"The more layers between the president of a firm and the factory floor, the harder and more expensive it is for the president to make sure the workers are doing what he wants them to do;...."
The problem is the government believes that. The more small businesses there are the harder it is to tax, police, bribe, regulate, control, and get kickbacks from.
Hence the rules and regulations lean toward massed agriculture, too big to fail auto manufactures, basically only 3 credit cards available, few banks and monopolies such as Amazon, et al, and definitely etc.
So Boss, how do we make Anarcho-capitalism work whilst still giving to Caesar as small a pittance as possible? I know a reply to this query may be a 300 page essay,but hey, it's a serious query.
Free cities, such as Prospera which I recently visited, are one possible answer. Get government to compete for very mobile taxpayers.
On your other point, one possible explanation of the growth of government over the past century or so in the US and similar countries is that it is an effect of the shift to an economy where most people are employees making taxation easier. But the shift to larger firms is, I think, a result of the sort of economic incentives I, based on Coase, discuss.
Yes, of course multiple factors always involved as well as multiple intended and unintended consequences.
Yes, Prospera sounds interesting. Christopher Cook, in his Freedoms Scale subsack proposes something of a distribution anarcho-capitalist nation that I find interesting as well.
This is my intuition on this take as well. An agorist future would require individuals to be able to effectively sell and purchase good and services while avoiding a complete onslaught of regulations and taxes that government overwhelmingly burdens small businesses and freelancers with. AI may have made a single individual more productive, but unless something like a particularly advanced form of cryptocurrency emerges in the future, Coase theorem still holds - transaction costs will keep us employed for firms in the nearby future.
On the other hand, regulations are easier to enforce against a large firm because more of what is happening has to be legible to the people running the firm and so to the government. If a one person firm wants to do something the government objects to there is only one person who has to keep it secret.
Maybe a particularly advanced form of cryptocurrency, maybe not.
One ounce silver rounds, shaped the same as silver dollars are available now and could be used in exchanges based on the daily bid/ask silver price. For example, as I write this silver spot price is $31.16/$31.26 per ounce. So you want ten bucks a dozen for those eggs? I'll take 3 dozen for this silver round, deal?
Also Nevada, New Hampshire and others are issuing goldback notes, 1/1000 of a troy ounce of gold encased in a plastic bill, at today gold spot that's $2.79. So you'll sell me one dozen of those eggs for 3 goldbacks, we got a sale?
Many fusty old folks such as myself are suspicious of that thar cryptocurrency thingie backed by nothing.
However there are cryptos exchangeable for gold such as Tether Gold (XAUt). They exchange gold for their bitcoin and deliver the gold to you. The problem is they'll deliver it to you anywhere in Switzerland, not elsewhere.
The gains from organizing as a firm are going to be heavily influenced by legislation and taxes. If the tax policy penalizes being self-employment, and allows bigger firms to provide compensation effectively untaxed (ie health care, other benefits), the agoric enterprises all suffer an unfair disadvantage. I haven’t noticed anybody talking about this, but it seems like a natural angle for libertarians who are also concerned about the power of big companies.
On the other hand, a one person firm is in a better position to blur the distinction between consumption and business expenses, with no employees to blow the whistle. I expect there are economies of scale in conforming to regulations but diseconomies of scale in evading them.
I think this is an under appreciated aspect. Most manufacturing firms I have worked for, some quite large, have lots of zero value added positions and roles, from the perspective of the customer. The value seems to come from economies of scale in regulation and legal compliance. Sometimes it is also straight value to management instead of owners nonsense, but compliance seems to be the main driver.
Seems to be trending that way, sort of. 90% of the population used to be farmers, now it's 1-2% in the US. Manufacturing used to be small firms, then steam and electrical power enabled huge factories. But increases in wealth enabled more people to buy more different things, and it's hard to imagine having more businesses owning more factories without decreasing most factory sizes. Computers enabled the Internet, which allows massive distribution of workers.
I think 3D printing and computers will accelerate that trend, to the point that most manufacturing will be on-demand 3D printing and automated assembly. I bet within 50 years people will design their own cars, choosing which attributes they want and from a multitude of compatible parts. It will start small: convertible or hard top? FWD, RWD, AWD? Engine size and type. Every choice affects the others. At first the choices will be limited, and lots of small features like what the dash looks like, whether you want real buttons and dials or touch screens. Some parts will automatically adjust within certain parameters to match other choices. Some of this is already possible for computers -- how much memory, choice of battery size, screen size, kind of keyboard.
The more automated, the fewer human factory workers, freeing them up for more flexible and interesting work.
Some work will always require lots of people working for a single company -- building roads and dams, skyscrapers, airliners. But the trend has been towards more and smaller firms, and I don't see any reason for that to abate.
I'm an incurable optimist. Given the choice of time travel back to any specific period and location, or any random future time, I would always choose the random future. The risk of hitting one of the dismal times strikes me as nothing to worry about. Imagine some peasant 1000 years ago given the same choice. Even the two world wars, the Great Depression, even 1776 in the American colonies; all would be an improvement for a peasant from 1000 AD anywhere in the world.
I am a case in point! I published my late brother-in-law’s four novels and a short-story collection on Amazon all by myself, as Kindles, paperbacks, and hardbacks. He had created cover images for all but one, and a month’s subscription to GPT4 was enough to let me create three covers for the remaining one (the physical versions had to be split into two volumes and each has its own cover) that I am inordinately pleased with.
Although I agree that the trend is going to be towards more individualized work, there has to be a limit due to economies of scale. It's hard to imagine physical goods production moving to small scale and still being efficient. Any technology available to make small firm or individual scale production viable can be ramped up to even more efficient large scale.
The advantage of on-demand customized manufacturing is a different kind of efficiency that allows customers more variety. Imagine a toaster manufacturer which allowed every choice you can think of -- number of slices, controls, and even appearance within reason. We get that variety today by having multiple factories. Same with cars -- imagine one factory for small cars, one for SUVs, one for minivans, one for pickups, and each factory allowed massive on-demand customization. That might reduce the cost of building factories and lower the overall production cost.
I'm no manufacturing expert. But it seems plausible enough for fiction, which is my main criteria for thinking something is feasible.
I spent over a decade working in factory management. Everything you do to add customization slows down everything else.
The kind of technology you are speaking of really is science fiction. Star Trek replicators would do what you're saying, but even then only because that's good enough, not because it's more efficient than large scale. If they really needed millions of something, large scale production would still be far more efficient. Just picture someone standing in front of a 2x2 foot cube asking for the same item over and over again. Now imagine a 100x100 foot cube and asking for thousands at a time. The time savings is there, as well as saving on personnel needed for it.
My point is that if 100 factories churn out small variations on similar products, like toasters, then having fewer factories which allow customization of trivial features might be more economical.
I'm not claiming this now. I'm not claiming this for 100x100x100 foot cubes vs 2x2x2 foot cubes or billions of nails. I'm suggesting it as a possible further expansion of variability in products which can be customized.
Do you think any developments of clever (can't say smart anymore) contracts that help mitigate the principal-agent conflict may drive the growth of firm size?
Extrapolate out further... how will transaction and optimal organizational structure change when we all have access to super-intelligent AI AND something like molecular manufacturing (with advanced 3D printing a sort of step on the way)? Interesting scenario: Coase + Drexler + AI = ? I'm hoping I live to see it.
1. Technology and AI offer tools to the individual that allow them to accomplish far more than was possible by a single person in the past,
2. Technology and AI tools are going to continue advancing,
3. These tools are going to continue increasing per-capita productivity, and
4. The increase in the per-capita consumption of goods and services does not keep pace with the increasing productivity enabled by technology and AI tools,
Then, doesn't it follow that:
A. A decreasing number (percent) of the population will be required to produce the goods and services consumed by the entire population, and either:
(1) Fewer people will contribute productively to society, so that government or private parties will either:
(a) support, cradle to grave, those members of society who cannot, or will not, contribute or
(b) allow those members of society who cannot, or will not, contribute to die.
(2) Everyone will work fewer hours. No one will want to have more stuff, be competitive or status driven. Everyone will be content with less than they could have by working more and all will be joyful.
I realize that 2. could be incorrect in the event of a catastrophe -- nuclear war, global pandemic wiping out 99% of the population, etc., and some people might think 4. will never occur and that increases in per-capita consumption will always keep pace with per-capita production. And, yes, the outcomes are a bit simplified.
If the initial assumptions are correct, then A(2) seems like the utopia scenario, but given human nature, does this even seem remotely plausible?
Consider that, by the standards of most of the past, we are already in the situation you imagine. Real income in the US is about thirty times the average through most of history. We work less, but not radically less. The main change is that we consume more, not more weight of food but more value of goods and services.
You may have misread my assumptions. I can't tell whether you disagree with my fourth assumption—that consumption won't keep pace with production—or merely consider it unlikely.
To see why consumption might plateau, consider an extreme case: if (yes, this is a big if) technology could someday create a near-perfect brain–sense interface, that would enable a complete artificial reality (like in The Matrix), that would appear to effectively maximize consumption--what more can we consume than an entire virtual (to us real) universe? With consumption capped, further increases in production could easily exceed demand.
Why should AI be any different from all previous tools? Railroads must have been hundreds of times better than horse wagons. Telegraphs and the printing press far outstripped individual messengers and story tellers. Satellites and the internet distribute information better yet.
What's that old saw about work expanding to fill the bureaucracies available? It applies more generally to everything people do. People are very creative like that. The newly unemployed will find new opportunities which were previously too marginal to be of any use. Textiles not only made more ready-made clothes available for more people, they enabled fancier clothing and bedding, window curtains, and probably a hundred uses no one would have wasted precious cloth on before. People don't just sit around and bore themselves to death once unemployed.
You are thinking of one of the statements of Parkinson's law.
There are three possible arguments for AI doom. One is that AI, unlike earlier technologies, substitutes for everything humans do. That shouldn't make us poorer but might make us feel of less value. One is that AI greatly increases the productivity of capital relative to labor, which is great for those who own capital but means that people who have labor and need capital to combine with it to produce things have to pay a higher price for it.
The third and most serious is that if we end up with AI much smarter than we are it might take over and not much care about our welfare.
Only three? Another potential AI doom scenario is that advanced systems could accelerate the creation of superweapons such as tailored viruses or nano-machine weapons, used by humans themselves to unleash death and destruction upon, or cause the mass subjugation of, people. AI might also enable totalitarian surveillance, manipulate politics, or degrade the environment at unprecedented speed. Your first argument, that AI might replace all human functions, risks shattering human ego and feelings of value, causing widespread unemployment, eliminating social mobility, and inciting social unrest or full-scale wars. Your second argument, that AI’s productivity gains favor owners of capital, is a milder version with similarly dire outcomes.
I think No. 3 is the only plausible doom scenario, and it doesn't seem stoppable, if it is going to happen. I'm an optimist, I see AI as just another tool, and like all tools, good in almost every way.
It seems to me, David, that strictly speaking, the term “self employed” is self contradictory.
That is because everything that is produced by one person is a response to a request made by another person. The pair of producer/consumer cannot be separated. Such is the case whether or not there is exchange of money. For example, take the case of the novelist. His production is a response to the public’s request for entertainment or whatever. Without that request, the novelist would never write. By the same token, if there were no writers, the public would not ask for novels.
"The more layers between the president of a firm and the factory floor, the harder and more expensive it is for the president to make sure the workers are doing what he wants them to do;...."
The problem is the government believes that. The more small businesses there are the harder it is to tax, police, bribe, regulate, control, and get kickbacks from.
Hence the rules and regulations lean toward massed agriculture, too big to fail auto manufactures, basically only 3 credit cards available, few banks and monopolies such as Amazon, et al, and definitely etc.
So Boss, how do we make Anarcho-capitalism work whilst still giving to Caesar as small a pittance as possible? I know a reply to this query may be a 300 page essay,but hey, it's a serious query.
Free cities, such as Prospera which I recently visited, are one possible answer. Get government to compete for very mobile taxpayers.
On your other point, one possible explanation of the growth of government over the past century or so in the US and similar countries is that it is an effect of the shift to an economy where most people are employees making taxation easier. But the shift to larger firms is, I think, a result of the sort of economic incentives I, based on Coase, discuss.
Yes, of course multiple factors always involved as well as multiple intended and unintended consequences.
Yes, Prospera sounds interesting. Christopher Cook, in his Freedoms Scale subsack proposes something of a distribution anarcho-capitalist nation that I find interesting as well.
This is my intuition on this take as well. An agorist future would require individuals to be able to effectively sell and purchase good and services while avoiding a complete onslaught of regulations and taxes that government overwhelmingly burdens small businesses and freelancers with. AI may have made a single individual more productive, but unless something like a particularly advanced form of cryptocurrency emerges in the future, Coase theorem still holds - transaction costs will keep us employed for firms in the nearby future.
On the other hand, regulations are easier to enforce against a large firm because more of what is happening has to be legible to the people running the firm and so to the government. If a one person firm wants to do something the government objects to there is only one person who has to keep it secret.
Maybe a particularly advanced form of cryptocurrency, maybe not.
One ounce silver rounds, shaped the same as silver dollars are available now and could be used in exchanges based on the daily bid/ask silver price. For example, as I write this silver spot price is $31.16/$31.26 per ounce. So you want ten bucks a dozen for those eggs? I'll take 3 dozen for this silver round, deal?
Also Nevada, New Hampshire and others are issuing goldback notes, 1/1000 of a troy ounce of gold encased in a plastic bill, at today gold spot that's $2.79. So you'll sell me one dozen of those eggs for 3 goldbacks, we got a sale?
Many fusty old folks such as myself are suspicious of that thar cryptocurrency thingie backed by nothing.
However there are cryptos exchangeable for gold such as Tether Gold (XAUt). They exchange gold for their bitcoin and deliver the gold to you. The problem is they'll deliver it to you anywhere in Switzerland, not elsewhere.
The gains from organizing as a firm are going to be heavily influenced by legislation and taxes. If the tax policy penalizes being self-employment, and allows bigger firms to provide compensation effectively untaxed (ie health care, other benefits), the agoric enterprises all suffer an unfair disadvantage. I haven’t noticed anybody talking about this, but it seems like a natural angle for libertarians who are also concerned about the power of big companies.
On the other hand, a one person firm is in a better position to blur the distinction between consumption and business expenses, with no employees to blow the whistle. I expect there are economies of scale in conforming to regulations but diseconomies of scale in evading them.
On the other hand in the days of 90% top bracket income taxes companies would have impressive executive lounges, executive airplanes, etc.
I think this is an under appreciated aspect. Most manufacturing firms I have worked for, some quite large, have lots of zero value added positions and roles, from the perspective of the customer. The value seems to come from economies of scale in regulation and legal compliance. Sometimes it is also straight value to management instead of owners nonsense, but compliance seems to be the main driver.
Seems to be trending that way, sort of. 90% of the population used to be farmers, now it's 1-2% in the US. Manufacturing used to be small firms, then steam and electrical power enabled huge factories. But increases in wealth enabled more people to buy more different things, and it's hard to imagine having more businesses owning more factories without decreasing most factory sizes. Computers enabled the Internet, which allows massive distribution of workers.
I think 3D printing and computers will accelerate that trend, to the point that most manufacturing will be on-demand 3D printing and automated assembly. I bet within 50 years people will design their own cars, choosing which attributes they want and from a multitude of compatible parts. It will start small: convertible or hard top? FWD, RWD, AWD? Engine size and type. Every choice affects the others. At first the choices will be limited, and lots of small features like what the dash looks like, whether you want real buttons and dials or touch screens. Some parts will automatically adjust within certain parameters to match other choices. Some of this is already possible for computers -- how much memory, choice of battery size, screen size, kind of keyboard.
The more automated, the fewer human factory workers, freeing them up for more flexible and interesting work.
Some work will always require lots of people working for a single company -- building roads and dams, skyscrapers, airliners. But the trend has been towards more and smaller firms, and I don't see any reason for that to abate.
I'm an incurable optimist. Given the choice of time travel back to any specific period and location, or any random future time, I would always choose the random future. The risk of hitting one of the dismal times strikes me as nothing to worry about. Imagine some peasant 1000 years ago given the same choice. Even the two world wars, the Great Depression, even 1776 in the American colonies; all would be an improvement for a peasant from 1000 AD anywhere in the world.
I am a case in point! I published my late brother-in-law’s four novels and a short-story collection on Amazon all by myself, as Kindles, paperbacks, and hardbacks. He had created cover images for all but one, and a month’s subscription to GPT4 was enough to let me create three covers for the remaining one (the physical versions had to be split into two volumes and each has its own cover) that I am inordinately pleased with.
Although I agree that the trend is going to be towards more individualized work, there has to be a limit due to economies of scale. It's hard to imagine physical goods production moving to small scale and still being efficient. Any technology available to make small firm or individual scale production viable can be ramped up to even more efficient large scale.
The advantage of on-demand customized manufacturing is a different kind of efficiency that allows customers more variety. Imagine a toaster manufacturer which allowed every choice you can think of -- number of slices, controls, and even appearance within reason. We get that variety today by having multiple factories. Same with cars -- imagine one factory for small cars, one for SUVs, one for minivans, one for pickups, and each factory allowed massive on-demand customization. That might reduce the cost of building factories and lower the overall production cost.
I'm no manufacturing expert. But it seems plausible enough for fiction, which is my main criteria for thinking something is feasible.
I spent over a decade working in factory management. Everything you do to add customization slows down everything else.
The kind of technology you are speaking of really is science fiction. Star Trek replicators would do what you're saying, but even then only because that's good enough, not because it's more efficient than large scale. If they really needed millions of something, large scale production would still be far more efficient. Just picture someone standing in front of a 2x2 foot cube asking for the same item over and over again. Now imagine a 100x100 foot cube and asking for thousands at a time. The time savings is there, as well as saving on personnel needed for it.
None of that is my point.
My point is that if 100 factories churn out small variations on similar products, like toasters, then having fewer factories which allow customization of trivial features might be more economical.
I'm not claiming this now. I'm not claiming this for 100x100x100 foot cubes vs 2x2x2 foot cubes or billions of nails. I'm suggesting it as a possible further expansion of variability in products which can be customized.
Do you think any developments of clever (can't say smart anymore) contracts that help mitigate the principal-agent conflict may drive the growth of firm size?
Extrapolate out further... how will transaction and optimal organizational structure change when we all have access to super-intelligent AI AND something like molecular manufacturing (with advanced 3D printing a sort of step on the way)? Interesting scenario: Coase + Drexler + AI = ? I'm hoping I live to see it.
If:
1. Technology and AI offer tools to the individual that allow them to accomplish far more than was possible by a single person in the past,
2. Technology and AI tools are going to continue advancing,
3. These tools are going to continue increasing per-capita productivity, and
4. The increase in the per-capita consumption of goods and services does not keep pace with the increasing productivity enabled by technology and AI tools,
Then, doesn't it follow that:
A. A decreasing number (percent) of the population will be required to produce the goods and services consumed by the entire population, and either:
(1) Fewer people will contribute productively to society, so that government or private parties will either:
(a) support, cradle to grave, those members of society who cannot, or will not, contribute or
(b) allow those members of society who cannot, or will not, contribute to die.
(2) Everyone will work fewer hours. No one will want to have more stuff, be competitive or status driven. Everyone will be content with less than they could have by working more and all will be joyful.
I realize that 2. could be incorrect in the event of a catastrophe -- nuclear war, global pandemic wiping out 99% of the population, etc., and some people might think 4. will never occur and that increases in per-capita consumption will always keep pace with per-capita production. And, yes, the outcomes are a bit simplified.
If the initial assumptions are correct, then A(2) seems like the utopia scenario, but given human nature, does this even seem remotely plausible?
Or ... is my simplification deeply flawed?
3. We consume more.
Consider that, by the standards of most of the past, we are already in the situation you imagine. Real income in the US is about thirty times the average through most of history. We work less, but not radically less. The main change is that we consume more, not more weight of food but more value of goods and services.
You may have misread my assumptions. I can't tell whether you disagree with my fourth assumption—that consumption won't keep pace with production—or merely consider it unlikely.
To see why consumption might plateau, consider an extreme case: if (yes, this is a big if) technology could someday create a near-perfect brain–sense interface, that would enable a complete artificial reality (like in The Matrix), that would appear to effectively maximize consumption--what more can we consume than an entire virtual (to us real) universe? With consumption capped, further increases in production could easily exceed demand.
Why should AI be any different from all previous tools? Railroads must have been hundreds of times better than horse wagons. Telegraphs and the printing press far outstripped individual messengers and story tellers. Satellites and the internet distribute information better yet.
What's that old saw about work expanding to fill the bureaucracies available? It applies more generally to everything people do. People are very creative like that. The newly unemployed will find new opportunities which were previously too marginal to be of any use. Textiles not only made more ready-made clothes available for more people, they enabled fancier clothing and bedding, window curtains, and probably a hundred uses no one would have wasted precious cloth on before. People don't just sit around and bore themselves to death once unemployed.
You are thinking of one of the statements of Parkinson's law.
There are three possible arguments for AI doom. One is that AI, unlike earlier technologies, substitutes for everything humans do. That shouldn't make us poorer but might make us feel of less value. One is that AI greatly increases the productivity of capital relative to labor, which is great for those who own capital but means that people who have labor and need capital to combine with it to produce things have to pay a higher price for it.
The third and most serious is that if we end up with AI much smarter than we are it might take over and not much care about our welfare.
Only three? Another potential AI doom scenario is that advanced systems could accelerate the creation of superweapons such as tailored viruses or nano-machine weapons, used by humans themselves to unleash death and destruction upon, or cause the mass subjugation of, people. AI might also enable totalitarian surveillance, manipulate politics, or degrade the environment at unprecedented speed. Your first argument, that AI might replace all human functions, risks shattering human ego and feelings of value, causing widespread unemployment, eliminating social mobility, and inciting social unrest or full-scale wars. Your second argument, that AI’s productivity gains favor owners of capital, is a milder version with similarly dire outcomes.
No. 1 seems like a milder subset of No. 3.
I think No. 3 is the only plausible doom scenario, and it doesn't seem stoppable, if it is going to happen. I'm an optimist, I see AI as just another tool, and like all tools, good in almost every way.
It seems to me, David, that strictly speaking, the term “self employed” is self contradictory.
That is because everything that is produced by one person is a response to a request made by another person. The pair of producer/consumer cannot be separated. Such is the case whether or not there is exchange of money. For example, take the case of the novelist. His production is a response to the public’s request for entertainment or whatever. Without that request, the novelist would never write. By the same token, if there were no writers, the public would not ask for novels.
Given the above, nobody is self employed.
You exaggerate a little. When I make myself dinner I am, in your sense, self employed.
I stand corrected.
Yet most people seem to have a pretty similar grasp of what the phrase means.