In the book Capital in the 21st Century, French author Thomas Piketty does a thorough analysis on the history of income and wealth distribution. One highlight from the data is that in most industrialized nations, about a third of all income is income from capital, as opposed to income from labor. In other words, doctors, cleaners, managers, technicians, teachers, and all other workers in the economy account for only two-thirds of income earned. The remaining third is the interest earned on land and property.

Pketty brought up a good point when he said it’s not the existence of inequality that’s a problem, it’s whether or not the society feels that that inequality is justified. Most cultures are somewhat intolerant of inequality of income from capital, and that is exactly the inequality that’s predicted to grow in the 21st century. In the United States, which is highly meritocratic, inequality of income from labor is highly tolerated. The US has what’s known as “super managers,” who earn ten to one hundred times the average income. We feel that hard work deserves extreme compensation in the US.

As mentioned in the previous post, this is where proprietism and ESOPs could shine in American culture. They would continue to reward hard workers, yet distribute the ownership of property more evenly. Piketty’s analysis is not apocalyptic, but he does imply the warning that there is no societal benefit to the continual accumulation of vast amounts of capital held by noncontributing people. Famous political philosopher John Rawls agreed on this point; he believed redistribution of income via democratic socialism was not the answer, but a repositioning of wealth could be.

A 21st century version of Marxism is alive and well in Argentina. It’s taking the form of worker cooperatives in plants that have been expropriated by the workers. The 2004 documentary The Take is a close look at an auto plant whose workers won the rights to run the factory in court after the original owner had filed for bankruptcy and then proceeded to sell off the plant’s assets. The worker cooperative documented in The Take is one of a growing movement in Argentina.

A plant overtaken and owned by the workers seems communist at first blush, but we must consider that the workers are doing it through the court system. Also, the workers initiated these expropriations themselves in Argentina. As an interesting contrast, Venezuelan ex-president Hugo Chavez created incentives for manufacturers to create workers cooperatives. Not surprisingly, that resulted in Venezuelan business owners falsely claiming their businesses as worker-owned.

It begs the question if there could ever be an acceptable form of a workers cooperative in the United States. It would have to have shared ownership, yet honor American meritocracy by allowing top managers to earn or own considerably more than the company’s hourly employees, technicians and representatives. Probably, it would look most like an ESOP (employee stock ownership plan). According to the Ohio Employee Ownership Center, ESOPs are doing well, especially when considering that they are usually formed to avoid foreclosing the business.

Louis Kelso invented the ESOP not because he was a Marxist advocate of a workers’ revolution, but rather because he was a capitalist. Central to his belief system was the idea that workers should be interest-earning capitalists just like wealthy business and land owners. He believed that previous assessments of political-economy did not factor in the element of continuous technological improvements in society, which would benefit the capitalists more than workers.

The debate over political-economy is snagged on whether a government should be more laissez-faire or more socialist. Bill Clinton was a big proponent of a cocktail of the two known as the “third way.” ESOPs and proprietism are an interesting alternative to the third way. They blend the meritocratic ideals of the free-market, but like socialism, they seek to eradicate the over concentration of wealth that results from capitalism. Call it the “other” third way: one that seeks to improve society with improved organizations without government intervention.

As I’ve discussed before, proprietism is not just a theory. It is a force brewing about in our society, and many thinkers, from academics to activists, have pondered its basic features to some extent. This post is devoted to the specter of proprietism that is haunting the United States.

The first and most obvious work is Free Agent Nation by Daniel H. Pink. Pink is arguably the founder of the concept as he documented the growing population of independent workers right at the turn of the millenium. Pink underlines the role that information technology is playing in this movement, and includes anecdotes, statistics, and even his own experience as a freelancer to help illustrate the notion of the rising free agent nation. One seldom-discussed postulation in this book is that independent workers sometimes enjoy a work-life balance superior and more natural than that of the organization man.

The proprietist form of organization in business boldly addresses the principal-agent problem: the problem of the owner of an operation having to trust that the actions of the controller of the operation are in the owner’s best interest. Adam Smith, who is often nominated the father of capitalism and modern economic theory, was troubled by this misalignment in the corporate form of organization. The principal agent problem was also a major contention for Michael C. Jensen, a financial economist and organizational strategist. Proprietism is a form of organization that theoretically corrects the misalignment of most principal-agent relationships, and I often find the works of these 2 mega-thinkers necessary prerequisites to proprietism.

The article Electronic Markets and Electronic Hierarchies by organizational theorist Thomas W. Malone provides a theoretical basis for the movement of proprietism. The paper states that the increasing use of information technology in business arrangements will cause industries and firms to favor market structures over hierarchical structures. In other words, the future of business will swap large, hierarchical and centralized organizations for a web of contractor-client relationships.

The presence of the specter of proprietism is perhaps felt the most in the writings of Sara Horowitz and her ideology New Mutualism. Horowitz is the founder of Freelancer’s Union, a non-profit that seeks to help and unify the 42 million independent workers in the United States. Freelancersunion.org is decorated in the colors of anarcho-mutualism, and it serves the practical purpose of providing great advice and resources to freelancers.

In ESOPs and CO-OPs: Worker Capitalism and Worker Democracy, David P. Ellerman writes about the benefits of employee stock ownership plans, in which employees of a company own and are compensated by stock in that company. This arrangement is extremely proprietist in nature because it is a system in which the workers of an operation are also the owners of that operation. ESOPs are also highly regarded among Rawlsian thinkers. John Rawls was a 20th century political philosopher who theorized that an elusive political-economic system he called Property-Owning Democracy would be the most fair and therefore most just system. A property-owning democracy would not be a form of welfare state, but it would instead be a system in which property was more fairly divided among a population. While POD and proprietism seem like disparate concepts, the general idea of a meritocracy in which ownership of capital is more evenly distributed among citizens is not unlike the big picture desired from a proprietist society.

Also, I’d like to mention some other texts I’ve read that don’t directly support proprietism, but seem at least like-minded.

The Second Machine Age by Erik Brynjolfsson and Andrew McAfee appropriately acknowledges the significance of the digital age and the social-media age. They stay mostly non-partisan and discuss possible future scenarios such as worker displacement due to automation and robotics in manufacturing and service. Proprietism is, after all, based on the premise that information technology is permanently affecting our society, so we need to adapt our political and economic models to fit the times.

Mastery, like all works by Robert Greene, is a wonderful book somewhere between history, social science, and self-help. With vivid anecdotes, studies, and narratives, Greene explains the painstaking discipline and understanding required to complete an apprenticeship and become a master at ones craft. I like this mentality, because a proprietist must become a master of one’s craft and develop his or her own unique brand of that craft.

Finally, the article Capitalism Redefined by Nick Hanauer and Eric Beinhocker introduced to me the concept of viewing capitalism as an evolutionary problem-solving system. The article states that “saying that profits are the goal is like saying the goal of life is eating.” They argue that prosperity should be redefined as to judge “economic activity by the social value it creates” rather than the “money it earns.”

So while proprietism has novelty in its concept and semantics, the theory is somewhat inevitable when considering the context of our times and current thinking. It is my hope that we will continue to think of ways to improve society and political-economic systems designed to fit a social and interconnected world.

**This page has become a post 4/9/2014**

Proprietism is based on the premise that a network of for-profit entities, each with unlimited liability, is the most efficient and welfare-generating form of human organization. The posts on this blog provide rationalist support for this notion (while the support for the movement of proprietism within society is empirical). Below is an abstract analysis that marries classical economics and proprietism.

The proprietist theory uses microeconomic theory terminology within the IPO model. An IPO model is very simple: it is a system that inputs a resource, transforms that resource in its processor, and outputs that resource. When two systems interact, the output of one system becomes the input of another system.

In microeconomic theory, a firm has inputs to production K for capital and L for labor, and the cost of capital and labor are represented as C(K, L). The firm produces a product X, and earns total revenue from the sale of X, represented as TR.

Logically integrating this terminology into an IPO model, K, L, and TR are inputs to the system, C(K, L) and X are outputs to the system. Total sales revenue enters the firm as a monetary input, and is retained as profit or leaves the system as the monetary outputs C(K, L), which are exchanged with a supplier for the resource inputs capital and labor, which are then produced into the resource output good X, which is then exchanged in a transaction with a buyer system for money, which reenters the system as total sales revenue.

Expanding this model, we can visualize the roles of traditional departments within a firm.

We can similarly use microeconomic theory to apply this model to the consumer/worker. A consumer system inputs money as income M, which he saves or outputs as money paid in exchange for the resource inputs good X and Y, which sustain and support the consumer system, allowing him to output labor, for which he gets paid an income M.

For the independent contractor, the self and business have merged into one. His goods and services are his inputs to production, which create his brand and motivate him to work. His work is his product, his income is his revenue, his savings are his profit, and the price he pays for goods are his costs. In an economy of sole-proprietors, there is a paradigm shift for the structure of businesses and industries. The model implies that an individual’s customers are his employer, on the grounds that he is providing them his labor service in exchange for their payment. Likewise, an individual’s subordinates are like suppliers in that the individual is paying them in exchange for the service they provide.

The directors of such [joint-stock] companies, however, being the managers rather of other’s people’s money than of their own, it cannot be well expected, that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own.

Adam Smith, The Wealth of the Nations, 1776

Certain forms of organization, like corporations and limited-liability partnerships, represent an ancient problem that has vexed scholars from Adam Smith to Michael Jensen: it is the problem of the separation of risk-bearing owners of an organization, and the controllers of that organization. In other words, how can a principal (the owner of an operation) ensure that an agent (the one tasked with executing and managing the operation) will have the incentive to perform in such a way that maximizes the interests of the principal? The classic and most studied example of a principal-agent relationship would be that of the shareholders (principal) and the CEO or president (agent) of a corporation. However, the principal-agent problem can take many different forms. For example, a principal might be the manager of a retail store who has her own set of goals and budget constraints, and she wants to make sure that the agents, the sales associates working the floor, have the incentive to behave in line with those goals and budget constraints.

Agency theory consists of both mathematical models and positivist theories. Kathleen Eisenhardt summed up positivist agency theory well in Agency Theory: An Assessment and Review (2001): an agent will act in the interests of the principal when he is:

1. bound by an outcome-based contract (in other words, compensated based on the results of his performance) or

2. bound by a behavior based contract (he is compensated based on his behavior despite the results), with sufficient information systems in place to keep track of the agent’s behavior.

The interesting impact of the information age on agency theory would therefore be that as the cost of information and information systems approaches zero (like an open-source business software), we will see increasingly more situations in which a behavior-based contract would be inexpensive, effective, and appropriate. For a great analysis on how and why bits will continue to approach free, checkout Free: The Future of a Radical Price by Chris Anderson. This suggests that in the future, as the movement of proprietism becomes more widespread, the workers who will excel will be those who get results, and those who are good at documenting their behavior.

In searching for a theory of organizations, business academics have noted that such a theory would be likely to be based out of agency theory in some capacity. In Theory of the Firm: Managerial Behavior, Agency Costs, and Ownership Structure (1976), Michael Jensen and William Meckling noted that traditional economic theory often treats the firm as a “black box,” and makes the mistake of personifying it. They point out that a company, like an industry, is a complex system of independent agents with different and often conflicting interests, and while we would never make the mistake of attributing feelings and motives to an entire industry, we do so often when we describe the behavior of a company. They conclude that an organization is not a self-contained entity with personal motives but is in fact a “legal fiction… which serve[s] as a nexus for a set of contracting relationships among individuals.” In other words, the world is not a clumsily stacked pile of institutions, but rather a complex network of people, connected by relationships and contracts.

My professional experience is very much in line with this paradigm. My core team is my customer service department, and we are all employees of my company. After that, things get fuzzy. I feel a strong partnership and work closely with:

1. many of our customers (who are very obviously not employed by my company)

2. our supply chain and logistics groups (of whom some are employees but many of the ones I work with are off-site contractors), and

3. our sales team (who are mostly employed by my company but some are contractors).

I have a much more intimate relationships with many of these non-employees than I do with employees of my company who work in other departments and business units. This “fuzzy” view of people, relationships, organizations, industries, sectors, and society is inherent in proprietism, because proprietism is a system born from the idea that business is a network of independent people working together with common goals, rather than blocks of companies that buy, sell, and compete.

I’ve discussed agency theory and organizational theory as a prelude to how an firm might form proprietist-style. The discussion helped by introducing the concept of a firm as a nexus of principal-agent contracts, of which a proprietist firm would be the literal embodiment. The agency theory discussion also introduced corporations as the epitomy of the principal-agent problem, and the proprietist firm is a legitimate alternative that re-aligns many of these incentive problems. The following story is highly fictional and simple; the point is to paint a more graspable picture of proprietism:

Kim has a business idea, and she needs to raise capital in order to produce her widgets. She uses sites like Upstart, Angel List, Kickstarter, and Y Combinator to interest investors and raise capital. Kim will present her operation and strategy to her investors, and share detailed projections of sales and how sales will correspond to investors’ ROI. Let’s say that Kim raises $1 million, expects her operation to cost $900,000 in its first year with sales of $1.15 million. She agreed to only take home 20% of profit the first year, so she will earn $50,000, and the owner’s equity is the balance of $200,000. Kim enters a contract with Michelle as an information systems administrator for the operation with a yearly salary of $100,000. This salary is above the market value for someone with Michelle’s skill level, but it includes the cost of purchasing and implementing information systems for Kim’s widget operation. This of course gives Michelle the incentive to manage the $100,000 budget like her own money, which it essentially is because she takes home what she does not spend. In a similar manner, Kim contracts with Roger, a widget production professional, with a salary of $900,000. The production of widgets is roughly estimated to be $800,000 for the first year: $300,000 in equipment, $400,000 in raw materials, and $100,000 for 2 laborers and a supervisor. This leaves Roger $100,000 if he finishes the year as budgeted, and creates incentive for him to minimize waste and stay creative.

In many ways, this example is similar to prevailing corporate structures: capital is raised, equity is grown, managers oversee aspects of an operation, a clear reporting structure is in place, etc. What’s different is the incentive structure for Kim, Michelle, and Roger, as well as the relationship between Kim and her investors. Rather than investing in a widget operation, the investors are investing in Kim as a person. Likewise, Kim has worked out contracts with Michelle and Roger based on her preconceived notions of their ability to deliver.

The weakness in this proprietist-style venture is that it lacks the advantage of investors’ limited liability in the operation. In an earlier post I discussed that the theorized advantage to limiting liability is that it increases the incentive to invest. I also discussed that this advantage merely compensates for our culture’s tendency to sue. An alternative method of protecting investors could be insurance plans that still provide incentive for entrepreneurs like Kim to not fail, yet ease the investors into enthusiastically providing capital for the operation. Despite this shortcoming, this model is the beginning of a legitimate alternative to the traditional corporate structure, and one that is a better fit for a society in which information systems are inexpensive and ubiquitous, and for a culture that honors individuality and relationships.

A recent report by the Pew Research Center compared and contrasted millenials (those currently between 18 and 33) to other generations. Most of the results, when considered on a case by case basis, weren’t huge shockers: as the youngest generation of adults, millenials are more liberal and more in tune with technology than everyone else. A Nielsen study backs this up. But the Pew report, through its very detailed and thorough poll, uncovered the big picture: millenials keep themselves detached from institutions.

This conclusion can be drawn from their responses regarding marriage, patriotism, religiosity, political ideology, and other organizational entities. Data from Millenial Branding and oDesk seem to confirm that millenials would overwhelmingly prefer working for themselves over being part of an organization. The trend certainly did not begin with millenials; in 2001 the oldest millenials had barely started college when Daniel Pink wrote of society’s journey away from “the organization man” of the 20th century. Nonetheless, we can infer that today’s young adults are becoming less favorable of the idea of institutions and institutional thinking. Why would that happen?

Before my generation came of age, we had already seen the divorce rate climb to over 50%. We saw the most powerful nation in the world get attacked by religious zealots; we saw the same nation have a questionable reaction. We’ve seen both republican and democrat politicians fail to live up to their promise (but unlike the generations before us, I don’t think we actually had much hope for them in the first place). We’ve seen people drown in debt and lose their homes because Keynesian economic theory institutionalized a culture of excessive consumption. We’ve seen companies fire lots and lots of employees. We’ve seen gay people and pot-smokers be functional and contributing members of society. We’ve seen immigrant laborers out-earn college graduates. We’ve seen consumer protection agencies like the FDA actually protect a manufacturer despite the consumer.

We’ve also seen a lot of pictures of each other on Facebook. We’ve seen that each person is connected to society through a complex network of relationships, rather than connected to society by being one cog in one machine. Maybe some have even seen that the human race is a giant, organic web of relationships, not a clumsily stacked pile of institutions. The title of the Pew study is perfect: Millenials: Detached from Institutions, Networked with Friends. That’s millenials in a nutshell. And as we continue or journey into adulthood, we will all see the decline of the institution, and the rise of the network of individuals.

After doing some research, my wife decided to donate her hair to Pantene Beautiful Lengths rather than the well established nonprofit Locks of Love. The primary and obvious attraction to Pantene (a Proctor and Gamble company) is the shorter length requirement of 8 inches versus 10 for Locks of Love. Also, although the two have different target recipients of wigs, many are attracted to the fact that Pantene donates its wigs, while Locks of Love (the nonprofit option, ironically) sells theirs. Dig just a little deeper and you’ll find that Locks of Love not only makes far fewer wigs, they’re not very accountable either. According to an investigation by Nonprofit Investor Pantene is able to make a wig for every 19 hair donations it receives; Locks of Love makes a wig for every 328 donations it receives.

My point is not to give Locks of Love a hard time; they probably receive, on average, far fewer usable hair donations than Pantene. Also, perhaps it’s what we should expect when comparing a standalone not-for-profit organization with an organization that has the resources of P&G at its fingertips.

But to be pragmatic, that doesn’t make it OK. In an earlier post, I concluded that an individual is incented to be more productive if his inputs (like income) are relative to and dependent upon his output (labor and work exerted), because if his inputs are fixed (if he receives the same income and material things no matter how productive his work is), then he has no reason to exert himself. An organization is no different. A for-profit entity must always stay on its toes if it wants to stay ahead of the competition and maintain a stream of revenue. A poorly run nonprofit could eventually lose donors and grants, but it generally lacks the consequential relationship between work and reward that any for-profit entity has. In other words, we can expect that a for-profit will, in theory, out perform a nonprofit.

Though the cause and effect relationship is complex, companies who give more, make more. Not surprisingly, the biggest givers are big companies with lots of assets like Wal-Mart and Wells Fargo, but I doubt I’m alone in thinking that Tom’s Shoes and VisionSpring (the nonprofit working with funds from Warby Parker) are the real heroes.

A study by Nielsen concludes that exactly half of consumers worldwide are willing to pay more for products from socially responsible companies. This 50% captures only the consumers who are willing to pay a premium to help save the world; it doesn’t account for the additional consumers who might buy the socially responsible product because they perceive a higher quality among products whose manufacturers can manage to afford altruism. The 50% figure was up from 45% in 2011. Let’s call it a trend: not only is consumer demand for social responsibility up, but even social responsibility itself is up, even during the recession. Maybe it’s because the millennials, also known as the “civic generation,” are making a dent now as workers and consumers.

So I say that it’s time that we, as companies, stop channeling our marketing efforts into cute packaging and product names that are intended to confuse customers into perceiving a product as more valuable than it actually is. Let’s instead do something to improve the world, and do it in the name of our brand.

I recently read Our Political Nature by Avi Tuschman, an evolutionary anthropologist and former advisor to Peruvian ex-president Alejandro Toledo. The book seems to have been inspired from the intrigue of humanity’s evidently ubiquitous divide into two groups: liberals and conservatives.

This was a must-read for me, because I too am fascinated by the polarizing bipartisanism in the US. Liberals and conservatives are both so staunchly consistent and automatic when it comes to opposing each other, yet, to me at least, so inconsistent within their own ideologies. On the “left” side are those defenders of our social civil liberties and the welfare state, represented in mainstream politics by democrats. On the “right” are defenders of social populism and the free market, represented in mainstream politics as republicans and, more recently, the tea party movement.

One must wonder why almost half the population believes that government should intervene with the market but not with civil freedoms, and another almost half believes the exact opposite. Why not one libertarian-leaning party that believes in less government, and another authoritarian-leaning party that believes in more government? Is there not an inherent connection between civil and economic oppression? Milton Friedman and many other economists believe the two types of freedoms are one in the same. In fact, up until the 20th century, the word “liberal” referred to someone who believed in minimal government, much like modern-day libertarians, who now only have a small and awkward place in mainstream American politics. But why the shift? I had a friend in college pass wisdom along to me that was at least somewhat satisfying: if you believe people are inherently good, you’re liberal; if you believe people are inherently bad, you’re conservative.

The other question our two-party system raises, and one that Tuschman poses as well, is: why do people so often vote against their own economic interests? Think of poor unhealthy Americans who oppose Obamacare, or the so-called “latte liberals,” the wealthy elites who pridefully defend the heavy taxation required to sustain a welfare state.

Here is (part of) Tuschman’s well supported and fascinating answer: for a tribe of humans, too much inbreeding within the tribe can result in genetic problems, while too much outbreeding compromises the tribe’s gene pool. The delicate and evolutionarily successful balance is reached when roughly half of the population is wired for xenophilia, and the other half for ethnocentrism. Modern-day liberals are therefore genetic xenophiles, with their openness to other cultures and high tolerance of unorthodox breeding behaviors. Modern-day conservatives are genetically ethnocentric, with their fear and aggression towards “outsiders,” and their low tolerance for breeding behaviors that don’t advance the tribe in its purity.

Tuschman evaluates other factors, including environmental ones, that can shape a person’s political leanings, and I think those are very important. For this post I am focused only on the proposed political genetics hypothesis, and accept it as at least explaining the voting behaviors of some, if not many. A gut-instinct to preserve ones own “group” could explain many cliche conservative characteristics, such as xenophobia, and religious and cultural zealotry. But the question is still open: why do poor republicans in America choose to vote for the candidate who best represents their Christian Americanism, rather than the one who may offer them the best economic support? Likewise, a gut instinct for the exotic may explain cliche liberal characteristics, but it does not explain why wealthy democrats will vote for the candidate who promises to make sure they lose money. Do people really hold their political ideals above money? Why?

Here’s what I think: liberalism, (classical liberalism) emerged at the twilight of the enlightenment. John Locke and Adam Smith proposed liberal ideologies that stood in contrast to authoritarianism, whether in the form of social authoritarianism or economic authoritarianism. The mantra of liberalism was “freedom” and “liberty,” and any talk of “equality” was referring to equality of opportunity for all individuals. By the 20th century, the freedom championed by classic liberals was (relatively) well-secured by government, yet inequality and unhappiness were still omnipresent. Liberals honed in on their role as defenders of the oppressed, and the mantra evolved into “equality” (of outcome, rather than opportunity) and “welfare.”

The evolution of the modern conservative might have two parts. Some modern conservatives are classic liberals who cherish the free-market above all and are consequently republicans. The other conservatives, the ethnocentric folks, need only be convinced that government entitlement programs or social policies give an unfair advantage to the minority groups they so fear and loathe, and they are now supporters of the free-market as well. Harsh as that may sound, I can balance it by saying that the modern liberal isn’t all that different. While American republicans hate greedy poor people who “work the system,” American democrats hate greedy rich people who “work the system.”

So it’s not a stretch to suggest that, amidst the confetti of red and blue districts that cover the United States, there is a purple majority. They are Americans who don’t take kindly to people who work the system. They don’t really see why the legalization of pot is such a big deal. Though many of them might prefer their kids not be gay, they don’t believe that the legalization of gay marriage will be the harbinger of the fall of civilization. They like the free-enterprise system, so long as the business being conducted is good business: that means visible accounting practices, safe products, and above all, the honest intention to profit in return for a contribution to society. A “purple” individual may believe that his belief system is the best belief system out there, but he knows that only a free and secular society can guarantee that his belief system flourishes. The purple majority believes in voluntary service and donates to those in need. They hate insurance companies, people who sue over stupid stuff, and ridiculous healthcare costs. The purple majority just wants to live, work, and have their kicks before the whole shithouse goes up in flames. In fact, I don’t think purple is even the best color to describe the purple majority because 1) it’s not bold enough and 2) it implies a Frankenstein’s monster-like combination of blue democrat ideals and red republican ideals.

I could be wrong but feel like our cynicism towards democracy must be coming to a head. We hate whatever candidate we didn’t vote for, then, after he spends a few months in office, we hate the one we voted for too. We hate politicians and we hate the two-party system. I hope something can swell up from the middle and break up the bipolar zeitgeist. Maybe proprietism is that something; maybe it’s not. If nothing else, let’s not let republicans and democrats pull us so hard in different directions that we end up ripping our future apart. Let’s find the gold majority, and move forward together.

Conceptions of utopia are not just for science fiction writers and political philosophers. We can safely infer that visionary leaders in business, government, art, and science all view their work as some sort of advancement or improvement to human civilization, and while they may not explicitly illustrate their vision of a more perfect society, nor identify their contribution as being in context of that vision, they undoubtedly have a vision: some personal notion as to what an ideal society would look like. (The only “visionary” members of society likely to not have some sort of personal notion of utopia would be religious zealots: those who believe that mankind will not progress until some sort of divine event delivers us to some next phase of existence.)

Of course, individual versions of utopia differ vastly, but I’m going to propose here that these are differences in means more than they are differences in ends. For example, Rand and Marx hold what could be called opposite views as to how society should be structured in order to be poised for progress. However, they would agree that the goal of society would be some sort of widespread, highly cooperative brotherhood (with or without money) in which the need for government has all but vanished.

With that in mind, I will outline what I believe would be three commonly agreed upon end goals of society, and the two barriers to achieving those goals.

An hypothesized notion utopian society would likely feature:

1. Zero crime
2. Zero poverty
3. Continual progression towards a) maximum human contentment and b) understanding of the universe

The constraints to achieving these three features are:

1. Humans are self interested organisms, so one party may have an impulse to content itself at a cost to another party.
2. We live in a world of limited resources.

I can think of three forces that have or could have a dramatic effect on crime:

1. Some sort of enlightenment in which the impulse to act selfishly has been conditioned out of us, and there exists a universal agreement on what constitutes “good” and “evil” acts. I put the words “good” and “evil” in quotation marks, because I’m of the belief that the universe itself is neutral; the concept of good and evil are human-evolved constructs. In short, a “good” action increased the overall fitness of the tribe; “evil” decreased the overall fitness of the tribe. Back when human societies did not exceed the size of a tribe, the tribe could effectively provide the social pressure to conform to generally “good” behavior, and it could also judiciously punish or destroy an “evil” person. I don’t think we will ever fully agree on the definitions of good and evil, and there’s too much gray area over what would be in a modern society’s best interests.

2. A fear of eternal damnation for one’s “evil” acts. This is, of course, the method of crime-control employed by the Abrahamic religions (and some Indian religions as well). I have to say that intellectuals are so often vexed by religion’s history of brainwashing and violence that they miss something big: many people are too simple-minded to know what ethical behavior is, so they may need the threat of eternal damnation to keep them from killing their ex-boyfriend. The tricky part with religiously defined “good” and “evil” is that it can easily lead to “we of this religion represent absolute good an you the infidels represent absolute bad; therefore we are correct in destroying you.”

3. Appropriate consequences for those who act recklessly or aggressively towards others. There would have to be some sort of system or even institution in place to accomplish this. If we apply the non-aggression principle as a guide, we can do our best to make sure that institutions within society avoid a similar problem of absolute “good” and “evil.” In other words, we should hesitate to give one single institution (a government) a monopoly over deciding (a) what is “evil,” (b) identifying the parties who committed this “evil,” and (c) carrying out the judgment for committing the “evil.” Such an institution will evolve to believe that it represents all that is “good” in the world, and that it is incapable of “evil,” and that all who oppose it are themselves “evil.” What an institution defines as a crime is a likely factor as well, and this is the point at which social libertarians will advocate the legalization of “victimless crimes,” such as drug usage and sales, gambling, and prostitution.

All three of these already help control crime to some capacity, and it’s unlikely that any will trump any other in a future society, nor will any become obsolete. Some of us simply don’t want to wrong others out of empathy, others of us fear a deity, and yet others fear terrestrial judgment from man-made institutions. A true utopia may perfect all three of these in such a way that crime becomes obsolete.

On the question of zero poverty:

Poverty may be highly relative: what’s considered poverty in the United States may pass as a middle class standard of living in another country. Utopias usually involve the elimination of poverty, implying that everyone at least has the opportunity to have basic needs: a house, some opportunity for employment, food, and access to educational facilities to better oneself. By this definition, poverty is a minimal issue in the US, but the rhetoric of what constitutes poverty continuously changes as the standard of living increases for the upper and middle classes.

A quick comment on the connection of crime and poverty belongs here. Perhaps we believe on some level that theoretically, the elimination of poverty should itself eliminate crime, because if the bottom rung of society were at least “content,” it would therefore not be motivated to commit crime. I don’t believe this would ever be the case. Humans will always be jealous of each other; crime will obviously exist so long as there is inequality.

Poverty may not only be relative; I believe it’s deplorability is also dependent on the self-esteem of the impoverished individual. In other words, poverty is a state of mind. Someone extremely close to me grew up in poverty in a developing country, but she recalls those chapters in her life with nostalgia, not the shame and discomfort Americans usually have when they speak of abject poverty. For her, bathing in a river and cooking with fire was fun. Her family built the house in which she lived, and they kept it clean. She regards her past life as not necessarily “worse,” than her life now in the US as much as it was “different.”

I contrast her experience to that of impoverished people in the United States: their obesity, their government checks, their satellite and cable TV, their cars, their filthy living quarters which are often cluttered with stuff they still manage to buy thanks to Keynesian Economics. We often misdiagnose our disgust for their lifestyle as disgust for the existence of poverty. It’s not that they’re impoverished; most poor people in the US are not lacking material things; they’re lacking pride.

So the question of poverty may really be a question of how far we should go in trying to eliminate inequality of outcome, (or rehabilitate the poor). If society is to advance, then it must be free in the sense of allowing appropriate compensation for one’s productive contributions and innovations. If we are to have economic freedom, then we must tolerate at least some degree of inequality, else we condone and create incentive for non-productivity and non-innovation, and society will not advance.

Marx believed that the relationship between a slave and an owner (or between a worker and a capitalist) was inherently unstable, because the slave was creating all the value, and the owner was absorbing the majority of that value. Such a relationship could only last for so long before the slave was able to leverage a more balanced relationship. This is called dialectic materialism, and though Marx never used that phrase himself, it sums up the idea that underlies his narrative of the history of man.

Within dialectic materialism is Marx’s tragic miscalculation: if some poor people within a society are permitted to not work, yet maintain the purchasing power of those who do work (as is the case in a welfare state), then the worker is still the slave; his new master is the poor non-worker. It’s hard to accept that this would have any consequence other than lowering the morale and productivity of the working class, which will likewise stifle society’s ability to advance.

So poverty will only be eliminated in a progressive society if poor individuals are constantly empowered to maintain a lifestyle that doesn’t make the middle and upper classes feel as though they have failed the poor. No matter what a society looks like, there will always be a bottom ten or twenty percent, and at least some but probably many of those individuals will feel as though the rest of society is responsible for their situation. If those feelings are what actually leads to poor self-esteem and a deplorable lifestyle, an “impoverished” section society will therefore always have to exist if we wish to have a society that can progress.

On continual progression:

Even more than zero crime or zero poverty, most may envision the road to utopia as advancing towards a more complete understanding of our universe via science and towards maximum human contentment via technology.

In the sciences, advances in thought are frequently the product of individual insight compounded on top of a body of prevailing theories, like with Einsteins theory of Special Relativity, Gregor Mendel’s early work that lead to genetics, Mendeleev’s publication of the Periodic Table, or the work of Paul Erdos, just to name a few. Sometimes, they are the product of team efforts, such as the discovery of the Higgs-Boson particle or the mapping of the human genome. Such discoveries and advances in thought not only help us understand the universe, they also lay a foundation upon which advances in technology and medicine may be made, improving the human condition.

Advances in technology and medicine are similarly dependent on teamwork, but often with the insight and leadership of a visionary leader. When Karl Benz developed the internal combustion engine, the possibility of an affordable and less-polluting mode of transportation was born. When Henry Ford developed an assembly line for the production of automobiles, he crystallized Benz’s concept: the masses could afford a personal carriage that enabled transportation in a way that was previously only available to wealthy elites. I see the efforts of Steve Jobs in a similar manner: he did not invent the cell phone, nor the concept of a personal computer, nor even a personal music player, nor even the concept of combining those objects into one technology. What he did do was permanently and dramatically raise our expectations for personal devices. It suffices to say that a society poised to advance must therefore convince an innovator that he will be rewarded for his contributing work with either money, power, or fame.

Conclusion

I think I’ve exhausted this theoretical discussion of utopia, or at least it exhausted me. The point I’d like to make most of all is that serious discourse on the philosophy of law, politics, or economics, should take a step back and see the forest for the trees. We should get in the habit of defining and finding consensus on the features of utopia before we start to argue about what’s better for society. With a clearly defined utopia, the rhetoric of the debate will transcend into a rational discussion of how to get there.

I’m going to make a bold statement: liability shields are wrong, and the situations in which they’re right do not justify their existence so much as they point to a bigger problem in our society.

The intended purpose liability shields was to incent investors by removing the risk of losing personal assets beyond their original investment. What eventually evolved was the corporation, a structure that overtly and systematically encourages irresponsibility by protecting decision-makers from the consequences of their own actions.

Corporations and LLCs have become the norm. Business consultants run commercials on daytime TV like ambulance chasers: “Running a business is risky! You could lose everything! Your house! Your car! Don’t delay, call us and learn how to incorporate your business now!”

Today, it’s a smart idea for most small businesses to incorporate, but only to protect business owners from our own culture. You know what I’m talking about–we sue for everything. Punitive damages are “to punish and deter,” but our culture views them instead as a financial reward system for a plaintiff’s alleged emotional distress.

If you Google words relating to the claim that liability sheilds are wrong, you won’t get much. This article I referenced earlier from the Cambridge Journal of Economics is one of the only good finds. On the other hand, if you Google words relating to lawyers destroying our society, you’ll get plenty of results.

Apparently it’s a more widely held sentiment. One of the less sensational is Philip K. Howard, a lawyer himself. What can fix the problem that makes liability shields a solution? Tough to say. Howard runs http://www.commongood.org/, a “nonpartisan reform coalition” aimed at “pulling back law into boundaries that frame free choices.” I agree. Too much law and too many lawyers may make it easier for those who have been wronged to be compensated financially. But this societal benefit is completely washed by the hazard of rewarding irresponsible behavior, and by the overall loss of liberty to those whose work is guided by avoiding fines and lawsuits. This type of cultural change may be a prerequisite to a proprietist society.