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unwanted enthusiasms; returns to scale; organization theory

Meat of this post is here: skip or link to this bit. If you read my blog for my self-indulgent inner voyages of auto-exploration, read on:

Good news: I stumbled upon an exhaustive and self-consistent set of economic and political explanations, together with deeply-documented statistics and examples that instinctively match my own observations and gut-instincts about how the world works!

Bad news: the conclusions reached are shared about a few thousand other obscure eccentrics, most of whom hover around my age, gender and social demographic, profoundly lowering the chances that we are right about anything!

Good news: I’ve been in this position before: at the birth of the popular Internet. Hence I do not feel so bad!1

More good news: Simultaneously in my field of view, I note lots of people are pondering the same broad topic area: the size of the corporation, regulatory transaction costs, and the true level of corporate economies of scale. We near a trend.

Bad news: that means you will be bored of this topic, and snarkily saying so, on MetaFilter in a matter of hours. Soon, your closest friends will link to an insightful Clive Thomas piece they have read on the subject. Doug Rushkoff will claim he invented it. Time passes. A Newsweek cover story appears.

Good news: you still have a few minutes to be ahead of the curve!

Here is my new Question of the Moment, together with the book you should read:

What if the Firm is The Wrong Size?

More leadingly, what if the libertarians and the lefties are both right? What if big faceless corporations are the primary benefactors of the misalignment of power relationships in our modern world; but those warped power relationships have largely been created by, and lopsidedly benefit from, the coercive intrusions of the State? And what if those intrusions — sometimes at the behest of capitalists puffing on big cigars, sometimes well-meaning Fabians — have led to an oligopolistic growth in corporate size that is way beyond the point of maximum efficiency that they would naturally shrink to in a freed market? What if all those suspicions you harboured about how horrendously inefficient any major corporation, or government department, you’ve ever worked for, were actually vindicated and documented by research?

That’s the delicious and dangerously self-confirming pleasure I gained from reading Organization Theory by Kevin Carson, a doorstop of a book that assembles a  wide-ranging selection of literature, from Keynesians to Austrians, Benjamin Tucker to Galbraith, econometric studies to Marx, Wobblies to Murray Rothbard to argue that Big Capitalism has been feeding off Big Government for centuries, and that it is way past time we liquidated them both.

Carson is a left-libertarian, which is sort of like saying you’re a whale-hunting Greenpeace supporter. In polite company, it gets you a lot of pointed questions, followed by a distinct lack of future polite company. I stumbled on this book, because, like many people my age, I’ve been jamming my tongue onto the very same two-pronged fork at dinner parties for years.  I’m old enough to remember the stultifying mouldiness of socialist dogma and managed markets consensus in the seventies and early eighties, as well as the cold heartless vacuum of Thatcherite/Reagan economics that gutted it. I like free markets because they remind me of all the best new ideas in my lifetime: decentralised, individualist-driven and reciprocal. On the other hand, the distance between that fast-moving, can-do solution space and the defensive flailing of the fat-catted, smug, Tessier-Ashpool plutocrat-run oligopolies you see on CNBC implies to me that free markets are about as far from the real world as the communist utopia was from East Germany, 1988.

Carson manages, as no other author I’ve read, to mesh these left and libertarian together. To do so, he has to stitch and mend much of the traditional narrative of both. Organization Theory reads, in parts, like one imagines the rest of Emmanuel Goldstein’s Book in 1984 might read: a rapid and abbreviated account of an centuries-long ahistorical and ongoing atrocity where no-one is quite on the side you imagined.

But this is no secret conspiracy. Carson, as the book’s title implies, is a theorist of the self-defeating nature of conspiracy: of organizational reaching too large to survive on a human scale, but too big to fail. Here, history is a repeated farce of correct economical instincts overridden by the temptation to take a coercive shortcut. Merchants commandeer the state and force land-enclosure as the quickest method to leverage labor and capital into the free market, thus guaranteeing the decrepit market inefficiency of both their labor exploitation and land use. Free trade globalists use military power to pry open up international markets, thereby subsidising trade with one-sided externalities that benefit only crony corporations. Progressive reform shores up the very cartels they seek to unseat, just at the point that those monopoly’s internal contradictions have begun their own demise. Well-meaning bureaucrats devastate working-class self-organization by their professionalization of social welfare. Management fads take obvious truths about incentive and sabotage in the workplace and turn them into saccharine parodies of real reform.

To list this out makes the book sound obvious, so let me point you to Sean Gabb’s  better attempt to summarise at the UK’s other Libertarian Alliance2. Far more than the precis though, note the impact of the book on Gabb’s own opinions, as a relatively “mainstream” libertarian:

…its overall theme was a revelation to me. As said, many libertarians recognise that big business is inherently exploitative. But we have also assumed that it is reasonably productive within its own terms. It is not. As already mentioned, Mr Carson believes that large firms show many of the weaknesses long since indentified in centrally-planned economies. He says:

Individual human beings make optimal decisions only when they internalize the costs and benefits of their own decisions. The larger the organization, the more the authority to make decisions is separated both from the negative consequences and from the direct knowledge of the results. And in a hierarchy, the consequences of the irrational and misinformed decisions of those at the top are borne by the people who are actually doing the work. The direct producers, who know what’s going on and experience directly the consequences of decisions, have no direct control of those decisions.[p.193]

The results of this are an obsession at the top with targets that can be measured and an indifference to local understandings of how work may best be done. Profitability crises are managed by thinly-veiled attempts to make people work harder for less, by “downsizings” that cut measurable costs while destroying intangible patterns of human capital, greater incentives to management to restore profitability, and an interest in fad management theories that talk of “empowerment” and decentralised control, but are just shifts in legitimising ideology to jolly the workers along.

Strikes and other forms of industrial action should not be seen as mindless wrecking, or attacks on property or violations of contract. Rather, they are often attempts by the workers to claw back some of the humanity stolen by them.(Emphasis mine).

You see? This is a book that can turn even die-hard libertarians wobbly.

Like Gabb, I don’t necessarily agree with every pinion that Carson meshes together to form his argument. The problem with being a left-libertarian is that it’s pretty much idiosyncracy squared, so Organization Theory’s conclusions are almost guaranteed to have something you’ll disagree with: worker-owned production, free contracting, steroidically strong unions, no public transport subsidy, land property reform, FidoNet (yes, FidoNet).

But for all its sprawl, Organization Theory is the first book I’ve read in a long while that, while it only occasionally tangentially touches my domain knowledge, nonetheless manages gets the facts and policy implications right every time. I’ve read technical articles that have got both the details and the gist of the United State’s IP provisions in its Free Trade Agreements wrong (hint: they have nothing to do with free trade). And rarely have I seen anyone make the link between DeCSS and the lack of innovation in the DVD market since its introduction, let alone in the same volume as a detailed discussion of soil management (a gardener of my acquaintance says he got that right too). It’s one of those books where, if you disagree, you start scribbling in the margin. And when you agree, you start cutting and pasting into the top of your quotes file, and the bottom of your email sig.

And you’d be perfectly free to do so. Let me also point you to the draft PDFs of the book itself, which is copyrighted under the “Woody Guthrie license” (“anybody caught quoting or copying this book without our permission will be mighty good friends of ours”).

I’m still processing what I’ve read, and I’m sure I’ll end up re-processing and critiquing it here. In the mean time, I hope Carson’s book gets many more good friends, and worthy opponents. We’ve all had these thoughts about the inefficiency and the cruelty of the modern firm and the modern state. Perhaps instead of blindly picking one to support, we should consider the ties that bind them together.


1 Truly, the emotional rewards one can extract from having been proven undeniably correct in a strongly-held position of dweebishly low popularity are not to be underestimated. Simply closing my eyes now and seeing the redoubled horror in the eyes of A.A. Gill, restaurant critic of the Sunday Times, as he wakes to a new day in the 21st century and realises, once again, that his radio co-guest from 1994 wasn’t the idiot he claimed and the Web did go on to be of pivotal importance to literature, is precious beyond compare. Screw you, successful author and racist A.A. Gill! May you continue to be cursed with a million young angry competitors, all with the face of me!

2 There are two Libertarian Alliances in the UK, with the same logo and early history; both LA’s have the slogan “Let A Thousand Libertarian Alliances Bloom!”. Unlike the left, British libertarians appear to factionalise with some eventual good humour.

19 Responses to “unwanted enthusiasms; returns to scale; organization theory”

  1. Cait Says:

    Jaysus Dan, I’m trying to do a day’s work here (about a third of the way through thus far).

  2. Kevin Carson Says:

    Thanks very kindly for the wonderful review.

  3. Lee Bryant Says:

    Thanks for the tip. Wish I had time to read such a doorstop book :( The only thing I would question is the idea that some corporations are “way beyond the point of maximum efficiency that they would naturally shrink to in a freed market” – a touch of market fetishism there. I don’t know if left-libertarian is quite the right term, but it is probably a more common position than you think.

  4. Danny O'Brien Says:

    The “freed market” is a nice term of art among left-libertarians:

    …with little clarification one can easily use the term ‘free market’ (or even ‘freed market’ as has become the fashion among some scenes) to mean the everyday interactions of individuals, unfettered by interference from an external third party. Unlike the term ‘capitalism’, ‘free market’ implies more than one concept and has been misused as rhetoric rather than as a label or a noun given to a set of ideals concerning the realm of statist party-politics and economics. In this sphere, it has been misapplied as oh so many ‘free markets’ are never, actually ‘free’.

  5. Lee Bryant Says:

    I think that’s the point. There is probably no such thing as a free market, which in reality means large orgs can continue to dominate through market power or position even if their internal efficiencies are far worse than smaller firms. So we should not expect the market to correct this distortion.

    What’s interesting about this, as you point out, is that these market leading positions have often come about through state intervention of one form or another. Rushkoff covers this in quite an engaging way in his recent book, looking at the history of the corporation.

  6. Gary Chartier Says:

    Carson would heartily agree that there is “no such thing as a free market.” But he would argue that the kind of market position that allows “large orgs . . . [to] continue to dominate” despite “internal efficiencies” is one secured by the state. Get rid of the state, which provides innumerable subsidies to corporate size, and we’d have a freed market, one in which there woudln’t be the multiple subsidies the state currently offers to large organizational size. Carson covers these subsidies in great detail; check out http://www.mutualist.org for more detail. Also, a very lively discussion was kicked off by this piece, which goes over some of the same ground:

    http://www.cato-unbound.org/2008/11/10/roderick-long/corporations-versus-the-market-or-whip-conflation-now/

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