There are certain words that get bandied about that say more about the politics and philosophy of those who utter them than about whatever might be the actual meaning of the word. Examples such as “sustainability” (translation: get rid of carbon fuels) and “neo-liberal” (mix of free markets and some central bank/State intervention, boo, hiss!) spring to mind. But arguably one of the worst offenders is “stakeholder”. In my view it usually means some group of people who consider themselves affected by the operations of a private group, such as a firm, and who interact with it, but who do not own property of said group, and who demand control/rights over that group/firm above and beyond any contracts they may have signed. For instance, in the great wodges of press releases I receive from advocates of corporate social responsibility the term “stakeholder” comes up. A lot.
So a question for you folks. Does the term have any value at all or is it simply a term to describe groups of persons who want free stuff and should be more accurately described in less, er, flattering ways?
Stakeholder.
Vlad The Impaler comes to mind.
The term “stakeholder” is borrowed from technical jargon in the vampire-hunting industry.
People who talk about “stakeholders” are apologists for theft.
If you want an honest concept that conveys the meaning you are asking about, try “skin in the game.” A compare and contrast of the two concepts could be illuminating.
Stakeholders are a wonderful way for corporate management to dilute their responsibility to actual shareholders. The whole stakeholder trend started with management decades ago, in part as a defense against takeover pressures. Someone like Warren, who was very involved in the corporate world as an academic, is well aware of this. As is often the case with politics, her role in the process is to position the government as protection for the intentionally inefficient from competitors who aren’t hamstringing themselves.
The principal-agent problem is a real one in corporate management. Excuses for poor performance are always welcome.
Once again it is necessary to take up the cudgels to warn would-be libertarians against indifferently corroding useful social structures.
Consider, for example, a situation in which a dominant employer decides to fully ‘casualize’ its workforce, rather than offer contracts or take on permanent employees. There are obvious external costs which such a policy would impose on the rest of the town – not least because those casualized workers would become ‘unbankable’, and thus less able to contribute to the stable growth of the society of which they are members. In such a case, it is absolutely plausible to argue that the rest of the town, including those not directly employed by the company, has a ‘stake’ in its lamentable employment policies.
You can pretend that this an unusual case, but – as we know all too well – it is not.
In these circumstances, it is not merely plausible, but right, that the wider society has an ‘interest’ in what the company is doing. They are, in fact, stakeholders.
Now, you libertarians can argue that this implies absolutely nothing about society’s legitimate interest in influencing their employment behaviour. But I can politely disagree without, I think, ceding any moral ground.
From time to time in my work, I speak of the stakeholders in a decision, meaning those who must be consulted before it can be considered valid in a technical sense. From the point of view of strict managerial authority, few decide (and each can be overridden by a higher up), but from the point of view of the decision being technically safe, certain others must be consulted.
That is a legitimate and useful role for the work stakeholder: someone whose area must adapt to work with the change, and so should say if they can and what adaption will cost or might risk, and/or someone without whose technical review the decision could be unwise or unsafe in some area the other participants would not see.
What authority a stakeholder should have, whether to refuse or merely to say, “Don’t say I didn’t warn you” is for a firm’s process to decide. There can be a danger of expanding stakeholder’s roles beyond what is needful.
This.
I use the word all the time in the confines of my employment; I have multiple projects affecting multiple parts of the business at any one time, without whose input I will inevitably make mistakes that I can’t foresee (yay for understanding the Knowledge Problem, thank you Hayek).
I don’t think it’s a wankword, to me it’s just a term for “someone who knows their part of the business better than you do.”
I guess in a more macro sense, as described by Jonathan Pearce, it’s more to do with people affected by potential externalities?
I can’t, off-hand, think of a better term.
Michael Taylor wrote:
“Consider, for example, a situation in which a dominant employer decides to fully ‘casualize’ its workforce, rather than offer contracts or take on permanent employees. There are obvious external costs which such a policy would impose on the rest of the town – not least because those casualized workers would become ‘unbankable’, and thus less able to contribute to the stable growth of the society of which they are members. In such a case, it is absolutely plausible to argue that the rest of the town, including those not directly employed by the company, has a ‘stake’ in its lamentable employment policies.”
The rest of the town may be impacted by the employer’s decision. But they don’t have a “stake” in the employer’s decision, in the sense of having any right to affect it. The use of the term ‘stakeholder’ has become overly-broad, and now is used to imply some right to affect the decisions of others merely by dint of any perceivable externality – along the lines of ‘because this has an outside impact, I (and everybody else) should be entitled to a say!’ It creates a right to tell others what to do with their property out of thin air.
Even leaving that aside, in the real world, those who proclaim themselves to be ‘stakeholders’ in such matters usually turn out to be rent-seekers in sheep’s clothing. Whether it’s those who claim a ‘stake’ in a casual gig-type structure like Uber or Lyft, but are always found to be acting in the interests of existing taxi-cab monopolies, or those who claim a ‘stake’ in the operation of zero-hours or flexible employment like Amazon, but who turn out to be acting in the interests of those seeking to unionize such operations, self-appointed ‘stakeholders’ always seem to be acting in direct opposition to whatever-activity they claim to have a ‘stake’ in.
The only people who actually have a ‘stake’ in the employment relationships you describe are the employer and the employee – they’re the only ones performing any sort of exchange, they’re the only ones with skin in the game. Assigning a ‘stake’ in that relationship to any other part of society due to alleged negative impacts assumes that the employment relationship exists to support society, when it should be the other way about.
llater,
llamas
Michael Taylor writes:
Consider, for example, a situation in which a dominant employer decides to fully ‘casualize’ its workforce, rather than offer contracts or take on permanent employees. There are obvious external costs which such a policy would impose on the rest of the town – not least because those casualized workers would become ‘unbankable’, and thus less able to contribute to the stable growth of the society of which they are members. In such a case, it is absolutely plausible to argue that the rest of the town, including those not directly employed by the company, has a ‘stake’ in its lamentable employment policies.
A fully “casual” workforce is not really a work “force” as such as a network of contractors using the firm’s logo/system to obtain work, such as Uber, to give a real-world example. (Of course, partly in response to pressure from the taxicab industry in various places, certain ways of operating have changed.)
There are external “benefits” obtainable to a town as well from such “casualisation”, such as people being able to work, such as being self-employed, rather than claiming benefits and not learning valuable job skills. It is a mystery why such people would be “unbankable” unless one assumes that self-employed people are not wanted as bank clients. In fact the assumption here seems to be that self-employed equals “casual” and is therefore in some ways inferior. Well, even if not all those who are self employed like that status, many do and choose that route.
When a person goes to work, they are looking to maximise their own goals and welfare. A system based on voluntary interaction via a market is – as old Adam Smith pointed out many decades ago – one that tends to work to a broader, healthier society in general.
It is, finally, worth noting that government actions such as minimum wage laws, employment “protections”, paternity leave and all the rest have meant many employers would rather use machines than people, given the costs. Ask yourself whether the “stable growth of society” is aided by such measures. In my impression few of those who talk about “stakeholders” question such things. Quite the opposite.
Llamas says it all even more eloquently than I. He is particularly on-target about how many of those criticising certain practices want to interpose the coercive power of the State into voluntary interactions.
Llamas and Jonathan Pearce.
Thanks for your responses, which I consider inadequate.
Here’s why. First, Llamas, there is a fairly well-grounded idea of ‘external costs’ which certain actions of people or companies place on other people, or even societies. You can think, for example, of companies polluting rivers. In those circumstances, the external cost is obvious and it seems natural justice for restoration to be made to those unwillingly bearing the cost. That’s the ‘polluter pays’ principle. Do would-be libertarians want to argue against that? If so, go ahead, try and make the argument.
In the case of casualization of the workforce, my argument is that something similar is taking place.
Second, Jonathan Pearce, it is simply not good enough to collapse the casualization of the workforce into the invention of either new technologies allowing liberation from stuffy old structures, and/or the discovery of a generation of sturdy and self-reliant self-employed. If you are not aware of what is actually happening in these situations, you need to study more and engage your sympathetic imaginations. What actually happens is that low-tech companies, faced with a ‘demand surprise’ learn that they can draft in large numbers of expedient immigrant labour rather than invest in capital stock. And from there they learn that – ‘hey, this works well, what did we think we were doing handing out actual permanent jobs, when we can always just ship ’em in, ship ’em out’. This may not happen where you live, but it certain does where I live. And in these circumstances, you end up with a significant swathe of the population becoming ‘unbankable’ . . . and soon enough, the banks then decide to move out of town, and the place is on the slide.
You think these things don’t happen? Haven’t happened? Aren’t happening in Britain today?
In this situation, the response is, inevitable, precisely pressure for the state, and taxpayer, to pick up the cost of the externalities foisted onto the community by the errant labour casualization. So your libertarian attitude ends up merely encouraging the growth of the state!
Be realistic. Libertarians should be willing to engage with their philosophy at a deeper and more subtle level than this exchange has suggested. Yup, ‘fraid so.
Michael Taylor – fair enough. Thank you for expanding your point.
Now, you wrote:
In the case of casualization of the workforce, my argument is that something similar is taking place.’
How so? What material or measurable negative impact does ‘casualization of the workforce’ in-and-of-itself have on the public at large that is in any way comparable to (say) the pollution of a river, which was your example?
I note that you go on the expand on possible externalities later in your post, when you speak of using imported labour and so forth – presumably the ‘externality’ you are alleging is the suppression of wages and/or increased unemployment of local people. But that’s not ‘casualization of the workforce’, that’s ‘importing another workforce’ – a different matter entirely.
Why would an employer do that? Usually, it’s because the imported workforce will work for lower wages. But, if you consider wage suppression or increased employment to be a significant eternality which entitles outsiders to have a ‘stake’ in the decisions which may cause it/them to occur, it’s but a short step to the assertion that people are somehow ‘entitled’ to a certain wage, and to be permanently employed for 40 hours per week where they live, and that actions which reduce wages or increase unemployment are somehow illegitimate, and those affected are entitled to prevent those actions.
Incidentally, the option to import a foreign workforce quickly and cheaply is only available in some places – like the EU. In other places, this option generally takes the form of exporting the work to where the cheaper workforce is. Mountain and Mahommed, that sort of thing.
I live in Detroit, so I see this all the time. Somebody works at GM or Ford, and they are laid off because the work is to be done at lower cost in Mexico or Vietnam. And all they can complain about is that ‘their’ jobs have been taken from them. The fact that millions of consumers pay less for their cars, as a result of the reduced cost of production, is the externality they never consider.
Tell them that the oil patch in North Dakota is crying out for skilled workers, and they can easily make much more than they were making if they will go there, and you’ll be told ‘Oh, but I can’t move to where the work is at!’ As though it’s somehow the responsibility of employers to provide the work they can do, where they happen to be, for life.
llater,
llamas
Michael Taylor,
The external costs of water pollution have nothing to do with “stakeholders.” They’re an issue of damage other people’s property: The people whose land the river flows over or past, or the holders of riparian rights. That is, they’re straightforward torts against rights to physical property, addressable through the machinery of lawsuits.
I’ll stipulate that there is a case for restrictions on low-intensity behavior that inflicts small harms on property or persons, but at a level where any one person’s contribution to the harm is hard to trace and/or too small to blame for any specific harm. But there’s a common law remedy there, too: The law of nuisance.
None of these things is a proper model for, for example, the state of California’s gig law, which compels Lyft and Uber to treat their drivers as employees, imposing overhead costs, against the wishes of the drivers themselves, for the gain of taxi companies, and to the detriment of poor people who can afford Lyft and Uber more easily than taxis. Still less is it a proper model for the extension of this hostility to such enterprises as freelance writing. That’s using a convenient buzzword as an excuse for denying people the right to structure their economic relationships as they mutually choose.
‘stakeholder’ n. ’Anyone but the rightful owner of property or a process.’.
I noticied when an exceedingly junior bureaucrat in the dying days of John Major’s time in office that Mr Blair started using this term when Leader of the Opposition, and civil service mangement suddenly started using it too.
“That’s the ‘polluter pays’ principle. Do would-be libertarians want to argue against that?”
No, but in this case the external costs go both ways. Labour market Protectionism has all sorts of indirect economic costs on the rest of society, too, which are in general greater. (And historically in most nations where socialism has really taken hold, prison-camps-and-mass-graves greater.)
“What actually happens is that low-tech companies, faced with a ‘demand surprise’ learn that they can draft in large numbers of expedient immigrant labour rather than invest in capital stock.”
Companies aim to produce the greatest amount of the stuff people want for the least amount of human labour. That means there’s more to go around for everyone. Protectionists aim to produce the least amount of stuff for the greatest amount of human labour, because scarcity keeps prices high and raises their wages. However, there’s less stuff to go round for them to buy with those higher wages. Everyone figures that if they only protect their own industry, they’ll get a bigger share, but the problem is everyone else is doing the same thing, so what you gain from protecting your own industry, you lose in spades through everyone else protecting theirs. Everyone is poorer.
The labour market operates according to the law of supply and demand. Employers have no more choice about the market wage than do employees. As with any market, if the price of a good is below the market equilibrium then you get more buyers than sellers and the result is a shortage, with a black market starting up in which traders make money off the difference between the set price and the market price. If the price of a good is set higher than the market equilibrium then you get more sellers than buyers and the sellers compete among themselves to find ways to lower their price.
This applies just as much to the employment market as any other. If you set a minimum wage above the market equilibrium, that reduces the number of employers able to hire people, and increases the number of workers looking for work. It increases the competitive pressure on workers to accept poorer working conditions to make up for the too-high minimum wage, just to get/keep a job. (Like casual labour, zero hours contracts, long hours, shorter breaks, overtime, etc.) The fewer workers with jobs get higher wages, but the remainder are unemployed. There are fewer jobs overall, less stuff being made, and therefore less to go round for everyone. And those rendered unproductive are supported by extracting higher taxes from the remainder, so that because of the law of tax incidence the cost of which falls predominantly on those least able to find alternatives – i.e. the poorest of the workers. (In case you don’t know, tax incidence theory says that the burden of any tax on a transaction falls on each participant in inverse proportion to the elasticity of supply or demand. So between suppliers, employees, customers, and shareholders, the costs of any corporate tax fall on those least able to go elsewhere. If you tax the chief executive more, he demands higher pay to stay, which takes more money out of the total pay pot, which means there’s less for the other employees. Indirect consequences, you see?)
The market starts by trying to give a minimum wage job to everyone. So long as there are still people out there capable of doing the work, more money means the company employs more people and makes more stuff. (More stuff to go around, right?) When it runs out of people with the right skills, then it starts paying more and improving conditions, to attract them to their own business. Only the most profitable businesses, making the most stuff for everyone, can afford the staff.
Thus, the only way to raise wages is to limit the supply of labour. You draw a line, and say the employers are only allowed to employ people inside that line. You create an artificial shortage of workers, and therefore an artificial shortage of the stuff they make. You completely screw over everyone outside the line wanting a job. You screw your employer. You screw the customers. You screw the taxpayers supporting the unemployed. And because everyone else is doing the same thing, and the artificially created shortage is universal, you wind up screwing yourself. And then you whine and moan about how hard life is, and how costs are going up, and wages are not keeping up with them, and the basic necessities of life are harder to find, and soon you’ve got general strikes, three day working weeks, power cuts, and 20% inflation, and not long after that you’re eating your own pets and hiding from the secret police.
The secret to increasing the wealth of society is not raising wages, but reducing prices, and hence the cost of living. The secret of wealth is to make more stuff, not less. Making less stuff raises wages, but means you have… less stuff. That means you’re poorer, right?
This stuff ought to be blindingly obvious, but it isn’t. This stuff ought to be taught in maths class in junior school, but it isn’t. This stuff ought to be known by every adult human being before he’s allowed out alone in the world without supervision, but it isn’t.
Libertarians are very much “willing to engage with their philosophy at a deeper and more subtle level”, but it drives us mad that the more we explain the blindingly obvious, the less people seem to understand. And then because we keep on arguing and don’t agree with their “scarcity is good” philosophy, we’re considered unreasonable and too “purist” for mainstream politics. Aauuugh!
This stuff has only been mainstream in economics since about 1850. Bastiat’s Sophisms is a pretty readable account and far more detailed than I can give here. Or you could try Hayek’s ‘The Road to Serfdom’. But whatever. Protectionism will never die.
This discussion has become one of “who ought to be allowed to have a say in Other People’s Externalities when those externalities affect them?”
No factual right, no factual wrong. Preferences. One can certainly claim a “stake” in a situation in which one has no legally cognizable right or interest, so long as “stake” simply means the situation might affect you. To the extent that tort law has failed to reflect society’s evolving standards on how much power ought to devolve to a bare “stake” holder from the true legal-interest holders, I would expect it to do so eventually (in our society of ever-growing statute books.)
So I’d not look for the concept of stakeholders to go away any time soon. In it lies one of the left’s essences.
“Stakeholder” is a term used to defend modern Fascism – i.e. the doctrine that business enterprises should not be run to benefit their owners, but to (allegedly) “benefit the wider community, including workers and consumers” (thus the assumption that the free market does NOT benefit “workers and consumers” is exposed).
Under Mussolini there was some pretence at setting up councils of workers and the general public – but all real power was with the STATE (with business owners being reduced to the servants of the state), under the National Socialist Adolf Hitler there was even less of a pretence than there was under the Fascist Mussolini.
The mass media and academia (basically Hollywood to Havard) pretend (as the Soviet NKVD taught them to do) that under Fascism and National Socialism business was in “partnership” with government, or was actually “in control” of the government – with the Fascist and National Socialist state “serving the capitalists”.
The NKVD (Stalin’s secret police) account of Fascism and National Socialism (believed by modern “liberals” due to the spreading of this view in the West since the 1930s) is false – the “capitalists” were not in “partnership” with the state – they were CONTROLLED BY IT, as explained in Hayek’s “The Road to Serfdom” and (better) Ludwig Von Mises’ “Omnipotent Government”. Just as the “War Socialism” of General Ludendorff was NOT about serving the capitalists – see Ludwig Von Mises “Nation, State and Economy”.
In many ways all this was a throw back to the state dominated society of, for example, Frederick the Great’s Prussia of the 18th century – but actually worse (much worse).
Ask yourself if a modern Fascist, such as Senator Elizabeth Warren, is really serving the interests of the “capitalists” or even corporate managers (NOT the same thing – for example the Economist magazine represents the interests of corporate managers, not actual capitalists, and it still does not like Senator Warren) – of course she is NOT serving the interests of capitalists or managers. The state is (as Hegel understood and Karl Marx denied) independent of class interests – other (and here Hegel did not understand – but the late Anthony de Jasey did understand – see “The State” 1985)its own interest, as long as one includes in that the belief of statists that they serve the general interest (it not a crude self interest – it is a belief that the maximising of state power serves the general interest).
It must be made clear that being a Fascist, such as the Senator Warren, does NOT commit a person to National Socialist (Nazi) racial beliefs – Mussolini did not himself share such beliefs. Indeed Fascism need have no racial content at all – although the Fascist Senator Elizabeth Warren is in fact an anti white racist (believing that white people are responsible for all bad things in the world and need to pay nonwhites “reparations” for the evil deeds of our “race”) – this may be part of the reason that Elizabeth Warren pretended (for many years) that she herself was not white (but was actually an American Indian – which she is not) – this is normally explained as a corrupt way to get ahead in academia, but it may also be about a deeply based SELF HATRED of Elizabeth Warren of herself as a white (European) person.
Just in case anyone does not know – Fascism is the control of the economy (and society – contra J.S. Mill there is no distinction between the economy and civil liberties) by the state, via regulations and edicts.
A Fascist state may own enterprises (indeed Mussolini’s Italy had more state owned enterprises than any other country of the time – other than the Soviet Union), but it does not actually need to have formal legal ownership – as long as it had control.
It is her belief that the state should control the economy (society) by edicts and regulations that makes Senator Warren and others Fascists.
“Stakeholder” can apply to any group or element with an important interest in a process or development which they do not have any formal control over.
For instance, the leadership of a military service might decide that a base should be closed as obsolete or inconvenient. “Stakeholders” in this decision could include all the commands or branches which use that base and would be affected. Or, on the other hand, the decision to build a new base and the design of that new base would have similar “stakeholders”.
They just closed a local lead-manufacturing facility here because thirty or so of the kids of the workers had very high lead levels in their blood.
I own no part of that factory. I have no legally cognizable interest or right in the goings-on there.
But, to the extent that I’m going to help subsidize medical care and long-term societal issues stemming from lead-stupid kids, and to the general extent that my society will be negatively impacted the more stupid people we generate, I’m a stakeholder.
Granted, I’m a very attenuated stakeholder. But at this point (like the old joke), we’re only arguing about price.*
(*: “Are you a prostitute?”
“No!”
“Will you sleep with me for $100?”
“No!”
“Will you sleep with me for $1,000,000?”
“Sure!”
“So, you are a prostitute, but you’re just haggling over the price?”)
Stakeholder is actually useful for government owned enterprise.
Schools have staff, who teach students. But you have to say that parents have a significant stake in school decisions. And so do the tax payers, if they are paying. A decision taken by a school — say about cutting the number of hours of Maths and English, should not be decided by the staff alone, without thought for the those with a stake in the consequences, because it suits them. (More so if you live in a polity where you have no alternative about which school to use.)
Hospitals, likewise, should not be run for the benefit of the hospital and its staff. It should be run for the benefit of potential users, and those paying.
The use of “stakeholder” to private enterprise is less helpful.
Leaving aside the usage of “stakeholder” I just wanted to query Michael Taylor’s analysis of “externalities.”
Externalities may be positive (contributing free goodies to third parties) or negative (imposing costs on third parties) or a mixture thereof. What is the nature of the “externality” associated with an employer changing its employment practices ?
It seems to me that Michael Taylor is beginning his analysis somewhere deep into the second half. We need to go back to kick off. When a business sets up in a town, offering new employment opportunities to townsfolk, the externalities are likely mixed. Existing competing businesses may suffer. But for the rest of the town, the externalities are surely positive. Banks, stores, housebuilders, bakers, local farmers, and their employees, and suppliers etc will gain new opportunities as positive externalities.
If, deep in the second half, the business changes its employment practices so as to reduce the wages of its employees or their job security, then that is merely reducing the size of the positive externality that dervives from the business operating in the town. It does not impose any negative externality on anyone. It is nothing like polluting a river. It’s like Grandpa, in straightened circumstances, reducing his birthday cheque to his grandson from $30 to $20.
So I think what Michael is asserting is some sort of customary “right of way” into a business’s pocket. That the townsfolk have grown accustomed to a pile of pleasantly free externalities from the business’s existence entitles them, with the passage of time, to assert a right to them against the business.
Grandpa ! If you decide to send me a cheque on my birthday, fine, but if you do, it must never be less than $30, and you must send it every year.
Well OK then.
More than a decade ago, a local busybody informed me that she had, twice, tried to get my former house listed. Behind my back on both occasions. That is a stakeholder. And the law empowers her to behave that way. Remarkably I still hold her, and that law, in low esteem.
Thanks to those responding to my original comment. Let’s have a look at them.
William Stoddard takes up my example of the river pollution externality, but thinks it is sufficiently dealt with by nuisance to private property (ie, riparian rights). Has he ever held riparian rights? I have (a trout stream in Northumberland – lovely), and I find it laughable to consider that the damage of pollution to my trout stream is merely confined to the infringement of my riparian rights. No, major pollution of a trout river is an assault on the environment in which many communities participate and very legitimately have a stake.
Nullius gives an economies exposition which, rightly, reminds us that employment in any degree delivers external benefits as well as (potentially) costs. Quite right too. But he then delivers an economics lecture about labour markets: simple stuff that ‘ought to be blindingly obvious . . .and ought to be taught in maths class in junion school’. Nullius, I bow to no-one in my reading of Hayek, which I first encountered as a lad in 1975 (‘New Essays’). However, and I don’t know how to break it to you, accepting the idea that wage levels are determined only, or even principally, by supply and demand is simply wrong. It’s just an error, along the lines of ‘the central message of Buddhism is every man for himself’, or ‘the London underground is a resistance movement’. The person you very seriously need to read to put you right on this is Piero Sraffa. Very unfashionable, and actually quite difficult – but incomparably elegant, never disproved, and his ‘re-switching’ argument now visible across the Western world.
Read Sraffa.
Paul Marks wants to badge the idea of stakeholder as a defence of modern Fascism. This is, I think, quite a spectacular intellectual over-reach, seemingly motivated by his attack on Elizabeth Warren. Not his finest moment, I think.
bobby b gets it.
Lee Moore gets to the nub of it, I think, and he’s right that I do start the argument some time deep into the second half of the situation (ie, not when the company is established ab initio, but when it has been around for some time). He thinks this is dangerous logical short-cut; I think it describes the world as it is experienced. Even in new boomtowns (for example Shenzhen), there quickly build up a web of traditions, expectations, practices and relationships (commercial, financial, personal) which go to bind communities together. They are what, in practice, allow a society to become, if you like, a coherent sample of various types of distributions. Individual man becomes a social/political animal. At some point of consequence, major changes to those traditions/expectations/practices/relationships imposed unilaterally do become of serious material concern to, if you like, innocent bystanders, and I assert that at some point, those concerns become sufficiently important to generate some sort of right of intervention.
I’m quite happy to acknowledge that this could be ‘the thin end of the wedge’, but I think rationality is better served by engaging in the knotty problems that arise, than pretending that it simply isn’t an issue.
I assert that at some point, those concerns become sufficiently important to generate some sort of right of intervention.
If so, this can only work as alcohol does – you only get a buzz from increasing the dose.
So if when a business starts up, the convention is that once it is established the townsfolk may reach three inches into the business’s pocket to claim their now accustomed externalities, then the business can assess the costs and benefits of opening in a town with a “three inch” convention. As opposed to the “one inch” convention in the town 30 miles away. Maybe “three inch” town still wins because it has other advantages.
But Economics 101 demonstrates that at the margin, “three inch” town will frighten away enough businesses to ensure that its “three inch” rule costs the townfolk more than it gains them.
So if businesses take into account the “three inch” rule when they set up, the town can only bank a net gain by luring in businesses with its “three inch” rule and then, after their costs are sunk, whacking it up to a “five inch” rule. Hair of the dog.
But then Economis 102 predicts that businesses will take into account not merely the expected cost of the current rule, but the expeced cost of ratchets. They have seen the future and its name is “Tenants Rights.”
None of this, of course, denies that businesses, particularly those that are substantial employers, form an important part of the local community, and may choose to incur additional costs to retain local goodwill – either for long term financial gain, or in the case of owner managed businesses, for the personal amusement of the owner. It merely asserts that if your town, or State, or country tells new businesses :
“Set up here and WE own YOU”
some businesses may prefer to set up elsewhere.
Nor do I deny that local townsfolk may genuinely feel that they have a right to insist on retaining established externalities, even when the law does not so entitle them. People are like that. It may be good politics to indulge them, for they see the established business and they do not see the businesses that have been frightened away. But that doesn’t make it good economics. Free marketeers are doomed, alas, to be Cassandras – we know how to maximise the public welfare, but we are fated not to be believed.
And while I’m rambling, I might add that this is the real tragedy of Trumpist economics. I’m sure he really does want to restore “real man” jobs to the rust belt, and I’m sure those who vote for him there believe he’s helping to save their towns for their kids. But twenty years on, the kids will have fewer opportunities because of the attempt to prop up the past. There’s no evil here, only error.
Paul is correct, in that that Mussolini’s state nullified business owners power by asserting the rights of other ‘stakeholders’ (OP sense). The fascists’ idea was for owners to have 25% of the votes, the workers another 25%, the customers (the public) another 25% and the state the final 25%, in deciding how businesses were run. Same-area businesses were grouped under boards who nominally voted this way. (In practice, the state simply nominated the 25% that supposedly represented the public, thus giving itself de facto control, plus neither the unions nor the business representatives were exactly free to argue and vote however they wished.) The scheme took years to set up and there was then not so long before WWII, so while I think people here can guess how well it would have worked of itself, the actual Italian economic evidence is much confounded with other factors.
There is an obvious and strong analogy between this way of taking over things and what the OP is talking about.
If I had a five-minute media window in which to argue against Elizabeth Warren I would very likely not use any of it to make this particular analogy – but the analogy is a good one and in the right venue, to the right audience, with a sufficient time-slot, well worth presenting (probably by discussing historical fascism first and noting the analogy to Warren’s ideas at the end).
Michael Taylor,
You don’t seem to be paying attention to my reference to the law of nuisance.
When I studied business law, quite a while ago, we had a chapter on the law of nuisance. It described how nuisance law was used in the nineteenth century to shut down mines whose discharges acidified streams—until the state legislature banned such legal actions, on the ground that coal mining was in the public interest and private rights had to be set aside for the public good. Capitalism provided legal protection against pollution; socialist policy removed it.
Lee Moore, I’m quite happy to run with the alcohol simile. Alcohol is a great servant and a terrible master. I enjoy it, but it killed a close friend, so I remain very wary of it. Seems reasonable to adopt the same attitude towards externalities etc.
It may be instructive to consider how the usage of the term stakeholder has evolved from its origins as the designation of one who is NOT a party to a bet or contention, but holds the funds (or other asset, rights, etc.) to be distributed to the prevailing party (winner) in the contention.
Where a stakeholder was engaged in a condition requiring a determination, anyone having a “stake” in the outcome could not be a “stakeholder” – for want of neutrality and trust to perform on determination.
We now find ourselves using that label for the opposite – to identify those who have something to get out of the determination (a “stake”) of the outcome, including merely being affected by the outcome, regardless of “putting anything up” on the bet or contention.
The term stakeholder’s greatest usefulness is in identifying villains with socialist tendencies.
It is much like the lawn and garden signs supporting political candidates that recently came and went here in Canada.
I now know which of my neighbours are of a mind to steal my stuff and/or murder me and to what degree. Our local Labour Party clone is the New Democratic Party and I was not much surprised by who supported them.
Not sure about Mr Stoddard, but I do hold riparian rights.
There are two approaches to pollution, one is “after the event” tort law, and the other is “before the event” regulation. The argument comes in working out which will more effective in preventing genuine harms vs imposing unwarranted restrictions on smaller companies, thereby stifling competition and helping to create monopolies. There isn’t a straight black and white answer on that, everyone has different opinions, from the “zero regulations!” guys to the “light touch” guys, all the way through to the “regulate everything!” guys.
All of which is very interesting, but I’m unclear how it relates to casual labour.
Let’s say I live in a small town with a dominant employer – a Ford plant in East London, just for the sake of a handy, and easily visualised, example.
What employment regulations would you propose?
Neonsnake
I don’t think you can deal effectively with it via ‘regulation’. I do, however, think that if you recognize there is an externality issue with the mass-casualization of labour (ie, the unsought-for disappearence of jobs with regular hours/earnings etc) then it can be addressed via corporate tax system. For example, you could require as part of the annual reports that the company calculates and state the median length of time their employees have been with the company, and give tax breaks to those who have a track record of sustained employment. It would also identify those who’s business model involves either the casualization of the workforce, or a management style (including but not confined to wages/benefits etc) which is discovered to be unsupportable by those involved. Those companies wouldn’t get the tax breaks. As I say, I think ‘the polluter pays’ principle is worth pursuing.
For what it’s worth, my hope would be that this could encourage the retention and therefore productive development of the workforce, including by investment and training. And yes, I’m quite happy to say that this is intended to foster a ‘social’ benefit.
More generally, I’d be very unwilling to mandate labour regulations at a national level at all, because, let’s face it, what might be good for Brighton might not be good for Scunthorpe. In these cases, I think there is a good case for local democratic decision making.
You could do that. Would you require all companies to do it, or merely those with a (permanent) workforce of, say, 300 or more?
I mean, we’re surely not going to impose that on the local curry house, are we? That would seem to offer unfair advantage to McDonald’s and their (presumably) very large and automated HR system?
Seems a touch unfair on the employees and customers of such a company, especially if we already think that they are causing social harms, given that an increase in corporation tax can be paid for by lowering costs (including salaries), raising prices (not great for the rest of our little township!) or realising less profit (let’s hope they don’t go bust!)
Neonsnake,
Yes, I think you’d have to do some fairly standard fine-tuning it to accommodate the local curry house, start-ups, very small companies etc. I don’t see that as an impossible ask.
I’m not as concerned by your second problem: after all, the easiest way to avoid the taxes is to retain your workforce and treat them decently. The way I’d view it is that it would give companies a fiscal incentive to invest and raise productivity.
Or, to put it in its broadest context: it slightly re-sets the terms of trade between capital and labour. I think this is a) possible and b) useful.
PS. Go on, read Sraffa.
Not impossible, but potentially ripe for abuse. In the example I gave of limiting it to only companies with 300 or more permanent employees, it strikes me that they could limit their permanent workforce to 295 and casualise the rest.
I’m not a fan of “accommodations”, per se. They tend to create loopholes. I’m more a fan of level-playing-fields between the big and the small, as much as is realistic. Alas! I’m a dreamer like that.
Could be. Or maybe they’d factor them into the cost of doing business. Who knows? Maybe a larger company could lobby the local representatives for some of that afore-mentioned “accommodations” we were talking about. Just a smidge of extra fine-tuning, nudge nudge.
Another thought occurs. It puts an amount of social pressure on the workers. If a company treats it’s workers well, especially a dominant company in a small town, then might not a feeling arise that if a worker leaves (of their own accord), then that would mess with the turnover statistics. Sure, one worker here and there…but still.
What if I happen to be that last worker, after whom the company – a beloved company – gets hit with a tax bill. Ostracism beckons if I decide I have amassed enough money for now, and want to exit the rat race and spend the rest of my life living frugally but free on the proceeds of my allotment, taking my pleasure from the sunrise and hikes in the woods.
That would be a shame. Feels like we’d be encouraging a society where your value to the community overrides your individual desires. I’m not really keen on that.
😳
I’ll take that as a compliment, but I confess: economics isn’t my strong suit, I don’t have the background, and I fear I won’t understand it. I leave the economics to the others here.
(That coughing noise you’re hearing is the sound of the others muffling the phrase “no shit, neon”, but being polite about it)
neon,
Yeah, but then your life would be meaningless.*
Well, yes. That’s the whole point.
(Signed)
Luv & kisses,
Dr. Zeke
*[To everybody but you, of course. OTOH, we Objectivist fellow-travellers kinda tend to think that’s the whole point. –Signed, Not a fan of Dr. Zeke]
.
Generic “you”:
Although “being of value to the community” could be the most fun, satisfying, rewarding thing you can think of. Then, that would be your individual desire. Just as long as you came to feel that way without indoctrination of a coercive or manipulative sort, and don’t propose to manipulate or coerce anybody else into “living to serve” *gag*.
BTW, I don’t see why we can’t have conflicting desires and even criteria for values. Seems to me I see it a lot. Snorri: Not I, of course.
*smirk*
My community is the block of flats I live in during the week. I’m of value to the Cuban woman upstairs, for whom we occasionally cook, who cooks for us, and whose daughter plays with our dogs. It’s totally fun and rewarding!
The guy with the motorbike who borrows my oil and tools, and pays us with the tomatoes he grows on his balcony?
(The old guy on the middle floor who shouts at my girlfriend and her sister when the dogs bark, but only when I’m not there, he can fuck off though)
Conflicting values and desires? I’m all for it, frankly.
“PS. Go on, read Sraffa.”
OK, I’ve had a quick look at Sraffa. Thanks for the pointer! It’s fascinating stuff!
However, I don’t think it conflicts with anything I’ve said.
Sraffa starts with a set of linear equations describing how much of each consumable good (including labour) goes into producing a collectively larger value of that same set of goods, considered over all the goods in the economy. He points out (correctly) that you can’t directly compare the value of different sorts of good (apples and oranges), and it’s illegitimate to use prices to set a scale, because then the logic becomes circular. Prices are used to assess comparative values, which are then used to explain prices. Agreed.
He then points out that there is a certain basket of goods (the solution to a particular eigenvector equation involving the quantity of goods consumed and produced by the production process) called the ‘standard commodity’ such that if you start with x units of goods in the ratio of the standard commodity, you produce (1+R)x units of goods in the same ratio, where R is the global rate of profit and a simple scalar. This rate of profit from production is a function of the equations describing the production process only, and doesn’t require any knowledge of the prices. And if you use units of the standard commodity to price individual goods, you find that you get the same rate of profit whatever mix of production, and whatever individual commodity prices you set. The rate at which you can make more stuff from the stuff you’ve already got is set simply by your method of production, as expressed by equations that include how much labour is required to carry out each process.
I’ve got no problem with any of that. But if you do something like switching to a method that uses more labour to produce fewer goods, you change the equations that Sraffa starts with. Since the global productivity of industry depends solely on the efficiency of production methods, then making production more or less efficient makes society richer or poorer.
This is the same point I was making above. You can restrict the supply of labour and increase wages, and if you assess the value of the industry using money as your comparator, that makes it look like you’ve increased value. But as Sraffa points out, money as a unit is arbitrary and misleading. What matters is the amount of stuff you’re making. And if you restrict the supply of labour artificially, you wind up making less stuff and making everyone poorer.
I notice that there are a bunch of commentators arguing that Sraffa has disproved the law of supply and demand as the cause of prices and the balance of production. No he hasn’t! His reasoning shows that whatever prices and balance of production you pick, the rate at which you can increase value, measured in units of the standard commodity, is fixed. But he doesn’t say that prices can’t change, that the balance of production can’t move, or that using less efficient methods of production won’t make you poorer.
However, it’s a very nice analysis of the issue, and I truly appreciate learning about it!
Many thanks.
Hmm, we are all stakeholders in our societies and the fact they are all breeding below replacement Tate.
There will be no young or too few to care for us in our old age, even indirectly by keeping the lights on.
We are surely all interested in getting more babies out there….
I Tell You,
Let George do it!
NinV: Using linear equations to model an economy is like being the proverbial drunk who looks for his wallet under the streetlight even though he dropped it in the dark alley, because there’s light under the streetlight.
In a business setting, it often gets used reasonably. If you’ve got a project going to change over, say, from Windows 7 to Windows 10, then your stakeholders are IT driving the project, the end users who have to deal with it, and maybe some others. More complex projects will have more. Getting them all on the same page is wise – not a legal requirement, but good sense. And for a lot of projects, your customers or the local community might be stakeholders. Sure, you’re perfectly free to run a project that’ll piss off everyone who pays your bills, but it’s not usually a good call. Likewise, good relationships are often worth protecting, even if you’re perfectly free under the law to break wind in their face.
The problem with NGO-speak “stakeholders” is that it’s basically just a pleasant way of saying “We’re going to boss you around now, okay? No? Too bad.”. That’s what’s terrible, not the term itself.
“NinV: Using linear equations to model an economy is like being the proverbial drunk who looks for his wallet under the streetlight even though he dropped it in the dark alley, because there’s light under the streetlight.”
I would say it was more like drawing maps of your local town on a flat sheet of paper, acting like you thought the world was flat. It’s an approximation that usually works well over small regions. But don’t extrapolate your model beyond the bounds for which it is valid. And don’t use it up in the mountains!
A steakholder is a fork, so they can fork off.
Nullius,
Very glad you made the effort with Sraffa, and found it worthwhile. I thought you explained it very clearly. I think the overarching point I take from it is that in any particular circumstance, the level of wages is not set solely, or perhaps even principally, by the simple laws of supply and demand. Rather, the stage on which these pressure play out is itself a social/political construct, which is potentially alterable (for better or worse). If so, it begins to make sense to query how, for example, the mass casualization of labour might ramify into wage levels vs profit levels.
If you recognize that there’s a political element to that, it becomes impossible to do the sort of libertarian supply/demand dodge upon which much argument here is based. I don’t mean that ‘dodge’ insultingly to Samizdatans, because I’ve no doubt that they don’t recognize the error that they make. Indeed, I’ve spent decades making it myself.
However, ultimately it is a genuine error, and one which leaves fully blown libertarians open, correctly I fear, to the charge of a potentially harmful indifference to outcomes. At which point, making the difficult leap from simple libertarianism to what you might have to call social democracy (for want of a better name) begins not only to make sense, but to become necessary. Despite all the messiness that involves. Hence my comments.
Julie near Chicago (October 29, 2019 at 10:10 pm), wikipedia quotes someone to the effect that ‘Let George do it!’ is “one of the best constructed and most consistently amusing of the George Formby comedies.”
Regrettably, this is a low standard to reach. 🙂
These remarks merely preface my confession that I have no understanding of your comment.
To paraphrase Arthur Dent, this is obviously some new usage of the phrase ‘to not mean insultingly’ that I was not previously aware of. 🙂 Since it is fairly commonly held here that the left think the right are evil and the right think the left are mistaken (albeit some of them mature into evil), does not saying we are not evil but mistaken hint you see us as guilty of a left-style fault? 🙂
Seriously, Nullius has given the thread a good summary (thanks, Nullius) which he concludes by noting “it’s a very nice [18th century meaning or modern, Nullius? 🙂 ] analysis of the issue”, but the issue is old – are Sraffas premises, conclusions and ‘flat-world mapping’ limitations fundamentally different from those of Marx or Ricardo (which I’m guessing Samizdatans have mostly met and considered before)?
Lastly (just for the avoidance of any doubt that text without tone can give), Michael, I am not of course insulted by you or anyone suggesting I’ve misunderstood something – how else can we learn. But I encourage you to feel some doubt, not ‘no doubt’ about whether this is all simply us not recognising the error we make.
Niall,
All taken in good heart. It’s a good thing when people argue and introduce each other to perspectives they may have missed. One of my (many) besetting sins is intellectual arrogance (you mean, you hadn’t noticed?), and here, once again, the cloven hoof has popped out.
On the other hand, if I’ve introduced some people to Sraffa’s work, then all is not lost.
“I think the overarching point I take from it is that in any particular circumstance, the level of wages is not set solely, or perhaps even principally, by the simple laws of supply and demand.”
In a sense, it’s part of what determines the supply and demand curves. The law of supply and demand is one part of the mechanism by which Sraffa’s relationship is maintained. Everything is interlinked – and the economy as a whole is a closed system.
Any analysis draws a boundary around some small piece of the system, and treats the influences acting across that boundary as exogenous controlling variables, but if you draw the boundaries of analysis elsewhere, what’s cause and what’s effect can look different. In the economy considered as a whole there are no boundaries, nothing is exogenous, and there are no first causes. But that doesn’t mean the analysis of how any one small piece of it works is incorrect. Just that it’s part of a bigger picture.
“[18th century meaning or modern, Nullius? 🙂 ]”
Both! I intended it in the modern sense, although it’s also a very subtle point, and it appears economists are still arguing about it.
Niall,
A bunch of people — three kids in a family, a bunch going backwoods-camping, a neighborhood, a church, a community or country, a knitting circle — are faced with a job that nobody really feels like doing:
“Who’s gonna clean the gutters?”
“Not me. Let George do it” is the general response of everybody who, the group tries to cajole into doing it. (Or washing windows, digging a latrine, setting up a booth in the annual art fare, going door-to-door with flyers explaining why householders should vote for a No Dogs in Our Neighborhood! candidate….)
Over here at least, it’s a humorous reference to getting out of a job by trying to foist it off on somebody else.
(The obverse humour is in, “It’s a dirty job, but someone’s got to do it,”* when the job’s something people are more than willing to do because highly pleasurable or desirable, like accepting Granddad’s gift of a fiver** to his favorite grandchild. Or eating the last shrimp.)
All in response to Ithellyyounothing at 9:23 pm above (My Trigger Warning in boldface):
“Let George do it” — make babies, i.e. engage in the highly un-fun job of, um, having s3x. 😆
Tickled my funnybone.
*On the other hand, another possible response of Mr. to Mrs.’s advances toward the same end: “It’s a dirty job, but somebody’s got to do it.” 😉
** Five-dollar bill.
. . .
Never heard of George Formby. But I see UT has a serious of half-hour old-time detective radio shows entitled “Let George Do It.” Description says it began as a sit-com but gradually became a hard-boiled detective show.
https://www.youtube.com/watch?v=gHitckyt2uE
Julie, thanks for the info on the US saying.
You haven’t missed anything. 🙂
It used to be understood that if you pollute the water or air supply (or even cut off light) you are violating the property rights of others.
Nothing to do with “stakeholders” – property rights. The “Wensleydale judgement” in the early 19th century (a judgement that horrified the later conservative political thinker Micheal Oakeshotte) undermined this – by holding that when “great undertakings” (such as great factories) are under way that will “benefit the public” the pollution of the air and water supplies of private individuals does not count.
In short “stakeholder” “general welfare” “public interest” thinking did not protect air and water supplies – it UNDERMINED them.
On this issue, two from Richard (Epstein) from Hoover:
“What Is The Purpose Of A Corporation?”
Column, Aug. 26, 2019
1 comment (a downvote)
https://www.hoover.org/research/what-purpose-corporation
.
“The Corporate Responsibility Canard” — Audio interview
Aug. 29, 2019. ~ 21 min.
Two substantive comments, but I must inform the first commenter that Richard is 76.
https://www.hoover.org/research/libertarian-corporate-responsibility-canard
Well, once Prof. Epstein gets a few years of experience under his belt . . .
😆
😆
Stakeholder is a term invented by Libertarians, and like most such things you can rely on the far-left to abuse it. Same for vision and mission statements. For that matter, terms like progressive, Green, social insurance, and libertarian socialism.
The far-lefty can get directions for an 8 oz. cup of hot black 1 tsp. instant coffee from a libertarian and screw it up…and then blame ‘capitalism, man!’ I speak from experience.
Stakeholder is a made up word. It is used to give power over others to people who have no such expectation of power.
Businesses are responsible to their shareholders (although, businesses sometimes behave as if they don’t care about their shareholders at all–I’m looking at YOU, Gillette). If you want to change how a company operates, you can purchases shares in said company, convince other shareholders you have a good idea, and vote in folks who will enact your policies.
To do that, “stakeholders” would have to actually purchase stock, which implies they have something of value to exchange for money to purchase said shares. In my experience, people who talk “stakeholders” don’t appear to have 2 sticks to rub together–have you seen the Antifa or Occupy Wall St crowd?
It’s about leveraging.