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Is the State a Business?

While people who voted for Donald Trump give various reasons for their choice, some say that they chose him because he is a businessman and they view government as a business. While some might be tempted to dismiss this as mere parroting of empty political rhetoric, the question of whether the state is a business is well worth considering.

The state (that is, the people who occupy various roles) does engage in considerable business like behavior. For example, the state routinely engages in contracts for products and services. As another example, the state does charge for some goods and services. As a third example, the state does engage in economic deals with other states. As such, it is indisputable that the state does business. However, this is rather distinct from being a business. To use an analogy, individuals routinely interact with businesses, yet this does not make them businesses. So, for the state to be a business, there must be something more to it than merely engaging in some business-like behavior.

One approach is the legal one. Businesses tend to be defined by the relevant laws, especially corporations. As it now stands, the United States government does not seem to be legally defined as a business. This could, of course, be changed with a law. But such a legal status would not, by itself, be terribly interesting philosophically. After all, the question is not “is there a law that says the state is a business?” but “is the state a business?”

To take the usual Socratic approach, the proper starting point is working out a useful definition of business. Since this a short essay, the definition also needs to be succinct. The easy and obvious way to define a business is as an entity that provides goods or services (which can be very abstract) in return for economic compensation with the goal of making a profit.

While there are government owned corporations that operate as businesses, the government itself does not seem to fit this definition. One reason is that while the state does provide goods and services, these are typically provided without explicit economic compensation. For example, while taxpayers do pay taxes, they do not typically pay explicit bills for what they have received. Some also receive goods and services without providing any compensation to the state. For example, some corporations can exploit the tax laws so they can avoid paying any taxes.

While this seems to indicate that the state is not a business (or is perhaps a badly run business), there is also the question of whether the state should operate this way. In his essay on civil disobedience, Henry David Thoreau suggested that people should have an essentially transactional relationship with the state. That is, they should pay for the goods and services they use, as they would do with any business. For example, a person who used the state roads would pay for this use via the highway tax. This approach does have some appeal.

One part of the appeal is ethical—Thoreau’s motivation was not to be a cheapskate, but to avoid contributing to government activities he regarded as morally wrong (two evils he wished to avoid funding were the Mexican-American war and slavery). Since the state routinely engages in activities that various citizens find morally problematic (such as subsidizing corporations), this would allow people to act in accord with their values and influence the state directly by voting with their dollars. The idea is that just as a conventional business will give the customers what they want, the state as business would do the same thing.

Another part of the appeal is economic—people would only pay for what they use and many probably believe that this approach would cost them less than paying taxes. For example, a person who has no kids in the public schools would not pay for the schools, thus saving them money. There are, of course, some practical concerns that would need to be worked out here. For example, should people be allowed to provide their own police and fire services and thus avoid paying for these services? As another example, there is the challenge of working out how the billing would be calculated and implemented. Fortunately, this is technical challenge that existing business have already addressed, albeit on a much smaller scale. However, this is not just a matter of technical challenges.

A rather obvious problem is that there are people and organizations who cannot afford to pay for the services they need (or want) from the state. For example, people who receive food stamps or unemployment benefits cannot pay the value for these goods. If they had the money to pay for them, they would not need them. As another example, companies that benefit from United States military interventions and foreign policy would be hard pressed to pay the full cost of these operations. As a third example, it would be absurd for companies that receive subsidies to pay for these subsidies—if they did, they would not be subsidies. The company would just hand the state money to hand back to it, which would merely be a waste of time. The same would apply to student financial aid and similar individual subsidies.

It could be replied that this is acceptable—those who cannot pay for the goods and services will be forced to work harder to be able to pay for what they need. Just as a person who wants to have a car must work to earn it, a person who wants to have police protection must also work to earn it. If they cannot do so, then it will become a self-correcting problem. Naturally, the state could engage in some limited charity, much like businesses sometimes do so for customers who are down on their luck but could return to being sources of profits. The state could also extend credit to citizens who are down on their luck or even conscript them so they can work off their debts to the state.

The counter to this is to argue that the state should not operate like a business here—that it has obligations that go beyond those imposed by payments for goods or services to be received. The challenge is, of course, to argue for the basis of this obligation.

A second reason the state is not a business is that it does not operate to make a profit. This is not merely because the United States government spends more than it brings in, but because it does not even aim at making a profit. This is not to say that profits are not made by individuals, just that the state as a whole does not run on this model. This is presumably fortunate for the state—few other entities could operate at a deficit for so long without ceasing to be.

There is, of course, the question of whether the state should aim to operate at a profit. This, it must be noted, is distinct from the state operating with a balanced budget or even having a surplus of money. In the case of balancing the budget, the goal is to ensure that all expenditures are covered by the income of the state. While aiming at a surplus might seem to be the same as aiming for a profit, the difference lies in the intent. The usual goal of achieving a budget surplus is analogous to the goal of an individual trying to save money for future expenses.

In the case of profit, the goal would be for the state to make money beyond what is needed for current and future expenses. As with all profit making, this would require creating that profit gap between the cost of the good or service and what the customer pays for it. This could be done by underpaying those providing the goods and services or overcharging those receiving them—both of which might seem morally problematic for a government.

Profit, by its nature, is supposed to go to someone. For example, the owner of a small business gets the profits. As another example, the shareholders in a corporation get some of the profits. In the case of the government, there is the question of who should get the profit. One possibility is that all the citizens get a share of the profits—although this would just be re-paying citizens what they were either overcharged or underpaid. An alternative is to allow people to buy additional shares in the federal government, thus running it like a publicly traded corporation. China and Russia would presumably want to buy some of these stocks.

One argument for the profit approach is that it motivates people; so perhaps some of the profits of the state could go to government officials. The rather obvious concern here is that this would be a great motivator for corruption and abuse. For example, imagine if courts aimed to operate at a profit for the judges and prosecutors. It could be contended that the market will work it out, just like it does in the private sector. The easy and obvious counter to this is that the private sector is well known for its corruption.

A second argument for the profit option is that it leads to greater efficiency. After all, every reduction in the cost of providing goods and services means more profits. While greater efficiency would certainly be desirable, there is the concern that costs would be reduced in ways that are harmful. For example, government employees might be underpaid. As another example, corners might be cut on quality and safety. It can be countered that the current system is also problematic since there is no financial incentive to be efficient. The easy reply to this is that there are other incentives to be efficient. One of these is limited resources—people must be efficient to get their jobs done using what they have been provided with. Another is professionalism.

In light of the above discussion, while the state should certainly aim at being efficient, it should not be regarded as a business.


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The State & Business


he American anarchist Henry David Thoreau presents what has become a popular conservative view of the effect of government upon business: “Yet this government never of itself furthered any enterprise, but by the alacrity with which it got out of its way…Trade and commerce, if they were not made of India-rubber, would never manage to bounce over obstacles which legislators are continually putting in their way…”

While this sort of laissez faire view of the role of the state in business is often taken as gospel, there is the question of whether Thoreau is right. While I do find his anarchism appealing, there are some problems with his view.

Thoreau is quite right that the government can be employed to thwart and impede enterprises—this is often done by granting special advantages and subsidies to certain companies or industries, thus impeding their competitors. However, he is mistaken in his claim that the government has never “furthered any enterprise.” I will begin with the easy and obvious reply to this claim.

Modern business could not exist without the physical and social infrastructure provided by the state. In terms of the physical infrastructure, businesses need the transportation infrastructure provided by the state. The most obvious aspect of this infrastructure is the system of roads that is paid for by the citizens and maintained by the government (that is, the citizens acting collectively). Without such roads, most businesses could not operate—products could not be moved effectively and customers would be hard pressed to reach the businesses.

Perhaps even more critical than the physical infrastructure is the social infrastructure that is created by the government (that is, the people acting collectively and through officials). The social infrastructure includes the legal system, laws, police services, military services, diplomatic services and so on for the structures that compose the governmental aspects of society.

For example, companies in the intellectual property business (which ranges from those dealing in the arts to pharmaceutical companies) require the existence of the legal system and law enforcement. After all, if the state did not enforce the drug patents, the business model of the major pharmaceutical companies would be destroyed.

As another example, companies that do business internationally require the government’s military and diplomatic services to enable their business activities. In some cases, this involves the explicit use of the military in the service of business. In other cases, it is the gentler hand of diplomacy that advances American business around the world.

All businesses rely on the currency system made possible by the state and they are all protected by the police. While there are non-state currencies (such as bitcoin) and companies can hire mercenaries; these options are generally not viable for most businesses.  All of this seems to clearly show that the state plays a critical role in allowing business to exist. This can, however, be countered.

It could be argued that while the state is necessary for business (after all, there is little in the way of business in the state of nature), it does nothing else beyond that and should just get out of the way to avoid impeding business. To use an analogy, someone must build the stadium for the football game, but they need to get out of the way when it is time for the players to play. The obvious reply to this is to show how the state has played a very positive role in the development of business.

The United States has made a practice of subsidizing and supporting what have been regarded as key businesses. In the 1800s, the railroads were developed with the assistance of the state. The development of the oil industry depended on the state, as did the development of modern agriculture. It could, of course, be objected that this subsidizing and support are bad things—but they are certainly not bad for the businesses that benefit.

Another area where the state has helped advance business is in funding and engaging in research. This is often research that would be too expensive for private industry and research that requires a long time to yield benefits. One example of this is the development of space technology that made everything involving satellites possible. Another example is the development of the internet—which is the nervous system of the modern economy. The BBC’s “50 Things that Made the Modern Economy” does an excellent analysis of the role of governments in developing the technology that made the iPhone possible (and all smart phones).

One reason the United States has been so successful in the modern economy has been the past commitment of public money to basic research. While not all research leads to successful commercial applications (such as computers), the ability of the collective (us acting as the state) to support long term and expensive research has been critical to the advancement of technology and civilization.

This is not to take away from private sector research, but much of it is built upon public sector foundations. As would be expected, private sector research now tends to focus on short term profits rather than long term research. Unfortunately, this view has infected the public sector as well—as public money for research is reduced, public institutions seek private money and this money often comes with strings and the risk of corruption. For example, “research” might be funded to “prove” that a product is safe or effective. While this does yield short term gains, it will lead to a long-term disaster.

The state also helps further enterprise through laws regulating business. While this might seem like a paradox, it is easily shown by using an analogy to the role of the state in regulating the behavior of citizens.

Allowing business to operate with no regulation would be like allowing individuals to operate without regulations. While this might seem appealing, for an individual to further their life, they need protections from others who might threaten their life, liberty and property. To this end, laws are created and enforced to protect people. The same applies to protecting businesses from other businesses (and businesses from people and people from businesses). This is, of course, the stock argument for having government rather than the unregulated state of nature. As Hobbes noted, a lack of government can become a war of all against all and this ends badly for everyone. The freer the market gets, the closer it gets to this state of nature—a point well worth remembering.

It might be assumed that I foolishly think that all government involvement in business is good and that all regulation is desirable. This is not the case. Governments can wreck their own economies through corruption, bad regulations and other failures. Regulations are like any law—they can be good or bad, depending on what they achieve. Some regulations, such as those that encourage fair competition in business, are good. Others, such as those that grant certain companies unfair legal and financial advantages (you might be thinking of Monsanto here), are not.

While rhetorical bumper stickers about government, business and regulation are appealing in a simplistic way, the reality of the situation requires more thought and due consideration of the positive role the state can play—with due vigilance against the harms that it can do.


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Automation & Ethics

Suomi: Heronin aeolipiili Türkçe: Yunanlı mühe...

Suomi: Heronin aeolipiili Türkçe: Yunanlı mühendis Hero’nun yaptığı ilk örnek türbin (Photo credit: Wikipedia)

Hero of Alexandria (born around 10 AD) is credited with developing the first steam engine, the first vending machine and the first known wind powered machine (a wind powered musical organ). Given the revolutionary impact of the steam engine centuries later, it might be wondered why the Greeks did not make use of these inventions in their economy. While some claim that the Greeks simply did not see the implications, others claim that the decision was based on concerns about social stability: the development of steam or wind power on a significant scale would have certainly displaced slave labor. This displacement could have caused social unrest or even contributed to a revolution.

While it is somewhat unclear what prevented the Greeks from developing steam or wind power, the Roman emperor Vespasian was very clear about his opposition to a labor saving construction device: he stated that he must always ensure that the workers earned enough money to buy food and this device would put workers out of work.

While labor saving technology has advanced considerably since the time of Hero and Vespasian, the basic questions remain the same. These include the question of whether to adopt the technology or not and questions about the impact of such technology (which range from the impact on specific individuals to the society as a whole).

Obviously enough, each labor saving advancement must (by its very nature) eliminate some jobs and thus create some initial unemployment. For example, if factory robots are introduced, then human laborers are displaced. Obviously enough, this initial impact tends to be rather negative on the displaced workers while generally being positive for the employers (higher profits, typically).

While Vespasian expressed concerns about the impact of such labor saving devices, the commonly held view about much more recent advances is that they have had a general positive impact. To be specific, the usual narrative is that these advances replaced the lower-paying (and often more dangerous or unrewarding) jobs with better jobs while providing more goods at a lower cost. So, while some individuals might suffer at the start, the invisible machine of the market would result in an overall increase in utility for society.

This sort of view can and is used to provide the foundation for a moral argument in support of such labor saving technology. The gist, obviously enough, is that the overall increase in benefits outweighs the harms created. Thus, on utilitarian grounds, the elimination of these jobs by means of technology is morally acceptable. Naturally, each specific situation can be debated in terms of the benefits and the harms, but the basic moral reasoning seems solid: if the technological advance that eliminates jobs creates more good than harm for society as a whole, then the advance is morally acceptable.

Obviously enough, people can also look at the matter rather differently in terms of who they regard as counting morally and who they regard as not counting (or not counting as much). Obviously, a person who focuses on the impact on workers can have a rather different view than a person who focuses on the impact on the employer.

Another interesting point of concern is to consider questions about the end of such advances. That is, what the purpose of such advances should be. From the standpoint of a typical employer, the end is obvious: reduce labor to reduce costs and thus increase profits (and reduce labor troubles). The ideal would, presumably, to replace any human whose job can be done cheaper (or at the same cost) by a machine. Of course, there is the obvious concern: to make money a business needs customers who have money. So, as long as profit is a concern, there must always be people who are being paid and are not replaced by unpaid machines. Perhaps the pinnacle of this sort of system will consist of a business model in which one person owns machines that produce goods or services that are sold to other business owners. That is, everyone is a business owner and everyone is a customer. This path does, of course, have some dystopian options. For example, it is easy to imagine a world in which the majority of people are displaced, unemployed and underemployed while a small elite enjoys a lavish lifestyle supported by automation and the poor. At least until the revolution.

A more utopian sort of view, the sort which sometimes appears in Star Trek, is one in which the end of automation is to eliminate boring, dangerous, unfulfilling jobs to free human beings from the tyranny of imposed labor. This is the sort of scenario that anarchists like Emma Goldman promised: people would do the work they loved, rather than laboring as servants to make others wealthy. This path also has some dystopian options. For example, it is easy to imagine lazy people growing ever more obese as they shovel in cheese puffs and burgers in front of their 100 inch entertainment screens. There are also numerous other dystopias that can be imagined and have been explored in science fiction (and in political rhetoric).

There are, of course, a multitude of other options when it comes to automation.


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The Sharing Economy III: Resources (Human & Other)

Olathe Human Resources

Olathe Human Resources (Photo credit: City of Olathe, KS)

In my previous two essays I wrote about the new sharing economy, focusing on regulations and taxes. In this essay I will cover resources (human and other). As noted in the previous two essays, the new sharing economy is exemplified by companies such as Uber and Airbnb that serve to organize transactions between individuals. In the case of Uber, people can serve as drivers for Uber selling rides in their own cars—without (as of this writing) all the usual costs and regulations of operating a cab. In the case of Airbnb, people can rent out property and (as of this writing) generally avoid the usual regulation and taxes associated with running a hotel.

For the people providing the goods and services, the new sharing economy makes it easier for people to make money. In general, the new sharing economy involves three parties. The first is the person who provides the actual good (apartment, for example) or service (a ride to the airport, for example). The second is the person who uses the service and the third is the company that provides the organizing service (often via an app) While this is an old model (people have long offered services and goods via things like newspaper ads), technological advances have changed the scale of this once informal economy. It has also served to blur the traditional roles somewhat. To be specific, those who provide the goods and services are not actually employees of the organizing services and those using the goods and services are not exactly customers of the organizing services. There are some advantages and some disadvantages in regards to these roles.

In the case of those providing the services and goods, one of the obvious advantages is that they can make money. While they could do this without the organizing service, the service obviously makes this easier and provides other advantages.

One of the advantages of not actually being an employee of the organizing services is that the provider has a high degree of autonomy that is usually absent in the traditional employee-employer relationship. The provider can (within the constraints of economic need) work as little as desired and is free to stop at will. This level of autonomy certainly has considerable appeal to some people—especially people who are looking for a more traditional job while making money to pay the bills. In some ways, the situation is somewhat like being a temp.

Of course, there are some disadvantages to being a provider. One is that doing this is rather like being self-employed in that there are typically no benefits and no job security. Also, the risks and costs tend to fall heavily on the provider. For example, if someone crashes into the company truck Sally is driving, then the company handles the matter. But, if Sally is freedriving for Uber and her car is hit, this is most likely going to work exactly as it would if Sally was just driving to Starbucks for a latte—that is, it is on her.

Another point of concern is that the organizer might be in the position to set rates or impose other limits—much like a traditional boss can. For example, Uber can set what drivers are paid on its own

But, this is nothing new—people who do freelance work or are self-employed in the usual sense face all these problems. After all, being the worker is generally not an optimal situation and being what amounts to a temp or freelancer can be even less optimal in terms of security and pay.

There are numerous advantages to the organizing companies. One is that they have people doing the actual work for them (for example, driving people) who are not employees. They also typically have people providing the resources (cars, gas, houses and so on) that are used. While the companies do incur costs in terms of running the organizing functions, they are able to avoid (or significantly reduce) the usual costs of running a business. For example, a hotel needs to have hotel employees (maids, etc.) and an actual hotel. Airbnd does not—the providers provide the services and buildings. As another example, a service that organizes drivers does not need to buy cars, maintain them or insure them—thus resulting in considerable savings.

In essence, the new sharing economy splits management from what would traditionally be the resources (human or otherwise) of a company. The organizer takes on the role of management while avoiding the need to have traditional human resources (beyond the administrative aspects of the business) and the need to have the material resources (beyond those needed for the administrative aspects).

Some companies do operate in something of a hybrid mode—having workers as well as material resources owned by the company while also having a sharing aspect to the business. This is, clearly enough, a variation on the old model of a company hiring temp workers, freelancers and contractors.

This model can, apparently, be very profitable—in large part due to matters of scale. After all, getting a slice of thousands of sales can result in a nice profit. Also, many of these companies benefit from internet inflation—the almost magical overvaluation of companies with business models based on the internet.

Given the apparent success of companies like Uber and Airbnd, it is reasonable to expect other companies to spring into existence to create what might be a new internet bubble—the sharing bubble. Of course, there are some clear limits on what sort of companies can exist—for example, airlines and heavy manufacturing are not really fit for the sharing economy. However, additional advances in economy might see some new realms for the sharing economy. For example, if 3D printers become truly viable, light and specialized manufacturing might become part of the sharing economy.


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The Sharing Economy I: Regulation

Airbnb logo

Airbnb logo (Photo credit: Wikipedia)

The rising success of companies such as Airbnd and Uber have created considerable interest in what has been called the sharing economy. The core idea behind the sharing economy is an old one: people provide goods and services as individuals rather than acting as employees or businesses. One classic example of this is paying a neighborhood kid who mows lawns or babysits. Another classic example is paying a friend’s gas money for a ride to the airport. The new version of the sharing economy does make some changes to the traditional model. The fundamental difference is that the old sharing economy was typically an informal word-of-mouth system while the new sharing economy is organized by companies. As an example of the old sharing economy, your neighbor might have told you about the teenager she hired to babysit her kids or to mow her lawn (back in the day when this was an accepted practice). As an example of the new sharing economy, you might use the Uber app to get a chipper soccer mom to give you a ride to the airport in her mini-van. Unlike the old sharing economy in which your neighbor (probably) did not take a cut for connecting you to a sitter or mower, the companies that connect people get a cut of the proceeds—which can be justified by the services they provide.

The new sharing economy has received considerable praise, mainly due to the fact that it makes it easier for people to make money in what are still challenging economic times. For example, a person who would be hard pressed to get a job as a professional cabbie can easily drive for Uber. However, it has also drawn considerable criticism.

As might be suspected, some of the most vocal critics of the sharing economy are the people whose livelihoods and profits are threatened by this economy. For example, Uber’s conflicts with taxi services routinely make the news. Some people dismiss these criticisms as the usual lamentations of obsolete industries while others regard the criticisms as having legitimacy. In any case, there is certainly considerable controversy regarding this new sharing economy.

One point of concern is regulation. As it now stands, the sharing economy is exploiting the loopholes that exist in the informal economy (which is regulated far less than the formal economy). For example, professional cab drivers are subject to a fairly extensive set of regulations (and expenses, such as insurance costs) while an Uber driver is not. As another example, the hotel industry is regulated while services like Airbnb currently lack such regulations regarding things such as safety and handicap access.

Some proponents of the free market might praise the limited (or nonexistent) regulation and this praise might have some merit—after all, it has long been contended that regulation impedes profits. However, there are at least two legitimate concerns here.

One is, obviously enough, the matter of fairness. If taxi drivers and hotels are subject to strict regulations that also involve additional costs, then it hardly seems fair that companies like Uber and Aibnd can offer the same services while evading these regulations. One obvious option is to impose them on the sharing economy. Another obvious option is to reduce regulations on the traditional economy. In any case, fairness would seem to require comparable regulation.

The second is the matter of safety and other concerns of the public good. While some regulations might be seen as burdensome, others clearly exist to protect the public from legitimate harms. For example, hotels are held to certain standards of cleanliness and safety. As another example, taxi companies are subject to regulations aimed at protecting the public. If the new sharing economy puts people at risk in similar ways, then it seems reasonable to impose comparable regulations on the sharing economy. After all, whether you are getting a hotel room or going through Airbnb, you should have a reasonable expectation that you will not perish in a fire due to safety issues.

It might be countered that the new sharing economy should still fall under the standards of the old sharing economy. For example, if I ask a friend to take me to the airport and she has an awful car and is a terrible driver, it is hardly the business of the state to regulate my choice (although the state would have the right to address any actual traffic violations). As another example, if I crash on someone’s couch for the night, it is hardly the business of the state to make sure that the couch is properly cleaned and that the house is suitable (although it would need to be up to code).

While this does have some appeal, there are two main arguments against this approach. The first is that the informal economy is largely unregulated because it is just that—informal. Once a company like Uber or Airbnd gets into the picture, the economy has become formalized—there is now a central company that is organizing things. This allows a practical means of regulating what is now commercial activity. The second is the matter of scale. When the informal economy is relatively small, the cost and difficulty of regulating for the public good can be prohibitive. For example, policing neighborhood babysitters or people who give the occasional ride to friends and get gas money for doing so would impose a high cost for a little return in public good. However, when an aspect of the informal economy gets organized by a company and greatly expands in size, then there is more at stake and hence paying the cost of regulating for the public good becomes viable. For example, regulating people occasionally giving friends or associates rides is one thing (a silly thing), but regulating large numbers of people driving vehicles for Uber is quite another matter.

One area that is going to be a matter of considerable controversy is that of discrimination. If Bob does not want to share a ride with a white colleague or give a handicapped associate a lift, then that is Bob’s right.  After all, a citizen has every right to be biased. But, it gets rather more complicated if Bob is driving for Uber—after all, discrimination does harm to the public and the public might have a stake in preventing Uber Bob from discriminating. Similary, if Bob does not want his Latino friend crashing on his couch because he thinks Latinos are thieves, that is Bob’s right (the right of being a jerk to one’s friends). But, if Bob is renting out a room through Airbnd, then this could be a matter of legitimate public concern.

It might be countered that people “freedriving” or “freerenting” for the sharing companies still retain the right to discriminate since they are acting as individuals, albeit under the auspices of a company. That does have considerable appeal, especially since the people driving or renting are not actually employees of these companies. The company is just assisting people to exchange services and, it could be claimed, is no more accountable than a newspaper that has a “for sale” or “help wanted” section. Obviously enough, companies are generally going to want to avoid being associated with discrimination and hence they will probably engage in some degree of self-policing to avoid PR nightmares (or will do so if they are sensible or ethical). However, there is clearly an important issue here regarding whether or not laws against discrimination should be applicable to individuals who are involved with the sharing economy companies. The somewhat fuzzy status of those providing services does create a legitimate problem. As noted above, on one hand they are still just individuals using the service to connect to others. On the other hand, this service does seem to bring them into more of a formal business situation which is subject to such laws.


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The Cost of Litter

English: Littering in Stockholm

(Photo credit: Wikipedia)

After running the Palace Saloon 5K, I participated in a cleanup of a nearby park. This event, organized by my running friend Nancy, involved spending about an hour and a half picking up trash in the Florida sun.  We runners created a pile of overstuffed trash bags full of a wide range of discarded debris.

On my regular runs, I routinely pick up litter. This ranges from the expected (discarded cans) to the unusual (a blender dropped off in the woods). These adventures in litter caused me to think about the various issues related to litter and most especially the cost of litter.

One obvious cost of litter is the aesthetic damage it inflicts. Litter is ugly and makes an area look, well, trashy. While this cost might be partially paid by those who litter, it is also inflicted on those who visit the area and do not litter. One of the many reasons I pick up litter is that I prefer not to run through trashy places.

Another obvious cost of litter is the environmental damage it inflicts. Some of this is quite evident, such as oil or paint leaking from discarded cans. Other damage is less evident, such as the erosion and flooding that can be caused by litter that clogs up storm drains.  There is also the harm done to animals directly, such as sea life killed when their stomachs fill with plastic debris. As with the aesthetic damage, the cost of the litter is largely paid by those who did not litter—such as the turtles and sea-birds harmed by discarded items.

A somewhat less obvious cost is that paid by people who pick up the litter discarded by others. For example, I take a few minutes out of almost every run to pick up and dispose of trash discarded by others. There are also walkers in my neighborhood area who pick up trash during their entire walk—I will see them carrying full bags of cans, bottles and other debris that have been thrown onto the streets, sidewalks and lawns.  And no, they are not gathering up the debris to cash it in for recycling money.

What I and others are doing is paying the cost of the littering of others with our time and effort. This is doubly annoying because the effort we need to expend to pick up the debris and dispose of it properly is generally more than the effort the discarder would have needed to expend to simply dispose of it herself. This is because such debris is often scattered about, in pieces or tossed into the woods—thus making it a chore to pick up and carry. Also, carrying trash while running is certainly more inconvenient than simply transporting it in a vehicle—and much of the trash beside the road is hurled from vehicles.

Some states, such as my home state of Maine, do shift some of the cost of litter to the litterer. To be specific, these states have a deposit on bottles and cans. When someone litters a can or bottle, he is throwing away the deposit—thus incurring a small cost for his littering. When someone picks up the bottle or can, she can redeem it for the deposit—thus offsetting the cost of her effort. While this approach does not cover all forms of litter, it does have a significant impact on the litter problem by providing people with an incentive to not litter or to pick up the litter thrown away by others.

This model of imposing a cost on littering and providing a reward for cleaning up litter seems to be an ethical system. In terms of fairness, it seems right that the person littering should pay a price for the damage that she does and the cost that she inflicts on others. It also seems right that people who make the effort to clean up the messes caused by others should receive compensation for their efforts. The obvious challenge is making the model work on a broader scale beyond just bottles and cans. Unfortunately, there are many more people who are lazy, uncaring or imbued with a feeling of entitlement than there are who have a sense of responsibility and duty. As such, I know I will be cleaning up after others for the rest of my life.



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Men, Women, Business & Ethics

Journal of Business Ethics

Journal of Business Ethics (Photo credit: Wikipedia)

On 4/9/2014 NPR did a short report on the question of why there are fewer women in business than men. This difference begins in business school and, not surprisingly, continues forward. The report focused on an interesting hypothesis: in regards to ethics, men and women differ.

While people tend to claim that lying is immoral, both men and woman are more likely to lie to a woman when engaged in negotiation. The report also mentioned a test involving an ethical issue. In this scenario, the seller of a house does not want it sold to someone who will turn the property into a condo. However, a potential buyer wants to do just that. The findings were that men were more likely than women to lie to sell the house.

It was also found that men tend to be egocentric in their ethical reasoning. That is, if the man will be harmed by something, then it is regarded as unethical. If the man benefits, he is more likely to see it as a grey area. So, in the case of the house scenario, a man representing the buyer would tend to regard lying to the seller as acceptable—after all, he would thus get a sale. However, a man representing the seller would be more likely to regard being lied to as unethical.

In another test of ethics, people were asked about their willingness to include an inferior ingredient in a product that would hurt people but would allow a significant product. The men were more willing than the women to regard this as acceptable. In fact, the women tended to regard this sort of thing as outrageous.

These results provide two reasons why women would be less likely to be in business than men. The first is that men are apparently rather less troubled by unethical, but more profitable, decisions.  The idea that having “moral flexibility” (and getting away with it) provides advantage is a rather old one and was ably defended by Glaucon in Plato’s Republic. If a person with such moral flexibility needs to lie to gain an advantage, he can lie freely. If a bribe would serve his purpose, he can bribe. If a bribe would not suffice and someone needs to have a tragic “accident”, then he can see to it that the “accident” occurs. To use an analogy, a morally flexible person is like a craftsperson that has just the right tool for every occasion. Just as the well-equipped craftsperson has a considerable advantage over a less well equipped crafts person, the morally flexible person has a considerable advantage over those who are more constrained by ethics. If women are, in general, more constrained by ethics, then they would be less likely to remain in business because they would be at a competitive disadvantage. The ethical difference might also explain why women are less likely to go into business—it seems to be a general view that unethical activity is not uncommon in business, hence if women are generally more ethical than men, then they would be more inclined to avoid business.

It could be countered that Glaucon is in error and that being unethical (while getting away with it) does not provide advantages. Obviously, getting caught and significantly punished for unethical behavior is not advantageous—but it is not the unethical behavior that causes the problem. Rather, it is getting caught and punished. After all, Glaucon does note that being unjust is only advantageous when one can get away with it. Socrates does argue that being ethical is superior to being unethical, but he does not do so by arguing that the ethical person will have greater material success.

This is not to say that a person cannot be ethical and have material success. It is also not to say that a person cannot be ethically flexible and be a complete failure. The claim is that ethical flexibility provides a distinct advantage.

It could also be countered that there are unethical women and ethical men. The obvious reply is that this claim is true—it has not been asserted that all men are unethical or that all women are ethical. Rather, it seems that women are generally more ethical than men.

It might be countered that the ethical view assumed in this essay is flawed. For example, it could be countered that what matters is profit and the means to this end are thus justified. As such, using inferior ingredients in a medicine so as to make a profit at the expense of the patients would not be unethical, but laudable. After all, as Hobbes said, profit is the measure of right. As such, women might well be avoiding business because they are unethical on this view.

The second is that women are more likely to be lied to in negotiations. If true, this would certainly put women at a disadvantage in business negotiations relative to men since women would be more likely to be subject to attempts at deceit. This, of course, assumes that such deceit would be advantageous in negotiations. While there surely are cases in which deceit would be disadvantageous, it certainly seems that deceit can be a very useful technique.

If it is believed that having more women in business is desirable (which would not be accepted by everyone), then there seem to be two main options. The first is to endeavor to “cure” women of their ethics—that is, make them more like men. The second would be to endeavor to make business more ethical. This would presumably also help address the matter of lying to women.


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Minimum Wage II: Freedom & Coercion

As I noted in my previous essay on minimum wage, one stock argument against minimum wage is based on liberty and rights.


Money (Photo credit: 401(K) 2013)

The basic idea behind this line of reasoning is that an employer should have the right to set wages and that the state is wrong to use its coercive power to compel a minimum wage. A rather key assumption here is that such coercion is wrong. This assumption should be kept in mind for what follows.

Those who oppose increasing (or even having) a minimum wage often like to appeal to the notion of the free market of employment. The basic idea is that businesses should be free to offer pay as they see fit. Workers can then consider the pay being offered by each employer and refuse to work for a low-paying employer and instead elect to work for one who pays more. For example, if Big Burger is paying $7.25 an hour and this is not to Sally’s liking, she can keep walking past Big Burger and find a job with better pay—perhaps the CEO position at Big Burger for $7.25 million a year.

Naturally, Sally will face some reasonable limits here—there will be jobs that she is not qualified for. For example, if Sally is fresh out of college with a degree in chemical engineering, she will not be able to get work as a lawyer or doctor. But, it is often claimed, she is free to find any job she is qualified for via the workings of the free market.

Alternatively, Sally can create her own business (Sally’s Sandwiches perhaps) and endeavor to get the income she desires. Naturally, Sally will also face limits here based on her abilities. She will also face the obstacles put in place by the government, or so the narrative goes. However, Sally is supposed to have a shot at being the next billionaire—or so the stories go.

On this view, the situation is rather rosy: Sally and her fellows are free to seek their desired employment and potential employees are free to offer what they wish, with no coercion being used against anyone. Alas, the government tinkers with this beautiful scenario of freedom by compelling employers to (generally) pay a minimum wage. Such coercion, as noted above, is assumed to be wrong: the powerful state is pushing around the weaker businesses and leaving them no choice in regards to the lowest wage they can legally pay.

While this tale is appealing to certain folks, it is not just the state that has coercive power. In the case of jobs, the employers often enjoy considerable coercive power. Going back to the example of Sally, it is true that she is free to walk on past Big Burger and other places that are paying the lowest wages. However, it would seem that she only has a meaningful freedom if there are other jobs available that pay better. Otherwise her freedom is a matter of wo

rking for the lowest wage or not working at all.

It could be replied that she is still free—after all, there would seem to be no coercion or compulsion at play here: she can take the job or not. If Sally is financially independent or is supported by someone else (such as her parents), then she would not be coerced—she would not need the job and is thus free to accept or reject employment as she desires. However, if Sally actually needs a job to pay for food, shelter and other necessities, then she would seem to be in a situation that involves coercion.

The obvious counter is that she is not being coerced by Big Burger or their fellows. After all, they did not create a world in which people need to purchase the basic necessities in order to survive. And, one might add, Sally could avail herself of welfare—at least until her benefits run out. Even then, there is always private charity. Sally could even attempt to create her own business, although this would be difficult and she would likely be competing against well established and well-connected corporations.  As such, Sally is still free and Big Burger is merely offering her one choice among many. So, since Sally can chose to be unemployed, it would seem to follow that she is not being coerced by Big Burger or their fellows.

If Sally elects to take the job, then she has chosen to accept the low pay and is thus not coerced in this scenario either. After all, it is her choice.

Interestingly, Sally’s scenario is analogous to that of the employer that is required to pay minimum wage. An employer is free to decide to not pay minimum wage. This could be done by deciding not to hire anyone, by deciding to not have a business or by deciding to simply pay below that wage. A business could also decide to leave and go somewhere that has no minimum wage—just as Sally could move away from an area in search of a job. So, employers are as free as Sally—they have choices, although there may be no good ones.

It might be countered that the employer is not free—there would clearly seem to be compulsion at play here. However, those who enforce the law could say that they did not create a world in which people have to pay a minimum wage any more than Big Burger created a world in which people have to pay for necessities.

So, since a business owner can chose to not pay minimum wage, it would be the case that she is not coerced. As with Sally, if a business owner elects to pay minimum wage, then she has chosen this and thus is not coerced. After all, it is her choice. Just as it was Sally’s choice to accept or not accept a low paying job despite it being the only sort of job available.

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Minimum Wage I: Arguments Against

Minimum Wage In Paraguay, one simple figure

Minimum Wage In Paraguay, one simple figure (Photo credit: WageIndicator – Paulien Osse)

The United States government, like many other government, sets a minimum wage. This is the lowest (with some exceptions) that an employee can be paid per hour. There is considerable debate regarding the minimum wage ranging from disputes over the exact amount of the wage to arguments over whether there should be a minimum wage at all.

Some arguments over the minimum wage are grounded in concerns about economic facts. For example, there is some dispute about the economic impact of the minimum wage. Some contend that increasing it would increase inflation (which would presumably be bad) while some claim that increasing it would boost the economy by increasing spending. In terms of what should be done, these disputes fall nicely within the realm of consequentialism. That is, settling them involves sorting out the facts about the consequences. There would also be some moral aspects to the matter as well, such as sorting out the positive values and negative values based on who they impact and how.

Other arguments about the minimum wage are more ideological in nature and have minimum (or no) connection to matters of economic facts. These arguments tend to be philosophically interesting because of the strong connection to matters of morality.

One argument against the minimum wage is based on the notion that it causes a culture of dependency that interferes with the mobility of labor. The idea, at least as presented in various talking points in the more conservative media, is that a higher (or any) minimum wage would encourage people to simply stick with the minimum wage job rather than moving upwards in the economic hierarchy.

On the one hand, this has a certain appeal. If a person believes that she is earning enough and making a comfortable living, then she might very well be content to remain at that job.

On the other hand, there seem to be some rather obvious problems with this argument. First, unless the minimum wage were increased dramatically, it seems unlikely that anyone would be able to make a comfortable living on such a wage. It also seems unlikely that most people would be content to simply stop at the minimum wage job and refuse opportunities for better employment. People generally stick with minimum wage jobs because they cannot find a better job not because they think they are making quite enough. I would not claim that it is impossible for a person to live what he thinks is a comfortable life on minimum wage nor that a person might be content to just stick with such a job. However, such a person would be an unusual exception rather than one among a vast crowd.

Second, this sort of reasoning seems to be based on the problematic principle that it is necessary to pay people poorly in order to motivate them to move up the economic hierarchy. One problem with this principle is that it would warrant paying people poorly all the way up the economic ladder so as to allegedly motivate them. After all, if people are content to coast at minimum wage, then they would surely be willing to coast if the pay was better. This would thus seem to entail that only the topmost position in a hierarchy should not pay poorly since there would be nothing above that position and hence no need to motivate a person to move beyond it. Interestingly, this does seem to match the nature of CEO salaries—it is common for the CEO to make many times what lesser employees make. Since the number of topmost positions is rather limited, this would seem to be rather unfair. In fact, if this principle is pushed, it would seem to point towards having one position in total that has good pay—thus motivating everyone to attempt to get that one position.

Another problem with this principle is that it seems to be untrue. As a matter of fact, people do attempt to get higher paying jobs when they are available, even if their pay is not poor. People mostly seem to stick with a minimum wage job or a lower paying job because they cannot find one that pays better (there are, of course, other reasons).

As a final point, the idea that paying people to do work creates a culture of dependency seems to indicate the view that the workers are mooching or sponging off the employer. This is, obviously enough, absurd: the worker is getting paid for work done which is the exact opposite of mooching.

A second ideological argument is based on the notion of liberty and rights. The idea is that employers are having their liberty (or rights) violated by being forced by the state to pay a minimum wage.

This line of reasoning does have a certain appeal. After all, people (and corporations are the best sort of people) have rights to liberty and property. If the state tells employers that they must pay a certain wage, the employers are being denied their right to liberty via the coercive power of the state.

There are at least two obvious responses to this line of reasoning. The first is that workers are also people and hence would also have rights, including property rights to their labor. These rights can be used to argue for a minimum wage (or more)—after all, theft of labor would seem to still be theft.  The second is that being part of a society involves, as Locke and Hobbes argued, giving up some rights. While some employers would like the liberty to pay whatever they wanted (which might be nothing—slavery was and is rather popular), it makes sense that such complete freedom would not be consistent with society. Having a civil society, as Hobbes argued, does require the coercive power of the state. As such, the fact that the state is imposing on the liberty of the employer does not automatically entail that this coercion is wrong. The stale also imposes on the liberties of those who would like to steal and kill and these impositions are hardly wrong.

The obvious reply is to contend that while the state has a legitimate right to limit some liberties, this right does not extend to coercing job creators into paying at least a minimum wage. This cannot, of course, be simply assumed—what is needed is an argument that employers should have the liberty to pay as they please. Even if such a liberty is assumed, surely it would have at least some limit. At the very least, it would seem that an employer has to pay more than nothing. Then again, some might like to see slavery put back on the table. There is much more to be said about minimum wage and more essays will follow.


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Ethics, Charity and Overhead

Curing the Charitable Curse

Curing the Charitable Curse (Photo credit: jurvetson)

While heading home after a race, I caught a segment on the radio discussing Dan Pallotta’s view of the moral assessment of charities and the notion that our moral intuitions regarding charities are erroneous. Pallotta’s main criticism is that people err in regarding frugality as being equivalent to being moral. So, for example, a charitable event with 5% overhead is regarded as morally superior to one with 70% overhead. This is an error, as he sees it, because what should be focused on is the accomplishments. If, for example, the event with the 5% overhead only raised $100 for charity and the event with 70% overhead raised a million dollars, then the second event would obviously have accomplished a great deal more. Naturally, it is being assumed that the overhead is for legitimate expenses such as salaries, advertising and such.

While I lack Pallotta’s experience and expertise in regards to running charities, I do think it is well worth while to consider some of the ethical issues that his discussion raised.

One interesting aspect of this matter, as noted by Pallotta, is that there do seem to be two sets of standards in regards to non-profits and for-profits. In the case of for-profit entities, generous compensation for top talent is often regarded as acceptable and even necessary. In the case on non-profits, generous compensation for the top talent is often regarded as wrong—those people should be willing to accept less compensation because they are supposed to be working for charity. In the case of for-profits, it is recognized that running a business involves considerable overhead and hence even relatively small profit margins are regarded as acceptable. In the case of non-profits overhead costs are generally regarded as being automatically bad and are only grudgingly accepted. As such, while a for-profit business is assessed by how well it does in accomplishing goals (how much profit is generated) a non-profit is often assessed in terms of the percentage of overhead.

Following Pallotta, it can be argued that this model is mistaken. If, one might say, charitable non-profits are going to be as successful as the top businesses, then this view must be abandoned. A key part of this, and one that Pallotta stresses, is that non-profits need to switch to the compensation philosophy of the for-profits. That is, they need to generously compensate the top talent. Another part of this is that non-profits and those who support them must change their views of overhead costs—these costs must not be regarded as being automatically bad but rather seen as necessary expenditures in order to accomplish the goals in question.

While this approach does have appeal, the rather large compensation for top talent in the for-profit sector is itself subject to moral criticism.  So, it is worth noting that while the idea of large compensation for the top talent at charitable non-profits is seen as morally wrong, the high compensation of talent in the for-profit sector is regarded by some as merely being less bad.

There is, of course the stock argument that high compensation is needed to actually get the top talent. After all, if charitable non-profits want to get the best people, then they will need to get closer to the compensation offered in the for-profit realm. If, for example, Sally can get $5 million in compensation as a top executive for a corporation and only $80,000 in compensation as an executive for a charity, then it is obvious where Sally should go.

While this does have appeal, there is still the question of whether the compensation is actually just or not. If the top compensation in the for-profit realm is unjustly large, then making the top compensation in the charitable realm comparably unjust would hardly seem to be an ethical thing to do.

That said, a reasonable rejoinder is that is does make sense to offer better pay in order to attract top talent to work on charitable causes. That is, our money should back our professed moral values.  It also does make sense to use the market to address certain problems, but it is obviously not going to help with problems that the market system creates itself—which could be one of the important ironies of this approach to charitable organizations.

An obvious point of concern is that the arguments in favor of accepting high overhead for charitable non-profits could be used as a clever sort of moral cover. That is, they could be sued to allow alleged charities to monetize charitable causes as for-profit companies now monetize natural resources and human labor. The obvious counter to this concern is that this approach could yield more effective results than the existing model. So, one might argue, if the price of a charity finally finding a cure for a disease is that the charity operate like a for-profit business, then it is worth the price.

This is a point well worth considering. As Pallotta has argued, charitable organizations often fail to address the problems they were created to solve. If changing our moral assessment of how charitable non-profits should operate could play a significant role in solving some of these problems, then this approach could be the correct approach. However, if this approach is actually a mere moral cloak to allow profiteering off charitable causes, then this approach would seem to be wrong.

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