Symposium on Rationalism Pluralism and Freedom

RPF Reply 2A: Pluralism and firms

One of the most frequent comments I have received on Rationalism Pluralism, and Freedom is a dissatisfaction with my exclusion of the world of commerce. It seems to me that there are problems in normative political economy that very closely parallel many of the problems I do discuss, including the problem of proceeding as if one can construct a complete normative political economy on a vision of persons and states, seriously neglecting firms and unions. I think this is a surprisingly common move– whether the individual persons are conceived of as entrepreneur-producers, as consumers, as property-owners, or as the holders of rights to material support. I think moreover that corporations and unions share features with the intermediate associations I do discuss of being both organizations facilitating common purposes of their members and new sources of social power over their members. So I hope that my book provides tools for the analysis of normative political economy; and I’ve been taking part in an NBER research team on the shared economic and legal history of commercial corporations and intermediate associations that has allowed me to start work in that direction.

But there are salient differences, too, such that I didn’t (and don’t) think that the arguments I develop in the book suffice to build a normative political economic theory about corporations and unions. The reasons for the associational freedom of a church are, at their core, about the freedom of the church’s members. The reasons for the organizational rights and privileges of corporations and unions are, I think, much more tied up with their external effects on the economic order as a whole. What we identify as a conspiracy in restraint of trade and what we identify as a reduction in transaction costs facilitating collective action, allowing economic actors to pursue their legitimate purposes together, is much less about fine-grained analyses of the common interests of workers or shareholders than it is about a rough sense of how unions and how firms (including corporations) help and hinder our normative understanding (whatever it might be) of the political economy as a whole. Why allow within-firm strikes but not secondary strikes? Why structure capital markets around publicly-traded shared in commercial corporations? Why ban insider trading? Why have or not have closed shops or right-to-work laws? These questions call for the use of (institutionally- and organizationally-rich) economics in the first instance: what will the consequences be of this or that rule? And the normative conclusions that we draw from those economic insights will depend on branches of normative theory that have to do with overall concerns with efficiency, growth, distribution, equality, and so on– not only, and maybe not primarily, with the associational freedom of workers or shareholders. By contrast, I think that external effects are typically secondary considerations in the cases I do discuss, and that we can get pretty far in them just thinking about the relationship between members’ freedom to associate and the threats to their own freedom created by their associations.

The best work I’ve seen that pushes beyond where I leave off in the book is a dissertation on the normative theory of firms and corporations by Jason and Peter’s Georgetown colleague Abraham Singer. He does just what I’m calling for above: situates the internal reasons for having firms against the background of a larger account of firms’ economic functions, making sense of the institutionally-lumpy economic world that has firms of various sizes as well as non-firm economic activity. Singer’s normative political economy is not mine; but I’ll still happily point to his work (soon, I hope, to become a book) and say, “yes, that’s what it should look like– the ideas in my book help get you there, but there’s a lot more that needs to be done, and that’s what doing it requires.” Reading his work makes me all the happier that I didn’t try to squeeze in a markets-and-firms chapter (or a unions chapter) into the book; I can now see what doing it right actually looks like, and there would have been no shortcuts to it that would have made it a chapter rather than a whole new book.

One final aside: I know that political science is hard, and it annoys me to see normative work that treats it as if it’s easy. Social science isn’t a matter of finding a few readings that support your prior views. I try to remember that and be careful about economics. I’m a libertarian and I have views about economics. But I don’t have scholarly expertise about it, and I’m very resistant to the move made by all too many libertarians of thinking that our views just count as expertise. (cf: If you are not yourself a serious scholar of economics, you don’t get to call Paul Krugman economically ignorant. You just don’t. You can may disagree with his views and rely on scholars whose views strike you as more plausible, but that’s different.) So I really don’t want to take the intellectual shortcut of developing a theory of corporations and unions by filling in as the background economics the things that happen to appeal to my normative views. We’re supposed to be learning from the social science we use, not projecting social science conclusions from our normative premises.

Coming this afternoon, I hope: 2B on pluralism and markets, replying to Matt, and to the James Scott/ F.A. Hayek question.


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