ECON: Socialism as a viable form of organization

Tim Hruby (
Thu, 21 Jan 1999 13:40:06 -0500

On Wed, 20 Jan 1999 14:48:02 -0500, "Michael S. Lorrey" <> wrote:

> Tim Hruby wrote:
> > It is obviously different from the "Socialism" coercively imposed by a
> > government, but that's what happens when you bandy about words loaded
> > with ideological baggage, without stopping to think about what they
> > really mean. If "voluntary socialism" is defined as "an organization
> > run with an internal command economy to which the members voluntarily
> > submit," then of course it has been an economically successful method
> > of organizing vis-a-vis its competitors. Just look at Microsoft....
> >
> > Now, if your ideological meme-set makes you want to define businesses and
> > families as something other than "socialism" then we've got a whole 'nother
> > semantic ball of wax around which to engage in a typical Extropian-list
> > ideological flame-fest.... But many such disagreements, it is rooted in
> > the fact that people attach different meanings to a meme-symbol like
> > "socialism."
>The difference between socialism and corporate structure is that: a) the
>egalatarian memes of socialism contradict the class strucure, promotion
>competition, and compensation inequality of corporate employee structures,

A couple of points:

  1. You have equated the Coasian "firm" with corporations rather than the broader class of institutions covered by the definition. In fact, you seem to be focusing on the narrow set of large "publicly" owned corporations, rather than the far more common closely-held corporation.

This is just to point out that your arguments are not directed at Coasian firms in general, but at a very specific subset of such firms. I still maintain that many families and businesses constitute working forms of voluntary socialism. And I don't even conceed that publicly-held corporations are not "socialist".

2) My understanding of the memes of "socialism" appear to be different than yours. Your understanding appears to be much more in line with what I understand to be the memes of "communism."

"Socialism," as I understand it, is much more tolerant of differences in positions and outcomes -- it is more focused on providing a "safety net" or minimum floor of economic outcome below which it's members will not fall, and sometimes providing a minimum starting position from which its members will compete. "Communism," as I understand it, is more concerned with equality of positions and outcomes, rather than minimum floors. Note that a "command economy" need not function under either of these memes, some examples being fascism and state corporatism (although both, admittedly, are forms of coercive government).

While I was talking about the viability of voluntary "socialism" as a method of economic organization, note that many successful families, and some business firms (e.g., even-split partnerships), appear to be heavily influenced by the communist meme in their distributive outcomes.

Also note how, as I predicted, this discussion is in many ways coming down to semantics and the ideological baggage associated with the word "socialism."

>b) socialism is majority tyranny only of members, while a the controlling
>majority of voters in a corporation is only the stockholders (and sometimes
>those that hold a specific class of stock), while employees have little to
>no say, unless they are shareholders. The fact that corporations are
>usually controlled by investors not employed by the corporations they are
>vested in says that a corporation is far less likely to go down a 'bread
>and circuses' route so long as the majority of employees are kept
>reasonably fat and happy, than in a collective where a majority of
>employees can overrule management decisions (witness Microsoft compared to
>1970's US auto manufacturers).

This is confusing. Are you saying that only one-man-one-vote democracies can be "socialist" and that oligarchies where many do not have the franchise cannot be "socialist"? The definition I gave above for "voluntary socialism" ("an organization run with an internal command economy to which the members voluntarily submit") makes no distinction about how command decisions are made. Even if you narrow this definition to only include those organizations focused on providing (a) a "safety net" (my definition of the socialist meme) or (b) equality of outcome (my impression of your definition of the socialist meme), no mention is made of how decisions are reached. Whether these decisions are made by an enlightened dictator or by universal one-man-one-vote sufferage, they are still "socialist" economies.

Perhaps you are saying that oligarchic command economies tend to be run better, as they are better able to control rent-seeking behavior (or at least limit it to members of the ruling oligarchy)? That may well be true, but it doesn't make these institutions any less of a command economy, nor does it make membership in them any less voluntary.

>I don't dispute Coase, except to say that command economic niches erode
>away with faster technological and economic growth, especially when
>technology helps with big advances in productivity, at which point his
>arguments become moot.

Ah, but you are ignoring a key point of Coase's analysis.

"Firms" arise not only because of transactions cost inefficiencies (And I agree with you that technology and economic growth help to reduce these costs, and thus reduce the size of many firms -- witness the growth of just-in-time outsourcing of production inputs, as technology has made this more feasible. However, until proven, I am skeptical of the claim that technological progress will at some time render these transaction costs moot. To me, that claim appears to be a technophilic meme, rather than based on any empirical observation).

According to Coase, "firms" also arise, as I explained in my first post, due to differing utility curves, the specific example I gave being risk-tolerance. Many people are risk-adverse and will quite willingly join a command economy in order to reduce the risk of catastrophic failure. Joining a Coasian "firm" can be seen in many ways as the same decision as buying insurance. As has been pointed out in a parallel thread, catastrophic economic failure is often defined by people in relative terms (i.e., in comparision to one's peers) rather than in absolute terms (i.e., whether survival requirements can be met). The subset of the population with this level of risk-aversion is therefore likely to join a command economy that provides them with this insurance, regardless of the level of technological progress.

Of course, anyone is free to junk the Coasian analysis as a meme-set that they don't agree with, and to adopt another meme-set.