“Evidently the members of the Harvard faculty consider themselves the owners of the institution.”
So what? If I considered myself the owner and fired the CEO would he step down? It’s not like their own illusions can empower the faculty.
]]>You’re right, to focus on the “short time horizons” of the people actually engaged in the mission of the university, while assuming that empty suits like trustees and the president have some mystical grasp of the “big picture,” has something of an Alice in Wonderland quality to it.
Barry Stein (Size, Efficiency, and Community Enterprise) has some excellent commentary on the unique competence of those actually engaged in the production process. Most innovation, he writes, is the cumulative effect of lots of incremental process improvements. And the people most qualified to identify opportunities for such improvements are, obviously, those involved in the process. In the hierarchical corporation, those most aware of what would improve efficiency have the least power to do anything about it. And, frankly, they also have very little incentive, since any productivity increases resulting from their improvements will surely be followed by layoffs, soaring stock prices, and senior management awarding itself a huge bonus for “cutting costs.” What worker in his right mind would do something to help his worst enemy?
]]>Thanks for the kind words.
You’re right of course; the other problem with Posner’s argument, such as it is, is that he’s not actually comparing the horizons
of shareholding workers to anything at all; he’s looking at what he knows about the horizons
of non-shareholding workers and extrapolating from that to a conclusion about how shareholding workers would act. But that only makes sense if having a direct share of governance over your workplace doesn’t change your horizons,
interests, etc., which seems ludicrous and in any case hasn’t been argued for.
Roderick:
Sure, there will no doubt be cases where such separation works better, and market competition will help identify such cases, but traditional management structures need to face more competition from the bottom-up alternative.
Right, and furthermore it’s perfectly possible for you to have separation of management from labor, in whatever cases it might be useful, without having separation of ownership from labor. It might occasionally be useful for the workers of a co-op to hire a third party to come in and handle some particular task that calls for critical distance or special expertise. The difference is whether the person entrusted with these tasks is ultimately accountable to the workers, or to some absentee third party (e.g. absentee shareholders or a Board of Trustees).
Even in cases where it really is best to hire outside help to do some of the sorts of things that executives or other red tape dispensers do, there’s no guarantee that the best people to decide who to hire, or what kind of latitude to give her, or when to override her judgment in a particular instance, or when to replace her, are going to be absentee shareholders rather than workers. The same knowledge and incentive problems that speak in favor of worker self-management also speak in favor of giving workers ultimate control over whatever supervisory positions may be helpful. I think, actually, that this is especially clear in the specific case of a University, where the absentee shareholders
— members of the Board of Trustees — have no personal interest in the outcome beyond (1) whatever vague sense of philanthropic duty they may have, and (2) whatever rewards they can take by using their power to establish private fiefdoms (as with Bobby Lowder). Professors have both knowledge of, and direct self-interest in, the situation on the ground; that gives them at least two advantages over conventional Board members, who typically have neither.
I suspect the European serf and the Southern slave also had “short time horizons.” Imagine that.
But when workers do have a reason to be interested in improving the work process, they usually have a far better idea of what needs to be done than management does. Posner should read Hayek on distributed idiosyncratic knowledge.
Posner’s piece is an example of how not to argue, period.
]]>On the issue of universities: I often hear people say: “A university run by teachers and students? Don’t you know what crazy ideas they have?”
Well, I’ve been associated in one way or another — as student, as faculty, or otherwise — with about eight different universities. And yes, academics often do have crazy ideas. And sometimes the administration is the voice of sanity. Nevertheless, in my experience the administration is crazier than students or faculty about 80% of the time — because they’re more distant from the process, have less of a clue what’s going on, and don’t have to live with the results of the bizarre rules they want to impose.
(It’s for similar reasons that I’m also friendlier to worker management of industry than many libertarians are: the separation between labour and management creates knowledge problems and incentive problems. Sure, there will no doubt be cases where such separation works better, and market competition will help identify such cases, but traditional management structures need to face more competition from the bottom-up alternative.)
]]>“The shareholders are the owners, the principals; the CEO is their agent. He is deferential to them [but mean to the employees],” is the conventional way of looking at a firm. However, if we consider that the corporation needs an input of labour to get anything done, it seems more reasonable to me to say that the workers are themselves also “the owners, the principals”: they own their own labour, without which the company is dead.
Every single time these Econo-Creep types describe the market economy in terms of who is deferential to whom or who has the privilege of abusing whom, they move us further away from freedom by contributing to its bad name.
]]>To educate people, the vast majority of whom are Undergraduate Students, and
To conduct research, publish and generally contribute to the body of knowledge that we, collectively, have access to.
So the two main interests that SHOULD be in control, in order for the University to operate efficiently are those of the students, and those of the researchers. Of course, society at large gennerally benifits from a more educated populace, so the education also benefits the general good, which is why we do things such as take money out of the pockets of wealthy people who propably didn’t earn it and use it to educate poor people. I’d like to see the process done by some institution other than the State, but the idea itself is, in my opinion, fairly acceptable.
A good way of organising an educational institution would involve representing the interests of students (and would-be students who can’t afford education), Educators and Researchers, and Society at large, and creating a means for these interests to make a compromise in allocating resources in education.
What exactly Deans and Presidents do for Universities, I don’t know. They don’t teach anyone, and they don’t gennerally research, so as far as I can tell, they’re useless, outside of the role of “organising things”, which tends to primarily mean imposing budgets, making financial decisions, and deciding growth.
It’s a fairly well-established tendency that people involved directly in economic activity are better at making it efficient than people not directly involved – this is why capitalists say central planning doesn’t work. Similarily, a managerial class that has no direct relationship with work that is done is propably more of a drain on efficiency than a cause of it.
As far as I can tell, the argument for the all-powerful CEO is no different than the State Socialist argument, the idea that one person (or one small, seperate class) who is given the title of “expert” can organise other people’s economic lives better than they themselves can.
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