Organization Theory A Libertarian Perspective Kevin A. Carson Center for a Stateless Society BOOKSURGE Copyright © Kevin A. Carson 2008 Woody Guthrie Public License May be reproduced without limit, with attribution. “Anyone found copying and distributing this book without permission will be considered a mighty good friend of ours, because we don’t give a durn.” Published by BookSurge ISBN 1-4392-2199-5 Carson, Kevin A. Organization Theory: A Libertarian Perspective Includes bibliographic references and index 1. Organizational behavior. 2. Management. 3. Industrial management—employee participation. 4. Anarchism. I. Title To my mother, Ruth Emma Rickert, and the memory of my father, Amos Morgan Carson, with love. Contents Dedication iii Contents vii Preface 1 Part One: State Capitalist Intervention in the Market 1 1. A Critical Survey of Orthodox Views on Economy of Scale 3 A. Cross-Ideological Affinity for Large-Scale Organization 4 B. Chandler, Galbraith, and Push Distribution 6 C. Williamson on Asset-Specificity 19 Appendix A. Economy of Scale in Development Economics 24 2. A Literature Survey on Economies of Scale 29 A. Economies of Firm Size 30 B. Economies of Plant Size 31 C. The Comparative Significance of Scale Economies and Organizational Efficiency 32 D. Increased Distribution Costs 34 E. The Link Between Size and Innovation 38 F. Economy of Scale in Agriculture 42 Conclusion 51 3. State Policies Promoting Centralization and Large Organizational Size 53 I. The Corporate Transformation of Capitalism in the Nineteenth Century 53 A. The Nineteenth Century Corporate Legal Revolution 54 B. Subsidies to Transportation and Communication Infrastructure 65 C. Patents and Copyrights 72 D. Tariffs 77 II. Twentieth Century State Capitalism 77 A. Cartelizing Regulations 79 B. Tax Policy 83 C. The Corporate Liberal Pact With Labor 84 D. The Socialization of Corporate Cost 86 E. State Action to Absorb Surplus Output 90 F. Neoliberal Foreign Policy 94 Part Two: Systemic Effects of Centralization and Excessive Organizational Size 105 4. Systemic Effects of State-Induced Economic Centralization and Large Organizational Size 107 A. Radical Monopoly and Its Effects on the Individual 111 B. Systemic Effects on Institutional Culture 119 vi organization theory C. The Large Organization and Conscript Clienteles 124 D. The New Middle Class and the Professional-Managerial Revolution 127 Postscript: Crisis Tendencies 141 Appendix. Journalism as Stenography 148 1. Scott Cutlip 148 2. Justin Lewis 148 3. Sam Smith 148 4. Harry Jaffe 148 5. The Daily Show 149 6. Brent Cunningham 149 7. Avedon Carol 149 Part Three: Internal Effects of Organizational Size Above That Required for Optimum Efficiency 151 5. Knowledge and Information Problems in the Large Organization 153 A. The Volume of Data 153 B. The Distortion of Information Flow by Power 157 Conclusion and Segue to Chapter Six 166 Appendix. The NHS’s IT Program as an Example of Systematic Stupidity 168 6. Agency and Incentive Problems within the Large Organization 171 Introduction 171 A. Mainstream Agency Theory 172 B. Radical Agency Theory 188 Summary 193 Appendix. Toilet Paper as Paradigm 194 7. Economic Calculation in the Corporate Commonwealth (the Corporation as Planned Economy) 197 A. The Divorce of Entrepreneurial from Technical Knowledge. 198 B. Hayek vs. Mises on Distributed Knowledge 205 C. Rothbard’s Application of the Calculation Argument to the Private Sector 215 Conclusion 222 Appendix. “The End of the Quarter Shuffle” 224 8. Managerialism, Irrationality and Authoritarianism in the Large Organization 225 A. The Corporate Form and Managerialism 225 B. Self-Serving Policies for “Cost-Cutting,” “Quality” and “Efficiency” 233 C. The Authoritarian Workplace: Increased Hierarchy and Surveillance 257 D. Authoritarianism: Contract Feudalism 263 E. Authoritarianism: The Hegemony of “Professionalism” 266 F. Motivational Propaganda as a Substitute for Real Incentives 269 Appendix A. Blaming Workers for the Results of Mismanagement 283 1. Senators Were Warned of Lexington Air Controller Understaffing 283 2. Dian Hardison. “I F-ing Warned Them!” 283 3. MSHA Makes The “Wrong Decision” To Blame Workers For Accidents 283 4. Labor Relations in the Health Care Industry for Nurses 285 Appendix B. Corporate Rhetoric vs. Corporate Reality: The Case of “Chainsaw Al” Dunlap 287 9. Special Agency Problems of Labor (Internal Crisis Tendencies of the Large Organization) 289 Introduction 289 A. The Special Agency Problems of Labor 289 B. Labor Struggle as Asymmetric Warfare. 296 contents vii C. The Growing Importance of Human Capital: Peer Production vs. the Corporate Gatekeepers 322 D. Austrian Criticism of the Usefulness of Unions 334 Appendix A. Sabotage in a London Nightclub: A Case Study 336 Appendix B. Yochai Benkler on Open-Mouth Sabotage: Diebold and Sinclair Media as Case Studies in Media Swarming 338 Appendix C. DeCSS as an Example of Media Swarming 340 Appendix D. Open-Mouth Sabotage, Cont.: Alisher Usmanov as a Case Study in Media Swarming 341 Appendix E. Open Mouth Sabotage, Cont.: Wikileaks as a Case Study in Media Swarming 342 Appendix F. Stupid White Men as a Case Study in Media Swarming 343 10. Attempts at Reform from Within: Management Fads 345 A. New Wine in Old Bottles 345 B. Lip Service and Business as Usual 351 C. Management by Stress 354 D. Dumbing Down 363 Conclusion and Segue to Part Four 371 Appendix. The Military Origins of Quality Control 376 Part Four: Conjectures on Decentralist Free Market Alternatives 379 11. The Abolition of Privilege 381 A. Reciprocity 381 B. Privilege and Inequality 386 C. Specific Forms of Privilege, and the Effect of Their Abolition 400 1. The Credit Monopoly 401 2. Artificial Property Rights in Land 411 3. Patents and Copyrights 419 4. Occupational Licensing and Safety Codes 420 Appendix. Reciprocity and Thick Libertarianism 422 12. Structural Changes: The Cost Principle 427 Introduction 427 A. Peak Oil and the “Long Emergency” 430 B. The Scale of Possible Savings on Energy Inputs 433 C. Path Dependency and Other Barriers to Increased Efficiency 441 D. The Cost Principle and the Work-Week 444 E. The Cost Principle and Local Autonomy 449 13. Dissolution of the State in Society 453 A. Revolution vs. Evolution 453 B. Dialectical Libertarianism and the Order of Attack 454 C. The “Free Market” as Hegemonic Ideology 460 D. Gradualism and the “Magic Button” 463 E. “Dissolving the State in the Economy” 469 F. Counter-Institutions 471 G. Counter-Institutions and Counter-Economics 472 H. The Two Economies and the Shifting Correlation of Forces 472 I. Privatizing State Property 477 14. Decentralized Production Technology 483 Introduction 483 A. Multiple-Purpose Production Technology 484 B. The Transition to Decentralized Manufacturing 499 C. Desktop Manufacturing Technology 500 viii organization theory D. Polytechnic 502 E. Eotechnic, Paleotechnic, and Neotechnic 505 F. Decentralized Agriculture 509 G. A Soft Development Path 515 15. Social Organization of Production: Cooperatives and Peer Production 517 Introduction 517 A. Self-Employment: Increased Productive Efficiency 519 B. Cooperatives: Increased Productive Efficiency 520 C. Innovation Under Worker Self-Management 532 D. Social Benefits of Worker Empowerment 535 E. Peer Production 543 F. The Social Economy and the Crisis of Capitalism 554 16. The Social Organization of Distribution, Exchange and Services 569 A. Demand-Pull Distribution 569 B. Local Exchange Systems: Household and Informal Economies 570 C. Certification, Licensing and Trust 575 D. Social Services 581 E. Mutual Aid and the Voluntary Welfare State 582 F. Education 589 G. Healthcare 594 Bibliography 605 Index 639 About the Author 643 Preface T his book had it origins in a passage (the “Fiscal and Input Crises” section of Chapter Eight) of my last book, Studies in Mutualist Political Economy. If you read that passage (it’s available online at Mutualist.Org), you’ll get an idea of the perspective that led me to write this book. The radical thoughts on organizational pathologies in that passage, both my own and those of the writers I quoted, dovetailed with my experiences of bureaucratic irrationality and Pointy-Haired Bossism in a lifetime as a worker and consumer. To get the rest of the questions on my perspective out of the way, I should mention that the wording of the subtitle (“A Libertarian Perspective”) reflects a long process of in- decision and changes, and is something I still find unsatisfactory. I vacillated between the adjectives “mutualist,” “anarchist,” “individualist anarchist,” and “left-libertarian,” not really satisfied with any of them because of their likely tendency to pigeonhole my work or scare away my target audience. I finally ended up (with some misgivings) with plain old “Libertarian.” It’s a term of considerable contention between the classical liberal and liber- tarian socialist camps. I don’t mean the choice of term in a sense that would exclude either side. In fact, as an individualist in the tradition of Tucker and the rest of the Boston anar- chists, I embrace both the free market libertarian and libertarian socialist camps. I chose “libertarian” precisely it was large and contained multitudes: it alone seemed sufficiently broad to encompass the readership I had in mind. I write from the perspective of individualist anarchism, as set forth by William B. Greene and Benjamin Tucker among others, and as I attempted to update it for the twenty- first century in my last book. Here’s how I described it in the Preface to that book: In the mid-nineteenth century, a vibrant native American school of anarchism, known as individualist anarchism, existed alongside the other varieties. Like most other contempo- rary socialist thought, it was based on a radical interpretation of Ricardian economics. The classical individualist anarchism of Josiah Warren, Benjamin Tucker and Lysander Spooner was both a socialist movement and a subcurrent of classical liberalism. It agreed with the rest of the socialist movement that labor was the source of exchange-value, and . . . enti- tled to its full product. Unlike the rest of the socialist movement, the individualist anar- chists believed that the natural wage of labor in a free market was its product, and that economic exploitation could only take place when capitalists and landlords harnessed the power of the state in their interests. Thus, individualist anarchism was an alternative both to the increasing statism of the mainstream socialist movement, and to a classical liberal movement that was moving toward a mere apologetic for the power of big business.1 I belong to the general current of the Left so beautifully described by the editors of Radical Technology (“the ‘recessive Left’ of anarchists, utopians and visionaries, which tends only to manifest itself when dominant genes like Lenin or Harold Wilson are off doing something else”). As such, I tend to agree with the Greens and other left-wing decentralists on the evils to which they object in current society and on their general view of a good 1. Kevin A. Carson, Studies in Mutualist Political Economy. Self-published via Blitzprint (Fay- etteville, Ark., 2004), p. 9.