Thoughts on Hans-Hermann Hoppe’s "Democracy: The God That Failed"

Economics Political Theory
21

Merlin

Although i agree with the most what you’ve said for corporations, i don’t think huge companies should be our target.

we all advocate free market capitalism right? so i don’t think there won’t be big businesses without government intervention additionally i m not against it either nor anyone with Libertarian values should do so.

for example i m working on web technologies, i won’t even think twice for uniting and havving company/corput marriage with a company which is owned by like minded business owner, because that way we can put what we got in our hands on table together and can serve our custommers better and also it is possible to atract bigger ones, so why shouldn’t i?

Zerubabel

i might be missed your point at the first place, now i understand, however what i’ve said for Merlin’s post applies to you as well…

22

I’m very surprised by this behavior, Clayton. I was expecting a higher quality of posting than this. You may not agree with what Zerubbabel wrote, but I think it’s clear that he dedicated quite a bit of time to thinking about it and posting it - just as you’ve done in your long and thoughtful posts. Somehow I don’t think you’d appreciate it at all if someone just blew you off like this.

23

Indeed, but I was not criticizing big business in itself. If big business survives in a free society, all the better for it. I just do not think it would.

24

@ Merlin

I take as bottom-line common-ground of all libertarian thought the ideal that __"__any time we interact voluntarily we treat each other as beings with rights*" I When I think of this I intuitively think -small- such as individual interaction. Whenever we form larger organizations of people this ideal becomes much more difficult to realize.

It is an observation of our Corporate reality that all interactions of a corporation occur because of an appeal to contract law and the attachment of the corporation to the violent power of the state who can compel involuntary action. The corporation leaves a paper trail wherever it goes, purchase orders, lease agreements, quotes, P&S agreements, disclaimers here and warnings there, employee contractual applications, sign here, sign there … each piece of paper is potential evidence in a civil suit, and each piece of paper is a tacit threat of appeal to the violence of government. The attached-ness to government in every aspect of business is so interwoven into our existence that we overlook it.

Corporations do not treat each other as individuals with rights. Corporations treat each other as entities with the wherewithal to summon the violent power of the state. In this they do not fall far from their origins as government Charters.

Additionally the concept of stock ownership is merely a facade of personal property rights. Otherwise the owner of 1% of a corporation’s stocks would be the rightful owner of 1% of any declared profits and not at the caprice of the corrupt steward to generously pay a potlatch dividend.

  • Adam Katz, Generative Anthropology Blog.
25

@GW,

You ask for my judgement on these different systems. I don’t know to what end my opinion might make, but I’ll tell you. I’m just finishing-up watching a ten hour series on WWI I don’t know the historical accuracy but through it all I have felt equal disgust at Monarchies and Democracies and Corporations (Krupps, Vickers etc) and even Wall St who made profit through speculating on winners “250,000 Bosche dead? Ho-ray!”

Oh, maybe I was not to make a moral judgement. Sorry. Hoppe judges sans empiricism, for empiricism would falsely declare Western Democratic welfare States with highly intrusive regulatory governments to be the superior economic system. I don’t know how to judge without empiricism yet I hate highly intrusive regulatory governments.

The answer is, I don’t know.

26

@Z,

That’s fine to say you don’t know. The reason I ask is that I don’t see how your critique of corporations is relevent at all to determining whether Hoppe’s conclusion is correct. Corporations exist in Natural Order, under Monarchies, and under Democracies. It’s just a business model. So it doesn’t make sense to compare a CEO to a PM / President when deciding whether Hoppe’s conclusion is correct. That’s not the choice we’re faced with.

You might ask whether corporations are better (i.e. better at allocating resources in line with consumer demand) in a Natural Order environment, under a Monarchy, or under a Democracy. Then at least you’d be comparing apples with apples. I think the answer to this question is clear: corporations will be better in a natural order than under either a democracy or monarchy, because in the former there is consumer sovereignty, whereas in both the latter two, the corporation can make profits using the political means, i.e. lobbying for favorable laws / regulations from the monarch / elected politicians. In the natural order, corporations can only profit by satisfying consumer demand better than their competitors.

Your critique of the corporate business model is interesting, but it is irrelevant in terms of deciding which is best out of the three options, which is what we as libertarians care about. If you were to agree with us that natural order is superior, then we have no major disagreement, as libertarians. If your critique is true, we can expect the natural order to result in abandonment of the short-sighted corporate model for doing business and replacement by some other business model that doesn’t suffer from the problems you point out. After all, if a big corporation just goes after short-term profits, and it is genuinely better for consumers if resources are used for longer-term goals, then small non-corporation businesses, which (you claim) are more likely to think long-term, will outcompete the big short-sighted corporations. We’d need a natural order to find out whether the ‘diseconomies of scale’ that you refer to would outweigh the ‘economies of scale’ or vice versa. But we do not need empiricism to recognise that natural order is superior to either a monarchy or a democracy. Just economics, i.e. praxeology.

27

Z,

Your comments re-corporations seem to be a riff upon the principle agent problem (otherwise known as the divorce of ownership and control). In fact I think a lot of modern life’s iritations are a result of this: always needing to speak to someone else with the correct paper work for example.

Whilst I don’t think you can correlate corporations and democracies per say I would tend to think that there would be less corporations in a natural order.

28

I’ve read Democracy: The God That Failed. I recommend you do too. It’ll give you a better grasp of the actual argument being made and you may find end up finding it more plausible. I only suggest this because your summary of Hoppe’s position seems to mischaracterize him as saying that any and all situations involving a non-owner/caretaker of a piece of property with a term limit must necessarily lead to short-sightedness, which is of course absurd and naturally leads to absurd conclusions like the one you drew.

Hoppe is really just making a “tragedy of the commons” analogy. A commons is a resource that is scarce (there are competing, mutually exclusive uses to which it can be put at any given time), but no ownership rules exist regarding it - if I want to put the resource (say, a pool) to a certain use (e.g. swimming), I cannot exclude anyone who wants to put it to a different use (e.g. industrial pollution).

The incentive structure is such that no one can take care of the resource in accordance with a fixed set of principles. (The pool, to be suitable for swimming, must be maintained, cleaned, etc., but I can’t do any of that if someone else is polluting it indiscriminately.) On the free market, we would expect that its capital value would tend to decline.

Hoppe defines democracy as basically that, as free entry into the helm of the ship of state, where no individual or group has the exclusive right of direction over who gets to steer.

(Naturally, real-world democracies don’t fit that definition perfectly - democracies have some rules about who gets to be president, about what constitutes a legitimate election, etc., on the basis of which anyone who doesn’t follow them can be booted out - but I think it’s fair to say they are closer to Hoppe’s definition than are other forms of government, say monarchies, which typically involve an ownership arrangement where the kingdom is counted as part of the ruler’s personal estate.)

It should be clear that Hoppe is not saying because democratic rulers are caretakers with limited terms, they must be short-sighted - or if he does say that, he shouldn’t because that would be completely baseless and would undermine his whole case (in addition to being irrelevant to his argument). Just because ownership of a resource is separated from posession or care or whatever doesn’t make it a commons. I can let someone else wash my car or clean my house or use my credit card while retaining ownership of the relevant property - the point is that no one gets to do anything with the property except on my terms; the resource is still owned. This is why your analogy to corporations is flawed. The corporation isn’t a commons because the shareholders own it and, at least in principle, the management is only there on their terms.

(Real-world corporations, of course, do plenty of evil things, not because of anything in principle wrong with incorporation, but rather because of various state privileges that have been granted to them which allow them to escape market checks on their behaviour.)

The rest of your comments, as far as I can see, are the sort of crude Marxoid generalizations about greedy capitalism people interested in honest debate ought to know better than to make.

29

@GW

I think these points of Hoppe’s stand alone as means of evaluating any system of organization.

#1 The superior caring of owner vs steward is a praxeological point according to Hoppe. It lends us the idea of the tragedy of the commons. This attribute is applied properly in comparing PM to King, or in CEO to sole proprietor, not in CEO to PM. In whatever way the king is superior to the PM then the sole proprietor is superior to the CEO. And as private property rights avoid the tragedy of the commons then air and water are doomed to be polluted until they are appropriated as someone’s personal property.

#2 short-sightedness of the Steward is a praxeological point according to Hoppe. I think it interesting that you frame it as the consumer being arbiter of the virtue of long vs short-sightedness. In that humans act as consumer there is no possibility to consume that which has been conserved. In that humans also act as ideologues is when we think long-term. The Pyramids were built by ideologues not by consumers. One may question the virtue of building pyramids vs the contents of a Walmart and then go on to question whether this is indeed a praxeological point or not.

All the other points, and all points of evaluation, fall under the same confusion of judgments and nothing seems absolute.

The answer is, I don’t know (I like how this seems to work for me :>)

30

Physiocrat,

I think you are right. That may be why the arguments of Isabel Patterson hit home to me. I want to deal with someone who I can either respect or kick, damn.

*“Whoever said that* "a corporation has neither a body to be kicked nor a soul to be damned" *had a glimpse of the truth, which is that any law whatever must bear upon 'persons. The acts of a corporation are necessarily performed by persons; the assets of a corporation belong to persons; the punishment must fall upon persons.”*   Isabel Patterson


God of the Machine was her main work. The argument is in chapter 16  <i>The 
Corporations and Status Law.</i>  The quote I gave is on page 177   http://mises.org/books/godofmachine.pdf
31

tunk,

@ tunk

Thought builds upon thought. Thought leads to new thoughts even if the originator would not approve where it goes. I do not need Hoppe’s approval to extend his thought as I did.

BTW read that thumbnail sketch I linked to see if it was an honest summation of the book. If not then you argue with Hoppe because he wrote it. And if he didn’t capture the essence of his thoughts then no tome would do better, or as Einstein said: “if you can’t explain it to a barmaid then you probably don’t understand it yourself.”

32

You are not “extending his thought” but rather substituting your own “thought” for his.

33

tunk,

Probably so, but I’m sure that throughout the development of Western Philosophical thought that the same thing was said at each stage.

If it is true you pay me a great compliment in having originated a unique idea and not merely redirecting an existing one. But probably not.

34

@GW,

Just to clarify, as I don’t think I was clear, I see economy of scale from a manufacturing, or materialist, view point. In manufacturing the quantity to be produced allows capital investment into the tooling and equipment for a more productive process, e.g. die cast verses machined from billet requires manufacturing the mold and buying the die-casting machine. The smaller quantity, smaller scale, does not offer the ROI to justify the capital investment. Scale also plays out in transportation costs, something realized since the advent of shipping. But there is a physical limit to these economies, maximum sized ship and most efficient manufacturing process. When a producer begins duplicating factories or manufacturing cells he has exceeded that limit. And this economy of scale is different from vertical integration, i.e. centralizing all steps of manufacturing.

Diseconomy also plays out in the inefficiency of any large human organizations where the motivationally challenged find a place to hide and the hyper-motivated engage in the manufacture of hierarchy, not products or services.

There is another type which I don’t understand. And that is the seemingly innate desire for bigness. Walmart can demand prices from it’s vendors that far exceed it’s economy of scale. At the limits of economy of scale the unit price becomes fixed but the subjective valuation continue as if an infinite economy of scale exists. I experienced this on the purchasing end in manufacturing and the respect (low prices I could demand) I could command while representing a big company verses a small one. And I witnessed at a distance this same thing playing out in sales. At some point in their manufacturing careers most people come to realize that “the Carrot” isn’t real.

35

@Z,

You’re talking now just about the question of which business model is more successful. This has nothing to do with Hoppe’s book or his argument in favor of monarchy over democracy, however. It’s a whole seperate argument. Hoppe makes an analogy between monarch vs PM and owner vs caretaker. You are just making the direct argument in favor of owners rather than caretakers. There’s no need to bring up Hoppe or democracy at all.

If you search this site, I expect you’ll find articles / discussion about what kinds of business models are promoted under different systems. For example, many government regulations promote ‘bigness’. This is a predictable consequence of big companies being able to influence the political system. So we might expect the ‘average firm size’ to be smaller absent the state. Or maybe not. Whatever the case, we can be confident the ‘optimal’ size for the average firm will be found in free market conditions. So there’s not really much point speculating about it and coming up with arguments like yours, because there’s no way you can be proved right until we actually have a free market to see which business model works best. Or, if you think your business model works better than the big corporation model today, with today’s distorted incentive structure, then be an entrepreneur yourself, out-compete them and show us you are right!

36

@GW,

“Hoppe makes an analogy between monarch vs PM and owner vs caretaker. You are just making the direct argument in favor of owners rather than caretakers. There’s no need to bring up Hoppe or democracy at all.”

No. It is quite clear in that thumbnail penned by Hoppe himself that he makes a judgement against democracy based on five specific attributes. I presented an argument using these same five attributes applied in the same way as Hoppe did, in a judgement against certain aspects of corporate capitalism. Instead of refuting the argument/judgement I bring, it seems that you (and tunk) have rebuked me for even bringing the argument/judgement (or maybe for co-opting Hoppe as a tactic), that is to say I sense a certain dogmatism of what is and is not open to judgement.

“not really much point speculating about it and coming up with arguments like yours”

Speculating? It seems to me that the whole libertarian movement is obsessed with the one salient speculation of what if the market were truly free. I like to speculate and play with intellectual dolls. I love abstraction. But in this case I wasn’t speculating, I was judging, as did Hoppe.

In the big scheme of things the Left are govaphiles, corpaphoebes; the Right are govaphoebes, corpaphiles. Surely there must be an escape from this dichotomy. I can only speculate.