Tuesday, April 7, 2009

Organizational Structures in Market Anarchism

Peter G. Klein has written a new criticism to the "left-libertarians" on organization theory. Both Klein and the "left-libertarians" have made some errors. We will identify some problems with the arguments pointed out by both sides below.

Klein, who cited Rothbard as a source, may have performed the argument to authority. Klein used Rothbard's "critique" of agorism, to exploit Rothbard's overwhelming popularity within libertarianism, to push his point-of-view. However, Rothbard, in his critique, entirely strawmanned Konkin's agorism.

Rothbard, in the first portion of his article, misinterpreted Konkin's objections to voluntary corporations and joint stock companies. Rothbard thought that Konkin wants to aggressively forbid the development of these organizations. Rothbard misinterpreted the statement "Konkin opposes wage labor."

Walter Block, Stephan Kinsella, and Murray Rothbard use and interpret the word "oppose" to mean that they oppose actions that violates merely the non-aggression principle.

However, the Aristotelian liberals, such as Roderick Long, defines morality differently. Aristotelian liberalism, which simply denotes a brand of market anarchism that preaches virtue ethics, defines "morality" as a broader system beyond the meta-normative conception of rights. The term "morality," in this sense, can imply voluntary ethical systems that does not necessary coincide with the non-aggression principle. When an Aristotelian liberal says that he "oppose something," he might actually mean that he want to voluntarily persuade others to avoid doing that thing. Likewise, when Roderick Long says that he "morally opposes wage labor," he actually meant to voluntarily advocate alternative arrangements besides wage labor. Long made a similar claim in his libertarian feminism article. When Long said that he "morally oppose prostitution," he actually meant that he wanted to voluntarily abolish prostitution by persuading prostitutes to look for alternative occupations.[1]

We should not use the term "corporation" due to its vagueness. Often, people conflate the term "corporation" in its legitimate sense and "corporation" in the illegitimate sense. In its illegitimate sense, the term "corporation" signifies state privilege; and "corporation" its legitimate sense signifies an orgazation with limited liability contracts with explicit consent by all parties. This terminological barrier confuses the whole debate.[2]

In addition, a "corporation" could mean a network of independent contractors,[3] to borrow this phrase from Peter G. Klein. One could conceptualize this by imagining independent contractors as employees. Even in the real world, we find it hard to distinguish an independent contractor from an employee in the legal sense. Some might define the two terms as the degree of boss control, but we cannot find any strict distinction between independent contractor and employee. How much boss control, specifically, would make the worker an employee instead of an independent contractor? Because we cannot indentify the essential characterists of independent contractors from employment, some would denote these two terms as synonymous.

The term "firm," like "corporation," also has a fuzzy denotation. A firm, for example, could mean a loose association of smaller firms. A firm could also man a cartel agreement among competing sub-firms, or a "business trust." Could we label a joint venture itself a firm even that it comprises of two smaller firms? If we go further with this, we could even label each "independent contractor" as a firm. One could simply imagine an independent contractor as a firm that associates with another firm that pays for its services. The arbitrariness of the term "firm" makes it hard for some to decode its meaning in certain contexts, such as the size of the firm in a free market. We cannot make a valid argument that the median firm will employ less workers in a free market, because of the vagueness of the term "firm."

However, I understand the gist of what the "left-libertarians" mean when they talk about "smaller firms" in a free market. We can rephrase this ideas to this:

Workers will have greater control over his workplace, instead of the CEOs and senior managers monopolizing control; management will be delegated to more specialized workers instead of unspecialized CEOs and senior managers; power will be distributed more evenly among the workplace; workers will have more freedom from boss commands

Obviously, I criticize the second half of Rothbard's article in defense of the reformist political process. Rothbard's critique of the U.S. Libertarian Party seems to not understand that Konkin opposes them on strategical grounds, not merely on meta-normative grounds.

Overall, Rothbard's wrote his article in an extremely legalistic tone. First, Rothbard strawmanned Konkin that he wants to illegalize corporations and wage labor. Secondly, Rothbard strawmanned agorists for their alleged belief them illegalizing the U.S. Libertarian Party and illegitimacy of voting. Even in an agoristic point-of-view, agorists do not want to illegalize either one of them. Agorists do meant "immoral" by "illegal."

When the agorists label corporations and hierarchy as "immoral," they do not mean that they want to prohibit them. They mean by a prediction that workers will find a lesser degree of hierarchy in a free market. The agorists also label "voting" as "immoral" because they consider voting as strategically counterproductive.

Rothbard, in a paragraph, uses over-systematized nonsense to defend the right for slaves to vote:

Let's put it this way: Suppose we were slaves in the Old South, and that for some reason, each plantation had a system where the slaves were allowed to choose every four years between two alternative masters. Would it be evil, and sanctioning slavery, to participate in such a choice? Suppose one master was a monster who systematically tortured all the slaves, while the other one was kindly, enforced almost no work rules, freed one slave a year, or whatever. It would seem to me not only not aggression to vote for the kinder master but idiotic if we failed to do so. Of course, there might well be circumstances — say when both masters are similar — where the slaves would be better off not voting in order to make a visible protest — but this is a tactical not a moral consideration. Voting would not be evil but, in such a case, less effective than the protest.

Rothbard therefore strawmanned the agorists. Like Rothbard, the agorists also defened the right to vote. However, the agorists oppose voting on strategic grounds. Aside from the deontological moral arguments against voting, agorists oppose voting mainly for its impracticality and its bad consequences. Some agorists even have created a moral rule against voting because of its impracticality and its bad consequences.

I see problems with the term "agorism" because of its ambiguity. An "agorist" could mean a Carsonian mutualist who opposes stick ownership of capital and land. That just does not accurately describe my positions.

Setting terminology aside, the term "agorist" has another problem. Some agorists strategically support the black markets and unions. However, I previously described black markets and unions as counterproductive:

Anarcho-capitalists who advocate political reform is functionally a classical liberal, since they do the same thing. Similarly, a market-anarchist who supports syndicalism is functionally an anarcho-syndicalist. An agorist who only sells prohibited drugs is functionally the same to all of the other non-libertarian workers in the black market. Non-straightforward ways of promoting libertarianism are thus highly inefficient.

I emphasized above that grey markets differ from black markets. Grey markets, unlike black markets, can actually work. I support grey markets for its decreased risk.

I also see problems with the term "mutualism." However, that does not imply that I consider the current system as the lesser evil than a mutualist society. Indeed, like most Rothbardian market anarchists, I would rather live in a mutualist society than in any corporatist system, if I had to choose from these two options. Furthermore, if someone opposes the term "mutualism," it does not imply that she opposes allying with the mutualists. Someone can still hold an ardent alliance with the mutualists even if she dislikes to describe herself as a "mutualist."

I have read most of the chapters in Kevin Amos Carson's book Organization Theory. Ninety percent of its chapters deals with empirical "case studies." These "case studies" look redundant and uninteresting. I learned noting new from this book, as I already know the corporate privileges beforehard. Many market anarchists know that there exists significant principal-agent problems in all organizations, such as the oversight costs of employing workers and communication barriers. For proof, I commented about this at Francois Tremblay's blog:

I agree that employment has the principle-agent problem caused from asymmetrical information. I know the significant communication barriers and oversight costs of employing a worker. I also know that in the current system, the employer can give arbitrary orders to the worker whatever the employer feels like it. I agree that in a free society, more independent firms would function.

In a free society, more workers would create independent firms. Instead of the worker agreeing on a contract allowing the employer give arbitrary orders without any extra compensation, the worker owning his or her own firm would have more motivation to innovate instead of doing tedious work that the employer demands. Productivity and innovation would increase and the worker would actually appreciate their work.

I commented the above before Kevin Carson even released his chapter of how productivity and innovation would increase, and oversight costs will decrease under a free market. I commented this on October 7, 2008, but Kevin Carson released his chapter about this on November 2, 2008. Even Stephan Kinsella mentioned the obviousness of these agency costs in all organizations, before Kevin Carson released his chapter.

Therefore I regard Carson's book as a total waste of time. Many other anarcho-capitalists, such as Stephan Kinsella and Peter G. Klein, knew the problems of business organizations without even reading Carson's book.

Furthermore, I carefully noticed the differing definitions of "social hierarchy":

If you define a hierarchy as the criminals above-the-law who defends the state’s existence, I would oppose hierarchies. If you define a hierarchy as any middleman, such as those who transports goods throughout the society, I would support the hierarchies that function voluntarily.


[1]

I commented about this at Polycentric Order:

The word "oppose" has multiple meanings. In an article on Libertarian Feminism, Charles W. Johnson and Roderick T. Long "opposed" prostitution. However, they still support the right for individuals to exchange sex for money. They had used "oppose" to mean that they want to voluntarily abolish prostitution, but still support the right to exchange sex for money.

Likewise, when mutualists say that they "oppose wage labor," they do not mean that they oppose the right to create employment contracts. They mean by a prediction that workers will find better ways to make money instead of following the orders of his employer.

[2]

I commented about this at Polycentric Order:

Even though I oppose "corporations" in the sense of state privilege and involuntary limited liability "contracts," I still support "corporations" in the sense of purely voluntary limited liability contracts between two explicitly consenting parties.

[3]

I had previously used the phrase assocation of independent contractors in place of network of indepent contractors at Polycentric Order

you cannot assume that worker cooperatives will have less problems than an association of independent contractors ... Comparatively, democratically-controlled worker cooperatives would have more agency problems than an association of independent contractors.


Left-libertarians argue that in a free market, there would be "less" "vertically integrated" firms, partially got that idea from Kevin Carson, and from their logic. However, this is not true.

First, they did not agree to a definition of what a "vertically integrated firm" is. All factories are "vertically integrated firms" because they seperate the production processes to different machines. In this way, vertically integrated firms exist because they are more efficient, and do not have to pay for the cost for transportation, etc.

So, certain types of "vertically integrated firms" are more efficient. However, they also argue that because of our current monopoly of firms, there would be less because competition undermines these inefficient vertically integrated firms. They are using the words "but" in "but there would be less" without thinking about others.

There would be MORE vertically integrated firms and corporations in a free market because there are no barriers to entry to start a corporation or a vertically integrated firm in a free market. So arguing that there would be less "corporations and more private contractors" in a free market is nonsense.

Also, many libertarians argue on blatant geographical assumptions. For example, some left-libertarians argue that everything in anarchism is privatized. However, there could exist unprivatized land and atmosphere. For instance, Hans-Hermann Hoppe defend "immigration reduction" on the assumption that all land and atmosphere is privatized so many people would use them to block transportation. Another example is the belief in collectivist roads from left-libertarians, as they argue because all land is private, there should be some collective transporation to prevent the owners to charge high tolls.

Also, left-libertarians are more sympathetic to anarcho-communists. This is false. Anarcho-communism is a type of collectivist anarchism, where the workers and people collectively own all the means of production. This includes the military. Why would anarcho-communists have respect to the individual when the military is collectively controlled by the workers, just like democracy? Hence, anarcho-communism is a dictatorship by the workers.
Limited liability can be specified by contracts, but in the current situation, some limited liability businesses has an advantage over unlimited liability businesses. Suppose a robotic truck driver runs over your property. This cannot be contractually enforced because you did not buy the truck. The owner from the truck driving company cannot get sued, because he has a state-granted limited liability privelage. Therefore, the owner can malinvest by producing more robotic truck drivers regardless of safety to get money. The business, however, is protected by the state.

If you attempt to use PDAs defend against the truck driver in a statist society, you are liable for damaging their property. But in an anarchist society, you can use private defence agencies to offer compensation from the truck company.

However, because our current situation is not a market anarchist society, the trucking business cannot be compensated by PDAs because they are protected by the state. Thus, in some situations, limited liability is a priveladge from the state.

Another thing is their limited liability from intellectual property violations. They have an advantage in making products that violate patents. This is unfair to unlimited liability businesses. But the main problem is the legality of IP laws, which should be eliminated along with the state.

Yes, do not mistake me--some limited liability can be specified by contracts--but some do not and is a priveledge of the state.

2 comments:

Neverfox said...

Kudos on pointing out different levels to "oppose". Too often "oppose" is taken to mean a desire to use force when no such proposal was made.

"One could conceptualize this by imagining independent contractors as employees. Even in the real world, we find it hard to distinguish an independent contractor from an employee in the legal sense. Some might define the two terms as the degree of boss control, but we cannot find any strict distinction between independent contractor and employee. How much boss control, specifically, would make the worker an employee instead of an independent contractor? Because we cannot indentify the essential characterists of independent contractors from employment, some would denote these two terms as synonymous."

This is simply wrong. We might as well say there is no difference between separate businesses and separate divisions within one business. They are clearly not synonymous, as the article you posted makes clear and as anyone familiar with common agency law would know. In agency law, the distinction is important for the imputation of legal liability when a third part is injured. And as with any legal matter, while it might sometimes require effort to distinguish, a distinction can and does get made in such disputes.

The most important distinction is that an IC pays for her own inputs (just like a separate business would when dealing with another business). Control over work, as you mentioned, is another aspect. Another distinction in terms of legal imputation, is that the work of an IC would never be considered the work of the hiring party; the work of the employee (e.g. the product) is. For all the detail, I refer you to p.86 (as well as others) in David Ellerman's P&C.

"The term "firm," like "corporation," also has a fuzzy denotation. A firm, for example, could mean a loose association of smaller firms. A firm could also man a cartel agreement among competing sub-firms, or a "business trust." Could we label a joint venture itself a firm even that it comprises of two smaller firms? If we go further with this, we could even label each "independent contractor" as a firm. One could simply imagine an independent contractor as a firm that associates with another firm that pays for its services."

"Firm" is indeed misused and has been made vague but it is far from vague in fact. A "firm" is a contractual role, a pattern of contracts between factor suppliers in a productive enterprise. It is simply loose language that we call corporations "firms". They may or may not be the firm depending on the contracts they make. If I lease your corporation's assets, I'm "the firm" as far as my productive enterprise is concerned, not your corporation, because that's the contractual pattern we created. If your corporations become a JV, they are together the "firm". You are correct to say that IC's are little firms; this is simply inherent in the definition of IC and the fact that they cannot alienate themselves from the responsibility of their labor.

anarcho-mercantilist said...

Neverfox, thanks for your analysis of my blog post! I enjoyed listening from your perspective.

"The most important distinction is that an IC pays for her own inputs"

Even this sounds vague. Like an IC, an employee also supplies his or her own inputs in the form of physical and mental power. Besides his labor input, the employee supplies his own capital as well. His limbs and eyes function as tools and machinery. His clothes may also increase his labor productivity. More generally, we could label all humans as "capitalists" in a sense.

Almost all organizational structures have some degree of inputs from each party. Contrary to the legal prescription, an "employee" may have some control over his or her inputs, as shown above. The "independent contractor" and "employee" differs only in the degree of the inputs between the contractor and the subcontractor. Unless we define a standard that specifies the quantitative requirements for an "independent contractor" and an "employee", such as the ratio of the cost of inputs between both parties, this distinction will continue to remain vague.