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Free Market Impersonalism

by Tony M.

It has been coming to my attention, more and more over the past few years, that there is a disconnect in both typical liberals and typical economic neo-conservatives in how they approach a certain complex of questions in market theory.

One of the major elements of success in our market system is the standardization of units. The first of these is the standard unit of money: whether you are using the dollar or the Euro, within some 1/4 of the world that unit is so broadly accepted, on equal basis in every instance, that we simply FORGET to notice: almost everyone accepts my money. It wasn’t always so. When money was coins - gold, silver, iron or copper - there were unusual sizes, diluted issues, shaved pieces, authenticity worries, coins so worn it was impossible to identify the specific denomination / source. And even when the specific piece of money was finally proven out as authentic, undiluted, etc, sometimes the seller might have to worry if he could later turn around and use it with equal effect (say, if he was buying goods from across the border).

The second area of standardization is that of units of goods. With mass manufacturing, each and every copy of a book, of a pencil, of a toy or a car part, is enough like every other copy that the buyer need only ask of his friends, neighbors, or fellow amazon-buyers what their experience with other instances of the same thing were like: variation between the individual instances is usually low enough not to matter much. The buyer need not care much whether he gets item # 2,368 or #9,339. In some things, like corporate stocks, the item is more of a notional reality anyway, and there is NO real difference between item #2,368 and #9,339. Just like the fact that there is no practical difference between this quarter and that one, and not one merchant in a million will even stop to look at the quarter with care.

The third area of standardization comes in on the OTHER side of the transaction: from the standpoint of the seller, each and every buyer is enough like any other buyer that he simply need not pay attention to the particulars: whether the buyer is tall or short, funny or somber, well-heeled or poor. As long as the buyer is willing to part with the stated amount of money, it simply DOESN’T MATTER who he is. To be a “buyer” means to be a person willing to buy at the stated price, and that’s all the seller cares about or is allowed to care about.

Now, there are certainly areas around the fringes of the markets where these are not as overwhelmingly true: trade between countries with different units of money (especially small countries with difficult-to-trade currencies), trade in antiquities and museum pieces, trade in race horses or pedigreed dogs, etc. In these, we may tend to think that the “market” is only imperfectly developed, that it falls away from a “perfect” market just to the extent that it fails to be so standarizable that we can ignore the particulars of copies or instances.

Yet this reveals assumptions that bear looking at. Is it truly an ideal thing that “the market” reduce the actors, the seller and the buyer, to mere notional and impersonal roles whose entire description is fulfilled by saying “seller” and “buyer”. Is it truly an *excellence* of that human meeting place called “the market” that we, with its help and urging, embark on abstracting from a transaction the individualities and personalities involved, that we refuse to even acknowledge the differences between A and B if both are buyers, the way in algebra we abstract out from the specifics of whether 8L refers to 8 ladders or 8 units of length in manipulating the equation? Is it a perfection of commercial transactions that they take place without even a notional place for discussing the particulars that tell us _why_ the actors are entering that transaction? Is that natural and good? Or is it, maybe, only natural and good within limits. Do we need to understand that assumption as demanding qualifiers?

Not all markets and not all societies so idealize a pristine, impersonal “the market” to the same extent that we do. In some places, not only is price negotiating the norm, it is considered rude and unsocial to refuse such interactions. Bargaining between buyer and seller is done with a more or less explicit advertence to the particulars of the person: whether you are buying that scarf for your wife or your mistress may matter; whether you are selling your first melon of the day or your last matters. Some people will refuse to sell an item of their craftsmanship if they are convinced the buyer will not use it honorably and with care. Want to buy an expensive sword from me? Prove to me that you can handle a sword, first, so you don’t dishonor my craft by your ignorance.

This last grates on American ears. If I want to buy an expensive guitar in order to violently bust it on stage, we tend to think the seller has no room to argue: he has guitars for sale, I am willing to buy at the price he offers, and that’s the end of it. For him to refuse to sell to _me_ is to deny my civil rights, because he has offered guitars “to the public” at large. Selling guitars is thus assumed to be an IMPERSONAL act toward the public, it is saying “I will sell at a stated price to any and all comers.” The condition “to any and all comers” means that he simply doesn’t look to any particulars of the possible buyers other than the FACT of being willing to buy at this price. The seller’s natural right to limit his (theoretical) capacity to make a different contractual relationship for different buyers is often constrained by law: an attempt to limit his offers to sell only on certain conditions is denied. To even BE a “seller” is assumed to mean “prepared to sell to any and all comers without distinction” and legally enforced that way.

You can begin see the difference such an assumption makes compared to a society that doesn’t even contemplate price tags. There, if you want to buy an item, from a knife to a bicycle to an auto, you have to talk to the seller first. Only after you establish a modicum of a relationship (even if only temporary) can you talk price, and it is inherent to the process that the price the seller names, and the price you name, work out BASED on that personal relationship. There is no presumption that “He is a seller at X price” because he makes a decision of whether to BE a seller based on many factors other than X price. And thus his first named price differs for different buyers, and his finally accepted price differs also for different buyers because his relationship changes from buyer to buyer. There is no such thing as the pre-set offered “price” of the object, there is only “the finally arrived at price he came to with A”, and separately “the finally arrived at price he came to with B…” etc.

Now, in America such social (and legal) constraints as our own with pre-stated prices available to all comers is not imposed uniformly and universally. Artists are, still, able to pick and choose their clientele, at least to SOME extent, and could modify their agreed selling prices according to their relationships to buyers. A portrait painter can still decline to enter into a contract to paint. An interior decorator probably can decline to decorate a person’s house merely because she “doesn’t like the colors he chose”. But even artists are saddled with constraints. A photographer renting space from Wal-mart probably cannot legally refuse to take photos of any and all comers, (according to current trends in interpreting law), at least if the subject is not doing something illegal (say, public nudity).

The gradual wall-building of our society to enforce that pristine, impersonal marketplace gets more complete by the year. By the early 1900’s, unions forced plant owners to pay everyone standardized rates. This has had some good effects, but some bad ones too: an owner cannot easily pay a man more merely because he has more kids. House sales now are “strictly commercial” acts and you may not discriminate on the basis of the particularities of person. (Yes, I know that the legal language is different, more limited: only religion, race, sex, etc, are protected from discrimination, but the net effect is the same: in theory I could refuse to sell a house to a buyer because I don’t like his hair style or his smell, but in practice – by legal imposition leading the way for now social conditioning – in practical terms I cannot.) My doctor has pointed out one of the results of Obamacare: he can no longer adjust his pricing to the capacity of the sick person to pay. He is constrained to charge the same price to everyone, thus pricing some poor people out of health care they would otherwise get.

Think, though, of what this means in the larger picture, about what such assumptions mean. I mean philosophically and socially. If “to sell” means “to act without regard to the individual personhood of the buyer”, then the act of selling is no longer the establishment of a person to person relationship, no matter how fleeting. This has implications for the long term, for the larger picture: the seller no longer has a care for the buyer because he does not think of the buyer as a person, only a “unit of buying.” The seller has no interest in the longevity of the product in the buyer’s hands, unless (a) the buyer bad-mouth’s the seller, or (b) the buyer comes back with a legally enforceable claim for repair or replacement, i.e. directly commercial consequences. The seller cannot even be bothered to be GLAD for the buyer’s enjoyment of the product. Indeed, the seller ideally would NOT want the buyer to enjoy the product, so that the buyer remains “in the market” for still more goods. Thus the seller’s attitudes contribute to rank commercialization that expects and applauds consumerism.

Likewise, the buyer has no interest in the personhood of the seller. Thus he does not, and cannot, reasonably take thought for whether the seller can support his family on the profit margin implied at a certain price (unless that affects his future market). The buyer will not reflect on or act on the issue of whether the seller cheated or gouged in order to acquire the good, (as long as he obtains clear title). Thus the buyer’s attitudes contribute to i>rank commercialization that expects and applauds cheapened goods and services at all (non-monetary) costs, including specifically human costs.

And both of these are, in the long term, attitudes such as to undermine the free market. A market, in order to be a good, successful market, must have long-term stability. (Just one reason is that a person cannot, without a stable market, attempt to price a good without any way of supposing what his marginal value for X that he might give up today might be worth to him tomorrow. Longevity is itself a required aspect of the marketplace.) But attitudes that lead to practices of dissembling, cheating, gouging, petty thieving (shop-lifting), shady warrantees that cannot be used / enforced, products that are engineered to break the day after the warrantee period ends, are all practices that will undermine the stable marketplace. The pretense that the “buyer” or “seller” is just an impersonal force, in the long run will undermine a good marketplace. It will undermine the factors that make a marketplace more successful as a marketplace.

Hence the marketplace, considered solely as a meetingplace of “market forces”, is an unstable and incomplete idea. The market is a part of human good, and must be understood as part in order to be understood really as a good. It requires being completed by things outside of itself. It requires additional input besides a sheer “buyer”, “seller”, and “item potentially desired.”

Much more pointedly, a refusal to see the other party to a sale as a *person* means the removal of MORALITY from the transactions. It means that one can no longer even bring the vocabulary of morality to the marketplace: people will look at you with blank stares if you ask “sure it’s legal, but is that a JUST way to sell?” Abstracting from the marketplace the personhood of the actors means draining the marketplace of the basis on which to even WANT to proceed with justice or honesty, (much less mercy).

If you are a buyer or a seller, if you buy from the grocery or work at the grocery, your first proximate motivation in each transaction should be to respect the confluence of needs and desires that unites the human family here: he has a need, I have a way of meeting that need; likewise I have a need, and he has a way of meeting that need; and by operating together we will both be better off than before. The desire thus to DO GOOD for the other person, which is a form of love, should be present at all times. The act of “operating together”, i.e. the sale transaction, is the working out in detail of the GENERAL love of persons, made particular in the here and now by mutual assent to an exchange that, so far as the information available (to both parties, not just one) implies that each one really is benefitting by making the exchange. A transaction in which one party is convinced he has “gotten much the better of the other ha ha ha” is, by definition, a deformity of human interaction.

This does not imply an absolute impossibility of standardized marketing prices, such as in a supermarket where the prices are on the label, pre-set and largely non-negotiable. Not absolutely – as long as other aspects of society step in and generate the necessary add-ons that keep personhood present to the market. It does mean that official attempts to use law to depersonalize market transactions, without adding some other mechanism of personal input will tend to degenerate the market as a human institution. We can see the effects of this tendency everywhere we look: store clerks who treat customers as cattle, and customers who treat store clerks as auditory robots to be yelled into submission. Financiers who consider credit card users as sheep to be fleeced. Corporate executives who view laborers as units to get the most out of for the least financial price, all other costs irrelevant. Consumers out to get the cheapest price even if due to illegal immigrants. Big chain stores that treat suppliers as entities to be crushed into submission.

The complete depersonalization of the market place (without any ameliorating structures) is both damaging to the true free market and damaging to society as a whole. And it is not what the conservative respect for the free market demands as a model of the ideal. Truly free markets implies agents free to respect the real differences of different persons – which implies the freedom of sellers not to sell to everyone or not to sell to some, as well as the freedom of buyers not to buy from sellers whose selling practices they find morally revolting. Nor can it be free if the freedom is on one side and not the other.

One of the irreducible aspects of a truly free market place is the possibility of agents choosing badly. That includes not just choosing to enter into transactions that ultimately do NOT exchange equal for equal (because they misjudge the value of one side or the other), but also actors choosing to cheat the other out of value. If the market place is constrained so as to attempt to make the latter impossible, it ceases to be a free market place. Like the world in which God placed us, the market is a field of opportunity to freely choose well or choose ill: making it impossible to choose ill by rules would make it no longer possible to freely choose the good.

Comments (40)

I'm not sure that the people running the markets really want the buyer to be depersonalized as much as they used to. I think that there has been a bit of a pendulum swing on that matter. We went through a period (I think) where maximizing efficiency was so paramount that differences among buyers were flattened. With the coming of the information age, however, and the ability to use massive computing power to hold massive amounts of information, personalization has come back. The form it is taking is with things like customer rewards programs. My local pharmacy knows a huge amount of my personal information and can use that to target me with ads by noting my buying patterns. This individualized information is like gold and is being processed and used by all sorts of sellers. Notice that this could also include coupons, which would be a form of preferential pricing for some customers, targeted to them because they are known to be buying those kinds of items.

Now, this isn't _quite_ the type of personalization you are looking for, and that level of personalization is of course in many cases so inefficient that most sellers, especially those selling on a huge scale, are understandably not motivated to pursue it. (E.g. Bartering.)

I think that if there weren't all these onerous laws in place against discrimination or any preferential treatment, freedom would in some instances be given to, e.g., local store managers to give some people a break, and so forth, out of charity.

What I think would happen is that sellers would operate highly efficiently in many cases leaving themselves a margin to be charitable or individualized in other cases.

The standardization of non-discrimination law has not (IMO) developed as a result of market forces at all but rather as a result of ideology. In the first instance, this ideology was related to race. Much as I deplore refusing to sell a sandwich to someone because he is black (for example), I think that the very notion of a personal buyer-seller relationship was broken down to a large extent by the triumph of the ideology behind the 1964 Civil Rights Act and its state copycat laws. That ideology _rejected_ the idea that buying and selling was a free act between persons intended for mutual benefit. In its place it put the picture of the seller-as-robot and the place of service as mechanized dispensary of the product rather than, e.g., an extension of one's home or private space in which to interact with other people by free choice. The notion of freedom of association, for example, was _absolutely_ disassociated from selling to the public, because it was seen as an enabler of bigotry.

Because private charity is also disliked by the ideologues, doctors' cost shifting activities have been under attack for decades for the same reason. That is "discriminatory." Medicare outlawed cost-shifting long ago, which of course has harmed the poor most of all, including the elderly poor. Large insurance companies like Blue Cross Blue Shield have also squelched cost-shifting through lawsuits. This, again, is a standardization not because of a concept of the market but rather because of a warped concept of equality and fairness,

The desire thus to DO GOOD for the other person, which is a form of love, should be present at all times

Personally, I fully agree with this view of market transactions. But how do you square it with Adam Smith, not to mention Austrians and how much will your present view require reformation of the classical economics?

Lydia,

buying and selling was a free act between persons intended for mutual benefit

This is classical economics but Tony appears to say that this is insufficient.
The free market act must intend at the benefit of the other party. If I am selling to you, I must intend at your benefit. With classical economics, I intend at my own benefit, and your benefit, if any, is purely incidental.

That you cannot see any overlap between

The desire thus to DO GOOD for the other person, which is a form of love, should be present at all times

and

buying and selling was a free act between persons intended for mutual benefit

is a very sad commentary.

As you can imagine, I don't much care whether I "square it" with Smith or the Austrians, neither position being particularly Christian.

I may have misread Lydia but I did think that "mutual benefit" is arrived at by the operation of the invisible hand and enlightened self-interest. The seller need not have any intention of benefiting the buyer but the buyer benefits as a (usual? necessary?) by-product. This is Adam Smith's picture and I would be surprised if Lydia dissents from it.

Whether the seller intends it or not, and in what senses, is going to vary immensely by specific circumstances. If I sell widgets that I make in a factory, and my widgets are useful things for housewives and not intended to be used in any bad ways (these are not torture widgets or pornographic widgets or anything like that) then I don't need to know the housewives personally to be intending to benefit them as buyers. Rather, I predict that the buyer will purchase my widgets by way of the realization that they are in fact useful widgets and hence that the buyer is benefited by buying them! There is no need for it to be face-to-face to be a form of "love" in the somewhat technical sense of that term that I think Tony intends.

The very act of thinking of a product for which there is a hole in the market and which is a good product and intending to market that product can be a form of intention to benefit others, even when one's primary motive is, yes, making a profit by selling the product.

Then there are of course more personal versions. I know that when the local contractor I work with has remodeled things around the house, he has _personally_ intended to benefit me and my family, because we have had a friendly relationship with his business for over a decade. Or, as Tony envisages, making and selling a work of art to a particular individual.

But there is no tension between "buying and selling as a free act with the intention of mutual benefit" and "the desire to do good for the other person" even in less face-to-face contexts.

Tony, I thought of something else: I think that things like Yelp and Angie's List have brought greater importance to and systematized a certain personal aspect of the market--namely, personal recommendation. This means that concerns about being bad-mouthed if one cheats the customer are a pretty big deal now, even more so than before there were such site.

My guess is that the bigger an organization is the more it can afford to cheat the customer and shrug off worries about being bad-mouthed. But even then self-interest should caution against doing so. The number of Facebook cartoons I have seen complaining about Comcast definitely decreases my interest in ever being a Comcast customer.

At the small business level, I have parlayed an Angie's List membership into a major price reduction for a partially botched plumbing job in return for agreeing not to post my experience on Angie's List! So the personal is definitely making a comeback.

but I did think that "mutual benefit" is arrived at by the operation of the invisible hand and enlightened self-interest.

Part of what Smith had in mind, I agree with. And it is older than Smith, too - Aristotle noted it. The reality that for a given item and a given possible buyer Fred and possible seller Pete, of a range of fair exchange prices each is willing to live with. If Fred is willing to pay UP TO $10 for it, and Pete is willing to take no less than $7 for it, a sale can take place. Presumably, Fred's marginal utility is such that any price below $10 is better than doing without the item. And Pete's marginal utility for it is such that any price over $7 is better than his hanging on to the item. So they are well suited to make a sale for it between $7 and $10, and ANY price in that range is fair to both. Because marginal utility is the deciding criteria here, and for different people they will actually have truly different marginal utility for the same item, it is truly possible that a sale can actually benefit both. This fact, also, underlies the truth that an economy is not a zero-sum game.

What I deny of the dead hand (as practiced in modern market places with sharp players) is that notion of "buyer beware", where they treat every participant in the market as being wholly and completely capable of seeing to every particle of their own self-interest without help. Used car salesmen who are perfectly fine selling a car that THEY know has problems A, B, and C, and refusing to disclose problem A when the buyer asks about B and C but doesn't know cars enough to ask about A. That kind of behavior is NOT making use of the REAL range of marginal utility of the item as it really is, but of an apparent range of marginal utility that the salesman knows is a false picture. He is, in effect, aiming to get more than the car is worth TO THE BUYER, based on the buyer's lack of knowledge which he could fix at ease. This is anything but the (modest, limited, qualified) sort of love each person should have for his even momentary neighbor.

There are other aspects as well, but this suffices for now. When a man enters into a transaction with another, he should be intending not only his own benefit, but (at least in a passive sense) also intending that the other party also benefit by the transaction: that the other party's ending position is REALLY an improvement to his marginal utility as best all parties could determine by working together. (I say "passive" because it is not equally my job as seller to make sure what his marginal utility is, but I deny that it is wholly and absolutely none of my concern at all - at least so far as making my knowledge of the object his knowledge also.)

I think your notion of a passive sense of intending the good of the other is an interesting and helpful one, Tony. It rules out deception, for example, without confusing business exchange with active charity. The seller need not be worrying about the details of the buyer, which in fact he may not know. And there is nothing wrong with not knowing those details. And he need not be trying to carry out his business qua charity. He can carry it out qua business with a primary eye to financial profit. But his goal should be to sell something that genuinely is worth the while of others to buy and not to deceive his buyers about their interest insofar as he is able to discern that--e.g., by hiding what he knows about the car, as in your example.

And this may be a way to a sort of refurbished, vaguely Smithian concept: Namely, that business transactions are not *the same as* attempts to help others in the sense that charity and friendship are attempts to help others. Transactions of sale have their own nature which is not the same as transactions of charity. In that sense, the seller's primary goal need not be to "help the little guy." For that matter, the buyer's need not be, either. The buyer need not be trying primarily to be sure to pay enough to _help_ the seller. But they should not be trying actively to _deprive_ the other of what they _know_ is in the other's best interests for purposes of their own gain.

without confusing business exchange with active charity

Absolutely correct. I am not talking about charity. I am saying the seller (or buyer) WANTS to improve his own marginal utility in the transaction, and is NOT engaging in charity. He isn't trying to make sure the other guy gets better than a fair deal.

If I sell widgets that I make in a factory, and my widgets are useful things for housewives and not intended to be used in any bad ways (these are not torture widgets or pornographic widgets or anything like that) then I don't need to know the housewives personally to be intending to benefit them as buyers. Rather, I predict that the buyer will purchase my widgets by way of the realization that they are in fact useful widgets and hence that the buyer is benefited by buying them!

That's fine. When you make the widgets, you make them knowing that they do in fact have a specific use: peeling escargot, stapling fridgets, whatever. You make the packaging to be CLEAR about what it does, and you don't imply that it does 3 other things as well. When your engineer points out a potential problem with manufacture that would end up meaning that you can only staple half-standard sized fridgets, you spend the money to correct the problem instead of simply saying "well, my packaging is valid in that they can staple SOME fridgets, just not most" - and you don't re-write the packaging to say "mini fridget stapler" to mislead buyers into thinking it is a just a small stapler instead of a stapler of very small fridgets. Etc. When you set up a contract to sell 20,000 of them to Walgrens, you craft the contract so that (a) Walgrens really does want to sell the fridget stapler and will benefit thereby, and (b) so that customers who actually need to staple fridgets will be attracted to the item - and by thinking of (b) you are attending to the needs of your immediate customer Walgrens. These are all normal, everyday upright business activities. At every step, you are conscious of the honest and fair manner in which providing for someone else's real marginal utility will represent a profit for you, and aim for THAT result. At no point do you _intentionally_ aim at achieving a profit margin so stiff that you knowingly, designedly, put the buyer's result in the negative, so that the transaction represents a dis-utility. THIS is the sense I have in mind for the qualified, limited, imperfect "love" of the other that I am claiming should be present. Not an act of charity, of mercy.

It is certainly the case that the internet has changed a lot of transactions for the better. For art, just for instance, there are musicians who are willing to put some of their music out there for free, and some more out there for a minimal price or for just "pay what you think it is worth". And some even more novel approaches. Craigslist and ebay have made pricing of used goods way more rational for the most part, though there are certainly exceptions. Reviews of products certainly affect some sellers very directly, and even big sellers have to worry if a huge market like Amazon or Walmart has terrible reviews for their product.

One of the things that motivated this post is something from my work. Part of my job involves doing or looking over valuations of certain types of difficult to value assets. I have repeatedly seen appraisers attempt to value such assets without having the least clue (so far as I can tell, anyway) that their valuation makes assumptions about "the market" and interactions of persons that may not be at all applicable. For example, one type of valuation, for what is called the "fair market value", is based on an assumption of a hypothetical buyer and a hypothetical seller, both interested in entering into a sale, and neither having any characteristic OTHER than "buyer" or "seller". That is, some theoretical person who has no more relationship to the seller than merely that of buyer. Then they go on to apply such a valuation assumption to a situation, for instance, in which it is fundamentally impossible that there be a buyer and seller with no relationship to each other (some assets have to do with property relationships explicitly based on marital status). Or, they will apply the valuation to a scenario where the seller and buyer are father and son, and not even notice that by assuming away the specific relationship in their assumptions, they eradicated a valuable aspect of the transaction (like the successful transfer of "key man" status in a family business), so they simply did not identify the values present in THIS transaction.

More generally, they seem often to start with an assumption that a "true" or "ideal" marketplace is one where only the fact of being a "willing buyer" or "willing seller" is the pertinent information about the parties, all other facts about them being irrelevant. But in the real world, especially for sales of non-mass-produced assets, this if often simply not valid. In selling a business to an outsider, an owner may well want to consider the character of the buyer, and to consider his capacity to take over, before selling (or for affecting the sale price). The effort to abstract out of the transaction analysis all features that cannot be mathematically modeled as "just like" a hundred other transactions, implies (to my mind) a vision in which the parties to transactions are not really humans, they are simply biological robots out to generate the greatest return, period. Which trends toward depleting the marketplace of the virtues of the human social plane: considering the market as an element of a community; that is, a sphere of operating together for the good of the entire body of men.

I am wondering about the intersection (if any) between a market player intending mutually beneficial transactions and a market player that plays by "enlightened self-interest".

In the Ebay example that Lydia gave, is Ebay motivated by the good of the buyers per se or the motivation is that Ebay will benefit (perhaps in long run) if buyers are provided this or that information or utility. Or is it possible to intend good of both simultaneously?

Relevant in this context Chesterton's criticism of the Model Employers in Utopia of Usurers. The model employer provided benefits, holidays etc to his employees not for their good but for his own (enlightened) self-interest. GKC was not impressed.

It is indeed interesting to see W4 moving towards a Chestertonian direction in economics, after years of dismissing any possibility of sense in GKC's discussion of economics. I look forward to a post that finds profit and utility in distributed property (which is called "several property" by Hayek).

The GKC Model Employer quote:
The special emblematic Employer of to-day, especially the Model Employer (who is the worst sort) has in his starved and evil heart a sincere hatred of holidays. I do not mean that he necessarily wants all his workmen to work until they drop; that only occurs when he happens to be stupid as well as wicked. I do not mean to say that he is necessarily unwilling to grant what he would call “decent hours of labour.” He may treat men like dirt; but if you want to make money, even out of dirt, you must let it lie fallow by some rotation of rest. He may treat men as dogs, but unless he is a lunatic he will for certain periods let sleeping dogs lie.

But humane and reasonable hours for labour have nothing whatever to do with the idea of holidays. It is not even a question of ten hours day and eight-hours day; it is not a question of cutting down leisure to the space necessary for food, sleep and exercise. If the modern employer came to the conclusion, for some reason or other, that he could get most out of his men by working them hard for only two hours a day, his whole mental attitude would still be foreign and hostile to holidays. For his whole mental attitude is that the passive time and the active time are alike useful for him and his business. All is, indeed, grist that comes to his mill, including the millers. His slaves still serve him in unconsciousness, as dogs still hunt in slumber. His grist is ground not only by the sounding wheels of iron, but by the soundless wheel of blood and brain. His sacks are still filling silently when the doors are shut on the streets and the sound of the grinding is low.

Or is it possible to intend good of both simultaneously?

Yes. Why shouldn't it be? That's Tony's point, I think. With which I concur heartily.

And that's what Chesterton appears to be denying. Which shows his characteristic silliness.

I won't speak for Tony, but I think Chesterton is largely clueless about economic matters. He thinks in caricatures, as your very quote shows. I'm certainly not moving in a move Chestertonian direction. I think when it came to economics, Chesterton was childish and simplistic. Of course, W4 is a _group_ blog. We have always had variations of opinion about economic matters. Just to take one example, I'm more interested in a gold standard than Paul Cella is.

Nice post, Tony.

It should be recalled that Adam Smith, in addition to his most famous work, also wrote a book called The Theory of Moral Sentiments, which lays out, with impressive psychological sophistication, a study of mankind's moral nature arising out of fellow-feeling or sympathy: we can only share in another man's pains or joys via the operation of imagination, by picturing how we should feel in similar circumstances.

Chesterton's Utopia of Usurers, despite the felicitous title, is one of his weaker works, barely deals with usury at all, and has little application at all to our own times.

In the Ebay example that Lydia gave, is Ebay motivated by the good of the buyers per se or the motivation is that Ebay will benefit (perhaps in long run) if buyers are provided this or that information or utility. Or is it possible to intend good of both simultaneously?

I haven't a clue what Ebay (or its founders) actually intend, all we were saying is that the venue lends itself to sound economic and social behavior - that individuals who intend the good of both simultaneously can readily use that market.

It is indeed interesting to see W4 moving towards a Chestertonian direction in economics, after years of dismissing any possibility of sense in GKC's discussion of economics. I look forward to a post that finds profit and utility in distributed property (which is called "several property" by Hayek).

Other than distributism, I don't really know what Chesterton promoted economically. I have a lot of sympathy for elements of distributism, but not (usually) as they are all put together by typical distributists. My first problem with distributism in most of its proposed forms is that it seems to require THE STATE to get started, to get everyone their "3 acres and a cow". Which is naturally contrary to existing private property rights and subsidiarity. My second problem with it is that they recommend and propose the glory of the LITTLE farmer, the little shop keeper, the small tradesman, the artisan who runs his own business, but they don't seem to recognize that many times it is these very people who band together to create a larger enterprise (a partnership, a corporation) because they can see economies of scale and protections from chance risks that they cannot achieve on their own. There is, in distributism (at least so far as I have read in it, which is very limited indeed) a preference for the small, without any principle applicable to actively defend the small, nor to create a limit against the large, which means that it has nothing to say when people aggregate into the large. Which means its preference ends up as mere pie-in-the sky sentiment. Or, as Lydia says, childish and simplistic. There is also an apparent reverse snobbery in distributism against any small business that succeeds and becomes medium or big, as if its successful planning, foresight, and industrious activities were odious because they were TOO successful.

In the lengthy quote above, I take it that there may be nothing distinctive about the economics of the "Model Employer" versus a good Christian in outward behavior - they both limit the work day, give holidays, etc. The difference is in their interior dispositions, one intending interiorly to treat people as machines from which to gain a benefit, the other as people to be willing, intelligent partners of mutual benefit. But for either of them, they better get the basic economics right: the correct pricing of supplies, labor, delivery, etc against the price charged, to operate a going concern. That basic part of the equation doesn't much care about the motivation, though certainly God does. Eventually, a successful business normally will garner enough leeway to have the luxury of having labor practices that distinctively promote good human arrangements more so than the "Model Employer" does, but in the beginning of a business that often isn't possible. We all know of small owners who drive themselves to 14 and 16 hour days, far beyond the "slave labor" levels of Giant Corp., Inc., because that's what it takes to get off the ground. I find it difficult to believe that what is good for a small businessman who owns a shop is intrinsically disordered for his employee in terms of labor standards.

I love the idea of most people owning property, especially their own house. I love the idea of many more people working for themselves, who want to, than are now able to under current systems. Having reflected on human nature, I find it difficult to believe that nearly everybody ought to be their own boss. Some people are simply not cut out for it. I also find it difficult to believe that the people who shine as managers of large enterprises - the hospital administrator who excels because he has the mind, temperament, skills, and knowledge all wrapped up together - ought not to have the opportunity to run a large enterprise because large businesses are contrary to humane economics. I also find it difficult to believe, as I have seen family members and friends "find themselves" in the oddest, most abstruse and technical niches, that the ideal "natural" economy only has room for about 200 occupations, because it is essentially rural /agricultural and guild/artisan run. Finally, I find it difficult to believe that a proper understanding of human nature and human good will disregard the principles inherent in "economies of scale" as if they were not, also, truths of the natural order.

Well said, Tony. Alas, some otherwise sound thinkers and preceptors have fallen into this studied ignorance of economic reason, and thus the gains and real progress elude them.

It is interesting to note the transformations in labor occurring right under our own noses.

Uber is but one example of many where independent proprietorship is again a working model. Drive what free hours you have. Pick up some extra income.

The upshot is that workers may chose their own schedule, hours, and workload. One would have thought that distributists and socialists would hail such achievements.

Instead, political labor is indifferent or hostile. The Parisian cabbies burned cars, damaged property and shut down the city back in the summer over Uber. Ruthless and violent defense of privilege, which the French Socialist government encouraged.

Our own labor laws are on the verge of shutting down Uber and companies like it. The distinction between statutory employees and independent contractors is pretty well-defined in labor law, both state and federal, and as it happens, a lot of these "gig economy" companies are skating on thin ice in considering their contractors to be contractors rather than statutory employees. I think that's sad, because it's going to squelch a lot of innovation in an economy that desperately needs new ideas. But I think the squelching is going to happen, and it's going to happen because of regulations that have long been in place, not because of anything new. I read an interesting (and long) article that I probably couldn't find again that said that some gig companies have switched voluntarily to a much more expensive employee model. Others are starting that way from the beginning because they can assure investors that there won't be expensive lawsuits down the line. If I were starting up a business and wanted to use the gig model rather than the employee model, I'd probably have to either a) keep it super-small, so that I could just trust my branding to the few friends I took on as contractors, without any appearance of controlling them like employees or b) let branding go to the winds and hope for the best while leaving the contractors to be sufficiently independent that there could be no question of their status.

It's a real dilemma.

Before I reply about failings or otherwise of distributism, a point about moral status of profit motive in ancient and medieval times which has been neglected here.

For medievals, profit motive itself was suspect irrespective of any simultaneous intention to benefit others. Thus, trading was held to be morally tainted. One gets the impression that for medievals, any act that is ordered to the self is selfish per se and thus not commendable.

For ancients, the moral or commendable act is ordered to the good of the City and not the good of neighbor. Acts ordered to self are selfish and not commendable.
Thus, the legal mutually beneficial agreements between city officials and public sector unions that overly burden future tax payers are immoral and also dubious are arrangements of the sort Newt Gingrich made with Fanny Mae.

When the free market apologists are not embarrassed by Randian and Misean enthusiasts, I do not see why distributism needs to forever apologize for socialist-sounding elements present in it.

Having said that, I reiterate that distributism is just "several property" that Hayek wrote about in Constitution of Liberty. For Hayek, the distributed or several property was the best safeguard for liberty. Thus, distributed property is sine qua non of subsidiarity.

Distributism says that property must be widely distributed in a community. There is no claim whatsoever that everybody should own a house or a business. This misleading claim that no distributist ever made is invariably brought up here.

If distributed property is a social and political good then why should not the State promote it? It may be done for instance, the distributists claim, by eliminating certain unfair advantages that big corporations enjoy that are denied to small business owners. Also, the giant corporations tend to enjoy fresh access to the newly created money.

That small businesses growing up to become giant corporations and getting hated by the distributists is again a red herring. Distributism is qualitative and makes no red line that a business may not cross. However, the present character of giant corporations and their effective ownerless condition is highlighted by the distributists. This character is not conducive to operations of the free market on personal principles.

A individual does not become a property owner merely by having units in a mutual fund which owns fluctuating shares in a variety of giant corporations. The merely financial ownership does not lead to any exercise of
ownership functions that are ordered to due stewardship of the Earth and its resources. Thus, financial capitalism actively retards due stewardship. This significant failing, characteristic of this stage of capitalism, is noted only by the distributists. The physical environment you say is cleaner but is your social environment cleaner? Do you see men acting like property owners with sufficient stake in affairs around them?

Distributists are hardly known for "ruthless and violent defense of privilege". It is quite an old and familiar trick to confound distributism and socialism and this makes one wary of the intentions of the perpetrator.

Distributism is the thesis is wealth distribution is a part of the common good. If you disagree, I would want you to envisage a situation where half of the nation comes to be owned by the Chinese Communist Party entirely by legitimate means and 25% by Saudi royal family.

The old canard that the distributists can not abide ANY man as an employee may be dismissed again. All the distributists claim is a society dominated by employees would not be as conducive to human flourishing as one dominated by the mass of owners. This allegation sits oddly with the simultaneous allegation that distributists are disguised socialists.

Both socialism and capitalism mean annihilation of property. It is plainly seen with socialism but capitalism too is unfriendly to property. (1) By robbing the great mass of people where they held some property to a state of property-less wage-earner status.
(2) Deluding them in the notion that financial property they have is equivalent to the real property they had and all men want.
(3) Concentrating all wealth of the nation in relatively few gigantic anonymously owned corporations that nobody is responsible for and thus are not responsible for anybody.

Property means a stable and public relation between a person and the thing owned. This is the property the distributists want the state to protect. It is the delusive financial property that . abets gigantic-ism and the distributists certainly have no love for it

For medievals, profit motive itself was suspect irrespective of any simultaneous intention to benefit others.

For the medievals who objected to profit in trading, they were wrong. Flat, point blank, unmitigatedly wrong. The trader who buys bulk and sells retail is performing a service: he is enabling the maker to do what HE does well - make the object - without having to learn to sell well, which is a separate task. He is also taking on a cost: warehousing the objects until buyers are to be found. He is also taking on risks: that all of the objects can be sold (before spoilage), that some other object won't come along that is even better or cheaper that people will prefer, etc. And the time he puts into handling the service, the cost, and the risks, is itself remunerable time. Thus he is clearly justified in charging more for the items than he paid, and reaping a profit that both covers his other costs and that pays him for his time.

For the trader who transports as well as sells goods, there is obviously an additional just reason to charge more.

One gets the impression that for medievals, any act that is ordered to the self is selfish per se and thus not commendable.

For ancients, the moral or commendable act is ordered to the good of the City and not the good of neighbor. Acts ordered to self are selfish and not commendable.

To draw that kind of line between "the good of the City" and "the good of neighbor", and again between "the self" is a very disturbed way of talking about the good.

The first thing to realize is that while the City or Polity is a real thing, and has as its purpose the common good, it is not a subsistent being. The common good is not a good enjoyed by "the City" as a man's good is enjoyed by the man. The common good is 'enjoyed by the City' by way of it being enjoyed by the men in the City. If the City government achieves some successful operation in order to secure the common good, at the expense of the death of all the MEN IN the city, the common good cannot be enjoyed at all. The good of the City resides in the men that make up the City, not in "the City" considered on its own as if it subsisted on its own.

The second thing is that man is an INTEGRATED being. He is designed, from the ground up, so that all parts, faculties, and aspects cohere towards a complete whole. Hence, a man's social aspect is coherent with his other aspects - including physical and animal aspects - toward a totality of good that is interpenetrated by all the aspects. It is nonsensical for a man, in a healthy society, that he should order his actions to the good of the City, ie the common good, and that he would NOT ALSO order his actions so as to be directed toward the good of his family and his own good. The good properly understood will be, if he is well ordered, a series of actions and objectives that correctly order the various aspects of good so that they are compatible and coherent: he will want to eat well in order to be a good soldier or servant at need for the city, AND to be able to work well on the family farm, AND to provide a happy social dinner table for his family and an invited neighbor, AND to stave off his personal hunger pains, AND to satisfy his sensual appetite for tasting good food, AND for the satisfaction of his intellectual grasp of a well=balanced table as reflecting a balance of the natural order (i.e. different courses highlighting different tastes, the meat and the wine chosen to complement each other, etc). These desires will reside all together in the same man, and in a Christian will be all subject to the desire to please God. It is not an either/or, it is not "for the City" while not being "for the self".

Reflecting this in a wholesome economy, a man doesn't contribute to the economy of the City essentially by neglecting, foregoing, or repudiating his own good, nor even by repudiating specifically those aspects of his good centered on his physical or animal aspects. If it is wholesome, it allows men to apply themselves to the entirety of the good for men. The appropriate natural economy allows a man to buy and sell goods and services that appropriately reflect different parties' own marginal utility, so that the whole effect is to direct efforts well regarding surpluses and deficiencies taken all together, and to promote men behaving with love as well as with gain and improvement as their motives.

On the forcible imposition on distributist ideals, it must be recalled that the free market and associated physiocratic notions of property were imposed on reluctant populations by strong central govts in Europe from 18c onwards. The people mostly preferred to cling to their customary notions of property which were dubbed unrational by 18c physiocrats.

Which is pretty much irrelevant, even if true both in the letter and the spirit, to whether distributism (to the extent that it can actually be pinned down to a concrete set of ideas at all) is a good idea right now.

I reiterate that distributism is just "several property" that Hayek wrote about in Constitution of Liberty. For Hayek, the distributed or several property was the best safeguard for liberty. Thus, distributed property is sine qua non of subsidiarity.

Distributism says that property must be widely distributed in a community.

What is the force of "must" there? By law? If your point is that laws should be written to encourage and support that property be held widely, without placing unnatural restrictions on behavior or property, that's kind of what I can agree with, though I am not sure just what measures will do so. If the point is that laws should be written to forcibly create the situation that property be held widely, or that forcibly restrict behavior that might accumulate large amounts for no other reason that it is large, or to forcibly take away large holdings solely because it is large and might be better held widely than narrowly, THAT I don't agree with.

One of the trigger points when it comes down to practical reality is laws about incorporation, partnerships, and the like. For example, in most states LLCs limit personal liability potentially even more than in a corporation, and protects the assets therein pretty darn strongly. Suppose a person (a human being, Sam) holds a 5% member interest in an LLC worth $20M, (so his own interest is worth $1M) and he has a judgment against him on an entirely unrelated matter to the tune of $100,000, and suppose that the LLC holding is just about his only asset. With a normal asset, the judgment would mean that the creditor could put a lien on the asset and possibly force its sale to get his $100K. With the LLC, all the creditor can do is become an assignee of Sam's member interest, and thereby has a direct claim to any distributions to the members that the LLC decides upon. If the LLC refuses to distribute, the creditor can do nothing, nor can he force a sale of the member interest, nor can he force a sale of any of the assets of the LLC to create liquidity. The creditor cannot even VOTE in member decisions like a member, Sam retains that.

That, to me, represents an excess of structured protections of property rights for group-held property. And these protections are set into state law.

However, generally I want to say that people ought to have the power to do anything rationally feasible with their property (i.e. that reasonably comports with enjoying it, preserving it or producing with it) EXCEPT in order to hurt other people, and normally law should uphold their contractual agreements for same. So, I tend to say that people have a right to associate not just their PERSONS with other persons, but to associate their PROPERTY with other property, in order to achieve group purposes that cannot easily be achieved separately. And that we need to be cautious in constructing restraints to that - to formally construct only such restraints as are _necessary_. So, what principle(s) are thus implied that allow us to spell out how far society will respect and support contract provisions for corporately held property, and how far we will NOT respect such contractual provisions?

I suspect that the GENERAL answer is that for activity within the corporation (or partnership, or LLC), the state will uphold all contract provisions not clearly designed to harm a person, but for transactions between the corporation and other parties, such principle doesn't apply and cannot control. So, even respecting the basic principle of subsidiarity and allowing people to associate and contract with others, the state is free to make more or less tight rules on such things as how your deciding to put your own property into group-control in a corp or partnership impacts personal liability with respect to events OUTSIDE of the corporation. That making laws that allow for tracking liability right through the corporate shell to the holders thereof, when the behavior at issue is not within the corporation but between the corporation and another party, does not violate the principle of subsidiarity.

Maybe this would mean most people will only put their investment money into the hands of people they know personally and trust? Would that be a sufficient way to reduce the size of entities? I am unclear on a lot of the ins and outs of property held via aggregate entities, and the effects (including secondary and tertiary), so I am under no illusion that what I just suggested would actually work. Or what WOULD work to draw us back from "finance capitalism" to a more reasonable, more wholesome free market structure.

Distributism is the thesis is wealth distribution is a part of the common good. If you disagree, I would want you to envisage a situation where half of the nation comes to be owned by the Chinese Communist Party entirely by legitimate means and 25% by Saudi royal family.

To the extent that Distributism is strictly about the thesis that wealth widely distributed contributes to the common good, I agree with it and never had any problem with saying so. As you would find in any and all of my posts and comments over the last 4 or 5 years.

But when I read what Distributists like Belloc and Chesterton actually say when they describe the distributist society, it's more than that. With Chesterton's famous "3 acres and a cow" mantra he waxes bucolic and fulsomely about the benefits of getting your hands dirty and in touch with the Earth, its cycles and rhythms, etc. He is implying something more, something specific, other than "widely distributed wealth" lies in his standard.

And I don't buy it. From my teen years to now, I have had a garden in my yard more years than not. And, of those many years, I am pretty sure there has not been a single year in which the cost of my materials ALONE (ignoring my time) has been paid off in produce. When our summers are very dry, my water prices are ruinous - when they don't just forbid watering altogether. When very wet, I get mildews and rot and double the bugs fighting me for the stuff. In my opinion, my main payoff from operating a garden is to convince my kids to get a college education because they sure won't make it as a farmer.

But aside from that: in order to beneficially operate 2.5 acres out of 3 for growing, I would either have to have modern farm equipment, or spend so much more of my time in it that I would not be able to pursue my preferred career well. I produce much more wealth per hour working in my profession than I do working my land, and I like it. I enjoy that work. ChesterBelloc seems to be saying that my preferential enjoyment of my profession, and my preference for putting in productive time in that (which effectively precludes farming 3 acres), is disordered because it prevents my "getting my hands dirty" and living in tune with nature's cycles.

It's kind of like my response to the Pope's offhand comment deriding use of air conditioners. I grew up without an air conditioner. My school didn't have them. I learned to live without. Except that I didn't, not really: I can't sleep in high temperatures, and I NEVER GOT USED TO IT. I always was a light/restless sleeper and always got insufficient sleep during summers when I was a kid, and I do not "make it up" later. And my mental ability reflects poor sleep: like most people, when I don't get enough sleep for several nights, I don't think very well. And yet my profession requires me to think at the top of my game. So, basically the Pope's suggesting that my profession is a luxury, I can do without it. And I don't think that's valid.

If we want to restrict distributism to "wealth is widely distributed" and that alone, I would probably go along with it, as long as we weren't achieving and maintaining that distribution by force.

On the forcible imposition on distributist ideals, it must be recalled that the free market and associated physiocratic notions of property were imposed on reluctant populations by strong central govts in Europe from 18c onwards. The people mostly preferred to cling to their customary notions of property which were dubbed unrational by 18c physiocrats.

Well, what's a "physiocrat"? I don't know what data you are thinking of in saying "imposed on reluctant populations by strong central govts in Europe from 18c onwards". I don't know what events that description applies to. Seems to me that there were an awful lot of serfs in Europe in the 700s to 1200s who NEITHER owned the land they farmed nor had a choice about whether they farmed or not. Is that the property at issue? I am more familiar with the settling of America, did that also have that "imposition" that Europe had?

That making laws that allow for tracking liability right through the corporate shell to the holders thereof, when the behavior at issue is not within the corporation but between the corporation and another party, does not violate the principle of subsidiarity.

Not sure what you are suggesting there, Tony. Would this or wouldn't it protect other personal assets from seizure in the case of a suit against the corporation? Because that's one of the whole points of an LLC, and it seems to me a good one. If someone sues an LLC because he was injured by their product or whatever, he can't take the individual houses of those who hold a member interest in the LLC if he wins the suit.

I am saying that that kind of protection of personal assets from seizure in case of a suit against the corporation MIGHT not remain if we re-examine how laws promote and protect the good. For instance, we might make it quite different between corporations, partnerships, and LLCs, so that one category has virtually no protection, one gets a lot, and the other in the middle - and then limit who can get the most protective form (or what purposes get the most protective form). (For instance, maybe only non-profit corporations get full protection, kind of like the good-samaritan laws protecting do-gooders in emergencies from ill effects.) I am suggesting that while subsidiarity has a lot to say about limiting state regulation of property rights with respect to FORMING cooperative entities with your property, it has rather less less to say about protection of property outside such entities.

I happen to think that the "protecting your personal assets" in case of a lawsuit is very likely the wrong way around the problem. If a person REALLY IS morally (i.e. personally) responsible for my loss, why do we want to let a corporate shell protect his personal assets? If he is NOT personally responsible, then I shouldn't be able to get his personal assets anyway. So the question of corporate responsibility alone is something of a red herring, in my mind. If GM makes an unsafe car, knowingly, and hides the fact of its being unsafe, knowingly, then GM may be as a corporate body responsible for losses. But my impression is that it is IMPOSSIBLE for GM to be actually (regardless of what the law says) responsible for people's losses without human beings also being responsible for refusing to take the right actions. If the stock holders elect a president / CEO of GM who is known to be a hard-nosed, go-get 'em, no holds barred "just the bottom line" kind of exec, who ignores safety and other concerns for profit, then WHY NOT hold responsible the stockholders who voted for the executive? They are, actually, morally responsible for putting into that place someone who was serving those objectives: they did it knowingly. They didn't choose to elect a guy who said "we'll always do the morally responsible thing, no matter what else." Why should we insulate them financially from their moral responsibility of knowingly choosing someone like that?

Can't prove that they KNEW he was like that? Well, then you can't prove they were morally responsible for his behavior like that, can you? So they can't be held liable. But the EXEC knew he was responsible, we can prove he knew what he was doing, and he can be held personally liable.

Largely, I think instead we need to refocus efforts not on litigating responsibility for losses, but on making good decisions about wealth on the front end. Responsibility for losses are always after-the-fact judgments, and while it is human nature to want someone else to take the responsibility for your misfortunes, we don't need a whole arm of government promoting that kind of thinking. Correctly limiting JUDGMENTS for failures of responsibility is certainly difficult, but I would prefer to achieve it mostly on the front end, people just taking responsibility for their own selves and trying their best to do the right thing, whether in a corporation or not.

Wow. I really disagree with you on that. I see that protection against personal liability as a wise limitation on the rapacious litigiousness, greed to "soak somebody," and blame-hunger of human nature (especially evident in our society right now) and its ability to ruin individual lives. All you have to do is read a few 19th century novels in which a stockholder blows out his brains because his company went under and his family is going to be starving because someone or other is going to successfully blame him, personally, to see the un-wisdom of abolishing that corporate veil. Trying to figure out who, *individually*, was responsible for the unsafe car or what-not and then allowing him to be personally ruined is, in my view, an _extremely_ unwise way to go. It would stifle the creation of legitimate enterprises, enterprises that have been helpful to large numbers of people (in the form of job creation, etc.), and would be extremely bad for the common good.

Well, I didn't lay out HOW we might reduce litigiousness all 'round. My belief is that most torts are egregious wastes of time (that of the court's, obviously, but also the defendant), and would very harshly penalize such egregious cases.

Secondly, I believe that like no-fault divorce, no-fault corporate liability (that is, no personal fault) leads to too darn many cases. It leads to "I got hurt in range of your company's sight, so your insurance is going to pay for me." That turns out to be LITERALLY the result in some cases: my neighbor slips and hurts himself on my driveway through no doing of mine in ANY way, and my home insurance covers the chiropractor's bill.

That's wrong. There are such things as accidents - which means _not-responsible_, it doesn't mean "I got hurt so somebody is going to pay". There are such things as misadventure. There are such things as unforeseen outcomes. We are human beings: since nobody is at the top of his game at every single moment of his day, everybody is going to make errors that (at other times, when he is firing on all cylinders) he wouldn't make, which are STILL "accidents" properly so called, and should not rightly be judged a case for restitution. Even the best marksman in the world gets a shot or two off in a 1000. We shouldn't hold him to a standard that says "we know you have the capacity to hit the perfect center, so your failure to do so in this one instance is tortious and you are liable." That's wrong. A doctor who makes a judgment call between diagnosing A or B, shouldn't be liable for missing the guess merely because, according to the best practice he COULD have picked A. Even if there is, slightly, better reason to have chosen A.

I know doctors who are as conscientious as it is possible to be (given we are human) who are being sued, and the SHOULDN'T be sued. I don't merely mean they should win the lawsuits. I mean they shouldn't be sued. They exercise such care, and are KNOWN to exercise such care, that it should be a no brainer that even if, perchance, they had a bad day and they didn't provide the best possible care, THAT'S NOT TORT WORTHY. The plaintiffs should be penalized severely, MUCH more than just the cost of legal fees and the doctor's time.

" and blame-hunger of human nature (especially evident in our society right now) and its ability to ruin individual lives.

And my third point is that punitive costs for things ought not go to the extent of "ruined lives" unless you can prove (a) the plaintiff had his own life ruined, AND (b) the defendant knew that's what he was doing. Then, it seems correct, just, that the defendant have his life ruined. People should be taking responsibility for their intentional acts, at least, where they knowingly engaged in ruinous behavior. But short of that kind of behavior, damages should not make a person destitute - we can go after personal wealth without turning him out of house and home. Bankruptcy courts allow creditors to get most of a person's wealth, up to a point and no further, leaving them a home, a car, and basic personal effects so they can continue living. No reason legal damages can't have the same limits.

Nonetheless, what I understand you to be proposing would, unless I'm misunderstanding, amount in practice to the elimination of the LLC, which I had previously thought you opposed. If the corporate veil does not protect against personal liability in suits against the corporation, or personal liability for corporate debt (another very important function), then most (all?) of the point of it is gone.

Not necessarily. Let's take liability for corporate debt. If you start a small corporation, say you incorporate your small business, but you can't raise enough capital by selling stock to really get rolling, you need a loan, to the tune of 200% of the book value of the corporate assets. Typically a bank isn't going to lend you money beyond 80% of book value of the assets - if they are either real estate or easily sold machines, not if they are unique items hard to sell. So you still need 120% more. You stake your PERSONAL home against the loan, which is just enough to cover. If the business flops, the bank is going to sell the company assets AND your home, leaving you out on your ear, and there is no legal problem with "piercing" the corporate veil, because you wrote that into the loan agreement.

In any case, the LLC is nearly brand new. Most states created LLC laws in the 1990s. There is no way we have to understand American market laws as fundamentally tied to LLCs as a normative structure. Corporations and partnerships, perhaps, not LLCs.

I have no problem with using some kind of corporate or partnership structure to protect personal assets from corporate _debt_ unless the corporate persons themselves broker their personal assets for corporate benefit. THAT part of corporate liability (or for partnership or LLC) is not on the same moral level as moral tort liability for your intentional actions, and so I am fine with treating it differently. Unless, for instance, you clearly and personally engaged in irrational and irresponsible behavior with regard to corporate assets, behavior not even plausibly directed to the good of the corporation. That, again, would seem to make you personally morally responsible for loss of assets or value for the corporation.

Lydia, do you agree with me that the LLC example I gave above (12:30pm) represents excessive protection of Sam's "personal" assets merely because they are held in LLC?

It appears that the reason for the charging order laws, which are what you appear to be referring to, is to prevent the other members of the LLC from being forced into an involuntary business relationship with the creditor or the person claiming the judgement. That makes sense to me. Moreover, as far as having or not having a vote, even in a non-judgement situation, if the member sells his membership interest, that person doesn't automatically get a vote unless he is approved as a new member by the other LLC members. (I did all this as research in response to your example, but it appears to be reliable.) So, again, the set-up is consistent. Just because Sam, who is a voting member, owes you money, you don't get to waltz in and tell Sam's fellow voting members, "Say hello to your new partner." That makes sense, just as it makes sense that Sam cannot sell his vote by selling his membership interest.

Moreover, Sam himself is in a bind if there is a charging order against distributions of his member interest. While his creditor or the person for whom the judgement has been made (ex-wife, person who sued him, whatever) cannot force sale of his membership interest and thus "get at" the full value of the asset directly to satisfy the judgement, neither can Sam! If he sells his membership interest, the proceeds become his ordinary assets and subject to being seized to satisfy the judgement. If he doesn't sell, and he can't receive any distributions, then he's getting nothing financial out of his membership interest, which drastically undermines the notion that it is presently of financial value to him or that he is enjoying its financial value in defiance of his creditors or successful litigators. So it's a stand-off, which will presumably be decided by patience, bluff, deciding how to wait, negotiation, etc. Depending on the circumstances, Sam could easily be the one to get the short end of the stick in any resulting settlement.

So, no, it is by no means obvious that that set-up represents excessive protection of his financial interests by being held in the form of a membership interest in an LLC.

Yes, I agree that if you have _offered_ your personal assets as collateral for corporate debt, they should be seizable if the corporation defaults. But otherwise, no, you shouldn't be liable for corporate debt just because you are a shareholder or member of the corporation. I take it we agree on that.

Let me also point out that the scenario you sketched above in which lawsuits for the unsafety of a car could be pressed personally against stockholders in GM would presumably toss out the liability protection of the corporate veil even for types of corporations other than LLCs--those that have been around longer. I think that proposal is a really, really bad idea.

Tony
I would use an example of a hunter that goes 50 miles into a wilderness and brings his hunt back. The physiocratic definition of property would give the entire animal to the hunter but I doubt if any primitive man would. He would be ruled by the customary tribal law as to the ownership. The physiocrats were the modernizing party in pre-revolutionary France and wanted to abolish customary property that generally ruled. Such as customary right to put market stalls in such


City being composed of individuals does not mean that some acts are most properly considered as directed to the good of the city Suppose a grain trader that raises prices after learning of a future scarcity. His act is directed to the good of the city if he intends to alleviate future scarcity but is selfish if he is intending to make profit for himself and is definitely not commendable

The physiocratic definition of property would give the entire animal to the hunter but I doubt if any primitive man would. He would be ruled by the customary tribal law as to the ownership.

Then you aren't going primitive enough. There is a natural law that comes before tribal law or custom. Consider Adam and Eve, removed from the Garden. There was no tribal law, and yet they had to acquire and decide on the use of goods. On what BASIS did they so act? There could not possibly have been tribal law or custom to circumscribe limits on them. Consider the account of Cain and Abel, they made offer to God of some of their respective produce, they did not first consult with the tribe about the matter.

All positive law and custom comes out of a prior reality that obtains regardless of tribe or polity: the physical world exists and is not of its own nature assigned to this or that person, but is available (in principle) for a person. That availability to men does not ARISE THROUGH custom, so men can act upon it without there being custom providing the "right". The root permission for an object becoming under the dominion of THIS tribe, or THAT person, cannot be tribal law, because the tribe does not prescribe nature. So, no, I reject your position that there is no natural law, only positive law and custom, about objects coming under the dominion of men. Which Pope Leo XIII and Pope Pius XI both indicated in encyclicals.

And in the physical order, an object cannot come under the ACTUAL dominion (i.e. as regards actually being controlled and/or used) until that happens by some human being acting, not merely by the tribe or polity prescribing a law permitting it to happen. If a tribe claimed dominion over the moon, that didn't make the moon actually under their dominion. Mere words aren't enough, without some prior relationship of dominion.

Custom and positive law regulates a great many aspects of ownership, and rightly so. And when custom has provided that a certain thing is owned in common, disregarding custom to impose a new specter of private ownership, without authority to change that custom, is certainly offensive. I am not siding with those who filled their pockets with what was properly understood as common property. St. Ambrose's comment about that is sufficient. But the theory that ALL property by nature subsists as common property until it is assigned to private ownership by custom or law is just bunk.

It appears that the reason for the charging order laws, which are what you appear to be referring to, is to prevent the other members of the LLC from being forced into an involuntary business relationship with the creditor or the person claiming the judgement. That makes sense to me.

Me too. That's why I find it difficult to understand why states would grant (except out of an excess of protection for some) that LLCs can impose a rule that forbids sale of a membership outside the group without 100% unanimous approval, EVEN when the prospective sale is to the government (for instance), rather than transmute the restriction to a right of first offer: If Sam needs to be divested of his membership, the LLC can either buy it outright or submit to it being sold to another party. The former permits them to keep control between themselves if that's what they prefer, if they don't want an outsider involved.

While his creditor or the person for whom the judgement has been made (ex-wife, person who sued him, whatever) cannot force sale of his membership interest and thus "get at" the full value of the asset directly to satisfy the judgement, neither can Sam!

A great many LLCs are family-run. In such a case, Sam is probably getting indirect benefits of the family retaining the assets (his portion) and the investment returns generated by retaining control of his portion, even if he isn't benefiting directly. It is well known that CONTROL of an asset is worth a significant amount - business valuations typically account it at between 10% and 30% of the book value. For purposes of ascribing control of an asset, several laws attribute to Sam the "ownership" of assets owned directly by family members, simply because of the family relationship, in reflection of this fact. So yes, Sam is going to suffer from not being able to benefit directly from the asset (i.e the asset that he had to hand over to someone to meet his just obligations), he isn't losing ALL benefit of it, the way he would if he just sold a car and handed over the cash.

Depending on the circumstances, Sam could easily be the one to get the short end of the stick in any resulting settlement.

I fail to see how, if he loses every stick and twig of the asset in the end, this is to be considered worse than his simply selling it for its actual value and handing over the proceeds in full. The assumption is that he owes an amount equal to ALL of the value of the membership: losing every fiber of benefit is the just result, it's what pays off his just obligation.

(Interestingly, if the creditor becomes an assignee of the membership held by Sam, and if that assignment remains measured by the $100,000 owed, rather than a putative "he now holds title to all of the pecuniary value of the membership interest, whatever that should be now or become in the future", then result COULD be that the creditor ends up (say, in 30 years when they decide to dissolve) a lesser amount than $100,000, if the membership values drop, but NOT MORE THAN $100,000 if the values increase. Sam might benefit on any upside swings but not lose on any downside swings. I don't know if that's how the charging orders would work, possibly different states will work it differently, but it is at least logically possible given that the creditor doesn't get the title to the membership itself.)

Let me also point out that the scenario you sketched above in which lawsuits for the unsafety of a car could be pressed personally against stockholders in GM would presumably toss out the liability protection of the corporate veil even for types of corporations other than LLCs--those that have been around longer. I think that proposal is a really, really bad idea.

But we agree that our society is too litigious in general, and we would be better served by rules and customs that precluded the perceived need for such actions on such a large scale, yes?

And I think we agree that SOME aspects of corporate law are conducive to less than ideal behavior, without necessarily sufficient offsetting goods in return. I.E. there are aspects of corporate law that could be improved. Is that right?

All I am proposing beyond that, really, is that one of the results of corporate law (and current custom) is a behavior of refusing to be personally responsible for your own personal actions and decisions, as if "I was an officer of the corporation" meant I no longer had an obligation to be honest, or to be fair, or to respect others - that becoming an officer meant no longer being a human being with human morals attached. While it is not, automatically, the place of LAW to fix ills like this if they become rampant, we cannot ignore the fact that positive law is sometimes a contributing cause, and THAT can be changed. I don't know whether allowing a broader piercing of the corporate veil is the right solution, but the reality is that we ALREADY (and have always) allowed it in certain limited ways. Conspired fraud by corporate officers is one. So it's not like there is an absolute wall of separation. It is possible we need to tweak the rules and make the opening a little larger. Or, as Lydia says, that might not be good. Corporations are not new, but the particular manner in which we effect corporate protections has evolved a lot, and currently we embody a set of protections that didn't exist from the beginning. Given that much of the evolution occurred at the hands of courts, or legislatures sometimes in the hands of business interests, I am not confident that the hodge-podge we have currently is necessarily better than an arrangement more thoroughly thought-out from top to bottom.

I.E. there are aspects of corporate law that could be improved. Is that right?

You could pretty much pick any area of law at random (contract law, patent law, and on and on) and say that probably there are aspects of it that can be improved. I have no *particular* areas of what I would call corporate law that I *know* need to be changed.

Generally in the vicinity of these discussions--e.g., large companies out-competing small ones--what I reach for are things that probably don't count as "corporate law." These include direct and unequivocal sweetheart deals with large companies. Or actual direct subsidies. Also onerous regulations that drive smaller companies out of business and discourage entry. An example of the latter would be the ridiculous cost of compliance with the Americans with Disabilities Act in terms of making buildings handicapped accessible.

I doubt that these count as corporate law, though.

Right, I agree that all of those are ripe for fixing, and don't properly fall under corporate law.

Consider it this way: 60 or 70 years ago, a person who started a business would just have a business. 70 years ago my uncle started a restaurant. No corporation. One of my neighbors ran a grocery store. Another ran an ice cream plant. A third ran a vending machine business. None of these felt the need to incorporate, and they were fine for years and years, decades. Now, nobody would do any of these without incorporating within a year's time, if not right out the gate. Why is that? Because changes in law (either written or judicial rulings) make it so. There have been changes in the business climate that push the ordinary mom-n-pop store to incorporate, where before running the shop as a sole proprietorship was completely satisfactory. I don't think those changes are all healthy, and I would say that they are part of "corporate law" either directly (i.e. rules for corporations) or indirectly (i.e. rules that put you in danger if you aren't incorporated).

I think that the regulatory climate, which _includes_ corporate law, creates too many perverse incentives. One aspect of that is the climate of torts and protection from torts, together with the incentives to dehumanize corporate decision making. Which is just one more piece of the puzzle of the depersonalized market place.

the theory that ALL property by nature subsists as common property until it is assigned to private ownership by custom or law is
But is this my theory? ALso, there is a matter of the incalculable debt each person owes to his tribe or polis. The polis can ask an individual to sacrifice himself for it. Why can't it ask for a certain share in what an individual has acquired?
But is this my theory?

I don't know. It is an actual theory out there. It is also consistent with what you said above. Maybe you have a more nuanced theory. Maybe you don't have a theory. You are allowed to suggest details. And (even better) to argue them from commonly held theses.

ALso, there is a matter of the incalculable debt each person owes to his tribe or polis. The polis can ask an individual to sacrifice himself for it. Why can't it ask for a certain share in what an individual has acquired?

The nature of man, and subsidiarity, that's why. Although man is social, and although he owes a great deal to the communities (plural, not just the highest) in which he lives, the good which those communities experience does not constitute the ENTIRETY of his good. His good also consists in eating good food, and in other goods that are enjoyed singly or in twos (such as the marriage bed, and friendships), not as a community of many. If man's social obligations take ALL of his energy, ALL of his goods, ALL of his attention, ALL of his thought, he will be like an ant or a bee, not a human being. No, man is social, and also individual. Both at the same time. A hint of this comes through with the fact that man's last end, his ultimate goal, will be enjoyed without the polity of the temporal order. That polity is indeed a great good, but man (in his immortal soul) surpasses it as well.

Subsidiarity says that action and decision-making belong at the lowest organizational level at which it can be achieved well. For many of man's needs and actions, that level is the level of the individual. What to eat for dinner tonight? Do we call up the Politburo and ask? No, we decide for ourselves. Who to marry? Do we call up Sun Myung Moon? No, we decide ourselves (or, at most, at the family level, depending on the culture.) Deciding what career you should best pursue? Should we go by the old rule that you get the career your father had? Not only did that not universally make sense at the time for purely problems of sheer possibility, (if there was no more land for the farmer to hand off to his 7th son - or a king with his 7th son, for that matter), it never was or could be universal and never was enforced universally because it was contrary to human nature to force pegs into such shapes. There is no natural law rule that takes the decision out of the hands of the individual. Likewise, while it is natural law that men should contribute to the welfare of their state / polity, the natural law DEFAULT position is that except where the common good requires it, a man's property is for him to decide how to use best, because the entirety of "the good" requires that many decisions be made at the individual level, too.

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