Governments are people?

Miles Kimball argues that corporations are people.   I agree with (almost) everything he says, except his conclusions.   Let me hand the mic to him for a moment, emphasis mine:

…There are two potential meanings of this statement, and I want to agree with both:

  1. When the government taxes a corporation, the tax ultimately falls on some human being.
  2. When a corporation makes a decision, some set of human beings is behind that decision, and they are morally responsible for that decision.

Mitt wanted to emphasize the first point: that any tax on corporations is ultimately paid by some human being. That is a sound principle in the academic field of Public Finance. The big problem with corporate taxes is that, despite efforts on the part of many economists, economists don’t have that good a handle on exactly who ends up paying them…So if the intent is to make taxes depend on income, for example, it is a lot easier to get the intended effect on that score by taxing people directly rather than by taxing corporations…

…I want to focus more on the second meaning: when a corporation makes a decision, some set of human beings is behind that decision, and they are morally responsible for that decision…When approaching corporate decisions ethically, it minces words not to recognize the people behind the decisions, even when their exact identities are not clear

…Now, although corporations are people, typically a corporation is not a person, but instead many people. To the extent that corporate decisions reflect the outcome of a game  among many people (in economists’  technical sense of the word “game”), the actions of a corporation may not reflect any coherent objective function…its actions can be judged in relation to the intended objectives of the corporation. In that way, we can try to protect people from Frankenstein monsters of corporations that are doing things no one intends because of internal games being played

…I don’t know of any theorem suggesting that an invisible hand will work within a corporation to make good things happen that no one intended. And the wisdom of literature such as Scott Adams Dilbert or TV shows such as The Office suggest, to the contrary, that entropy often reigns—so that corporations often do less well than the intentions of the people in them

First and foremost, I think Miles  is missing a key meaning for the statement “corporations are people”, that is the reason the issue is in the news at all: if corporations are people, do corporations have any rights?   In Citizens United, the Supreme Court said yes.

This is not a question about taxes–the government can tax individuals who most definitely have rights–and its not an issue about morality–free speech as an example is not a moral imperative, it rather defines an individual’s relationship to the government.   I’ll get back to this, I’d like to say a few things first.

Me being agreeable

Like Miles, I’m not particularly interested in the tax argument either.   It is completely true that taxing corporations as something other than people is potentially problematic.   To the extent that standard theory has anything to say about this issue, the key takeaway is that we should tax all income equally and income always–eventually–flows to a human being.   If one source of income is taxed at a different rate than another,  that encourages agents to play games disguising one source of income as another–and these games are pure economic waste.

As one minor caveat to that, my understanding is that the corporate tax was instituted in the first place to close a tax loophole wherein personal income could be disguised as un-taxed corporate income.

So I’d like to focus a little more time on the second point.

At one point in my life, I would have agreed with Miles, here completely.   A long long time ago–in a Texas classroom not long after the Gingrich revolution–I found myself alone debating this exact position.   That was my first thought.

The only problem is I no long think it’s quite right.  Sure the people at a corporation have a moral responsibility for their actions, but do we conclude that, therefore, corporations are people?    I’ve highlighted select passages from Miles’ post above.   There is a theme.

By its nature as a conglomeration of individuals, a corporation–or any firm, government or organization–cannot truly be said to make decisions at all.   If two try to steer a car simultaneously, can one be blamed for crashing through a storefront window.   If a corporation were to bulldoze the wrong house because no one bothered to double check the address, IS there someone to blame, even in theory?   Can anyone be blamed for the inaction of everyone?

Satisfying Godwin’s Law

Miles has the right argument, but draws the wrong conclusion.   A corporation is not a person precisely because it cannot be held accountable for its own actions.   It is a ‘frankenstein’s monster’ of individuals, but also procedures, paperwork and lines of authority, stitching them all together.   An individual can have moral culpability, but only when that individual has made a decision.

If I were to ask you whether a German Jew were responsible for the Holocaust, you would rightly scoff.   Yet as an organization of people, the German government is the responsibility of all German voters.   Conversely, if this government were a person responsible for its own actions than would it still be right to blame Hitler?   No one would agree to that; we all feel viscerally that Hitler is the villain (along with more than a few of his henchmen and enablers).   You can’t blame individuals for the actions of organizations of which they are a part and you can’t absolve individuals for improper actions on behalf of their organizations.

In what sense does this make a corporation a person?

Me being less agreeable

I would characterize my argument above as a minor quibble: I’m endorsing his argument, while rejecting the label he seems to think it implies–it is not an argument, but a meta-argument.   Is it helpful to say that “Lehman Brothers” is a person, when it comes time to assign blame for its actions?  I would tend to say ‘no’, Miles seems to be saying ‘yes’.   Yet we would both agree that the management at Lehman is ultimately responsible.

Mitt Romney may have been discussing taxes; yet, none of this is what the public debate is really about.   We are talking about corporations as “people” because “corporate rights” have been thrust into the center of the public debate.   If a corporation is a person, does it have free speech rights, so that (if money is “speech”) it may spend unlimited sums of money to influence a democratic election.

This is the third possibility of what it may mean for the “corporations are people”-meme, which Miles completely ignores.   A person has “rights”–“rights” defining what a government can’t do to a person.   Therefore, as a  person the government cannot regulate activities of corporations which it cannot for individuals–which it turns out are many.

A few questions:

  1. If a person can vote, do we have universal suffrage while corporations can’t vote as well?
  2. If a person can be punished for wrong doing, should not we a corporation (or a government!) be sent to prison for wrongdoing?   If another Nazi massacre is discovered, should not “Germany” be punished for it?   Whatever previous punishments had been doled out for previous crimes, there is no statute of limitations for murder.
  3. If a government is a person–and why would a government not be a person, if a corporation is one–why would it not have the right to flood the public with propaganda?   Draft enemies lists?   Deny government services to those it deems unworthy?

The solution is clear.   These questions are nonsense, because an organization–though composed of individuals with rights–is an unthinking Frankenstein’s monster that has no rights.


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