As a side, I recall reading the history of Mesopatamia where one dynasty after another comes through and establishes their rule. Yet for the people (people not directly attached with the previous dynasty, nor ideologically or nationalistically dogmatic) it did not matter. Life went on pretty much as normal. In fact it was the invading groups who eventually were altered by the customs of the indigenous people. Bring sharia. I’ll buy knee pads to pray 5 times a day and I’ll beat my wife. After a while our invaders will be exploring Western liberal ideals.
ZZZZzzzzzzzzzzz
The CEO’s term is even more limited than the politician‘s. The CEO’s survival is often a quarter by quarter affair, and sometimes even monthly. Seldom, if ever, is there any foresight beyond the requisite 5-year-plan.
Have you ever worked for a corporation? Even if you haven't, do you honestly believe that the merger's and acquisitions are short sighted endeavors?
they said we would have an unfair fun advantage
3 corporations, I averaged about 8-10 years in each, two had 2 CEOs during my tenure, one had 4 CEOs. As engineering dept manager I witnesses inumerable decisions made that were long-term stupid, yet short term (end of month/quarter) smart. One Corporation was into military optics. There were several products, which while good money makers, had environmental testing specs that required 3 months in a test chamber before it could be shipped. We eventually lost those jobs because they NEVER made it into the end-of-quarter-financial-statement priority list. It was that financial statement that determined the job security of the CEO, and by threat, the jobs of various managers under him.
It displays liquidity and not long term stability.
Right, but you were criticizing long sightedness, not long term stability. I was just pointing out that shelling out a billion dollars to acquire another company is not something you do if you are only concerned about profit in the next 5 years.
While I do agree that in some cases the corporate entity can be seen in the same light as you have described. But where ceo of corporations are different is incentives and reputation. If a CEO crashes and burns a corporation that is not going to sit well on his CV. Monarchy however does not necessarily care for a CV in a similar manner. The reputation of the monarchy can easily be improved by appealing to the masses, it is not like a ceo can start handing out gifts to his prospective employers or convince the population to his favor by other means.
There are also many exceptions when it comes to CEO compared to Monarchy. Many CEO worked their way up and built up an international corporation through hard work over several decades. Take the CEO of Tesco (British walmart equivalent) Terry Leahy, http://en.wikipedia.org/wiki/Terry_Leahy#Early_life . In short he used to stack shelves and became the ceo of Tesco and spent 20 years there. Not realy comparable to the type of CEO you have described.
There is difference between a day trader and an investor and a ceo. I think you might be putting them all under the "capitalist pig" umbrella. While I agree many CEO do not care about anything but themselves and their interests. As well as some CEO are only brought in to improve profits over a short period of time. The CEO is brought in to improve X and if he does not for fill that goal by a certain date he will be let go. That is completely different than a politician who during his term can break promises and realy only has to allocate misappropriated funds.
The difference between the attraction of people who lack moral quality is that it does not matter as much because people still have a voluntary choice to do business with a morally corrupt organization, but when it comes to politicians they have an illusion of choice. I do not agree with your 3.0 point. I would say that in non fraudulent business it does not matter so much what your moral character is, what matters is that you get the job done, within reason of course. But within fraudulent based business, it is of course important, like it is within government, that you employ the individuals that have the highest lack of moral inhibitions but are able to display a certain charisma as to hide it sufficiently.
Capitalism is not expropriation, it is voluntary. I think you misunderstand point 4.
Bringing the CEO in is an interesting move, but I cannot agree that the same incentives presented to a PM also apply to the CEO. This position can only be held if one falls into that old trap of considering voting as some sort of market activity: it surely ain’t so!
The way that the electorate steers a PM is through voting, the way that owners steer a CEO is through selling stock. The difference is crucial: voting is an all or nothing affair, selling stock is not.
As voting is an all-or-nothing affair, several effects too well-known to detail emerge: it pays no one to inform himself and vote rationally, it pays the PM to interest himself only in the median voter, it pays large minorities to coalesce into robbing larger majorities, it pays no one to have a long time-horizon, and so on.
On the other hand, not a single one of these issues emerges with selling stock as a control technique. I reap the whole benefit (and pay the whole cost) of a right (or wrong) decision. I need not care of what the ‘median’ stockholder thinks, and no intra-group robbing is ever lasting. All in all, stockholders operate in a market, while voters operate in a democracy. The analogy you try to make is fully void of foundation and is based on a quite shallow, it seems to me, understanding of both voting and the market. And let’s not even get started with capitalism allegedly promoting short-sightedness. Ridiculous!
Now, if one wishes to make comparisons between a democratic state and a corporation one can, but only for a corporation controlled only through voting (as it would be if selling stock would be forbidden), and no such corporation exists.
Otherwise, one can find issue with the size of most corporations which greatly decreases their internal rationality and gives rise to beurocracies (a point in common with states) , but this has nothing to do with the entity being a corporation, and everything to do with the entity being large in itself.
So, all and all, I think you are working towards a dead-end here.
@ mikachusetts,
No one makes plans for a far sighted future that is not stable. "shelling out a billion dollars" is a non sequiter because point 1 establishes the stewardship-ness of the CEO and Corporations in general, i.e. the billion dollars are other people's money.
@ Jack Roberts,
I don't believe the CEO escaps subjective valuation. The CEO is subject to polular opinion, with the population being the stock buying population. Say some corporation signs a rock-star CEO like your Terry Leahy, and the Corporation's stock valuation immediately skyrockets. It's all reputation. Even in the midst of failure blame can be subjectively manipulated.
Environmental stewardship is the clearest arena of moral inhiubitions. Without government regulatory inhibitions big manufacturing corporations do not act on it's own except for a propaganda in public relations.
I clearly stated the voluntary nature of point 4.
BTW you wrongly assign me capitalism antipathy.
@ Merlin,
I had problems digesting your critique until I realized that you have gone entirely outside the 5 point framework that Hoppe laid down. The CEO and PM are both morally uninhibited (#3) temporary (#2) stewards (#1) of other people's money. Points 4 (expropriation) and 5 (war) are systemic attributes.
And let’s not even get started with capitalism allegedly promoting short-sightedness. Ridiculous!
There is one thing I'm sure of: Dismissal is NOT refutation and does not deserve a counter-argument. Refute the idea and I will do my best to champion it with a counter-argument.
Zerubbabel: There is one thing I'm sure of: Dismissal is NOT refutation and does not deserve a counter-argument. Refute the idea and I will do my best to champion it with a counter-argument.
You are completely right on this point. Brushing a point aside is not the same as arguing it, and I do not normally do so. But I am so convinced that that claim is baseless that I have no interest in debating it. More than trying to critique that assertion, I was rather expressing my strong disbelief as well as lack of interest in arguing that point. Anyway, it’s truly not a proper thing to do.
Zerubbabel: The CEO and PM are both morally uninhibited (#3) temporary (#2) stewards (#1) of other people's money. Points 4 (expropriation) and 5 (war) are systemic attributes.
The CEO and PM are both morally uninhibited (#3) temporary (#2) stewards (#1) of other people's money. Points 4 (expropriation) and 5 (war) are systemic attributes.
Here too you are right, but in a diminutive sense. you took Hoppe’s analysis and applied it to a CEE and you got e perfect match. You may be excused to draw the conclusions you do.
But Hoppe forgot a crucial point in his analysis, and you by proxy, are doing the same. He treated a PM as being in charge of inanimate stuff. He often uses the “owner vs. renter” concept to illustrate his point, and the example itself is instructive. A PM truly has every incentive to use up all the value of the resource he controls in the time allotted to him, and the CEO does too. But neither of them can do what they want!
A PM can move only in a relatively constrained circle allowed by public opinion. If he, following his incentive to run the country aground, undertakes some policy which will not be tolerated by public opinion, he will either face an internal party rebellion, emergency election, assassination, riots and, in extremis, revolution. So, Hoppe would have been right to say that, within his area of freedom, a PM may act to suit his incentives. Otherwise how to explain that 150 years of mass democracy have produced a gradual erosion of liberty instead of a total crumbling of society right away?
The CEO is in the same position: he can act to suit his short-term interest, but his area of movement is infinitely more constrained, by the value of the company in the stock exchange. Ideally, a CEO can do nothing at all unless his every action raises the value of the company. In practice he too has a degree of freedom, but he is vastly more constrained than any PM can ever be.
As to the nature of these constrains, I can continue my analysis in the previous post: the constrains a PM faces tend to be far less efficient than those a CEO faces. So, the CEO is kept from doing the wrong thing, and the PM is merely delayed.
But you did well to bring what I see as the major defect of Hoppe’s analysis to the light: it will not do to assume than, just as a cattle rancher, a PM can do whatever best suits him personally in managing a country. The very same, of course, applies to the monarch.
We agree that dismissal is weak. You may hold that the claim is baseless while I find it is innate in the system. As I lamented to mikachusetts above, investors will not tolerate a loss for very long, in my particular experiences it was three months ... and I think you even amplified this idea of limited loss as a constraint on the CEO. But despite what Anenome says, even if one cites reality we needn't talk.
Well, even by factoring in the difference between a PM’s constraint and a the consequence of a CEO’s action, we yet end up in the same spot: both would prefer to waste the capital placed at their disposal, but both are constrained in what they can do. The PM by rules, the CEO by monetary considerations. In a sense, the CEO is given the choice between a momentary high income and a steady stream of income in the future. He chooses the latter.
The PM is given no incentive to behave, and is indeed positively encouraged top follow stupid policies by the mechanics of voting, and yet he is forbidden from doing certain other things which would destroy society in a matter of years, not decades.
All In all, I still do not see any parallel in practice: democracy fails, the company thrives.
Neither is necessery, what we need is constitutionalism with a good ngo structure that supports it, although somehow we may need local democracies to decide roads and improving laws via referendum as well...
don't by this monarch bullshit, in democracy you have at least the chance of picking the best of the worst between some dirty politicians, how will you change the ass hole king...
don't forget democracy was the need of people who lived under kingdoms and empires, if that was really good people wouldn't be asking dems to go.
obvious that we need something better, but sure thing it's not monarch.
If we must remain within the realm of the state, I’d advocate ruthless decentralization as the only relal improvement achievable. No political system can produce a passably free society if a large state.
@Merlin,
I give you my absolute approbation of this idea. But where we might diverge is that I believe that both the State and Corporation serve the purpose of the centralization of wealth/power. They gather together wealth/power from a widely dispersed low density to a highly centralized high density which can be effectively utilized by a small group to clandestinely use for their own purposes as if it were their own. I.E. Hoppe's corrupt steward.
To a point I agree, but you find the wrong enemy when you accuse the corporation. The corporation, understood as a business model where ownership, fluid is dispersed and separate from management, is indeed a very evolved and rational structure. The CEO faces none of the practical problems that doom the PM to failure (from our point of view, not his).
What I think you might be justified is in being suspicious of big companies, regardless of their ownership model. I agree that such big businesses are nothing but a scale model of the state, replete with buaurocracies and inefficiencies. But the corporation, in itself, need not be a huge monolithic entity, hence you could leave it out of the picture and focus on size itself.
@Z,
Hoppe concludes that Natural Order > Monarchy > Democracy. Do you disagree with him?
Government Explained 2: The Special Piece of Paper
Law without Government
Merlin
Although i agree with the most what you've said for corporations, i don't think huge companies should be our target.
we all advocate free market capitalism right? so i don't think there won't be big businesses without government intervention additionally i m not against it either nor anyone with Libertarian values should do so.
for example i m working on web technologies, i won't even think twice for uniting and havving company/corput marriage with a company which is owned by like minded business owner, because that way we can put what we got in our hands on table together and can serve our custommers better and also it is possible to atract bigger ones, so why shouldn't i?
Zerubabel
i might be missed your point at the first place, now i understand, however what i've said for Merlin's post applies to you as well...
Clayton:ZZZZzzzzzzzzzzz
I'm very surprised by this behavior, Clayton. I was expecting a higher quality of posting than this. You may not agree with what Zerubbabel wrote, but I think it's clear that he dedicated quite a bit of time to thinking about it and posting it - just as you've done in your long and thoughtful posts. Somehow I don't think you'd appreciate it at all if someone just blew you off like this.
The keyboard is mightier than the gun.
Non parit potestas ipsius auctoritatem.
Voluntaryism Forum
Chaghlar: Although i agree with the most what you've said for corporations, i don't think huge companies should be our target. we all advocate free market capitalism right? so i don't think there won't be big businesses without government intervention additionally i m not against it either nor anyone with Libertarian values should do so.
Indeed, but I was not criticizing big business in itself. If big business survives in a free society, all the better for it. I just do not think it would.
That's fine to say you don't know. The reason I ask is that I don't see how your critique of corporations is relevent at all to determining whether Hoppe's conclusion is correct. Corporations exist in Natural Order, under Monarchies, and under Democracies. It's just a business model. So it doesn't make sense to compare a CEO to a PM / President when deciding whether Hoppe's conclusion is correct. That's not the choice we're faced with.
You might ask whether corporations are better (i.e. better at allocating resources in line with consumer demand) in a Natural Order environment, under a Monarchy, or under a Democracy. Then at least you'd be comparing apples with apples. I think the answer to this question is clear: corporations will be better in a natural order than under either a democracy or monarchy, because in the former there is consumer sovereignty, whereas in both the latter two, the corporation can make profits using the political means, i.e. lobbying for favorable laws / regulations from the monarch / elected politicians. In the natural order, corporations can only profit by satisfying consumer demand better than their competitors.
Your critique of the corporate business model is interesting, but it is irrelevant in terms of deciding which is best out of the three options, which is what we as libertarians care about. If you were to agree with us that natural order is superior, then we have no major disagreement, as libertarians. If your critique is true, we can expect the natural order to result in abandonment of the short-sighted corporate model for doing business and replacement by some other business model that doesn't suffer from the problems you point out. After all, if a big corporation just goes after short-term profits, and it is genuinely better for consumers if resources are used for longer-term goals, then small non-corporation businesses, which (you claim) are more likely to think long-term, will outcompete the big short-sighted corporations. We'd need a natural order to find out whether the 'diseconomies of scale' that you refer to would outweigh the 'economies of scale' or vice versa. But we do not need empiricism to recognise that natural order is superior to either a monarchy or a democracy. Just economics, i.e. praxeology.
Z,
Your comments re-corporations seem to be a riff upon the principle agent problem (otherwise known as the divorce of ownership and control). In fact I think a lot of modern life's iritations are a result of this: always needing to speak to someone else with the correct paper work for example.
Whilst I don't think you can correlate corporations and democracies per say I would tend to think that there would be less corporations in a natural order.
The atoms tell the atoms so, for I never was or will but atoms forevermore be.
Yours sincerely,
Physiocrat
I've read Democracy: The God That Failed. I recommend you do too. It'll give you a better grasp of the actual argument being made and you may find end up finding it more plausible. I only suggest this because your summary of Hoppe's position seems to mischaracterize him as saying that any and all situations involving a non-owner/caretaker of a piece of property with a term limit must necessarily lead to short-sightedness, which is of course absurd and naturally leads to absurd conclusions like the one you drew.
Hoppe is really just making a "tragedy of the commons" analogy. A commons is a resource that is scarce (there are competing, mutually exclusive uses to which it can be put at any given time), but no ownership rules exist regarding it - if I want to put the resource (say, a pool) to a certain use (e.g. swimming), I cannot exclude anyone who wants to put it to a different use (e.g. industrial pollution).
The incentive structure is such that no one can take care of the resource in accordance with a fixed set of principles. (The pool, to be suitable for swimming, must be maintained, cleaned, etc., but I can't do any of that if someone else is polluting it indiscriminately.) On the free market, we would expect that its capital value would tend to decline.
Hoppe defines democracy as basically that, as free entry into the helm of the ship of state, where no individual or group has the exclusive right of direction over who gets to steer.
(Naturally, real-world democracies don't fit that definition perfectly - democracies have some rules about who gets to be president, about what constitutes a legitimate election, etc., on the basis of which anyone who doesn't follow them can be booted out - but I think it's fair to say they are closer to Hoppe's definition than are other forms of government, say monarchies, which typically involve an ownership arrangement where the kingdom is counted as part of the ruler's personal estate.)
It should be clear that Hoppe is not saying because democratic rulers are caretakers with limited terms, they must be short-sighted - or if he does say that, he shouldn't because that would be completely baseless and would undermine his whole case (in addition to being irrelevant to his argument). Just because ownership of a resource is separated from posession or care or whatever doesn't make it a commons. I can let someone else wash my car or clean my house or use my credit card while retaining ownership of the relevant property - the point is that no one gets to do anything with the property except on my terms; the resource is still owned. This is why your analogy to corporations is flawed. The corporation isn't a commons because the shareholders own it and, at least in principle, the management is only there on their terms.
(Real-world corporations, of course, do plenty of evil things, not because of anything in principle wrong with incorporation, but rather because of various state privileges that have been granted to them which allow them to escape market checks on their behaviour.)
The rest of your comments, as far as I can see, are the sort of crude Marxoid generalizations about greedy capitalism people interested in honest debate ought to know better than to make.
@GW
I think these points of Hoppe's stand alone as means of evaluating any system of organization.
#1 The superior caring of owner vs steward is a praxeological point according to Hoppe. It lends us the idea of the tragedy of the commons. This attribute is applied properly in comparing PM to King, or in CEO to sole proprietor, not in CEO to PM. In whatever way the king is superior to the PM then the sole proprietor is superior to the CEO. And as private property rights avoid the tragedy of the commons then air and water are doomed to be polluted until they are appropriated as someone's personal property.
#2 short-sightedness of the Steward is a praxeological point according to Hoppe. I think it interesting that you frame it as the consumer being arbiter of the virtue of long vs short-sightedness. In that humans act as consumer there is no possibility to consume that which has been conserved. In that humans also act as ideologues is when we think long-term. The Pyramids were built by ideologues not by consumers. One may question the virtue of building pyramids vs the contents of a Walmart and then go on to question whether this is indeed a praxeological point or not.
All the other points, and all points of evaluation, fall under the same confusion of judgments and nothing seems absolute.
The answer is, I don't know (I like how this seems to work for me :>)
Physiocrat,
I think you are right. That may be why the arguments of Isabel Patterson hit home to me. I want to deal with someone who I can either respect or kick, damn.
“Whoever said that "a corporation has neither a body to be kicked nor a soul to be damned" had a glimpse of the truth, which is that any law whatever must bear upon 'persons. The acts of a corporation are necessarily performed by persons; the assets of a corporation belong to persons; the punishment must fall upon persons.” Isabel Patterson
God of the Machine was her main work. The argument is in chapter 16 The Corporations and Status Law. The quote I gave is on page 177 http://mises.org/books/godofmachine.pdf
tunk,
You are not "extending his thought" but rather substituting your own "thought" for his.
Probably so, but I'm sure that throughout the development of Western Philosophical thought that the same thing was said at each stage.
If it is true you pay me a great compliment in having originated a unique idea and not merely redirecting an existing one. But probably not.
@GW,
Just to clarify, as I don't think I was clear, I see economy of scale from a manufacturing, or materialist, view point. In manufacturing the quantity to be produced allows capital investment into the tooling and equipment for a more productive process, e.g. die cast verses machined from billet requires manufacturing the mold and buying the die-casting machine. The smaller quantity, smaller scale, does not offer the ROI to justify the capital investment. Scale also plays out in transportation costs, something realized since the advent of shipping. But there is a physical limit to these economies, maximum sized ship and most efficient manufacturing process. When a producer begins duplicating factories or manufacturing cells he has exceeded that limit. And this economy of scale is different from vertical integration, i.e. centralizing all steps of manufacturing.
Diseconomy also plays out in the inefficiency of any large human organizations where the motivationally challenged find a place to hide and the hyper-motivated engage in the manufacture of hierarchy, not products or services.
There is another type which I don't understand. And that is the seemingly innate desire for bigness. Walmart can demand prices from it's vendors that far exceed it's economy of scale. At the limits of economy of scale the unit price becomes fixed but the subjective valuation continue as if an infinite economy of scale exists. I experienced this on the purchasing end in manufacturing and the respect (low prices I could demand) I could command while representing a big company verses a small one. And I witnessed at a distance this same thing playing out in sales. At some point in their manufacturing careers most people come to realize that "the Carrot" isn't real.
You're talking now just about the question of which business model is more successful. This has nothing to do with Hoppe's book or his argument in favor of monarchy over democracy, however. It's a whole seperate argument. Hoppe makes an analogy between monarch vs PM and owner vs caretaker. You are just making the direct argument in favor of owners rather than caretakers. There's no need to bring up Hoppe or democracy at all.
If you search this site, I expect you'll find articles / discussion about what kinds of business models are promoted under different systems. For example, many government regulations promote 'bigness'. This is a predictable consequence of big companies being able to influence the political system. So we might expect the 'average firm size' to be smaller absent the state. Or maybe not. Whatever the case, we can be confident the 'optimal' size for the average firm will be found in free market conditions. So there's not really much point speculating about it and coming up with arguments like yours, because there's no way you can be proved right until we actually have a free market to see which business model works best. Or, if you think your business model works better than the big corporation model today, with today's distorted incentive structure, then be an entrepreneur yourself, out-compete them and show us you are right!
"Hoppe makes an analogy between monarch vs PM and owner vs caretaker. You are just making the direct argument in favor of owners rather than caretakers. There's no need to bring up Hoppe or democracy at all."