Corporation as psychopathic? Nonsense!


RealClimate offers some great science and discussion but also reveals a lot of the unvarnished bias you get when true believers discard reason for hyperbole and nonsense.  (thx to JCH for this caveat about caution when confusing a blog with the comments).

This little nugget emerged from a regular commenter:

I called the corporations psychopaths, not those running them, and for a very good reason: they are legally bound to consider only maximising shareholder value. Damage to the environment? No. Deaths among employees, customers or third parties? No. So long as such deaths or damage do not break the criminal law, and will increase profit, that’s what they are legally bound to do. That’s why I said capitalism created these psychopaths…

I’m seeing this bizarre view appear more and more and I’m not sure where it comes from, but probably the film I have yet to see about corporations and how evil they are.    I think it’s called “The Corporation”.

One can easily make the case that corporations *emphasize* profit.  They should do that within legal means – that is the *whole point*.   American style socialist (ie heavily taxed) capitalism is the reason we live large while those in less corporate driven societies struggle just to keep fed and keep healthy, often failing in both measures.

Almost *every single corporation* will typically factor in a variety of environmental and social factors in the interest of the greater good,  the good of employees, and the prevailing cultural and ethical standards.   This is in part due to the laws and prevailing cultural standards as is almost every type of collective behavior, but it is also because contrary to the assertion above, corporations that act psychopathically

In the USA these factors generally make big businesses a great place to work.  Yahoo, for example, has extensive ‘green’ initiatives.  Google not only pays a small fortune in stock and salaries but pays for all the meals and does the laundry…free.  You’ll say these are the exceptions but good stewardship is the corporate rule which is why the west enjoys such high living standards.  That prosperity sure didn’t come from the bureacracy – it came in spite of it.   This is why your rules are better applied to enterprises run by those who generally despise US style multinational corporations.

My challenge to corporate critics is to randomly pick 10 companies from S&P 500. Assign either “mostly psychopathic activity” or “mostly morally acceptable activity” to each and also do that on the “mostly exploits those in developing world” or “mostly helps those in developing world”. In most cases 9 of those 10 will pass both tests if you answer these rationally and reasonably without cherry picking from the companies or company histories as CL has done above.

Here’s a list of the S&P 500 – clearly a good list of companies that powerfully represent a globalized capitalist vision and experience:  http://en.wikipedia.org/wiki/List_of_S%26P_500_companies

Now let’s grab ten of these.  Presumably the first letter should not bias the sample so I’ll grab the first and last five on the Wikipedia S&P 500 list:

3M
Abbott Labs
Abercrombie & Fitch Co.
ACE Limited
Adobe Systems

XTO XTO Energy Inc. reports Energy
YHOO Yahoo Inc. reports Information Technology
YUM Yum! Brands Inc reports Consumer Discretionary
ZMH Zimmer Holdings reports Health Care
ZION Zions Bancorp reports Financials

OK so now the questions to apply to each are whether they are “psychopathic” or not, and whether they are “exploiting more than helping”.     My test allows only ONE to fail either test.

—– to be continued after I get some real work done ——–

—– Ouch, Karma injection alert?   Just after posting I was trying to get Bank of America to credit my card for the Beijing Scam I was conned with in China.   After charge dispute sent me away claiming that becaue I signed the paper it was out of their hands, fraud said (incredibly) that even if they had changed the number it would not be a fraud case – fraud is basically only reserved for stolen numbers.  I’m not sure this makes Bank of America a psychopathic corporation but it’s also true that they are helping perpetrate scams all around the globe by failing in follow up.   Given that I *cancelled my card number* after this they should assume I’m not just ranting without cause.   But backwards Karma injection: Super low interest for one year will save far more than my $85 ripoff from the Tea House.

——– back to work! ————

Hey, double karma reinjection –  B of A eventually refunded my Tea Scam payment.   Would a psychopath have done that?

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About JoeDuck

Internet Travel Guy, Father of 2, small town Oregon life. BS Botany from UW Madison Wisconsin, MS Social Sciences from Southern Oregon. Top interests outside of my family's well being are: Internet Technology, Online Travel, Globalization, China, Table Tennis, Real Estate, The Singularity.
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40 Responses to Corporation as psychopathic? Nonsense!

  1. JCH says:

    The comment about corporations did not come from Real Climate. It came for a the public, which is free to post on RC as long the posts pass their moderation rules.

    As an oil and gas investor, it’s nice to hide behind the skirts of yahoo! and Google. I assumed the comment was directly mostly toward the petrochemical industry – my industry. Down at the wellhead, YaHoo! and Google are thought of as pinko liberal scum. I don’t know how many people die when a search engine explodes.

    I’ll start my list with:

    1. Enron
    2. BP

  2. JCH says:

    exucse me – it came from the public.

  3. glenn says:

    Interesting you chose Yahoo as your example…where Yang definitely doesn’t think he is legally bound to increase shareholder value…lol

  4. JoeDuck says:

    JCH – A very fair point that comments are not at all the same as the blog postings. I don’t agree with many of the comments here and in fact was very annoyed when an RC Commenter said my blog should be added to the list of “denialist” websites when my posts are not reasonably called AGW skeptical since I accept most of the IPCC conclusions about the science. I do think RC has a very powerful “leaning” from the scientists however, and certainly from most of the commenters, and in the case of MBH98 the science itself, which is alarming to me. I belive that the anti corporate bias of the scientists at RC actually colors the conclusions they draw and the way they manage that blog. Evidence of that ? ClimateAudit is rarely mentioned and *very actively* excluded from relevant discussions for which that blog offers important insight. This is ego driven and not in the spirit of good science or blogging.

    I’m not sure what you mean about “oil and gas investor”? Unless you count my $75 fill up a few days ago….wait… I guess fillups are approaching *investment* level money these days, and I add very snarkily “especially if you are flying private jets around to promote AGW mitigation via changing lightbulbs”. [note – I strongly support changing lightbulbs and all other modest cost CO2 mitigations].

    Hey JCH: if you read the original comment is it *crystal clear* he did not just mean Petrochemical, though I’d apply the same standard to that industry which is not immoral by any reasonable definition of that term unless you include the basic greed inherent in the capital model, which I don’t think is “good” but is “acceptable” because it brings long term prosperity to most. Are you suggesting the petro industry is “psychopathic?” !

  5. JoeDuck says:

    Glenn – ha – good one! I guess I could say my point is so valid it’s costing me money as the Yahoo board refuses to turn the extra buck from an MS merger.

    But I guess some would say they are psychos for being so darn stubborn.

  6. JCH says:

    No, but they have made decisions that have done great harm, including killing people. I don’t know that YaHoo! or Google are good comparisons. What they do is not dangerous. Oil and gas is dangerous, and it is ripe with pollution and exploitation opportunities. Many corporations in the industry have botched their responsibilities multiple times.

    By investor, I mean I earn my living investing in oil and gas companies.

  7. JoeDuck says:

    JCH – thx for clarifying and we may agree on most of this.

    I’m not supporting an Ayn Rand moralistic vision here that says companies are wonderful and virtuous. I’m simply saying that on a “moral balance sheet” at least 9 in 10 would pass. I’d guess as many as 1 in 10, or 50 of the 500, will fail the tests above.

    I wish you were blogging about Climate stuff JCH – you’ve got a very interesting insider position and it would be fun to hear your views about climate, profit, AGW, and other things.
    Think about it!

    Also: A very interesting link you posted over at RealClimate. Better get out my wallet?
    http://afp.google.com/article/ALeqM5hfpZd7sSjQH6m99E7NkvDYVL-ywg

  8. glenn says:

    JCH,

    There are plenty of internet companies that cause massive damage to people specifically myspace as an example.

    All they care about is how many bodies they have signed up and how many eyes are looking at their ads.

    It goes beyond just what they do for their employees is really should include what and how they interact with their customers and users that ultimately drive their revenue machine.

  9. horatiox says:

    corporation as psychopathic

    Not phrased very effectively, but the commenter has a point. Galbraith had claimed nearly as much in his discussions of corporate structure. Consider not only “IT” giants, but say Ford, Chevy, Exxon, Occidental (Al Gore’s old patron), big cattle or lumber corporations, etc.

    After sitting in daily 405 traffic jams for a few years, with 1000s of SUVs stretching from Mullholland to Long Beach, it’s hard not to hold corporations (and laissez-faire, really) somewhat responsible for the madness. (Or when shelling out 4$+ a gallon for gas). The mass production of automobiles, and SUVs (especially with oil reserves drying up) could be interpreted as psychopathic. Henry Ford, enemy of the people.

    Executive salaries might be considered psychopathic as well. A Google exec–what’s his name, Brin–making some weighty decisions in his lofty suite, should perhaps make more than Raoul and the crew in the mail room. Some humans might argue, however, that at some point there should be limits to those salaries: or at least there’s a division of labor issue with the corporate hierarchy, and one needn’t quote Karl Marx to understand it. Page and Brin, Stanford grads or something, spin around Mt. View in their Ferrari (or Ferraris, most likely). Esmeralda am RN, a few miles south in San Jose (say SJSU grad) is in her camry on the way to work. Some might say such great divisions in wealth are psychopathic, or sociopathic to some degree. Teddy Roosevelt thought along those lines, one would suppose, when breaking up Standard Oil/Rockefeller: and Google (Ford, Microsoft, etc etc.) might be considered another Standard Oil.

  10. JoeDuck says:

    Horatiox – very interesting reply with good examples of problems, esp. the CEO salary issue which I won’t try to defend because I think it is out of hand as well.

    However I’d say you are making a good case for corporate *rehab* rather than a corporate *frontal labotomy* to keep the psychopath analogy ticking.

    I recently heard somebody say that CEO salaries in Japan and Europe are on the order of 10x average rather than the 100+ we have in the USA, and the commenter (VA Senator Webb maybe?) was suggesting massive reform is in order using indirect legislation (like taxing hedge fund manager money as salaried rather than as capital gained, etc).

    I’m up for reforms as long as you don’t kill the capitalisit goose that is laying a lot of golden eggs which in turn are taxed (along very inefficient lines as I’ve noted many times before) to provide services for society and the poor. For me, fair solutions are important but come before *workable* solutions, which I see as essential. We need to optimize the relationship between profits, prosperity, and safety nets for those who don’t participate in the mainstream economic advantages.

  11. JCH says:

    Yeah Glenn, after I wrote that I started thinking about some of the downsides to the computer and all its reaches. Still, I rather doubt that YaHoo! or Google will ever equal BP’s employee body count.

    I wonder what is the largest unincorporated American business? There are some huge private corporations – Cargill or Koch are two. Is it really corporations that have delivered all these “wonders”, or is it just us?

    On executive pay, I thought at the time that Reagan-era elimination of marginal rates above 50% was a huge mistake. Say you know the federal government is going to take 95% of any compensation above 1 billion. You are not going to see very many executives making 2 billion a year. But when they know they can keep 65 cents of every dollar, then there is no end to how much they will pay themselves. And why not?

    Today’s corporate executives would hire the Pinkertons to kill Teddy, not the union leaders.

  12. JCH says:

    To make it clear, by Reagan the top rate had fallen to 50%.

  13. lethologica says:

    I think the danger of corporate structures is that too many of them shut out criticism from the people who do the actual work, many are organized as a series of mini-dictatorships. As an interactive designer/programmer in the advertising industry, I’ve been mostly tertiary to this decision making process, but I have on occasion seen how the authoritarian nature of corporate hierarchies can be harmful on a number of levels.

    First and foremost, I’m quite simply someone who hates to do something that I find to be illogical or pointless, or the worst reason of all “because I say so”. Over the years, though, I’ve conditioned myself to know what battles to fight in order to maintain a career and “go along to get along”, but my battles usually consisted of merely having to “make the logo bigger”, change this button from blue to red, etc–nothing I’ve ever “gone to the mat” over.

    But now that I’ve been on my own freelancing for the past year, this self-conditioning process looks more and more like collective insanity to me.

    For instance, a old college friend of mine is now a data-analyst for a major pharmaceutical company who has on many occasions casually explained how his job is essentially to participate in a highly sophisticated system of targeted payola aimed at getting doctors to prescribe his company’s drug. Never once does it occur to him that his drug may be less effective than his competitors and that it is (in my opinion, at least) fairly amoral for such an aggressive system of coercion to be implemented at all. It’s all about his “team”, not the positive or negative effects of his job upon society.

    Of course, I’ve been acutely aware of my personal relationship to authority and a keen observer of how others do ever since reading Bob Altemeyer’s long-term psychological study of authoritarian tendencies, The Authoritarians (available as a free pdf). In a super-small nutshell, we all must struggle against our desire to grant certain authorities unquestionable fealty. Authority can be defined as just about anything, a parent, an idea, a religious leader, hell a can of soup. It’s been one of the most enlightening reads I’ve had in my ongoing struggle to understand our ongoing struggles, and everyone I’ve recommended to has tended to agree. Ironically, the book has become my authority on the value of questioning authority.

    So while I do agree with the fundamental critiques of the film “The Corporation”, I would not necessarily personify them as BEING insane, but rather they condition people to working against their own interest. This is largely accomplished by the mere fact that most large corporations prevent honest and pointed criticism at the bottom from rising to the top–something that most people would call democracy.

  14. lethologica says:

    I’d also like to apologize for some of my hasty phrasing. I usually re-write things a thousand times to emphasize clarity, but this time I hit Submit a bit too fast.

  15. ApaulO says:

    ‘The Corporation’ was a Canadian production, so it must be true.

  16. JoeDuck says:

    Lethologica – thanks for checking in with such an informed comment. It seems to me we need to make a strong distinction between systems that are essentially the right idea but need modifications and systems that are “psychopathic” and thus need to be destroyed. I think that, clearly, Corporations are the former and not the latter.

    The idea that companies are “unethical” is complex because it is true that ethics is generally secondary to company designs, which are profit-centric. This creates more effective companies but also winds up breaching more ethical barriers than would seem to be ideal. Tweaking laws – especially international laws – might do some good but most of the problems are already violations.

  17. Lu says:

    If you don’t mind, I’ll let the free market do my “cherry picking”. In other words, why random? why not pick the most SUCCESFUL companies of 2008?:

    http://money.cnn.com/magazines/fortune/fortune500/2008/

    And the winners are…

    1. Wal-Mart Stores
    2. Exxon Mobil
    3. Chevron
    4. General Motors
    5. ConocoPhillips
    6. General Electric
    7. Ford Motor
    8. Citigroup
    9. Bank of America
    10. AT&T

    The ten largest companies of 2008. Lets see, that’s 10 top companies and 9 psychopaths. Penny for your thoughts.

  18. JoeDuck says:

    Lu what you talkin’ bout? When you do the test above and assign either “mostly psychopathic activity” or “mostly morally acceptable activity” to each and also do that on the “mostly exploits those in developing world” or “mostly helps those in developing world” I think all these would pass as helping more than hurting. Wal Mart does a lot to fuel the US and the China economy leading to jobs and prosperity.

    Obviously if you *only focus* on negatives any large entity will have thousands of examples of good and bad stuff. So you must look at the balance of those two factors. In my experience big corporations create more good than small ones and far more good than the non-corporate, non-globalized nightmare scenarios we find in places like North Korea.

    I do favor changes in trade relationships so the prosperity corporations bring can be more optimally distributed to poorer folks, but simply getting rid of corporations/ nationalizing and other centralized economic approaches have been done a lot throughout history with generally far more negative consequences than the capitalist alternatives: (Viet Nam, N. Korea, Cuba, USSR, etc, etc)

  19. Lu says:

    I didn’t advocate socialism either, and I think you’re misinterpreting what a “psychopath” is.

    A psychopath, believe it or not, doesn’t necesarily have to damage other people. A psychopath doesn’t care as long as he/she gets its way, good and evil don’t factor in, it is not capable of feeling empathy, or fear, or love but it IS capable of acting out of rational self interest.

    It’s not that corporations do “more evil than good”, it’s the fact that good and evil don’t exist to them in the first place that’s unnerving, and the lack of accountability to society compounds this problem. Think about it for awhile, the dominant institution of our times is commited not to ideology or morality, but to profit. This doesn’t mean they run around killing puppies (though they WOULD inject them with hormones or make “designer puppies” through genetic engineering if it was profitable) and bunnies, it means whenever a conflict of interest between the public good and immediate “results” (read: financial bottom line improvements for stakeholders) comes up, the latter will, by law, take precedence. Without advocating redistribution of wealth or state control, can you not see how this is disturbing?

    Obviously, if you choose the worst of anything you can make it look bad. Note that I mentioned the top 10 companies, I didn’t cherry pick and go for the companies with the worst track record when it comes to damage, I picked the most succesful and these companies, while making goods that satisfy public demands and raise the standard of living for many, are still poisoning the environment, exploiting third world labor, promoting a culture of empty consumerism and undermining democracy and the rule of law.

    Communism is NOT the answer. Neither is laissez-faire capitalism. But corporations NEED to become socially responsible AND legally accountable (that means among other things, enforcement of international treaties and antitrust laws) because the path that we’ve been travelling so far leads to self-destruction: the corporation cannot survive if it keeps damaging society, and its own long term survival for the sake of quarterly earnings.

  20. JoeDuck says:

    Lu I think we agree on some of this – I certainly favor more accountability – as close to “full accountability” as possible – for corporations and Govt too. We’d probably disagree on how much effort and profit we already sacrifice to that end. I don’t think we know yet if the financial crisis could have been averted if we’d had a lot more rules – much of this appears to have been caused by SEC and Congress *failing to act* on information they had in front of them, news media and pundits failing to analyze well, and mostly our own human fallibilities.

    FYI short term financial gains do *not* legally trump morality at a corporation. I keep hearing this false claim pop up and it’s simply wrong. First, there are tons of laws to keep things in check plus there is an enormous amount of legal room for companies large and small to do all kinds of fundamentally moral actions and all major companies do these things (Billions in food and drugs are sent all over the world, hundreds of millions are donated in employee donation and labor aid programs, etc, etc, etc.

    I’m using this standard definition and suggesting it’s not reasonable to say these are the key forces at work in corporations:

    aggressive, perverted, criminal, or amoral behavior without empathy or remorse.

  21. horatiox says:

    I’m using this standard definition and suggesting it’s not reasonable to say these are the key forces at work in corporations:

    aggressive, perverted, criminal, or amoral behavior without empathy or remorse.

    Yes, but those are the key forces at work in, like, humanity at large.

    This was an interesting post, but one problem seems to be separating the “good” corporations from evil. Companies that produce real items–whether CPUs, or bicycles, sugar, what have you–are not quite the same as the financial industry, or attorney’s firms, etc. Traditional, Smithian economics at least began with a certain materialist viewpoint–people are buying and selling things they need , whether in terms of food,clothes, appliances, houses, etc.

    With the post-Keynesian and macro schools it’s all about aggregation, and, arguably, meaningless generalizations (say, GDP itself). Similarly the corporate world overwhelms any simple supply-demand model: Walmart may bring jobs to poor areas (in USA and across the earth), but Walmart also shuts down small businesses–tho’ Ma and Pa are often provided with a blue or orange vest when their knick-knack shoppe closes.

    Citizens can do little about Walmartization, and other megolithic, capitalist structures, apart from like writing their congresspersons (cap executive salaries, Marquess Pelosia, por favor), or maybe moving to Cuba.

    Though I object to many democratic policies, some type of interventionism (usually viewed as liberal) seems rather necessary at this stage, including regulations on corporate excesses, and possible monopolies: the Clinton Admin’s anti-trust stuff against Microsoft was needed, however much IT management hated it. Obama however has shown himself to be fairly corporate-friendly–and had no problem supporting the GOP led bailout.

  22. JoeDuck says:

    Horatiox I think your point is important about the difference between real goods and services and the type of derivative ‘abstract’ stuff that has created some if not most of the current trouble.

    Still I don’t think the derivatives were as much a product of malice as they were a product of stupidity. Impt to note that despite a handful of over-reported exceptions most of the rich people who had a hand in the current debacle have lost far more than regular folks.

    That does not excuse them – in fact I support clawback laws to return $ to shareholders even from those who have lost a lot – but it suggests that they hardly knew what was coming any more than any of us did.

    I don’t think corporations are “virtuous” any more than I think they are “psychopathic”. I’d suggest they are simply a very effective but often flawed profit structure that on balance deliver a lot more than any alternatives to date. Even Adam Smith wanted Govt to intervene with free market sometimes, and clearly that was called for a few years back as well as now.

  23. JoeDuck says:

    Yunus – nobel prize winner for his microfinance brilliancies, was making something similar to your point yesterday Horatiox, which was that US banks focused on derivatives and profits rather than humans and that his Grameen bank has dodged debt bullets by loaning almost exclusively to poor women who … replay at a 97% rate.

    I’m not convinced you can apply his model to the USA (loaning only to women would be illegal here in fact), but it’s provocative to note that lending to the *poorest* seems to work better than lending to the *richest*.

  24. Dominie says:

    At first, it appear that the giving of money was a cover to make themselves look good, while doing evil deeds, when really this is hard because this knoledge I had has been taken from me, (identity theft, literally!!) these companies are being used, this is what my gut feeling was in the past about this, and Is written down in my notes somewhere to remind me of how I have felt about this. Just like the presidents. EVeryone thought they were so bad, they have lineage that goes back to blue blood Monarchies, and they were USED- fed info and made to look really badk cannot explain it here, but it is complicated, then places like y-tube will make fun of them- so these people with these lineages have their identities taken from them or are USED then made fun of in the end it seems!! Goes back to pre-christian times and religious aspects all I can say here. 🙂

  25. shoe says:

    very interesting discussion.

    to lend some clarity, the accusation that the corporation is a psychopath is from the documentary ‘The Corporation’, and is a conceit playing on modern legal definitions of the ‘personhood’ of a corporate entity.

    this comes down to us from an 1886 u.s. supreme court decision,
    Santa Clara County v. Southern Pacific Railroad Company, 118 U.S. 394,
    that i’m certain many readers and writers here would be interested to learn more about.

    the movie ‘The Corporation’ asks, if a corporation is identified as a legal person, then what kind of psychological person would a corporation be? the only reasonable way to imagine that would be to diagnostically observe the ‘behavior’ of a corporation.

    so, it’s a literary flourish. not an economic treatment, nor is it really a sound discussion on the grounds of justice theory, although i get the impression that many viewers of ‘The Corporation’ take the liberty of making that leap.

  26. JoeDuck says:

    The 1886 case from Wikipedia:
    http://en.wikipedia.org/wiki/Santa_Clara_County_v._Southern_Pacific_Railroad

    Corporation Defined:
    http://en.wikipedia.org/wiki/Corporation

    Another irrational part of the corporation as psychopath argument is that assuming (correctly) that corporations have many of the same rights and liabilities as real humans, we therefore also would tend to assume they will
    generally behave as humans do: Fairly reasonably and only infrequently as psychopaths.

  27. Lu says:

    I clicked on the link to the definition of a corporation, check the “Corporate law” section. I quote:

    “shareholders of a modern business corporation have “limited” liability for the corporation’s debts and obligations.[23] As a result their potential losses cannot exceed the amount which they contributed to the corporation as dues or paid for shares.

    Limited liability regulations enable corporations to socialize their costs for the primary benefit of shareholders.”

    In other words, make the profits private and the costs social. It’s legal, and it’s immoral, and it’s at the very core of the “limited” arrangement.

  28. Lu says:

    More to the point, limited liability incites hubris: “the corporation” is responsible, which means everybody and nobody is responsible. It’s like a tragedy of the commons on a smaller scale.

    The problem with laissez-faire capitalism is that taken to the extremes it starts to resemble communism. I assure you, I’m not one of those people that thinks “big business is evil, lets take their money and give it to everybody else”, more to come at a later date.

  29. horatiox says:

    Corporation: An ingenious device for obtaining profit without individual responsibility.

    (Ambrose Bierce).

  30. shoe says:

    “Another irrational part of the corporation as psychopath argument is that assuming (correctly) that corporations have many of the same rights and liabilities as real humans, we therefore also would tend to assume they will
    generally behave as humans do: Fairly reasonably and only infrequently as psychopaths.”

    that’s playing a little fast and loose with categories. incorporation, after all, is just one of many kinds of human social organization.
    we could just as easily and rationally draw these analogies:

    human is to animal as human social organization is to animal social organization;
    psychopath is to human as corporation is to human social organization.

    i still think the more interesting point about the ‘corporation as psychopath’ conceit is that it questions the legal assignment of personhood to a specific kind of human social organization … is this really an outcome of natural right? sounds more like a consequence of legal fiat, to me.

  31. JoeDuck says:

    Shoe you may be right that I’m bending things out of shape with my point, which was trying to simply assert again that even if one insists that companies as analogous to humans one won’t conclude they are psychopaths.

    Lu I’m pretty familiar with Limited Liability and most argue it helps create biz and jobs and wealth by allowing investments to flow more effectively as well as protecting small investors from liability for company actions. Although I think you could argue that grannies $1000 investment in her Grandson’s website should expose her to infinite liability if he screws up, I would not agree.

    I also think you are conflating two types of “social costs” above – they are not talking about burdening society at large with unfair costs. Although “old style” corporations sometimes got away with this (pollution is the best example), we have much better accountability mechanisms in place now.

    Is there enough corporate accountability? I think that is more debatable. Certainly there has not been with TARP beneficiaries, but I’d blame that on GW and Paulson and congress as much as anybody.

  32. JoeDuck says:

    Even Adam Smith recognized that you need rules in place to keep the profit motives in line with the social good. This is why we make it illegal to dump toxic waste in the river, although I’d argue the most effective approaches to pollution are not legislation but “cap and trade” style arrangements where we recognize costs and benefits and then optimize the costs using payments/agreements between companies that are Government regulated to make sure the public’s health and welfare is optimized.

  33. Lu says:

    See the thing is, economists keep saying “we have much better accountability legislation” and every YEAR there’s an enron, or a cochabamba waters, or a bhopal, or hell how about the toxic loans that triggered this recession? And those are just the ones that made headlines, what about the things like coalmine fires and blackwater (the mine tailings not the military contractor, although, there you go as well) while energy companies keep shoving their “clean coal” mantra on the public? what about things like atmospheric emissions where they just shut down incinerators in America and build them in China?

    There are some examples of corporate responsability out there. Hooker chemical sadly, got crucified over Love Canal in spite of the affair being caused by the local school board authorities (and later the local government) and in spite of their initial refusal to sell the site due to health concerns. But these are few and far in between.

    I’d have to say it seems like the advocated of free market and the advocates of regulation live on separate worlds. I’ve thought about it for awhile now, and I mean no harm by this, but I get the impression that while I surely don’t get/know the ways in which corporations benefit modern society, free market advocates don’t know much about how they are harming us either, because in response to the truly catastrophic, reprehensible and in many cases deadly harms corporations exact upon third parties the most frequent response is cavalier dismissal (“A few bad apples”, “positive balance on the whole”, “human nature”, etc.). How about honest and open engagement? how about “Okay, lets exchange notes, lets see the damage and lets see the benefits”?

  34. glenn says:

    (33) Lobbyists are the biggest problem regardless of industry. They are the #1 reason lawmakers look the other way because they are basically paid off and the main reason the scum in these companies think they can get away with it. After all they have paid the king’s ransom through their lobbyist.

    Another big issue is everything is driven by short-term results and goals and unfortunately the human side of the equation gets trampled when you have key management focused on short-term objectives to please a market which has unfortunately become corrupt because of the lobbyists, etc.

  35. JoeDuck says:

    Lu we certainly agree that open dialog about the costs and benefits is important. I think *most* companies will pass that test in terms of doing more good than harm, though defining good and harm is not a simple process. From my perspective the reason to think corps are a good way to manage the economy is simply that standards tend to be much, much higher in countries with strong corporations. (e.g. US, Europe, Japan) and weak in the weak corporate environments (e.g. Cuba, North Korea,Pakistan). Simplistic, yes, which is why we should all keep looking for more data and ways to process the info.

    Glenn I think your “short term” point is really true and important. One of the key reasons for current problems is that short term interests were very different from long term for many companies, esp. in banking and finance.

  36. Lu says:

    Okay, do you favor a Keynesian approach or a Miltonian approach?

  37. JoeDuck says:

    Lu I’m inclined to distrust Keynesian approaches. Soon we’ll invest in the most dramatic test of that notion and I suspect we’ll have very underwhelming results. But if I’m wrong….I’ll rethink my views on economics which are very much more along the lines that buyers and sellers should drive the economy rather than political considerations or centralized economic forces – e.g. I think communism in most flavors has failed so miserably so many times I can’t believe people still think it could ever work. The modified capitalistic “communism” of China seems to be working to elevate average standards but I’d hardly call the successes a product of communist thinking – in fact Wen JiBao has been known to quote… Adam Smith! https://joeduck.com/2008/09/28/wen-jiabao-interviewed-by-zakaria/
    … Adam Smith!

  38. Lu says:

    I’d hardly equate Keynesianism with socialism, or even social-democracy with communism. There’s a big difference between government having a say and a hand on the economy as regulator and government creating state-sanctioned monopolies. Central planning in communist countries doomed their economies since they weren’t nearly dinamic enough to cope with market fluctuations (and as much as communists would like to ignore them, markets are still there in spite of rethoric).

    That having been said, I don’t see how a partnership, following very specific guidelines and very tight regulations, between government and private parties to stimulate the economy is akin to replacing the stars and bars with a hammer and sickle. Yes communism doesn’t work, but equating very specific public investment with total state control is kind of reactionary.

    There’s a perfectly good example of keynesianism at work, the U.S. economy by all accounts is a mixed economy and had been so since the new deal, that only started changing during the deregulation wave of the late 70’s and increased during the Reagan years which coincidentally were marked by huge internal deficits, cutbacks in social services, an alarming polarization of wealth and “trickle down” economics that never quite trickled down. Deregulation of the energy sector in particular caused problems in California for instance, and weak environmental regulation meant that superfund sites kept growing and growing (and of course the expense of cleanups to the taxpayer along with them).

    Laissez-faire, by definition, means less regulation and thus, less accountability. This means less risk to the investors and thus potentially faster flow of capital to areas in development, true. It also means those capitals can quickly evaporate as markets crash, or leave the country for attractive overseas labor and environmental regulations or to put it more dramatically, to get wage slaves and get carte blanche to spew toxins more freely. If the corporations are in fact, doing more good than bad on the whole, I think we can chalk that up to government “interference” on the free market, not to “rational self interest”.

  39. JoeDuck says:

    Lu I think the comment before this one is simply excellent, and agree that my “Keynes to Communism” mini-rant seemed to make a totally unfair comparison. I just went down a garden path there and did not mean they are the same. Also agree with pretty much everything you wrote above although I think we’d disagree on the optimal level of Govt involvement.

    Several excellent points by you dude!

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