Unincorporated Man

The science fiction novel, The Unincorporated Man, is widely praised for its thought-provoking premise.  Yet I find no evidence that it provoked thought about its premise.

The premise is folks selling shares in their future income.  Initial ownership is: person 75%, parents 20%, government 5% (there are no other taxes).  People typically sell 12-15% to their university, more for other early training and resources, and they trade shares with relatives, spouses, and coworkers.  They then own less than 50%, must accept majority control over their careers and locations, and try over time to rebuy enough to regain control.

Among the 70+ reviews/comments on the book I’ve read, a few take a position on this idea (all against), but none engage the idea, i.e., offering arguments for or against it based on details of the book.  The most detailed argument I found was:

A horrendously bad idea that will only fuel the worst aspects of human nature: greed, ruthlessness, selfishness, and more of such unpleasantness.

The book’s characters at least give arguments.  For: gains from voluntary trade, and the system’s wide acceptance among vast peace and prosperity.  Against:  Horrors, its “slavery”!   (Spoilers below the fold.)

The plot is propelled by a mean greedy executive at a big bad corporation playing unfair to try to get our blast-from-the-past hero to incorporate, so that others won’t get ideas.  His heavy hand inspires sympathy and the book ends as a rebellion begins, expected to kill billions of the forty billion then alive, in the hope of stopping a future of trillions “programmed from birth to accept a certain range of menial jobs for 5 percent of their labor.”  (The sequel, Unincorporated War, arrives in May.)

Now it is quite unfair to portray big corporations as the bad guys here.  The obvious villains, if any, are parents; people own so little of themselves because parents take 20% off the top, and then make kids pay for school and expenses that our parents give us for free.  Yet in the book’s 500 pages no one ever resents parents; it is all those conniving corporations, who don’t even have a direct stake in folks’ self-ownership.

Also, the book never even considers the possibility of non-voting stock, or loans.  Sure non-voting stock might sell for a bit less, but if self-control is so precious, why not pay a bit to keep it?  Or why don’t parents sign over their proxy votes to their kids?  Instead of killing billions to fight corporations, why not just free your kids?

In the book’s back story, two thirds of the world died in a Great Collapse, when within a few months virtual reality gear went from decent to fantastic and most everyone who could stopped working to plug in.  Soon they realized their problem, but most chose a few more weeks of virtual fun then death over rebuilding their lives.  Not very believable, but perhaps worth pondering.

My position: in general it is a reasonable system, though improvable via non-voting stock.  I might wish parents felt more generous toward their kids, but that’s hardly the fault of the property system.

So why do so many folks praise a “thought-provoking” book that seems to provoke no thought?  Do they like the idea of a book that signals they are thinking, more than actually thinking?

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  • http://herebetigers.wordpress.com PeterW

    One of the changes that occur over time is people’s evolving perceptions of evolving institutions. For example, “The Church” means something very different today as it did in the 19th century, and something even more different than it did in the 13th. It is disappointing that this book does nothing more than amplify our emotional reactions towards today’s institutions. Rather than apply the same set of adjectives towards parents and corporations that we intuit today (“caring,” “greedy”), it would have done better to explore the changing roles of such institutions as society changes.

    As it stands the novel is little more than bashing via exaggeration.

  • http://www.churchofrationality.blogspot.com LemmusLemmus

    Perhaps “thought-provoking” = confirms my general outlook on life in a novel way?

    • david

      Hanson asserts that it isn’t thought-provoking because fellow readers have failed to reach his own enlightened outlook on life, so probably, yeah.

      Many books can be thought-provoking without having lead to the One True Hanson Way, really. When you read Brave New World or 1984, you aren’t really supposed to start cheering for the dystopia. Nonetheless these are often regarded as thought-provoking, if only because most people are not libertarian professors in economics who have thought of all this stuff before. And, likewise, a book can be thought-provoking even if the thought it aims to provoke is “this idea, which you the reader may be encountering for the first time, truly sucks. Don’t do it”.

      • http://entitledtoanopinion.wordpress.com TGGP

        Hanson writes “none engage the idea, i.e., offering arguments for or against it”. The Amazon review he finds most satisfying is called “the most detailed”, his complaints is that it is not all that detailed and the others aren’t as well. You have completely misread the post, or you are addressing what you see as the esoteric motivation behind Hanson’s post which was not made explicit. If you are going to accuse someone of being disingenuous, be straight-forward about it.

        The blogger “LorenzofromOz” has argued against the libertarian defense of voluntary servitude contracts. I haven’t thrown in my two-cents yet, but others here might interested in the discussion.

        I actually thought “Brave New World” sounded like a pretty good scenario.

      • http://williambswift.blogspot.com/ billswift

        I don’t remember the source, it was from years ago, but I read that “Brave New World” was originally intended to be a utopia, not a dystopia.

      • http://contemplationist.wordpress.com Contemplationist

        Brave New World is not a bad utopia if ever-increasing statist control is inevitable. It beats 1984 anyday.
        But I’d rather we reverse the tide of ever-increasing statist control.

      • http://infiniteinjury.org Peter Gerdes

        The reason Brave New World is a dystopia is at the time Huxley only had some pretty poor drugs, basically alcohol, varieties of depressants/hypnotics, and opiates. Apparently he didn’t like opiates that much but that response varies from person to person..or he didn’t try and assumed.

        However, after he god some psychedelics (certainly not *my* favorite) he wrote Island about the drug using utopia. Unsurprising only Brave New World is taught in any school I’ve ever heard about.

      • oldoddjobs

        Sheesh, someone got out of the wrong side of bed

  • Philo

    Only 5% to the government–what a deal (compared with what we have now)!

    As for the parents’ 20%: what are the parents’ responsibilities toward the child? If they are extensive, 20% might be OK. If they are skimpy, or even non-existent, 20% seems excessive.

    • Jess Riedel

      Exactly. Under our current system, parents own 0% of their children’s future income but are required to contribute substantially to raising their children; that’s the responsibility you accept when you have kids. To take an additional 20% (especially if it was involuntary for the kids because, say, they were being extra-invested in while very young), those parents better be contributing something pretty great.

      • http://www.jrganymede.com Adam Greenwood

        Why? What about our present 0% level of compensation is so obviously just and efficient that an increased share requires an extra contribution of something pretty great.

    • Mycroft65536

      The 20% seems like a replacement for social security and medicare, likely all retirement benefits. This would create significant pressure towards larger families, 8 kids making 20k a year as high school dropouts is a better deal for the parents than one kid making 120,000 as a consultant. And if one of the eight gets lucky and is a pro athlete, all the better.

    • stanfo

      I haven’t read the book yet, but….

      Do the parent’s shares turn into grandparent’s shares? For example if my parents hold 20% share in me and I own 20% share in my kids, do my parents own 4% in my grandkids? Similarly for the government, and any sale of shares?

    • http://hanson.gmu.edu Robin Hanson

      stanfo, no, you don’t own 20% of everything they own, only of their future labor income.

      • baconbacon

        In this case the end game is pretty simple. In a world where I am taxed 20% of my labor but receive 20% of my childrens’ labor tax free then having many children and selling my share of their production and laboring less (or not at all) has some pretty heavy incentives to it.

        Of course so does killing my parents if that 20% is non transferable.

    • Anonymous

      To make the system fair, at the very least parents should give the children terms they can walk out of- almost none actually will, but a child should have the option of say, deciding at 10 years not to accept the arrangement any longer and have to pay a lesser percentage of income.

  • Michael Kirkland

    Sure non-voting stock might sell for a bit less, but if self-control is so precious, why don’t folks pay a bit to keep it?

    Presumably, because it’s not on offer. Negotiations really only work when both parties have the option of walking away.

    • Peter Twieg

      Why wouldn’t it be on offer? Would there be a large endowment effect in owning equity in the labor of others?

      • Michael Kirkland

        Why would it be? Would you invest in a corporation that lacked a fiduciary duty?

      • What?

        The ones with the majority of their own shares already “lack a fiduciary duty.”

    • http://robertwiblin.wordpress.com Robert Wiblin

      If human equity is a major asset class there would presumably be a competitive market for it.

      • Michael Kirkland

        Sure, and I’d imagine it would work much like our current mortgage system; rather all right for the rich, mostly ok but occasionally disastrous for the upper middle class, tenuous for the lower middle class and downright exclusionary for the poor.

  • http://www.bandwagonsmasher.com John

    Haven’t read the book, but had this idea myself awhile back. I always thought that the system would not violate the 13th Amendment as long as you retained more than 50% of your “voting shares”. My idea was that you would “go public” at the age of 17 and the government, corporations, and investors could purchase shares in your future income, with the money going directly to you to fund schooling, etc.

    The idea about non-voting shares makes sense — shares could be like Berskshire A and B class . You would think that there would be a lot of financial innovation and flexibility if such a system were institutionalized.

    • Peter Twieg

      I think every once in a while stories pop up about entrepreneurial teenagers trying to sell equity in their future earnings in order to pay for college. It’s worth seriously questioning why this is considered more objectionable than accumulating debt.

    • adam

      Just wanted to mention that Berkshire’s A and B shares are exactly the same with the exception that B shares are 1/30th (pre any recent splits) of an A share (and you can only convert A shares into B shares (never the other direction).

      News Corp is the only major public firm I know of that has tradable voting and non-voting common shares, while most media companies (Google, Viacom, Comcast) have supervoting shares that allow founders to retain voting control (or heavy influence). Normally these shares convert to the low vote shares if sold but notably not in the case of Viacom where both trade on the open market (the many vote shares are vastly less liquid however).

      There’s no reason some super voting shares couldn’t be held by the individual, allowing them to retain majority control.

      • Mike

        Berk A and Berk B are not so simply related.

        Before the 2010 split, each B had 1/30 the economic interest of a B, but 1/200 the voting power.

        The 2010 split was 50:1 on B’s, so now
        Econimic interest of B = A/1500
        Voting power of B = A/10000

  • Edward

    Not voluntary trade if control is owners’ not individual’s. Also, truly voluntary trade means slavery is feasible if owner won’t sell.

    • Peter Twieg

      “Not voluntary trade if control is owners’ not individual’s.”

      I don’t think that the slavery would be so complete here that an individual couldn’t even make an offer to buy back his equity without the approval of his owners. Even if it were, why would the owners preclude this possibility?

      • Edward

        I haven’t seen anything to suggest so far that any owner is obliged to sell part of their ownership of a person. The usual tenor of this blog is to regard caveats as evil, though.

        Perhaps the owners value control of a certain individual more than the market does. Indeed, economic theory would suggest that this will be the case in a market with lots of buyers and sellers.

      • Peter Twieg

        No one in a market system is “obliged to sell”, but we still expect that the market process will gradually match goods with those who have the highest willingness to pay for them.

        So then it’s simply a matter of asking why individuals wouldn’t have a high willingness to pay for their own autonomy, and if they don’t whether this indicates that they’re better off by being able to expend their efforts towards alternate ends.

      • Michael Kirkland

        Peter, individuals would not necessarily have the highest willingness (or, more importantly, ability) to pay for their autonomy.

        Consider a freelance reporter doing an expose on a certain industry or company. It may be worth more than the market value of a journalist to the target to buy up a controlling interest and direct them to another career. They wouldn’t need to do that to every journalist, just enough to signal the threat.

        Ditto anyone else doing something that someone with enough money doesn’t like.

      • http://hanson.gmu.edu Robin Hanson

        Michael, so reporters would hear the “threat” that if they investigated this company it would raise the price of their shares?

      • Michael Kirkland

        Robin: Would it, though? I suppose those who sold the 51% to the company might do a bit better than market value, but once it has that there’s no need to buy more. After that, the company is likely to vote against the best interests of the other shareholders. Say, have our reporter take up a career digging ditches, which would have a rather negative effect

        Is a rising stock price even a good thing for our sub-majority reporter? It just makes it all the harder to buy his emancipation. And a low price wouldn’t help them if the majority owner won’t sell.

      • Michael Sullivan

        They still own equity in that person’s income stream, why would they direct such a person to a low income job particularly? All they care about is that they no longer are hurting the value of their main business/assets. Of the many alternate career/job choices that do not do that, they would still have a financial incentive to choose the highest earning (or let her choose among various of the highest earning).

      • Michael Kirkland

        Michael Sullivan:

        Because the implied threat to other reporters could be worth more than the difference in return between ditch digger and, say, copywriter.

  • bootstrapper

    Robin is right. I see little evidence that this has caused the commenters to any serious thinking. I think Robin means, and I KNOW I mean, that people are just reacting to a caricature without giving it any deep thought. For example, what about it specifically is bad? Could it merely be the price? I’d be willing to exchange a 10% share of my lifetime income for a billion dollars up front without a second thought. I’d have all the money I would ever need, meaning I would never have to do any work for money that I didn’t want to do. That would make me freer than I am today. Or is it also a question of voting rights? I wouldn’t even consider selling 51% for 51 billion if there were voting rights. Unless, that is, my mother were one of the buyers of the 51%, creating a voting block with me that I could trust (Mom has her leverage even today) and returning full control to me by inheritance on her death.

    We have credit cards today that demand a share of your future income, but the share is specified differently (absolute dollars that grow over time instead of perpetual fixed percentage of income). Is that an important difference? Once again, what if the price were made more attractive and voting rights were never included?

    You don’t have to be in favor of this idea (I’m not) to put some thought into your analysis of its flaws, but I don’t see any evidence from the comments that much thought has been provoked, just knee-jerk reactions, sort of like the comments about Robin equating thought with agreement.

    • Michael Kirkland

      There are safeguards to credit card debt. At worst, you declare bankruptcy.

  • http://clarissethorn.wordpress.com Clarisse Thorn

    In my experience, the books labeled “thought-provoking” do tend to be kind of … shallow … or at the very least, not thorough. But I’ve often thought that the general public is less accustomed to quickly riffling through extrapolations the way regular science fiction and fantasy readers are. I don’t mean to sound arrogant or superior. I think it’s just a question of what you’re used to. If most books you read don’t present tough questions — or even any questions at all — or even make you “work” for the reading experience at all — then you’ll be more startled by one that does a little bit of that, and so ill-prepared for those that do a lot of it.

  • http://hanson.gmu.edu Robin Hanson

    All, the Australian government acquires shares in student future income in trade for tuition assistance.

    Philo, without parental assistance, the kids would not even exist. In a literal sense they are therefore providing enormous value. We might wish they were generous enough to give most of that away instead of charging for it, but on what basis can we really insist they be as generous as we wish?

    Michael, people could offer non-voting stock, and surely many would accept for a slightly lower price.

    Edward, it is clear in the book that stock owners don’t control your cash or other assets.

    Clarisse, most of the 70+ commentors I complained about are science fiction readers.

    • Edward

      That’s great but is it clear in the book that stock owners don’t control their continued ownership of stock in me?

    • Michael Kirkland

      Robin, what do you base that on? I’d suspect quite the opposite – investors would be likely to insist that your shares be non voting. You’re more likely to make choices taking into account your personal happiness than your return on investment.

    • ShardPhoenix

      The Australian system (which I am a part of – 5% of my income goes towards paying off my student loans) is more a system of mandatory debt repayments – once you’ve paid off your tuition there’s no further obligation, and there’s no “voting rights” as in the book.

      Also, from an evolutionary point of view, kids are a valuable asset to the parents, not some altruistic thing.

    • http://hanson.gmu.edu Robin Hanson

      Edward, anyone is free not to sell shares.
      Michael, it is all a matter of price.
      Shard, thanks for clarification.

      • Michael Kirkland

        My disagreement was the “slightly” part. I think non-voting stocks in such a system would be worth significantly less. Not necessarily much above zero.

        If we used such a system for something critical (like student loans) you couldn’t reasonably claim people were free not to sell shares.

      • http://williambswift.blogspot.com/ billswift

        Actually, Michael, as long as you maintain, or with close associates maintain, 51% of voting shares, there should be very little premium for voting over non-voting shares.

    • Philo

      Well, I’m not impressed by the father’s role in bringing the kid into existence. The mother has to carry the fetus for nine months, enduring pain and risk, especially in childbirth–that does seem to justify some claim on the future stream of income. But further parental claims should be contingent on further parental support; if the parents do nothing for the child after birth, the mother’s claim should be rather slight and the father’s nugatory.

      A general question: If someone saves my life, does he thereby become entitled to a share on my future income (or perhaps of my present wealth)?

    • http://www.jrganymede.com Adam Greenwood

      Its not clear how ‘voting’ stock would be enforced anyway. Most contracts aren’t enforceable with criminal penalties. So unless that gets changed, what are your ‘stockholders’ going to do if you ignore their directives? Sue for a share of your income, which means that what they have is essentially non-voting stock anyway?

      Anyway, under corporate law the right that shareholders have is little more than the right to vote for a board of directors, and since the director of your corpus is you by ineradicable right of birth . . .

      You could create non-voting shares in a person without a lot of difficulty, but creating voting shares would require a whole constellation of legal changes, to the point that you might as well just call it something else.

    • On the basis

      that being born into slavery is bad.

  • Matt C

    This sounds like fun, too bad I’ve not read the book yet.

    If my indentureship to the govt started at a 5% baseline, I’d be capering with joy.

    Mycroft’s point about large families is a good one.

    15% to university? Sounds outrageous to me. Of course, 10s of thousands of dollars per year now also sounds outrageous. (I’m not sure what our family will do here in the real world. I’m hoping for a higher ed revolution in the next 10 years, but it’s not moving fast enough for me to be confident about it.)

    I’m not sure why scattering, say, 60% of my ownership among five different parties would result in me giving up control of my career. Why are they (including my parents!) necessarily going to be unified against me?

    Does anyone in the book run a game where they sell off a big chunk of interest in themselves, sandbag for a few years, and then buy it back at a much lower price? It sounds like this system would need a great deal more monitoring of the individual and ability to predict his behavior than we have now.

    I wonder how the people who are outraged by this book feel about the health care reform that just passed–legally indenturing everyone in the U.S. to the health insurance industry.

    You might get a more interesting discussion at someplace like rec.arts.sf.written as compared to Amazon reviews.

    • http://www.theunincorporatedman.com dkollin

      Mycroft’s point about family would actually be inaccurate. Three children raised well will, I posit, be far more productive and therefore lucrative than say 15 children raised poorly (as the evidence suggests today).

      Re: scattering 60% of yourself – consider that those parties will in all likelihood be mutual funds and that a board running those funds could in theory compel you to work somewhere else if say, you were offered a job with a far larger salary (perhaps in a place you might not want to live). Still, it’s in everyone’s best interest to keep you happy (in order to keep you being that fantastically talented you that’s earning your investors money) so they couldn’t or wouldn’t “force” you to work where you’d be miserable but they’d probably set you up with a nice house, move your best friends with you and generally go out of their way to “compel” you to accept. It’s not a bad investment either because remember this novel takes place in a future in which humans have indefinite lifespans (with the magic wand of nano-medicine and advanced stem cell technology at hand). Not so bad…or is it?
      Re: running games – yes, they do, but they’re punished for it (fines, jail or worse case scenario – something called a psyche audit).
      Re: People being outraged – It is rather odd but one of the early reviews of the book (by Don D’ammassa of Critical Mass) speculated that the idea would cause a fair amount of controversy. Looks like he nailed it.
      Re: Health Care Reform – That is the point/message of the book – to be a clarion call to the notion that with every bit of freedom we give up for a promise of some sort of security we run the risk of slipping deeper into what the novel calls a “Dictatorship of the Content” (Anybody remember the famous Far Side cartoon where the cow looks up from the field and says, “Wait a minute, this is grass we’re eating!”). It was why the book attempted to create a Utopia where both the technology and the economic model had produced as a near a perfect and secure system as could be imagined (SF wise that is) in order to ask the question: Is it worth it? Or more specifically, what price freedom?

      • http://entitledtoanopinion.wordpress.com TGGP

        Judith Harris in “The Nurture Assumption” suggests that how you raise kids doesn’t matter that much. I think large Mormon/Catholic families tend to do alright in the U.S, though large families in the third world tend to be quite poor. A multiple of five sounds like a strong hurdle to overcome, plus there’s the inherent benefit of diversification/law of large numbers.

      • http://www.jrganymede.com Adam Greenwood

        Re the Nurture Assumption:

        Something like this would be a way of testing that hypothesis. Anyone who thinks they have some highly effective nurture techniques would have an incentive to buy up lots of kids contracts. You’d have to have a long investment horizon though.

  • Steven Schreiber

    There’s already a natural experiment in this, small business owners (who generally have their identity and choice scheme concept bound up in their business), and it seems to indicate that people would probably take on debt or enter into structured arrangements with a partner involving equity swaps.

    That would probably be 70% of all personal equity decisions. The other 30% would probably be when people fall into bankruptcy and have a debt-to-equity conversion enforced on them or because all debts are now repos.

  • Robert Koslover

    Robin, are you presently offering for sale shares in yourself? What’s the going price? 🙂 Oh, and if I owned some of you, how would your life insurance figure in?

  • Edward

    How many people are actually thinking about the proposal on this comment thread? How many people are signalling self-identification with Robin? How many people are signalling self-identification with so-called “libertarian” political opinions?

    • kentucky

      Does that make you a “so-called” “liberal”?

      Are you fond of so-called “scare quotes”?

      😀

    • oldoddjobs

      So-called “libertarian” !!

      Ok, let’s call them what they really are. Something insulting and nasty, no doubt.

  • Raphfrk

    Does the person have a fiduciary duty to maximise income, or does the person count as the single employee of the company, rather than the equivalent of a board member?

    Also, if the person’s cash/assets are not corporate assets, what happens if the person invests them, presumably, any profit counts as corporate income?

    The labour the person expends on investing the stock would belong to the company, but the underlying assets belong to the person.

    Would he need to negotiate with the company to get the right to spend time thinking about how to invest his assets.

  • http://modeledbehavior.com Karl Smith

    I think Robin is grossly over-estimating the baseline level of “thought”

    That the reviewers took the time to understand even a rough sketch of the characters arguments likely counts for an extraordinary amount of thought.

  • http://hanson.gmu.edu Robin Hanson

    Matt, many games are played in the book.
    Raphfrk, personal investments are not corporate income.
    Karl, is it really so much to ask that readers excited by a book on a radical proposal decide if they like the proposal and why?

  • http://danieltarmac.blogspot.com/ Nichlemn

    Seems like this would have large asymmetric information and moral hazard problems, but I guess that doesn’t stop insurance or other forms of shares.

    I would like to see this for a similar reason that I want to see widespread prediction markets – because I get to see what the market expectation is. We could, to a limited extent, quantify the role of luck in life. How much do you think you could buy shares in Bill Gates for on his 18th birthday? How many people would have high expected lifetime incomes at that age? Top athletes and teen stars for sure, but could you identify anyone else?

  • kentucky

    I love the idea. While I would be extremely hesitant to sell even a few of my shares, I think it makes much more sense than the current system. For one thing, you have greater certainty about your government tax obligations (and a flat tax, too!). Also, it gives parents a big incentive to raise productive children, instead of welfare cases.

    Would investors have limited liability for debts accrued by the person?

    • Erisiantaoist

      I think the question on debts exposes a hole in this strategy–hopefully, an insolvent person could not be liquidated and dissolved, which sounds rather gruesome. In the absence of the ability to liquidate, a person with high earning potential could sell himself short, start coming in to work drunk every day until his price dropped low enough to buy himself out, then stop sandbagging and enjoy both a financial windfall and unencumbered future earnings.

  • http://robertwiblin.wordpress.com Robert Wiblin

    Anyone can say something is thought provoking – only smart people can actually have interesting thoughts about it and know whether it is or not. Someone saying that something is thought provoking without then giving a thought about it to me signals they are not smart. Am I the only one?

    Even in ancient Rome or Medieval England most slaves managed to buy their freedom, and they didn’t own any equity in themselves to start. What is stopping these guys from buying back up to 50%?

  • Daran

    Two separate issues: a throught-provoking premise and a well-written book. As the comments above show, the premise does provoke at least some discussions.
    (If parents take care of their children until those are 18, and this more or less matches 20% of life expectancy, is a 20% stake reasonable? Is there an arbitration board in case the parents do a sub-par job? If so, I see vast opportunities for no-cure-no-pay law firms. Imagine the wealth and influence of these firms; how much effort they would spend on lobbying for draconian laws supporting the system.)

    However, if the premise is the central theme of the book, as a reader I expect the author to provide some solid arguments in favor of the premise, and to make logical extrapolations. Should the author fail in that regard, then the theme fails. Of course, the book can still be enjoyable for other reasons. As i haven’t read the book, I cannot comment on that (although I’m wondering how solid the premise is implemented in the book if it takes only one guy to overthrow the system).

  • Ian

    Informal payment rules are preferred by large-brained individuals for better exploitation.

  • Ryan Vann

    I assume I could buyback my stock if I expected an increase in future earnings, or would this be insider trading?

  • http://danieltarmac.blogspot.com/ Nichlemn

    “I assume I could buyback my stock if I expected an increase in future earnings, or would this be insider trading?”

    You could always declare your future intentions, although this is problematic in some cases. Suppose you were a songwriter who just wrote a really good song – it would be difficult to prove that you didn’t come up the song *after* you bought some shares back.

  • http://danieltarmac.blogspot.com/ Nichlemn

    “For one thing, you have greater certainty about your government tax obligations (and a flat tax, too!).”

    This makes me think – why does it need to be a flat tax? You could always sell proportions of your income over and above a certain amount to create a progressive tax.

  • http://hanson.gmu.edu Robin Hanson

    kentucky, it seemed investors did have limited liability.
    Robert, many reviewers did signal smarts; they just didn’t engage the premise.
    Daran, the author did give arguments on both sides.
    Ryan, insider trading wasn’t prohibited.

  • http://www.angryblog.org Brian Moore

    I think people’s objections to this are merely in the framing and the fact that the percentage based system is boundless.

    For example, regarding the gov’s 5%, people are very comfortable with the government being able to take much higher percentages of our future labor income. But obviously they object when it is framed as “they own 5% of YOU”. Is this illogical? I guess.

    Regarding the parental/educational percentage, people are okay with the idea of fixed costs for parents (you should help your parents when they get older!) and university — but this percentage thing seems to inspire opposition. Which is funny, because fixed costs are regressive — fixed college costs hurt people who make little money much more than they hurt people who make lots of money. The percentage stated in the book seems insanely high though — 15% of lifetime income for a college education?

    I am surprised though that the book did not make the parent situation the other way around. Given the way our society is currently constructed, it seems much more like children own a percentage of their parent’s income (plus many parents happily invest in retirement funds which implies they don’t expect their children to support them), rather than vice versa.

    All in all, the way you describe the book, the only difference between reality and this science fiction is that we owe people fixed amounts instead of percentages. Which seems like it is biased towards wealthier people.

  • http://www.angryblog.org Brian Moore

    Also, given the way that many fancy universities view alumni donations, perhaps the “college cost as a percent of your future income” is a pretty decent model of our current reality.

  • Dave

    Oi. The premise of the book makes no sense. Why would parents want to own stock in their children? The whole point of being a mammalian parent is giving extra resources to your children, not taking them away. And who would pay 15% of lifetime income for a university education when it can be had for about 5% of lifetime income now? Even if the stock were non-voting, giving up that much equity in your future income is just stupid.

    I suspect Amazon reviewers did not have thoughts that you find interesting because economics doesn’t fire the imagination of most people.

    • http://www.theunincorporatedman.com dkollin

      Parents don’t have a choice – they’re automatically given stock in their children. If the parents were smart they would ensure that their kids did their homework, ate well, hung out with the “right” people – whatever it took to insure that their kids grew up to be a healthy and productive members of society (it is after all, in the parent’s self interest). Ideally, as you state mammalian parents shouldn’t need incentives to be good parents but sadly that’s not always how it turns out. In the society the book sets up self interest is only one of the foundations of the “modern” family but it’s a powerful one.
      Re: Education (or anything of perceived value for that matter) – you’d give up more of your stocks (percentage of yourself) if you felt the school (or “thing”) you wanted to get into was worth it. And the unincorporated society is geared specifically to get you to give up more and more shares of yourself (especially when you’re young).

    • http://www.jrganymede.com Adam Greenwood

      Its’ widely believed that in agricultural societies, children give you back at least what you put into them.

      Also, many, many human mammals are willing to receive resources from their children when they are old. Yelling ‘Darwin! Darwin!’ won’t change that.

  • http://theunincorporatedman.com Eytan Kollin

    Thank you all for discussing this book in such a detailed and interesting manner. I have much to ponder because of your words and that is something I find invaluable.

    • http://hanson.gmu.edu Robin Hanson

      You are of course most welcome.

  • http://entmod.blogspot.com Doc Merlin

    Its labeled ‘thought provoking’ because it is anti-corporate in a new way.

  • JMoon

    Finally found an active discussion on this book. Props to you Hanson. I read this book a while ago and some details elude me, since my book is at home and not with me in college.

    I purchased and read the book ever since I saw it in the “New SF bookshelf” at a Barnes and Nobles and I think it sounds like a wonderful idea. I am a university student majoring in accounting and finance and I have to say that the concept of self incorporation does not seem to be outrageous at all. To me, with some new laws, revisions in tax codes, and changes in Generally Accepted Accounting Principles; this idea seems workable.

    From what I understand, all the percentages of shares the author says that parties like the government, parents, and universities have are arbitrary. From the start, we find the lead female support bitter about her grades and that she had to sell a higher percentage of her shares to the university than say a straight A student who could negotiate for less. From this we see that they don’t necessarily have to sell 15%. The percentage of shares that the student sells (I suppose it would be the present value of all expected future cash flows) should equal the price of the university education. A student who screwed up in high school would have to sell a lot more shares, because their expected future earnings would be much lower.
    So the actual percentages that various parties have are not important since they are arbitrary.

    Before I go on further with this concept, I noticed that the book never mentions someone taking on liability by taking on debt.. I don’t see why debt financing will ever not be an option.

    As for the social aspect of individual incorporation, this book shows us a possible future where capitalism is shown at its best (some would say worst). My favorite character happens to be the antagonist who supports the system. The system is based on self-interest. While you may be offended and that think there is more to humanity than self interest, self interest is still a major factor in every action we as individuals take.

    About the government, the book says that the government takes 5% from all individuals. The reason that it is so little is because that the government is a joke. There appear to be no wars before the protagonist came into the story, since that would be irrational and self destructive to everyone’s investments. That meant that the gov’t did not do defense. Almost all other government functions we think they should have today are privatized in the future. Instead of paying the government for police, fire department, and ambulances, I’d imagine you subscribe to their services or something. So unless people want everything to be privatized, the government would of course take much more than 5% of your future earnings. The percentage would be based on factors like population and how many services you want the government to provide.

    As for parents and family, the book says that they get 20% of their children’s earnings. I read that some of you think that its backwards and that its the parents responsibility to give their children free support, but not all parents are as good as you think they should be. This gives the parent’s incentive to raise their children into literally productive members of society. The book also says that many parents return their shares through their will. Also, remember that parents have no social security, and it gives them a return on their investment later in life. I suppose mutual funds and the like work too, but do you think the average person would prefer something they probably have less control over? The antagonistic (antihero?) says that there are imperfections with the system and some people do get fucked over, but the overall impact of the system is very positive. I think it is analogous to the whole democracy being bad, but better than all the alternatives quotation. The antagonist also mentions the needy children donation commercials the protagonist used to see on TV (like we do today since the protagonist is from near our time). He says that instead of a person donating just to feel good about how altruistic they are and the children probably dying anyway; if one were to buy a share of that child, we would genuinely have an interest to see that child grow and become something productive. Wouldn’t it be good to say that you really helped a child instead of prolonging their misery just to make yourself feel good? You can be both altruistic AND selfish!

    As for fiduciary duty, control and happiness. As some of you previously mentioned, individuals do have a fiduciary duty to maximize earnings to their shareholders. If other parties do have a majority, it is not in their best interest to make you unhappy by telling you what to do. dkollin is right when he said that unhappiness causes loss in productivity and they can only try to convince an individual to move (or not if the thing they want the individual to do is worth more than the potential loss due to loss in productivity).

    As for how this system can fit into our existing social structure, the book mentions a lot of things. Some are: parents owning shares in their children, spouses trading stock as a sign of love and mutual commitment, government owning a certain percentage, universities owning a certain percentage, siblings owning a share in each other so they don’t fight with each other if they dislike each other, and so on.

    Those are my thoughts on this interesting concept. I just typed whatever came to mind. Thanks for reading what I had to say! Maybe its because of my background and chosen fields of study, but I think this could really work.

    • JMoon

      I just read the rule about posts have to be <500 characters. Sorry about that, I just really liked this concept.

  • http://www.rogueeconomistrants.blogspot.om rogue

    To my mind, 5% to the government seems rich, given the incentives. Consider, 20% to the parents incents them to make even more kids. More kids means more of the 5 per cent equities going around for government. Government ceded more shares to parents so they will in turn make more for the government. Kids here are nothing more than resources. Diabolical!

  • Kevin Postlewaite

    Robin mentions that there was no talk of non-voting shares, which struck me as odd. Also, why is equity so much preferred to debt, to the complete exclusion of debt? Why don’t people who sell their shares also buy options to repurchase those shares in some long time period?

    Most of share sales seem to be to finance education. It’s hard to imagine education such that the economic payoffs are worth it to go from 75% self-ownership to 50% self-ownership are worth it, as are the economic payoffs to go from 50% to 25% (25% being the lowest legally allowed self-ownership percentage) but it’s not worth it to stop at 50% and then use future earnings to pay for your further education as you need it. It sounds like the first half of your education is worth much less, economically, than the second half, especially when you consider that for the first part you sacrifice 1/3 of your future earnings that you keep, but the second half you sacrifice a further 1/2 of your future earnings.

    But these are just minor points side-stepping the interesting question posed by the book.

  • eg

    How does the “chain” of ownership work? I mean, if I own 10% of your income, does that imply some fractional ownership (2%) also of your childrens’ income?

    • Buck Farmer

      No. I think it is only productive income i.e. wages, salaries, etc. Not income from investments.

      That said, if I’m a sole proprietor, does my income count as wage or investment?

      These kind of details I don’t think bear much thinking about since it’s fiction we can specify the system however we like.

  • Jeff

    Interesting idea, but it doesn’t quite meet the assumptions of an efficient capital market.

    For one thing, there would be at least some information asymmetry – the incorporated individual may be able to know more than whatever metrics are used by outsiders to assess his worth. Also, it isn’t true that indistinguishable commodities are being traded. Some portion of Joe Blow’s career is not the same thing as some portion of Jane Doe’s, they are imperfect substitutes for each other.

    Finally, unless Joe and Jane are really good marketers there may not be many people who are even aware they exist, much less interested bidders. So market size doesn’t quite work either although we can probably assume people in such a society would market themselves far more effectively than we do in ours.

    So yes, an interesting idea but theoretically not really correct.

  • Matt Lye

    I think you’re misunderstanding what’s being signalled. A ‘thought provoking’ book allows one to feel that one has been thoughtful without eliciting the concomitant experiences of fatigue, uncertainty, and insufficiency. As it is valuable to have confidence in one’s intellect, and thus both risky as well as costly to attempt to establish such confidence through productive thought, such a book is a notable find.

    • oldoddjobs

      ha, nice one

  • http://www.jrganymede.com Adam Greenwood

    The parental share helps solve the demographic free-rider problem that plagues modern societies.

  • http://www.jrganymede.com Adam Greenwood

    How does immigration work in ShareWorld?

    Presumably governments would have a pretty big incentive to not recognize foreign shareholders as a way of attracting high-value immigrants.

    Of course that’s essentially the system we have now–governments invest education, etc. in their young and don’t recoup much if they immigrate to another country for their productive years.

  • http://kazart.blogspot.com Mike

    I actually went and read the book in preparation for commenting on this thread.

    First of all, as a proposed system, the individual incorporation is not spelled out nearly well enough to be given detailed consideration. This must be some kind of limited individual incorporation. If I put together a majority coalitiion in you, then I can elect the board, choose the CEO, etc., so I have complete control of the assets, i.e., you. But the asset is you, what if you don’t do what I tell you? If you were a person, my option would be to fire you, perhaps sue you. But you are the asset, I can neither fire you nor sue you. Your stock would go down if you didn’t obey your board/CEO but who cares? Once you have lost control of yourself and/or have sold the max of yourself you can sell, your only self-interest is to have a low stock price.

    And what if you are a financial analyst? Robin keeps re-saying, we only own product of labor, not your assets. But if your expertise and brilliance is used in enhancing your own portfolio, then your stock holders don’t have much to invest in. So professional investors get to almost automatically be free (have their majority)? What we have here is a failure of the paradigm, the authors want you to be owned, but they also want you to develop your own property. They need you to be two things, a you that is owned and a you that owns and can buy up the you that is owned.

    It seems to me this book does not rise to thought-provoking as far as politico-economic suggestions. As allegory or story it works: rise against the machine, stick it to the man (even if you are the man, especially if you are the man). My recollection of Heinlein is he was much clearer in his political economy.

    Whatever else I say about the book, I enjoyed reading it and zipped through it pretty fast. I think it is good science fiction, with story elements that surprised and pleased me.

  • rob

    A quick read but reads as if it was written by a teenager who has read a bit too much Nietzsche and Cato institute backgrounders.

    Problems:
    -there are still common and public goods that people will underpay for due to free rider problem. Hiring a security agency may protect you from robbers etc, but it doesn’t deal with large threats (invasions, groups of religious fanatics etc. Oh wait, everybody is rich in this world so they are neither nationalistic or religious. One problem – that argument didn’t hold in 1914 or Sept 11, 2001)

    -Huge assymetric and imperfect information problems.

    -sharecropper problem. Essentially, everyone (except the very rich) are sharecroppers. They keep a portion of the profits they generate. Doesn’t work, which is why most societies have gotten rid of the practice. Why bother working hard if most of the fruits of your labor are kept by others.

    – overemphasis on the role of money in motivating people. I could earn far more working on Wall Street than my current job as a journalist, and have turned down several offers. In the book, I probably wouldn’t be able to because I wouldn’t own a majority of myself. Is it really good for society to force people into the most remunerative job?

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  • spearsem

    Four years later and we can bring in some interesting (albeit anecdotal) evidence:

    • IMASBA

      All along I’m wondering how this all is any different from having social democracy where people pay a high share of their income in taxes and get a lot of services in return, including ones, such as higher education, that their taxes will only pay for decades later.

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