Gary Chartier’s Reply to David Friedman

In The Machinery of Freedom, David Friedman offers some observations about the possible shape of productive activity in a stateless society.

Goods might be produced by giant, hierarchical corporations, like those that now exist. I hope not; it does not strike me as either an attractive way for people to live or an efficient way of producing goods. But other people might disagree; if so, in a free society they would be free to organize themselves into such corporations.Goods might be produced by communes, group families, inside which property was held in common. That also does not seem to me to be a very attractive form of life. I would not join one, but I would have no right to prevent others from doing so.My own preference is for the sort of economic institutions which have been named, I think by Robert LeFevre, agoric. Under agoric institutions almost everyone is self-employed. Instead of corporations there are large groups of entrepreneurs related by trade, not by authority. Each sells, not his time, but what his time produces. . . .The actual arrangements by which the market provides an economic good, be it food or police protection, are the product of the ingenuity of all the entrepreneurs producing that good. It would be foolish for me to predict with any confidence what will turn out to be the cheapest and most satisfactory ways of producing the services now produced by government. . . .[1]

Sharing Friedman’s view that a production model dominated by large corporations features neither “an attractive way for people to live [n]or an efficient way of producing goods,” I find Friedman’s analysis quite congenial. I also share his view that one cannot be dogmatic about what a society liberated from state-secured privilege might look like. But I am at least a little less inclined than he is, in his contribution to this Liberty Matters symposium on Molinari, to think I’m engaged simply in wishful thinking when I suggest that the concerns that prompt Molinari to propose labor exchanges could be addressed simply by eliminating state-secured privileges.

Perhaps the large hierarchical corporation will persist in the state’s absence. Friedman is right that I hope it won’t, and no doubt confirmation bias is a factor in my evaluation of the relevant evidence. But I still think there’s reason to be optimistic.

My case for a future in which a much greater percentage of people could be expected to work in sole proprietorships, partnerships, and cooperatives includes several elements:

Being treated well at work is a consumer good, one for which people might be expected to pay something. The more affordable it is, the more people will be inclined to buy it. Several things might make it more affordable:

If self-employment is less risky than at present, people might find it easier to choose to work for themselves. Reduced health-care costs, reduced costs associated with working at home (created by an end to zoning rules, licensing requirements, and building codes), and similar factors could be expected to make it safer to work for oneself.
The realistic availability of self-employment would increase competitive pressure on employers to recruiting workers, and providing greater opportunities for participation and greater dignity at work would be one way of attracting them. Obviously, some workers might prefer higher salaries, but the market could presumably meet both sets of needs.
Removing state-driven burdens on economic activity would presumably boost productivity generally and raise average incomes. Compare changes in working conditions—e.g., the emergence of the 40-hour week, increased workplace safety, etc. As prosperity increased, things people might have thought of as luxuries became increasingly affordable, and therefore more widely available.
Remedying past instances of state-perpetrated and state-tolerated injustice and making state-engrossed and similar assets available for homesteading might be expected to boost the wealth of some workers and thus, again, to increase their ability to secure more attractive working conditions.

Large hierarchical organizations face persistent informational and incentival problems similar to those confronted by state bureaucracies. Thus, other things being equal, smaller, more flexible alternatives might be expected to out-compete them in virtue of diseconomies of scale—a point Friedman seems to acknowledge when observing that corporate production doesn’t seem to be “an efficient way of producing goods.” If it’s not efficient, why does it persist? One possibility is that features of business culture dispose most people, including (perhaps especially) major investors, to see existing hierarchical business models as inevitable or desirable. Another is that the full force of the informational and incentival problems isn’t being felt in today’s economy. I sought to explore the latter possibility in my initial contribution to the symposium, suggesting that the state rigs the game in favor of hierarchy.

Friedman is unconvinced. He offers several reasons for his skepticism:

He notes that employers always face the choice between offering higher wages and offering various nonwage incentives to workers, so that if workers in today’s economy (say) really wanted more participatory workplaces badly enough to accept lower wages in exchange for them, the market would provide such workplaces. That they do not suggests, he seems to imply, that there is little market demand on the part of workers for greater participation.
He proposes that we might reasonably conclude that the economies of scale yielded by the contemporary hierarchical corporation outweigh the associated diseconomies of scale.
He notes that state action may in fact encourage reductions as well as increases in firm size.

If workers don’t care very much about participatory workplaces or opportunities for self-employment, I have no burden to force them to create such workplaces. Let a thousand flowers bloom! But it seems perfectly sensible to think, given that workers do report some interest in such workplaces,[2] that if the affordability of noncorporate employment increased, more workers would choose it. State action makes such alternatives less affordable both by increasing the costs of and the risks associated with self-employment and by decreasing workers’ incomes by decreasing overall wealth levels.

I don’t doubt that state action can be seen as pressuring firms to reduce as well as increase in size. And, ignoring cultural-cum-psychic factors, no doubt the balance between economies and diseconomies of scale achieved by corporations in today’s economy is efficient in that economy. But the question, of course, is why we ought to think that a similar balance would obtain were the state absent. I am prepared to wager that it wouldn’t, that the factors I note in my original contribution to the symposium, addressed in much greater detail in Kevin Carson’s Organization Theory,[3] would make for a significantly different pattern of worklife in a free society. But, like Friedman, I don’t propose to be dogmatic. I think it is also reasonable, though, for me to note, as he does, both that corporate hierarchies don’t seem to be efficient or appealing, and to hope and work for their replacement by more flat and flexible arrangements for organizing work. Endnotes

[1] David D. Friedman, The Machinery of Freedom, 2d ed. (Chicago: Open Court 1989). The quoted passage is from the chapter, “In Which Prediction is Reduced to Speculation”; I draw here on the on-line version, available at <http://daviddfriedman.com/The_Machinery_of_Freedom_.pdf>.

[2] See, e.g., Richard B. Freeman and Joel Rogers, What Workers Want (Ithaca, ILR 2006).

[3] Kevin A. Carson, Organization Theory: A Libertarian Perspective (Charleston, S.C.: BookSurge, 2008), online at https://www.scribd.com/doc/53649743/Organization-Theory-A-Libertarian-Perspective-by-Kevin-a-Carson.

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