslitigation.com/articles/case-summaries/derivative-claims/
Michael, thanks. Some interesting reading.
No.
Selling products that kill people, while keeping that fact a secret, should be illegal in my opinion.
And please, can you dispense with the “Tragedy of the Commons” as your knock-down-pow argument? Either you don’t understand it yourself or you’re making a total hash of explaining how it fits into this discussion.
michael @120: But that case doesn’t say that the corporation itself (or its owners) was criminal charged; officers were, for exposing employees to cyanide. There’s nothing about a ‘death penalty’ for the corporation itself. Fines can be high enough to shut down a company via a Chapter 7 bankruptcy, assuming it doesn’t have insurance to cover those fines (that’s why corporate interests hate punitive damages, by the way), but I see nothing to suggest that the corporation’s assets are burned and the ground salted over and the owners forbidden from starting a corporation over again, or reorganizing through Chapter 11.
Certainly corporate liability protection isn’t absolute, particularly in regards to corporate officers, rather than the shareholders, but it’s quite strong – and knowingly selling a dangerous product to consumers doesn’t magically create criminal liability.
DA: can you dispense with the “Tragedy of the Commons” as your knock-down-pow argument? Either you don’t understand it yourself
Dude, read this:
DA@98: No it means that the cows are also a public good, not just the commons. And you know what that proves? That the “Tragedy of the Commons” is little more than an artificial exercse for stimulating classroom discussions; but unable to explain the complexities of many real world situations.
Cows are a public good??? Public benefit??? The commons cant explain any real world problems????
You do not understand the tragedy of the commons. At all. Cows on a commonly shared pasture is exactly the tragedy of the commons.
or you’re making a total hash of explaining how it fits into this discussion.
Coal plants dumping tons of mercury, arsenic, and lead into the atmosphere every year is precisely one real world example of the tragedy of the commons. That dumping is a perfect example of sociopathic behavior, which was the original post.
To which you said Everyone benefits from power stations, so it doesn’t fit the “tragedy of the commons” theme. which only reinforces that dude, you have no idea what the tragedy of the commons is. It was a snake and it just bit you.
But hey, if coal pollution is such a problem, an easy solution is to privatize the commons. Right? Privatize the atmosphere, right? Let someone own the air?
But since it can’t be privatized, since your corporate solution to every commons problem doesn’t actually work here, you start making pretzel logic arguments to explain how the atmosphere, something we all share, is not a commons.
Which brings us back to the fundamental problem of our conversation:
You. Don’t. Understand. The tragedy of the commons. AT ALL.
And now you’re trying to double down by saying I don’t understand it???
Oh my head. It boggles.
I said it was one solution. In some situations. Just trying to broaden your mind. I didn’t say it applied to coal or the atmosphere.
Either it’s the Tragedy of the Commons (a tragedy arising from seemingly normal rational behavior) or it’s sociopathy. You can’t have it both ways.
Anyway, it’s not an example of TOTC because coal companies don’t mine the atmosphere. TOTC is about damaging the very resource that you and others are expoiting. Instead, it’s an example of plain old pollution. Everyone understands that. You don’t need a degree in philosophy to understand that pollution is bad.
DA: Either it’s the Tragedy of the Commons (a tragedy arising from seemingly normal rational behavior) or it’s sociopathy. You can’t have it both ways.
Just when I think it can’t get any worse…
Some basic info for you. Game Theory is a brach of mathematics. Sociopathy would fall more under the realm of psychology/psychiatry. You might as well say a car can either be blue or have a diesel engine, but not both.
Game theory models situations boiling things down into numbers, such as profit/loss, but also non monetary measures into numbers so one can see the outcome mathematically. The prisoner’s dillemma measures how many years each player will spend in prison.
Sociopathy is acting without caring how your actions impact others. If Alice is a sociopath, she has some internal motivators (things she wants) and she would pursue those motivations without regard to how it would affect or impact others. Alice might, however, learn how to behave so as to avoid breaking the law, because getting put in jail for any length of time is something Alice would consider a big negative.
This is where your misunderstanding of what the law says versus what the law should say comes in.
Alice has tons of mercury, arsenic, and lead she wants to get rid of. Here are some things she knows:
Dumping it into the air:
monetary cost: zero
health cost to her: slightly increased chance that she will get sick, but it is statistically small chance that she personally will get sick from dumping the waste.
cost to the world: statisitically speaking, some number of people in the population WILL get sick and die from dumping it into the air.
Chemically treating and long term storage:
Monetary cost to Alice: 1 bilion dollars
health cost to Alice: none
health cost to everyone else: no one gets sick and dies.
Alice, being a sociopath, looks at the math and only considers the costs and benefits to her. If she dumps it, she is taking a small chance she will get sick, but its free. If she stores it, she won’t get sick, but it will cost her a bilion dollars.
Guess what? When presented with this scenario, most sociopaths will dump the waste and take a 1 in 100,000 chance that it makes them personally sick.
Now, a non-sociopath will also consider the cost/benefits to everyone else. Bob is a non-sociopath. He has the exact same scenario and decision to make. He knows if he dumps the waste, some number of people will die. To him, saving himself some money at the expense of knowing it will kill some people isn’t worth itto him, so he treats the waste and stores it.
But Bob is in competition with Alice, so Bob goes out of business because he has to sell his product for more than Alice so he can pay for waste treatment.
The rest of the population (Charlie through Zeke) start to realize thaty they’re getting sick and dying because Alice is dumping toxic waste into the atmosphere. They consult a mathematician, a chemist, and they talk with Bob. They figure out that it costs 1 billion dollars for alice to treat 100 tons toxic waste and store it safely. So they change the law so that for every 100 tons of waste she dumps into the air, Alice is fined 2 billion dollars.
Alice is still a sociopath, but now she has a new scenario to consider:
Dumping it into the air:
monetary cost: 2 billion in fines
Chemically treating and long term storage:
Monetary cost: 1 bilion dollars
So, now Alice chooses to treat and store the waste safely. Because thats whats in her own sociopathic, selfish, best interest. It is cheaper for her to do that.
A year later when people are still getting sick and dying, folks put a chemist on the government payroll to figure out that Alice is secretly dumping waste. So, they fine Alice for dumping, change the law to double the fine for trying to hide dumping, and require random government inspections.
With all the laws in place to require coal companies do the right thing, and with fines to enforce that behavior, Bob decides to go back into the coal business, because he can now do what he knows is right, and still compete with sociopaths like Alice.
So, there’s game theory and then there’s psychology.
Game theory lists all the costs/benefits that are presented to Alice in deciding whether to dump or store waste.
a psychologist diagnosing Alice as a sociopath would explain why Alice only considers teh costs/benefits that directly affect her. Psychology would also explain why Bob considered all teh costs, eevn ones not directly affecting him, because Bob is not a sociopath.
So, yes, in fact, you can have a tragedy of the commons and be sociopathy.
Profit and sociopathy are completely unrelated.
it’s not an example of TOTC because coal companies don’t mine the atmosphere. TOTC is about damaging the very resource that you and others are expoiting.
I actually feel a little ill now.
Seriously???
Dumping waste into the atmosphere isn’t damaging and exploiting the atmosphere?
The idea of a commons does not require you take something physical out of the commons, like grass from a pasture, or fish from the ocean. It is a mathematical model, and all it requires is that the overall effect of what you do is a negative effect on the commons.
even though Alice puts physical mass into the atmosphere, the effect on the atmosphere is negative.
Also, just as an example, wikipedia says you’re completely and totally wrong about this.
You don’t need a degree in philosophy to understand that pollution is bad.
When the next kind of technology comes along, you will have to understand it first before you will be able to know if it is bad or not.
Once you understand that Alice is dumping the waste because it saves her a billion dollars and because she doesn’t care about everyone else getting sick, then you can see that it is bad, and more importantly, you can understand it enough to fix the law to get Alice to stop dumping.
Unless you have some stone tablets that enumerate every possible future human behavior and label which is good and bad, then you’re going to have to come up with some way to study behavior, model it, and determine whether its good or bad. Game theory is designed to study and model exactly that.
@greg You’re welcome. This area of the law was much like a hobby of mine in law school… Fascinating- and I can’t look away, like a nasty grindhouse flick. Only messier and more amoral.
@mythago #123:
For some reason I can’t find the original circuit court decision right now, but I distinctly recall the bit about the corporation being given the death penalty. Regardless, the first paragraph of the appelate decision (People v. O’Neil, 194 Ill. App. 3d 79, 550 N.E.2d 1090 Ap. Ct. Ill. 1st Dist., 5th Div. (January 19, 1990)) clearly says who was charged and with what, and what the ruling was:
“Following a joint bench trial, individual defendants Steven O’Neil, Charles Kirschbaum, and Daniel Rodriguez, agents of Film Recovery Systems, Inc. (Film Recovery), were convicted of murder (Ill. Rev. Stat. 1981, ch. 38, par. 9 — 1(a)(2)) in the death of Stefan Golab, a Film Recovery employee, from cyanide poisoning stemming from conditions in Film Recovery’s plant in Elk Grove Village, Illinois. Corporate defendants Film Recovery and its sister corporation Metallic Marketing Systems, Inc. (Metallic Marketing), were convicted of involuntary manslaughter (Ill. Rev. Stat. 1981, ch. 38, par. 9 — 3(a)) in the same death. O’Neil, Kirschbaum, Rodriguez, Film Recovery, and Metallic Marketing were also convicted of 14 counts of reckless conduct (Ill. Rev. Stat. 1981, ch. 38, par. 12 — 5(a)) involving 14 other Film Recovery employees.”
The appeal was based on the idea that one cannot be simultaneously guilty of murder (requiring specific intent to kill) and involuntary manslaughter (more akin to criminal negligence- but I’m not a criminal attorney and I don’t practice any law like this, so I’m certainly wrong in some subtle or not-so-subtle way here…). Anyhow, the appeals court probably got it right (legally and logically); the lower court meant well, but got a wee bit overzealous and sloppy in this regard. There were other issues, too, notably an assertion that federal OSHA regulations preempted state criminal prosecutions- this was settled in another Illinois case, finding that prosecutions based on workplace conditions were not preempted by OSHA.
Other articles I read said that the humans pled to involuntary manslaughter on the eve of retrial (except for McKay, who was never extradited from Utah, apparently because he was an important part of the local political machine). I assume this resulted in jail time. Don’t know about the corporations, but they certainly ceased to exist.
Found this (a ppt presentation) that gives additional, different details about the Film Systems Recovery case in a web site from a business school course. I’ve looked it over and have no real comments other than “here’s more to think about”.
http://blocksonl.people.cofc.edu/Business%20Leadership%20Society/PowerPoints/Ch.%2015-Film%20Rec.%20Systems.ppt
being rude doesn’t make you right, it just makes you rude, Greg. You’re too self-absorbed and sure of your own superiority to discuss this with you further. I should have stopped before. (cue snark from Greg).
.being rude doesn’t make you right
Rude? I keep telling you when you’ve been wrong. Don’t confuse that with rudeness.
For example: You said polluting the atmosphere is not a “TOTC because coal companies don’t mine the atmosphere.”
I gave you a link to wikipedia that lists a number of Tragedies of the Commons, including, surprise polluting the atmosphere.
So, you were wrong. And teling you that isn’t being rude.
If you want a conversation where you can be outrageously wrong and nobody gets to tell you that you are wrong lest you accuse them of rudeness, then I don’t know where you can find such a thing.
Greg, your wailing and moaning about your hurting brain and feeling ill and rolling about being amazed at what you percieved as stupidity – is rude. IMO.
“I feel a little ill now. Seriously???” … that’s rude, and anyway, it was referring to something I didn’t say.
You’ve failed to understand a single point I’ve made. I know this because you keep cleverly refuting positions I don’t hold. I’ve pointed this out a couple of times – but not every instance of it.
And look, you can cite wikipedia all you like, but I don’t agree with the excerpt you linked to (for the reasons already provided and I’ll be damned if I’m going over it all again).
There was a chance to have an interesting discussion here, but the only thing you want to discuss is that conservatives and libertarians – they’re all the same thing to you – just don’t get it. (insert cheesy undergraduate cliche for “it”). You’ve proved it to yourself a thousand times before; and I guess you’ll keep proving it to yourself a thousand times hence. Good luck with that open mind of yours.
DA, you said polluting the atmosphere is not a tragedy of the commons because the coal companies arent mining the air. those were your words. you were extremely clear and extremely unambiguous and extremely certain of your position.
I didnt refer to something you did not say, I quoted you. I didnt refute some position you didnt hold, I quoted you. You can try to make this sound like I am being totally unfair but you SAID it is not a totc because they dont mine the air. those were your words. All I did was tell you that you were wrong and provide a link for reference.
Now apparently wikipedia is misquoting you as well. or its being rude to you. or something.
, you said polluting the atmosphere is not a tragedy of the commons because the coal companies arent mining the air
Yes. But I didn’t say it’s not a tragedy. I didn’t say it’s not bad. I simply think that TOTC has to be distorted beyond recognition to apply to that particular example, and anyway it adds nothing, because “pollution is bad” is a pretty simple concept on its own. That’s what I said.
Yet these are the words you put into my mouth: “Dumping waste into the atmosphere isn’t damaging and exploiting the atmosphere.” Bad faith, much?
DA: I simply think that TOTC has to be distorted beyond recognition to apply to that particular example
The standard meaning of Tragedy of the Commons includes poluting commonly shared resources like the atmosphere. Thats what it means.
Whether you think pollution is bad or not, whether you think exploitation is bad or not, is NOT the issue. The issue is you keep trying to take game theory and tragedy of teh commons and turn it into what you think it should be, rather than what it is.
Remember that bit I said about libertarians and ultra conservatives not understanding Tragedy of the Commons? You don’t understand it if you have to redefine it to mean what you think it should mean.
DA: Yet these are the words you put into my mouth: “Dumping waste into the atmosphere isn’t damaging and exploiting the atmosphere.” Bad faith, much?
Words in your mouth??? lets rewind the tape:
DA@125: (polluting the atmosphere is) not an example of TOTC because coal companies don’t mine the atmosphere. TOTC is about damaging the very resource that you and others are expoiting
Those were your words.
Polluting the atmosphere is not TOTC, you said.
TOTC is about damaging and exploiting some resource, you said.
How is polluting the atmosphere not damaging and exploiting that resource? I asked
you gave your own defintion of TOTC which exactly fits polluting the atmosphere, yet you insist in the sentence before that polluting the atmosphere is not TOTC.
How does my pointing out the mismatch in your words get turned into me exercising “bad faith”???
I’d like to tack on a late post here to recommend a book:
Gain by Richard Powers
It’s an extremely thoughtful novel about this subject of corporations.
DA, Greg:
I’m not sure you guys are doing anything more than arguing to argue at this point.