Sunday, March 13, 2011

"The Unincorporated Man" Book Review: Incorporating the Human Soul

I have always been into reading a lot of fiction growing up.  I could never get into Isaac Asimov and the detailed wonders of the universe he created but I really enjoyed books such as "Legend of the Duelist" by Rutledge Etheridge.  I was really young when I read this book though at the time I considered it the best story I had ever read.  Since then I have read much more and have probably become more discriminating.. but we'll see.  Maybe I'll try one of the sequels.  Basically, I have always considered myself a lover of fantasy books and dystopia novels but never really sci-fi.So when someone from Liberty Fund recommended "The Unincorporated Man" to me, after saying "Atlas Shrugged" was unreadable to them (PhD in Literature may do that to you), I had it in the back of my mind when getting free audio books from amazon.  Having a Business Finance B.S. made my mind run with possibilities.  What follows contains no spoilers but discusses the concept of human incorporation.  

In the libertarian community there is a somewhat esoteric debate about the ability to sell ones self into slavery.  Economist Murray Rothbard, in "The Ethics of Liberty" claimed that the core principle of his brand of libertarianism, non-aggression (non-initiation of the use of violence) is antithetical to the ability to contractually arrange a slavery agreement.  Dr. Williamson Evers explicated the view Rothbard would later take up here.  The argument is that if people need free-will to sell themselves into slavery, and slavery removes free-will, the contract becomes void because it is no longer the result of free-will.

Dr. Walter Block of Loyola New Orleans has what I believe to be a more consistent view on this issue.  People CAN sell themselves into slavery.  Signing a slave contract gives someone the moral right to enforce specific agreements in the contract with the use of violence.  Dr. Stephen Kinsella points out that this would not be a useful thing to do and that such contracts as a contract with a soldier to fight in a war are null and void.  Contrary to Block's view, Rothbard and Kinsella would claim that a person has an inalienable right to quit a job even if they agree in an explicit written statement that they would not (click on Dr. Block's link above for a better summary of the debate).

The Kollin's are libertarian, or so it would appear form the fact that they won the 2010 Prometheus award and their book has libertarian themes.  It is seems apparent that they are against the idea of incorporation, an idea that may have been inspired by a Milton Friedman quote they reproduce in the beginning of their book:

The counterpart for education (financing) would be to "buy" a share in an individual's earnings prospects; to advance him the funds necessary to finance his training on condition that he agree to pay the lender a specified fraction of his future earnings.  There seems to be no legal obstacle to private contracts of this kind, even though they are economically equivalent to the purchase of a share of an individual's earning capacity and thus to partial slavery.  
In the Kollin's book this form of slavery is ultimately viewed as a bad thing by the hero.  The concept is quite thrilling though.  I would predict that libertarians would be split on this issue, most coming down against incorporation, but a few of the really consistent ones coming down in favor of it.  I myself would be in favor of contracts such as the one described by Milton Friedman.

Incorporating voluntarily and mandatory incorporation at birth (the latter method used in the book) are on two different levels according to libertarian theory.  The latter would never be acceptable while the former would be hard to argue against (for non-libertarian readers, sorry, I'm sure there are plenty of other arguments out there against both... but read on to hear the utilitarianism of incorporation).  Even if the likes of Rothbard and Kinsella could argue against selling ones entire self into slavery, voluntary incorporation throws a wrench into their theorizing.

A company can gain capital in multiple ways, all of them relate to savings.  First, a sole-proprietor could invest his own cash into the company for any capital goods, buildings, etc. that he needs.  A partnership does the same thing except with multiple people and a revenue sharing agreement.   Both of these entities also have the ability to go into debt (as do consumers seeking non-productive ends).  However, a third method of gaining capital is to incorporate and allow many people to have equity streams coming in from the revenue the company earns.  During an initial public offering a company gains capital on initial sales (not in the secondary markets like a stock exchange.. as people mistakenly believe.. which adds to their belief that policies propping up stock prices help companies keep going.. which is not nearly as true as people think).  This is where things get interesting.

Individuals are unable to incorporate themselves (in real life today, they are forced to in this book).  They miss out on an opportunity that is exclusively delegated to corporations by the will of the state.  I submit that this is an injustice that should be remedied!

In "The Unincorporated Man" the government owns a 5% share of everyone and does not tax.  The government is somehow constitutionally bound to this 5% fraction of ownership (suspension of disbelief! a limited government!).  Immediate family is given a total of 20% percent ownership of a new baby on top of the 5% government takes.  The consequences of this incorporation turn out to be really positive.  The government has a monetary incentive to have people prosper (apparently they forgo pure power for revenue that they can never really directly control... being limited and all).  Parents have a major incentive to have their children build the skills necessary to be big earners as they grow older.

There is one major reason why incorporation would or could never happen for individuals today.  First, people view democracy as sacred.  In the Kollin's book politicians sent their shares to potential voters to give them a monetary incentive to vote for someone they had a stake in, an egregious violation of democratic principles by itself, but the sole fact that someone was incorporated means that they lose control over themselves.  An incorporated person, especially one with only a minority stake in him or herself, would have influence exerted on him or herself that would make democracy as we know it unworkable.  I am of the opinion that democracy IS unworkable anyways, but this would be an ostentatious violation of the feigned sanctity of the voter.

"The Unincorporated War" seems to be exploring this idea further.  I will save further comments on the subject for a review of the book but I will say that I don't think the idea of incorporation is a bad thing.  It is not antithetical to freedom.  The way it is being done in "The Unincorporated Man" is certainly antithetical to freedom but that is only because it is forced.  I think as I read more of this series the ideas of Eytan and Dani will become more clear to me.  I look forward to it.

This book review has no real plot details but I want to assure anyone interested in the book that there is a vibrant plot.. a good story to go along with the interesting ideas presented in the book.  I really enjoyed listening to it and would suggest to anyone who likes the ideas of liberty or sci-fi to check it out.  You can get the audio-book for free if you do not already have an audible subscription an Amazon (I'm sure the author's still get royalties for this).  So far the second book is a bit different but just as enjoyable (don't listen to the negative reviews, not sure what their deal is).

Good readings!


  1. I would say that ability to contract should be unlimited. But, contracts should always have exit clauses. Or, rather, you should always make sure your contract has a reasonable exit clause!

  2. Mike! Follow my blog with the "follow" button for google in the right hand panel of this blog.

    Things like this work itself out in common law. If people are fooled into believing a contract is something that it isn't and a "meeting of the minds" isn't established then enforcement agencies would likely not enforce these contracts.

    A few ostentatious abuses of certain ownership contracts would also scare most people away from ever signing them. However, the reward for signing one could be really high.

    Suppose your child has an expensive disease and you had no way of ever paying for it.. and charity was infeasible. If the only option was to sell yourself into slavery in exchange for a medical procedure that would help your child.

    The tricky part for libertarians is the selling of the will of someone. What, exactly, is alienable from a person? Is love alienable? By definition it isn't! Someone can never pay for true love. Someone can pay for sex.. or cuddling.. or everything that looks like true love on the surface.

    Can someone willfully give up their will? Can they freely give up their freedom? People do it 8 hours a day, why not 24? The ability to quit is the standard for some libertarians.. but I agree with Dr. Block's disagreement. Contracts can and should be enforced using force. If force is to be used at all in society it should be relegated to the mutually agreed upon contracts that people consciously and willingly sign (as opposed to the "tacit" consent that political myth supports.. and rapists support in the defense of their crime).

    Specific damages should be agreed upon in contracts but if they are not then only specific actions can be enforced. It may be costly to enforce them.. thus more beneficial to have cooperative safeguards such as insurance coverage for damages and agreed upon recompense for dereliction of duties, but this should be naturally developed and not made into a stoic law... that would impede unimaginable courses of development.

  3. Thanks for the well-thought out review. Our exploration of liberty in this series was ultimately about answering the question "What price freedom?". It's why book two is so different than book one (war is necessarily different - our model was the civil war) and why book 3 is manifestly different than 2 (what happens when nice speeches and stalwart beliefs STILL aren't enough?). Add to this unruly cocktail the re-emergence of religion (oddly enough faith is a very good partner of freedom) and we arrive at what we believe to be a reasonable answer.