Commentary on the economy, the markets, and business

Larry Lessig says corporations are like pet tigers (personally, I prefer guinea pigs)

From a Larry Lessig review of Robert Reich's new book, Supercapitalism (via Ezra Klein):

[W]e need to understand the nature of the corporation -- to make money -- and come to love it, and yet, to keep it in its proper place, just as you can love a tiger, but know that it's not the sort of thing that should play with your kid. Corporations are not more efficient governments. They are instead increasingly efficient money making machines. And while there's nothing at all wrong with money making machines -- indeed, wealth and growth depends upon them -- there is something fundamentally wrong with trusting these machines to restrain the drive for profits in the name of doing the right thing. The cushion that enabled that in the past (relatively limited competition) is gone. The job of GM is even more now to make money for GM.

Recognizing this point forces you to recognize how important it is that we make government work. It is government's job to set the appropriate limits on corporations (and individuals) so that when corporations and individuals pursue their self-interest, they will not harm a public interest. If government were doing that sensibly, it would force carbon producers to internalize the negative externality of carbon (something our current government doesn't do), just as it would force those who benefit from creative work to internalize the positive externality of creativity (something our current government is obsessed with doing).

And this leads to the link with the work on corruption: for notice (surprise!, surprise!), government is pretty good at forcing internalization when it benefits strong special interests (again, copyright), and not when it harms strong special interests (again, carbon).

What's striking to me about this is the echo of Milton Friedman famous 1970 New York Times Magazine essay, "The Social Responsibility of Business Is to Increase its Profits," in which he wrote:

In a free-enterprise, private-property system, a corporate executive is an employee of the owners of the business. He has a direct responsibility to his employers. That responsibility is to conduct the business in accordance with their desires, which generally will be to make as much money as possible while conforming to the basic rules of the society, both those embodied in law and those embodied in ethical custom.

So Lessig basically endorses Friedman's main point, demonstrating yet again how it has gone from very controversial in 1970 to commonplace today. He just sees that "the basic rules of society" that corporations are supposed to follow aren't set in some kind of corporation-free vacuum. So how do you fix that? Lessig apparently gave a lecture on the topic last month, which appears to be available only in video form. I think he says the Internet will save us. I'm dubious, but I'll reserve judgment until I take the time to watch it.

  • Print
  • Comment
Comments (5)
Post a Comment »
  • 1

    "Corporations are not more efficient governments."

    Of course, corporations are not trying to be governments at all...they are only trying to make money better than the next guy.

    Let's look at this. Sovereign governments do not create wealth themselves...they underwrite their activities by collecting revenues (taxes) from their own GDP's...they take a piece of the earnings generated by the corporations organized within their jurisdictions.

    Sovereign nations are out of the "military imperialism" business. In some ways this is sad...because military adventures and the annexation of weaker neighbors were the activities countries were best at.

    At this point, financial capitalism is the only competitive arena available to governments. It follows that governments must work closely with corporations to maximize their mutual best interests. When in doubt, this process subordinates individual citizens...in the interest of the common good...that is, whatever seems to be best for the sovereign entity itself.

    The question regarding how we might get to better government remains...

    But, better at what? Social services and civil liberties rather than national security tasks. The problem is that sovereign governements are simply not very good at sustaining cultures and managing social behavior.

    In the past the princes turned to the priests to gain control of their own citizens. Failing that, the government simply crushed cultures that conflicted with its own immediate agenda.

    Global civilization is rapidly moving past that sort of thing. Citizens are becoming resentful of archbishops and police captains.

    A new secular institution that operates both as an economic entity (like a company) and as a cultural unit (like a tribe) to deal from strength and to protect individuals regarding the self-serving inclinations of both governments and corporations might be effective and appropriate.

    Such medium scale partnerships could create their own wealth by competing with other incorporated entities (in the global arena) and should reappropriate many of their own social responsibilities by working "better faster, and cheaper" than any central government does.

    What might be a name for such economic entities, organized as general partnerships and practicing "social capitalism"?

  • 2

    triberations?

  • 3

    Forget looking out for the next man. In this world, you have to look out for yourself and only yourself. Trying to be socially conscious and charitable is fantasy that plagues the human. This fantasy leads to such beliefs as people looking out for one another's interests. This fantasy leads to people believing that being good in and of itself will lead to success in life. This fantasy leads to the belief that anyone with an abundance of money is a bad person and is required to share his wealth with the masses in order to acheive some sort of balance with humanity. There is no one out here more important than me, myself, and I. I will not wait for the government or corporations to provide for my welfare. I will go into the world and take what I want.

    The only truth is life is that if you do not acre about yourself more than anyone else, no one cares for you!

  • 4

    Justin,

    Triberation. Sounds something like Tribulation...but also sounds like Liberation! That's a good way to start. So let's see:

    Tribe + Company = Tripany, Trompany, Trumpany

    Tribe + Partnership = Tribership, Partnatribe

    Tribe + Entity = Trentity, Tribity

    Tribe + Consensus = Tribensus, Contribe, Contrinsus, Contri

    That last one is pronounced like "country". Anyway, this is a process for branding things. Thanks.

  • 5

    Yadgyu,

    You said "Forget looking out for the next man. In this world, you have to look out for yourself and only yourself."

    So let's talk about that. I assume by yourself you mean to include your immediate family. How about your extended family? How close to each individual would your definition of "self interest" reside.

    At the more macro extreme it might be a stretch for most people to be described as "humanitarians" but many of us are at least nationalistic...willing to sacrifice ourselves for the security and freedom of our own countries. That should seem to be appropriate behavior.

    When we play team sports we should be willing to sacrifice our own personal self-interest (and moments of glory) during the game.

    When we work for a corporation we are each expected to do what we are told...even if we do not see how this benefits our personal best interest.

    In short, we are social players. Of course, if we do not sort through those who we might reasonably trust and if we do not dedicate ourselves to those who should depend on us, then we would never get anything accomplished...because you cannot trust strangers...just like your mother always said.

Add Your Comment:

You must be logged in to post a comment.
The Curious Capitalist Daily E-mail

Get e-mail updates from TIME's The Curious Capitalist in your inbox and never miss a day.

Quotes of the Day »

Get & Share
LORI HAAS, whose daughter was wounded in the 2007 Virginia Tech shootings, on a new report finding that officials warned their families more than an hour and a half before the rest of the campus and released locked-down students who were later killed