Here’s a dumb argument that people sometimes make against workers’ co-ops. The incarnation I’ve picked comes from Econo-Creep Central, where Posner was lamenting the fact that Larry Summers, the overbearing jackass at the top of the educational red-tape hierarchy at Harvard, was hounded out of his position, largely by rowdy arts and sciences faculty with whom he was extremely unpopular. Here’s Posner, quoting some remarks from a year ago that he thinks are confirmed by the sorry end of Summers’ sorry tenure as University President:
To appreciate the sheer strangeness of the situation, imagine the reaction of the CEO of a business firm, and his board of directors, if after the CEO criticized one of the firm’s executives for absenteeism, ascribed the underrepresentation of women in the firm’s executive ranks to preferences rather than discrimination, dealt in peremptory fashion with the firm’s employees, and refused to share decision-making powers with them, was threatened with a vote of no confidence by the employees. He and his board would tell them to go jump in the lake. But of course there would be no danger that the employees would stage a vote of no confidence, because every employee would take for granted that a CEO can be brusque, can chew out underperforming employees, can delegate as much or as little authority to his subordinates as he deems good for the firm, and can deny accusations of discrimination.
If, however, for employees we substitute shareholders, the situation changes drastically. The shareholders are the owners, the principals; the CEO is their agent. He is deferential to them. Evidently the members of the Harvard faculty consider themselves the owners of the institution.
They should not be the owners. The economic literature on worker cooperatives identifies decisive objections to that form of organization that are fully applicable to university governance. The workers have a shorter horizon than the institution. Their interest is in getting as much from the institution as they can before they retire; what happens afterwards has no direct effect on them unless their pensions are dependent on the institution’s continued prosperity. That consideration aside (it has no application to most professors’ pensions), their incentive is to play a short-run game, to the disadvantage of the institution—and for the further reason that while the faculty as a group might be able to destroy the institution and if so hurt themselves, an individual professor who slacks off or otherwise acts against the best interests of the institution is unlikely to have much effect on the institution.
Of course it’s true that in most workplaces, top executives are very often insufferable know-it-alls who treat workers rudely and don’t bother themselves with what the folks doing the work have to say about the workplace or the company. But being common is hardly the same as being right, so if you want to give some kind of argument against employee self-management, at a University or elsewhere, you’re going to need to provide some substantive argument. Posner tries to offer his substantive argument a couple paragraphs down, in his discussion of the incentives faced by workers in
institutions; the problem is the argument, such as it is, relies on a jaw-droppingly crude economic fallacy.
Posner’s right that when it comes to operations like Harvard, workers generally have
a shorter horizon of interest than the
institution that they work for. There’s nothing wrong with pointing out the temptations that this creates. There is something wrong with passing this off as a problem that’s unique to workers (industrial, professional, or otherwise), or claiming that this kind of organizational problem is somehow solved by ditching co-operative models in favor of an organizational hierarchy.
When institutions are hundreds of years old and designed to last into the indefinite future, everyone has
horizons shorter than those of hte
institution. This is not just true of workers; it’s true of shareholders, trustees, clients, executives, and all other mortal human beings. Posner, like many theorists trying to stick up for modern corporate org charts, blithely assumes that a hierarchial model somehow removes the ordinary limitations of fallen humanity and creates some kind of mystical union whereby the CEO acts as The Institution itself. But since the
institution makes no decisions and takes no actions independently of the decisions and actions of mortal human beings, organized in some concrete way or another, you can’t just lazily compare the horizons and incentives of the workers to the horizons and incentives of the institution and claim that this proves that workers shouldn’t be owners. You need to compare the horizons and incentives of shareholding workers with the horizons and incentives of shareholders not working for the institution (let’s call them
absentee shareholders from here on out). Absentee shareholders are limited, self-interested, mortal human beings no less than workers are, and if Posner seriously wants to make the case for treating faculty as underlings and not as part of the governance of the University, he needs to make honest comparisons between the two, not a phoney comparison between workers and the disembodied Institution.
So, if you’re concerned with the long-term flourishing of the institution — actually, how important that is is open to some serious questions, but that’s for another day — you need to ask a different set of questions, questions which Posner’s fallacy simply closes off without consideration. For example, (1) whether absentee shareholders have longer
horizons than shareholding workers, or vice versa; (2) whether absentee shareholders are less likely than shareholding workers to milk the institution for personal gain within the
horizon of their own relationship to the institution at the expense of the long-term flourishing of the institution, or vice versa; (3) whether absentee shareholders are more willing or better able than shareholding workers to discover the best means of serving the interests of the institution within their short-term horizons, or vice versa; and (4) whether absentee shareholders are more willing and/or better able than shareholding workers to discover the best means of serving the interests of the institution beyond the short-term horizons of their personal relationship to the University.
These questions are all important, and I think not obviously to be answered in favor of control by absentee shareholders, at least not in every imaginable case. (Since the structure and goals of the University make it an atypical case compared to factories, restaurant chains, shipping companies, and other for-profit enterprises, it seems like special caution is needed in the particular case at hand. For more on the role that bossless worker co-operatives actually played in the birth of the European University, see Roderick Long’s A University Built by the Invisible Hand.)
But all of these questions remain unasked as long as we pretend that the mystical body of The Institution will somehow be making decisions once mortal workers are no longer playing a substantive role in decision-making. Posner needs a much stronger case before he can justify such a radical set of policy proposals as the
accountable to none save the Board platform for University CEOs that he outlines in his post. And folks who want to defend corporate-capitalist modes of production against worker-driven alternatives need to give a much more serious and detailed argument in defense of their position.