Tag Archives: James Hanley

On Corporations as Persons

James Hanley offers a backgrounder on the whole “are-corporations-persons” argument:

So the question is, is there systemic/procedural unfairness in our system of wealth distribution? I believe that there is, but I want to clarify first what is not an indicator or symptom of systemic unfairness—the corporation. Corporations are, at their basic level, a generally, if not perfectly, fair system. (To be clear, I don’t believe in perfection in human systems, so to say something is not perfectly fair is only to say that it is the product of humans, not gods.)

Consider the origins of corporations—individuals joining together for the purpose of investing in merchant ship ventures. It took a lot of money to buy or charter a ship, then supply it with trade goods, and the return was very uncertain due to the danger of pirates and ships foundering. So various investors put in various amounts, and if the venture is successful, got back a return proportionate to what they put in. It’s nothing more than a contractual arrangement.

Say they do this several times, and then realize it would be easier if they owned their own ship(s). But with a large number of investors the contractual arrangements get complex and time consuming, creating high transaction costs. So they simplify by forming a joint stock company. The company owns the ships, and they own shares in the company. As economist Ronald Coase explained, in discussing the nature of the firm, people form joint-stock ventures because the costs of operating through that kind of organization are less than the costs of trying to operate by formal contracts for all matters. There’s nothing nefarious, no theft, fraud, or coercion, so it’s fair.

And that’s where corporate personhood really comes from. Instead of every owner having to negotiate and sign a contract to purchase a new ship, the manager can do it in the name of the firm. While corporate personhood has a bad name—because it is not well understood, I think, rather than from some deep insight about it—let’s not forget that all kinds of non-profits have corporate personhood, too, from the private college I work for to United Way to Doctors Without Borders. Are these organizations all nefarious, or do they simply find incorporation a more efficient mode of operation?

I know that probably won’t please folks on the political left, but it does make some sense- at least to me.

How’s the Middle Class Doing?

Professor James Hanley has a great post from a few weeks back comparing the middle class circa 1950s vs. the middle class of today.  It has touched off a quite a debate at the League of Ordinary Gentlemen after Jason Kusnicki picked up on it a few days ago. Here’s part of what Hanley said in that January 5 post:

it seems to me that part of the problem is that as the country becomes wealthier, it doesn’t seem to become easier to live a middle class life. And it seems to me that this is because the material standard of living that defines the middle class today is higher than that which defined the middle class in past generations. For example, in the 1950s, a middle class lifestyle meant a window air conditioner and some fans to move the air around; today it means central air conditioning. Back then a single car family was middle class; today most middle class families are two car families. A single television set was sufficient to be middle class back then; today–even though televisions are much cheaper–most middle class families have multiple televisions, many pay extra for a television that’s much larger than what their (grand)parents had, and most pay extra–sometimes a lot extra–for cable or satellite (i.e., once upon a time three free channels was middle class; now 100 pay channels is middle class). They didn’t pay for microwaves and computers (and internet access) in the 1950s, while we do now. We also eat out a lot more today than they did back then. One of the biggest changes is the size of American homes. In the 1950s, the average home size was just under 1,000 square feet; today it’s over 2,300 square feet. As importantly, a house back then most often had a single bathroom; now homes regularly have 2 1/2 baths or more.

All this extra material wealth is a good sign, from a strictly economic point of view,* because this means our middle class can afford more than our grandparents’ middle class. Our middle class has a higher standard of living, is better off, than our grandparents middle class. But as commenter E.C. Gach’s question, “Will we (human race) ever have competed enough in the rat races to have a future where our children can have their needs met while only working part time at the “low end” job?”

Like I said, it’s created a lot of debate. As of today, there are 353 comments. This is what E.D. Kain, once a heterodox conservative and now newly-minted progressive, had this to say:

Jason,

I’m well aware that leisure items and material goods are in many ways more fun and more advanced than in the past. But this says absolutely nothing about retirement security or healthcare – two far, far more important issues. Furthermore, it doesn’t speak to the preferred changes libertarians and many conservatives would like to make which would, on sum, make retirement security even less reliable. And frankly, if left to just libertarian and conservative ideas on healthcare – without the pressure liberals place on the issue – I don’t think you’d ever see anything like healthcare security for the poor and working classes. Just look at the efforts to cut people off the Medicaid rolls across the country.

Furthermore, while this does a fine job at explaining how things have improved in society (and I don’t think most people are arguing that we should return to the 1950’s or the 1800’s – the idea of progress is well-rooted in the collective psyche) it says nothing at all about how things should have improved. Would we trade our high-tech middle-class existence for the low-tech middle-class existence of the 1950’s – maybe some die-hard nostalgiaits would, but most people would not, even if they believed that there was a crisis in the middle class. Asking to pick the present over the past and then using that as an example of how things must have improved is pretty paper-thin as far as arguments go. Nor does it say why things have gotten materially better. Perhaps some of these much-loathed government programs are to blame; and perhaps, too, the liberalization of markets and the lowering of tax rates have helped as well. Perhaps it is a very mixed bag with no simple explanation, just as the gains made across the board don’t tell the whole story either. But I suspect that the usefulness of libertarian economics has reached its peak. Civil liberty issues are the next frontier for libertarians who want to improve the lives of Americans – not attempts to privatize public libraries or fight for more tax cuts.

Anyways, this argument also says nothing about how things will be in the future if we maintain the current course. I don’t trust that the nation as a whole will be very good with its 401k investments, or that the investment bankers who just thrashed the economy will be very wise stewards of our money. Pointing out that the middle class can afford more leisure and better toys than it used to, and that we live in more material comfort, ignores the chaos in the system, the rapidly shifting industries, the rough and tumble ride that middle class workers face, and how very important things like health insurance are for people who have none, or who lose it when they lose their jobs.

The argument that is going on about the middle class could be summed up in another comment:

Being middle class isn’t just the ability to buy stuff… it’s security: knowing that if you get sick you’ll get health care, when you retire you will be comfortable; etc.

One of the main defenses of the globalization of labor is that this decreases the cost of consumer goods. Well, we have that now.
Maybe it’s time to focus on the other side of the equation… finding ways to drive up the costs of labor so that the middle class can have both cheap TVs and a decent retirement.

The debate boils down to what the middle class can do: are they able to buy certain consumer items or are they able to afford retirement and health care.

Since, I tend to lean to the right, I tend to resonate with Hanley’s argument.  But I don’t know if some the anxieties that the middle class feels is just due to higher living standards.

What do you all think?