The Unincorporated Man (book)

I'm reading this sci-fi book ("The Unincorporated Man", http://www.amazon.com/Unincorporated-Man-Sci-Essential-Books/dp/0765318997/ref=sr_1_1?ie=UTF8&s=books&qid=1260391305&sr=1-1 ). The premise is intriguing, as I've never contemplated such a concept.

A 21st century billionaire is unfrozen three centuries later into a technologically advanced (post-"Great Collapse") society where every person is a publicly traded corporation -- the parents owning 20% and the government 5% of every person at birth. As one goes through life, they can buy/sell shares of themselves in the open market for whatever purpose they see fit. For example, a promising smart kid would only need to sell 5% of himself to pay for good college tuition whereas a dumber one may have to sell up to 30% of himself for the same purpose -- all decided by the free market. Shareholders have a proportionate claim on every person's earnings/salary/profit. Most people work toward the goal of achieving 51% majority in themselves (Haven't yet got to the part as to what not having this majority means with respect to their freedom to choose jobs, location, etc.) 

Initially (and that's where I still am at this point) I can't find major quibbles against this concept. Good aspects I can think of:

1. Incentives toward efficient allocation of resources.

2. Flexibility in managing one's risk. Diversification and insurance against calamity. For instance sell 20% of yourself bringing your self-ownership from 80% down to 60% when the going is good (and your shares are high) and invest the proceeds into other people's shares, or anything else. So when a rainy day comes and your shares collapse, you only lose on the 60% while your investment in others still pays dividends and perhaps grows in value. 

I also wonder what CURRENT laws would make implementing something like this today illegal -- of course, everyone starting off with 100% self-ownership but with the freedom to sell shares (claims on their future earnings) in the open market? (Perhaps a constitutional amendment against slavery?) 

I'd be curious to hear reactions.

Z.

This isn't a new concept, to the contrary, it was tried in Europe during the Dark Ages.

What was?

Seriously though, what would be the problem with a voluntary contract between two sentient agents by which a claim on a percentage of Agent A's future earnings is exchanged for Agent B's cash now?

We already have contracts exchanging cash for corporate bonds (claims on fixed principal + interest payable by the corporation in the future) and corporate equity (claims on future corporate earnings). We also have personal bonds/loans (claims on fixed principal + interest payable by a person in the future). Why not personal equity (claims on future personal earnings)? 

Z.

 

It`s kind of silly. An induvidual`s sole goal in life is not to make profit. Induviduals realise themselves in a variety of ways, most of which are not economic. Plus people can retire, slow down, turn into moochers overnight, get crippled, die suddenly or go crazy. Too many variables, there wouldn`t be much demand for shares.

Perhaps most importantly precisely the people you shouldn`t invest in would be the first to want to sell a share of themselves, because they are not expecting they will be earning much to begin with. Companies sell a share of themselves to gain more capital to expand. But with people the capital in form of money is the least important of all, much more important are skills and working habbits and those that have them wouldn`t see much need to sell off the proceeds of their skills for some money right now. They don`t need money right now except if they are starting a business, but in that case they can just get a loan.

Marko:

Too many variables, there wouldn`t be much demand for shares.

Everything you said in your post about personal shares is equally valid in the case of corporate shares -- there are both penny stocks, and blue chip stocks. By the same logic, good quality companies would also never sell shares, and only crappy ones would. 

Marko:

They don`t need money right now except if they are starting a business, but in that case they can just get a loan.

Then companies too would never sell shares, as they could also just get loans. And yet, look at all these corporate shares being traded globally on the free market, alongside corporate bonds.

Seriously, wouldn't you be curious to find out how much the market would pay TODAY for a claim on 1% of your future earnings? Or wonder how you would go about valuing a 1% claim on someone else's earnings? Wouldn't every talented/smart but poor kid benefit from offering personal shares in exchange for college tuition and allowing the market to bid on its future potential -- the higher the perceived potential, the higher the share price, hence the smaller the percentage he/she would have to sell. Giving up 10% of after-college earnings in exchange for tuition seems better than the alternative of foregoing college altogether because you can't afford it  -- so everyone is better off, which is regularly the benefit of free markets after all. 

Z.

 

 

Why don`t we think about it for a moment. 

Mooching. There are no moocher companies. Even a company that is doing poorly is doing its best to turn a profit.

Incentive. A person which has sold 80% of itself has less incentive to continue to work as hard. Not so a company.

Control. Buying 60% of a person gives you no control over him. Thus no mechanism to stop him from selling the other 40% or to make him continue to work as hard.

Predictability. The types of agreements of which the obligations are as predictable as possible win out. A scholarship (a type of loan) is going to win out over investing into a student, because both parties can offer better terms, because with them they are buying predictability which is valued by humans.

Purpose. Companies live to turn a profit and give a return on investment. Persons live to attain other goals. A company is likely to spend the proceeds on capital to help it turn an even better profit. A person is likely to spend the proceeds on a trip to Barbados.    

Mortality. A company is immortal barr the instance of business failure. A person is much more suceptible to mortality. Thus the nature of shares of people to lose value in time.

Business death. A company experiences business death only if it suffers a business failure. A person can experience business death for any amount of reason. Such as a simple change of heart eg decision to reitire early, a newfound religion or a hobby. Or suffering a physical death.

Marko:

Why don`t we think about it for a moment. 

Thanks for suggesting a skeleton valuation model for personal shares. Quantifying pros vs. cons like you just did, mixed in with some actuarial statistics, would be the way to go. 

My point is, the market will settle to SOME price for a 1% claim on my (or anyone else's) future earnings. Is your position that this price would inevitably be ZERO? 

Z.

 

z1235:

A 21st century billionaire is unfrozen three centuries later into a technologically advanced (post-"Great Collapse") society where every person is a publicly traded corporation -- the parents owning 20% and the government 5% of every person at birth. As one goes through life, they can buy/sell shares of themselves in the open market for whatever purpose they see fit. For example, a promising smart kid would only need to sell 5% of himself to pay for good college tuition whereas a dumber one may have to sell up to 30% of himself for the same purpose -- all decided by the free market. Shareholders have a proportionate claim on every person's earnings/salary/profit.

The smaller the "share" each person has in his own earnings, the less incentive he has to earn.

Plus, the idea of somebody being owned at birth by their parents and by the government, before they even have the chance to consent to such an arrangement, is fundamentally unjust.

ama gi:

 The smaller the "share" each person has in his own earnings, the less incentive he has to earn.

On the contrary, the smaller his share the more he'd have to earn to make a living. Besides, even assuming your proposition was true, what is his alternative to working/earning? Just laying down and dying on the street?

ama gi:

 Plus, the idea of somebody being owned at birth by their parents and by the government, before they even have the chance to consent to such an arrangement, is fundamentally unjust. 

In the book, the parents own 20% and the government only owns 5% at birth, so everyone starts with 75% self-ownership. The government also cannot ever change its 5% ownership in anyone -- so look at it as a 5% flat-tax. But that's besides the point -- let's assume we all start with 100% self-ownership, as we all have today. 

Btw, any legal experts here that can shed some light on what CURRENT laws (if any) would make a personal share sale (contract) like this illegal? Thx in advance.

Z.

 

 

z1235:

My point is, the market will settle to SOME price for a 1% claim on my (or anyone else's) future earnings. Is your position that this price would inevitably be ZERO?

No, if the price is zero then I can buy 1% of someone with nothing.

The question is would this sort of trade take place. If the buyer is not willing to surpass the worth to the seller then there is no exchange. I think owning 1% of someone would not be worth much to a third person so there would be few people that would value 1% of themselves so low as to sell. (BTW now you are getting somewhere. It is much better to buy 0.1% of 100 people than 10% of 1 person.) But yes there being few of them is still not the same as there being none of them.

But I think it is like the horse and buggy thing. A horse and a buggy are certainly worth something. Jet you do not see them on roads anymore at all. This is because they have been surpassed by automobiles. The same I think would likely happen here. These complicated and basicaly vague arrangements (because it is very hard to predict what you will be getting out of them and what are you tying yourself to) would be pushed out by much more specific and specialised arrangements, like all sorts of loan contracts, scholarship contracts, insurance contracts... Sure you have shares in companies. But a share in a company is still a very specialised thing, because a company does only one thing; tries to realise monetary gain. A company won`t sell you its shares only to three days later pick up its baggs and go seek spiritual enlightment.

z1235:

On the contrary, the smaller his share the more he'd have to earn to make a living. Besides, even assuming your proposition was true, what is his alternative to working/earning? Just laying down and dying on the street?

He can start begging and relly on charity. He can go mooch of his relatives or just turn into a stay at home parent. He can evade paying up, or turn completely to a life of crime (and undeclared income). He can start to work to overthrow the system. He can also go work someplace for nothing but lodging and food. He can fall of the grid and go hitchiking around the world doing odd jobs or go live in a forrest and fish and pick berries or whatever. It`s not like there are no ways of more or less droping out of the market.

z1235:

Is your position that this price would inevitably be ZERO?

Marko:

No, if the price is zero then I can buy 1% of someone with nothing.

Then you go back and say...

Marko:

But I think it is like the horse and buggy thing. A horse and a buggy are certainly worth something.

So which one is it? You keep arguing (by listing all possible drawbacks and ways for criminal avoidance of contract obligations, which btw characterize ALL investments) that these shares would be practically worthless, but not too worthless (not ZERO) because then you can buy 1% of someone for "nothing". Isn't this exactly the process (supply/demand) by which a free market settles on a price? 

Z.

 

 

z1235:

z1235:

Is your position that this price would inevitably be ZERO?

Marko:

No, if the price is zero then I can buy 1% of someone with nothing.

Then you go back and say...

Marko:

But I think it is like the horse and buggy thing. A horse and a buggy are certainly worth something.

So which one is it? You keep arguing (by listing all possible drawbacks and ways for criminal avoidance of contract obligations, which btw characterize ALL investments) that these shares would be practically worthless, but not too worthless (not ZERO) because then you can buy 1% of someone for "nothing". Isn't this exactly the process (supply/demand) by which a free market settles on a price?

Z.

1. I was pointing out that you said something that was very dimwitted, but I did not want to be too harsh on you. Why don`t you stop for a moment and ponder what does a price set at nill actually means. It means people are actually giving away shares of themselves. Who would be stupid enough to give away their future income?

2. What is the purpose of arguing with you if you are just going to ignore my points? Am I just going to have to repeat myself? Why don`t you first respond to my horse-buggy point.

A horse and buggy are worth something to me. Infact a world without automobiles they are worth a small fortune to me. However in a world where automobiles are mass produced and I can buy one for 500 dollars the horse and buggy are worth perhaps 100 dollars to me. So if the guy who makes horses and buggies can not make a horse and a buggy for less than 100 dollars (he can`t) then no transaction is ever going to take place. Which means I am never ever going to buy a horse and a buggy despite valuing a horse and a buggy somewhat. (And no that doesn`t mean the price is zero. That means there is no such thing as price. Price is whatever was received in the last transaction, where there are no transactions there are no prices.)

Yeah, I would be willing to offer a certain amount of dollars to buy a share of a person. But that person would not be willing to accept my bid deeming it too low. While I would not accept his counter-bid for my money. Because I have much better alternatives, as does he. (However if there were no alternatives and this was the only possible investment for me and the only possible way of raising money for him then yes perhaps we could work something out. But there are better alternatives, so it is pointless to speculate. You are like a person selling a hand produced flintock rifle to people with access to mass produced ray guns.)

Marko:

Yeah, I would be willing to offer a certain amount of dollars to buy a share of a person. But that person would not be willing to accept my bid deeming it too low. While I would not accept his counter-bid for my money. Because I have much better alternatives, as does he.

I acknowledge your opinion, and I thank you for the supporting explanations. I, on the other hand, think there WOULD be a market (thus transactions and prices) for a product like this. We merely have differing opinions and it's all good. No need to get yourself worked up about it. 

Z.