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Corporate Cyborgs: the Ontology of the Modern Business Corporation

Wade Rowland


(Note: a version of this article was published in the journal Social Epistemoplogy in 2005)

Corporations are much in the news as this is being written. Pharmaceutical firms are being questioned for their unwillingness to provide affordable anti-AIDS drugs to Africa, and for having promoted hormone replacement therapy for menopausal Western women with bogus health claims. Corporate concentration in media is being called a threat to democracy, second only to corporate donations to political campaigns. Corporate lobbies have mounted apparently successful attempts to scuttle the Kyoto treaty on global warming. Fast food corporations are accused (by the U.S. Surgeon-General) of causing widespread illness through obesity-related disease and cancer. Corporate agribusiness and transnational chemical corporations are accused of recklessly endangering the world’s food supply in the pursuit of profits from the sale of genetically-modified plant organisms. Without looking back beyond even the past few months, the list could be extended almost indefinitely to include individual cases of  corporate indifference to the endangerment human and environmental health and to outright corporate crime.

Even more highly visible are the accounting scandals that have crippled world industry leaders in the energy and communication industries and destroyed at least one transnational accounting firm. What is seldom acknowledged in media coverage of these scandals is the fact that they are merely the most recent in a more or less continuous history of corporate malfeasance that reaches back to the earliest prototypes in the sixteenth and seventeenth centuries. One historian has written:

“Governments fought these [misleading and unethical accounting practices], stiffening company laws, forbidding secret reserves, placing stricter demands on auditors, and making directors personally liable for the accuracy of  financial reports. But the increasing complexity of capital structures, and especially the growing interest which some concerns obtained in subsidiary companies, made control, prevention, and conviction more difficult. It is virtually impossible to enforce the demand for the truth, the whole truth and nothing but the truth; and many published balance sheets are “collectors specimens rather than business guides.” [1]

The quote could easily have been taken from yesterday’s newspaper, but it describes conditions following the North American financial crash of 1873. A similar account could be given of the aftermath of the South Sea Bubble crisis of 1720. In the late twentieth century we have case of the Ford Pinto, Nestlè’s campaign to sell baby formula in the Third World, the tobacco industry’s death-dealing machinations, corporate Hollywood’s campaigns to pitch R-rated videos to young children … and on and on. The point is that corporate behaviour has been from the beginning, and continues to be, characterized to a significant degree by what in any other context would be called immoral, antisocial or even criminal tendencies.

An important question is raised: how does one account for this pathological behaviour? Are corporate managers self-selecting for criminal or immoral behaviour? Or is there something in the nature of the business corporation that encourages antisocial activity? Are culpable corporate leaders merely bad people in positions of great power, or can their behaviour be explained somehow in terms of the constraints under which they operate? In other words, are we dealing with a psychological issue or an institutional problem in trying to comprehend the antisocial behaviour of so many of our largest corporations, both today and throughout the history of the institution? Alternatively, is the problem of corporations merely symptomatic of wider difficulties of the capitalist market economy, as is sometimes supposed?

One current, well-received book on the subject characterizes the problem as one of “profligate greed” resulting in a transformation of human institutions worldwide,

“(as) a result of the sophisticated, well-funded, and intentional interventions of a small elite whose money enables them to live in a world of illusion apart from the rest of humanity…. The related market forces are deepening our dependence on socially and environmentally destructive technologies that sacrifice out physical, social, environmental, and mental health to corporate profits…. The problem is not business or the market per se but a badly corrupted global economic system that is gyrating far beyond human control. The dynamics of this system have become so powerful and perverse that it is becoming increasingly difficult for corporate managers to manage in the public interest, no matter how strong their moral values and commitment.” (Emphasis added.) [Korten, 12-13.]

The “”system” that is identified as being the root of the problem is at the same time both “far beyond human control” and under the control of “a small elite” of wealthy, self-deluded humans. Corporate “managers” find themselves increasingly unable to manage. These kinds of contradictions are typical of recent critiques of the world economic system, and they result from a misunderstanding of the nature of the modern business corporation and its relationship to the market.

Answers to these questions are approached here in two ways: through an examination of the historical roots of the modern business corporation; and by looking into modern theory of complex bureaucratic structures as exemplified in such disciplines as cybernetics, general systems theory and automata theory. It is clear that the modern market is a technology, deliberately constructed to serve an economic purpose: “[T]he market has been the outcome of a conscious and often violent intervention on the part of government which imposed the market organization on society for noneconomic ends.” [Polanyi, p 258.] It will be argued here that the modern business corporation is also a technology and can best be understood as an autonomous, self-regulating cybernetic machine which has evolved in complexity to the condition of being in control of the humans who nominally manage it. As a machine, it is a non-ethical entity operating in what has traditionally be seen as an ethical environment: to the extent that it does conform to human standards of ethical behaviour, these are external to it, and imposed by law rather than social sanction since corporations qua machines are not susceptible to the informal sanctions that regulate so much of human behaviour. These legal sanctions are typically narrow and rigid, having been designed for the most part to curb only the most profoundly aberrant human conduct. Thus, corporations tend to operate, in an ethical sense, at the extreme outer limits of what is socially permissible or acceptable—on the edge of the law.

It will be argued here that the answer to the question of why corporate interests seem so commonly to be in conflict with human interests lies in the fact that corporations and humans are different species, with different goals.

The Business Corporation in its Historical Context

Earliest origins

The history of the corporation is a long one, dating back to early Medieval times, and most references mention as early examples of this social artifact the monastery, the incorporated town and universities. Their purpose was to ensure continuity in the operations of important institutions by allowing them to carry on their business uninterrupted by changes in the ranks of their human officers. Thus, they have from the beginning been endowed with the potential for immortality. Another distinguishing feature of corporations, the principle of limited liability, is also an ancient one, and was recognized in British law courts as early as the fifteenth century: “Si quid universitati debetur, singulis non debetur, nec quod debet universitas, singuli debent.” (If something is owed to the group, it is not owed to the individuals nor do the individuals owe what the group owes.)

The post-medieval development of corporations occurred in three stages.  The first was a response to the enormous financial demands of colonial expansion in the sixteenth century. So-called ‘regulated companies’ were created to minimize, through cooperation, the enormous risks involved in colonizing and conducting foreign trade. This might involve the sharing of expenses involved in construction and arming of the very large ships needed to undertake long trading voyages or construction of fortified trading posts in hostile territories.  Such business organizations—part guild, part partnership—were not unknown in Medieval times, but became much more common in the first half of the sixteenth century, underwriting such enterprises as John Hawkins’ slave voyages, Francis Drake’s  raids on Spanish-American shipping, Martin Frobisher’s search for the Northwest passage and early European settlement in North America.

It was essentially an association of merchants (sometimes hundreds of them) to monopolize, control and exploit some particular branch of trade. It was chartered and given its monopoly by the government, which backed up its efforts to exclude outsiders. Each merchant provided his own capital, traded on his own account, and took the profits or the losses that came to him. But the governor and directors of the company decided on policy—when the ships were to sail, and other matters—maintained foreign trade centers, provided protection, and laid down rules for the conduct of business. The member of a regulated company was in one sense a merchant trading on his own, but he was also a sharer in a big monopolized trade under the control of a group of officers chosen my him and his fellows. [Clough and Cole, 148.]

These ‘regulated companies’ were seldom successful as business enterprises because individual members typically competed with one another over buying and selling prices of trade goods, reducing their respective profit margins.

Out of this experience was to evolve a new kind trading company, which is more accurately described as an association of capital than an association of persons. Originally ad hoc and extra-legal, these ‘joint stock companies’ were eventually recognized in law and granted charters in England, France, Denmark, Prussia and elsewhere. The new joint stock  companies differed from earlier co-operative ventures among autonomous businesses in that they held a single pool of capital. A group of traders put money into a venture, entrusted its conduct to officers and managers, and shared in the profits or losses proportionately to they amount they had invested. A subscriber or ‘shareholder’ wishing to withdraw from the company could do so only by selling his share of the capital pool at current market value (and not by withdrawing his original investment).

At first, in some joint stock companies as in the older regulated companies, voting was done in stockholders meetings by a show of hands with one vote per person, but gradually it came to be the rule that a man had votes in proportion to the number of shares he held. It was capital, not men, voting since the company was a union of capital, not men. [Clough and Cole, 149. Emphasis added.]

The great advantage of joint stock companies was their permanence. Whereas a partnership could be disrupted by the death of one of its members, the joint stock company was essentially immortal as long as its capital remained. This was a significant advantage in ventures where voyages were long, treaties with natives had to be negotiated and large investments had to be made in what might be called infrastructure: forts, armed vessels and so on.

The first of the new companies in England was granted a charter in 1600 by Elizabeth I, who gave a group of wealthy businessmen and aristocrats the right to be “one body corporate” known as the British East India Company. Two years later the Dutch East India Company was formed in Amsterdam, its shares being among the first traded on that city’s new stock exchange, or Bourse. As befit the mercantilist ideas of the time, these early chartered companies were strictly regulated by the state, but at the same time they were granted extraordinary powers to carry out what were perceived to be the common goals of state and enterprise. The East India Company, the Royal Africa Company, The Hudson Bay Company and others like them were given authority to make and enforce laws throughout their chartered trading territories, and acted as extensions of the state as well as profit-making enterprises.

In 1606 a royal charter was granted to a syndicate of businessmen to develop Virginia as a “royal domain” complete with its own currency and militia, and similar charters were later granted to encourage the settlement of Massachusetts and Pennsylvania. While English entrepreneurs were willing to operate within the strict guidelines of their charters, Americans were apt to regard them as repressive, sometimes reacting violently as in the case of the Boston Tea Party. The War of Independence may be seen as a revolt against mercantilist doctrine of direct links between commercial enterprise and government policy. In its aftermath, Americans firmly established the principle that a corporation need not demonstrate a public purpose in order to be chartered

There existed, on both sides of the Atlantic, a deep suspicion of the business corporation, linked to the controversy over mercantilism and its abuses. Thomas Hobbes called them “worms in the body politic” and “chips off the block of sovereignty.” [Hacker, 32.] Adam Smith (1723-90) believed that they were a danger unless incorporated for narrowly-defined public purposes such as banking, insurance, canal building and waterworks. He believed it was in the public interest that all other trades and businesses should be run as partnerships.[2] [Smith, 1776.] In the newly-independent United States, early corporations were chartered for such public purposes as establishment of highways, canals, waterworks, docks and bridges: only a handful were engaged in commerce or manufacturing. All had to describe the specific purpose of their enterprise in the articles of incorporation. In England, the South Sea Bubble crisis in 1720 had exposed widespread corporate malfeasance and fraud. In the accompanying stock market crash many corporations were wiped out and Parliament responded with the passage of the Bubble Act under which all commercial undertakings (both corporations and partnerships) “tending to the common grievance, prejudice and inconvenience of His Majesty’s subjects” would be illegal and subject to dissolution. The Act also banned speculative buying and selling of shares in Britain: after 1720, shares could legally be sold only to persons genuinely taking over a role in running the corporation or partnership. For the next hundred years most business was carried on by partnerships or sole proprietorships. The few statutory corporations chartered by Parliament were typically involved in large, single-purpose projects such as canal or bridge construction.

The rise of the modern business corporation

 The infancy of the business corporation in its current form can be dated to 1811 when the State of New York enacted a law of incorporation that required only a summary description of the business undertaking. The other states followed suit during the 1840s and ‘50s.  In Britain, a series of Acts of Parliament beginning in 1825 had the effect of making what had been a privilege granted by the Crown, often in the name of national interest, a right available to anyone who met certain minimum conditions. These culminated with the Joint Stock Companies Act of 1844 which allowed corporations to be created by a simple act of registration with a summary description of the nature of the enterprise.[3] Initially these registered corporations did not enjoy limited liability, but in 1855 further legislation was passed limiting a shareholder’s financial liability to the amount paid for the shares owned—that is, shareholders, once they had paid for their shares, had no further liability for any action taken by the corporation. The corporation had evolved from being a creature of the state or some monopoly interest in society with clearly defined public purpose to being an all-purpose legal mechanism for facilitating the carrying on of business within a market economy. The law no longer required corporations to fulfil any pubic purpose in return for the privileges afforded by incorporation.[4] This evolution continued to the point where, “Today state charters are essentially permanent rather than subject to any meaningful review.” [Fox, 4.]

Large scale engineering undertakings, both industrial and agricultural, characterized the industrial economies in the second half of the nineteenth century. These included the building of railroads, telephone networks and transcontinental and transoceanic telegraph lines and the opening up of vast new regions to farming. Enterprises on this scale required enormous infusions of manufactured goods such as steel rails, copper wire and glass insulators, farm machinery and ships, locomotives and rolling stock and petroleum fuels. Often the engineering projects themselves would be undertaken by corporations, many of them formed at the behest of governments. However capital goods were still frequently supplied by older-style business ventures—partnerships and proprietorships. These increasingly obsolescent commercial organizations were stubbornly maintained because they avoided the public disclosure of financial records that was required of corporations. The penalty for privacy was that private companies were not allowed to raise capital by selling shares to the public. However, privately-held corporations were granted the privilege of limited liability, first in Germany in 1892 and in most other industrial nations within the next decade. Many of these companies were enormous. For example, Andrew Carnegie’s Carnegie Steel Company was a partnership, and several of John D. Rockefeller’s Standard Oil affiliates were not incorporated.

The Panic of 1873 touched off a long depression that was marked by a frenzy of business mergers in the United States. Undertaken primarily to lower production costs, these led to a restructuring of major portions of American industry. [Horowitz, 77.] The number of partnerships and proprietorships among major business enterprises declined dramatically, and at the same time a great many new and powerful joint-stock corporations were spawned, divorcing ownership and management. The era of the robber baron was ending, and the era of the modern business corporation had begun. Between 1899 and 1904, United States Steel, International Harvester, American Can and 2,500  other corporate mergers changed the face of American business. By 1904 one in ten American workers was employed by a corporation.[5] As the old business patriarchs died off or were replaced, corporate management was increasingly made up of university-trained functionaries who saw all corporations as essentially alike in terms of the skills required to run them efficiently and profitably.[6]

Mechanistic social science

Most of these defining developments took place within the scope of the later Victorian Era, roughly from 1850 to the end of the century. The prevailing intellectual milieu of the time was unique in its positivist self-confidence:

A general sense of intellectual achievement can be discerned in all the writers of that period, a feeling almost of exuberance, and the sense that what had been hidden was at last being made manifest. The scientific method seemed to open up illimitable possibilities in the study of man. “It is our happiness,” wrote Taylor, the anthropologist, “to live in one of those eventful periods of intellectual and moral history when the fast-closed gates of discovery and reform stand open at their widest.” [Hearnshaw, 198 ff.]

The feeling arose largely out of the idea of development, which found its apotheosis in Darwin’s Origin of Species, published in 1859.[7] The rationalism of the previous era was being reinterpreted in biological rather than mechanical terms. Although the notion of a teleology of the world-system was thus largely replaced by the theory of random mutation leading to selective adaptation, in its microcosmic operations it was no less deterministic and law-abiding than the previous, mechanical model had been.[8]

To the extent that the social sciences were studied in this period (notably in Hobbes and Locke), the amazing success of the physical sciences prompted the hope and then the belief that, “human nature and social life might be explained in analogous terms. It was thought that if the forces determining man’s character could be found and if the processes by which his mental content was established could be determined a science of society could be constructed on a firm basis. The method to be pursued was to be the same as in physics, the analysis of the simple case to discover the universal axiom…”. [Hearnshaw, 254.] Stanley Jevons (1835-1882), like Walras, Pareto and other pioneers in the modelling of economic behaviour, defined economic theory as “the mechanics of utility and self interest.” [Jevons, 2.] Each of these considerations was considered to be quantifiable, indeed the Utilitarian philosophers had seemingly met with considerable success in this regard. Utility maximization notions taken from Jeremy Betham and John Stuart Mill were influential in Victorian welfare economics no less than in politics and jurisprudence.

Thus the new, biological interpretation of the mid-to-late nineteenth century appeared to have much broader application to the sciences of human psychology and social behaviour than the earlier model it replaced.  Its approach was inductive rather than deductive, substituting for ‘top-down’ rationalization from a given hypothesis the ‘bottom up’ reasoning from experiment and observation.[9]  Out of this approach would grow the behaviourist theory of social psychology  initiated by the Russian Pavlov and the American Watson (based on the newly-discovered ‘conditioned reflex’), and, more recently, burgeoning fields of study such biochemistry, neurophysiology and even artificial intelligence: “The purpose of this school of thought is to reinterpret in strictly mechanical terms the facts not only of physiology and of psychology as hitherto understood, but ultimately of social phemonena also.” [Hearnshaw, 253.] James Mill, for example, attempted to analyze all experience in terms of primary “sense atoms” that interacted according to fundamental physical laws. Psychology was the science of that interaction. Affection, aesthetic feelings, moral sentiment and belief were all described as compound states which could ultimately be resolved into measurable units of pleasure and pain.‘ Mind’ was reduced to ‘behaviour’, but it was now included at every level of evolutionary advance, in the form of either ‘intellectual’ or ‘active’ powers. The former concerned how our knowledge of the world is built up and consequently how beliefs are formed; the latter dealt with the notions of instincts and motives—conditioned action. Both views owe much to Hobbes, who pictured man as essentially selfish, animated merely by the impulse to gratify desire. [10]

Mechanistic social institutions

The problem for the new social scientists of the Victorian era was how, then, to account for the development of social institutions. Darwinism and the idea of development posed a conundrum: how did the collectivist social sense and civilization arise out of individualist evolutionary struggle “red in tooth and claw”? Walter Bagehot is often credited with suggesting the approach to finding the answer that made behaviorists out of social scientists. It was an evolutionary idea: social behaviour was the result of millennia of conditioning, transmitted in a Lamarkian way from generation to generation. This, of course, consigned the idea of a past “Golden Age” and subsequent Fall, to oblivion, replacing it with an evolutionary emergence.[11] Survival in the Darwinian sense is applied not to particular physical traits of the individual but to the custom-group that best disciplines its members.

From the behaviourist perspective of conditioned responses, it is but a small step from here to beginning to think of social institutions—particularly economic institutions— as furthering evolutionary interests by reinforcing the needed “discipline” within certain “custom-groups”. Social institutions thus become social technologies. Soon, scientific interest shifts from the group to the technology, which is better suited to quantification and experimentation, and soon the group is explained in terms of the machine, rather than vice-versa. Liberal economic theory had already ‘dehumanized’ human workers by reducing them to factors of production identical to minerals and other raw materials for purposes of policy-making (or the avoidance thereof). [See, e.g., Polanyi, 232-3.]

In this intellectual atmosphere, it is natural to conceive of deliberately engineering social technologies to supplement, improve upon or even replace existing human institutions. The obvious motivation for such ambitious undertakings is that machines are more efficient than humans in carrying out the essentially mechanical operations that purportedly characterize all social institutions, such as those processes involved in reaching and sustaining economic equilibria.[12] It is within this intellectual milieu that the modern business corporation evolved from its early ancestors, not through any natural process but with the help and encouragment of political and judicial policy. It can be seen as a feat of institutional engineering resulting in the creation of a machine—not a figurative, but a literal machine—called a business corporation, that would act as a human avatar.

As a machine, the corporation would be perfectly adapted to its environment, which was the elegantly machine-like market economy as theorized by the nineteenth-century liberal economists. With the gold standard in place, national and world markets became, in theory, an integrated, self-regulating mechanistic system capable of autonomous operation so long as it was carefully shielded from human interference.

World trade now meant the organizing of life on the planet under a self-regulating market, comprising labor, land, and money, with the gold standard as the guardian of this gargantuan automaton. Nations and peoples were mere puppets in a show utterly beyond their control. [Polanyi, 226.]

 We have seen how the corporation was invented to serve pre-market needs and how it was successfully adapted to the emergent market economy of the eighteenth and nineteenth centuries. We can now take a closer look at exactly how the modern business corporation was initially shaped on this basic conceptual structure, and how it evolved as it adapted to its changing political and economic environment.

The Modern Business Corporation


The standard dictionary definition of a corporation is an association of individuals, created by law, having a continuous existence irrespective of that of its members, and powers and liabilities distinct from those of its members.[13] This definition contains two ideas: one of an association of (human) individuals; and a second, more mysterious idea of an entity that has a continuous existence separate and distinct from its (human) ‘members’. It might be said that a corporation is both human in the sense that it is an association of people and non-human in the sense that it has an existence separate from that of its human members—in fact bears the distinctly non-human trait of having a continuous existence, of being potentially immortal.

An association of humans can take many forms, some of them analogous to machines or organized biological entities, as in the case of teams, in which individuals play limited, well-defined roles or positions that complement those played by other team members. The modern corporation is team-like in this respect. However, the human association or team within the corporate structure is secondary to the transcendent identity of the organization itself as defined in modern custom and law. As vital entities at large in the world of manufacturing, commerce and finance, corporations are always associated with humans. Humans give them life in a symbiotic relationship of mutual dependency. But this should not be misunderstood as meaning that humans are the life of the corporation, or worse, that humans are the corporation. Humans are the life-giving element in the sense that they are what enables the corporation to perform its role, to actualize its intentions. They do this by supplying necessary inputs in the form of intellect, and energy and technology (in the broad sense of technique). But the corporation has a life of its own, in the sense that its existence transcends that of the collectivity of its human functionaries.

The ‘modern business corporation’ as the term is used here has several distinctive features. It is typically very large in terms of revenues and numbers of employees, owned by large numbers of individual and/or institutional shareholders, and run by highly trained cadres of professional managers. The modern business corporation is enormously more complex than its predecessors and is accordingly ‘managed’ using sophisticated organizational techniques, many of which were developed with military sponsorship during and after WW2 in such institutions as MIT, the Cowles Institution and  the RAND Corporation. [Mirowski, 2002.] Significantly, it has achieved the legal status of personhood, and thus can claim protection from the state under human rights codes.

The roots of corporate personhood

Even in its ‘non-human’ aspect, the modern business corporation  bears distinctly human attributes, in that it is considered to be a person under the law. Courts throughout the industrialized world have granted it statutory personhood distinct from the personal identities of the humans who own and manage it. It has, for legal purposes, been anthropomorphized. This legal status has historically taken one of two forms— artificial personhood or natural personhood. The distinction is a crucial one: as natural persons, corporations are assumed for legal purposes to pre-exist the state just as humans do, and thus to be entitled to protection from the state. As artificial persons, corporations are assumed in law to be creations of the state and therefore subject to regulation and restraint at the whim of the state. In the first case the corporation is assumed to operate under the protection of historical or universal rights; in the second its operations and existence are subject to regulation at the pleasure of its creator.

In recent decades, corporations in the United States have greatly extended their claims to civil liberties through successful court appeals to the protections of the Bill of Rights. The notion of natural personhood is gaining ground over the competing concept of artificial personhood, and these gains are being consolidated and further extended by transnational trade agreements that seek to “harmonize” corporate regulation across continental and hemispheric territories. [Mayer, 1990.]

The remarkable growth of corporate power and influence caused concern from the beginning, and the rhetoric of those who saw it as a dangerous tend is strikingly consistent is its evocation of the imagery of robotic creatures. For example, on the eve of his becoming Chief Justice of Wisconsin’s Supreme Court in 1873, Edward G. Ryan warned:

[There] is looming up a new and dark power… the enterprises of the country are aggregating vast corporate combinations of unexampled capital, boldly marching, not for economical conquests only, but for political power…. The question will arise and arise in your day, though perhaps not fully in mine, which shall rule—wealth or man; which shall lead—money or intellect; who shall fill public stations—educated and patriotic freemen, or the feudal serfs of corporate capital….[14]

In 1888 President Grover Cleveland expressed similar concerns: “Corporations, which should be the carefully restrained creatures of the law and the servants of the people, are fast becoming the people’s masters.”[15] Half a century later U.S. Supreme Court Justice Louis D. Brandeis referred to corporations as “the Frankenstein monster which States have created by their corporation laws.”[16]

The U.S. Supreme Court played a major role in defining the modern corporation, both for that country and for the rest of the industrialized world, with an early ruling by Supreme Court Justice John Marshall in the case of Dartmouth College as foundational:

…A corporation is an artificial being, invisible, intangible, and existing only in contemplation of law. Being the mere creature of law, it possesses only those properties which the charter of its creation confers upon it, either expressly, or as incidental to its very existence. These are such as are supposed best calculated to effect the object for which it was created. Among the most important are immortality, and, if the expression may be allowed, individuality; properties, by which a perpetual succession of many persons are considered as the same, and may act as a single individual. They enable a corporation to manage its own affairs, and to hold property, without the perplexing intricacies, the hazardous and endless necessity, of perpetual conveyances for the purpose of transmitting it from hand to hand. It is chiefly for the purpose of clothing bodies of men, in succession, with these qualities and capacities, that corporations were invented, and are in use. By these means, a perpetual succession of individuals are capable of acting for the promotion of the particular object, like one immortal being.[17]

Note that Justice Marshall is here using the implied definition of the corporation as artificial, rather than natural, entity. The corporation as he defines it is created at the sufferance of the state and given the privilege of operating within those boundaries permitted by its state charter. The idea of the personhood of the corporation, touched on rather gingerly by Justice Marshall as “individuality” in this 1819 ruling, would receive clear legal sanction in the U.S. Supreme Court case Santa Clara County v. the Southern Pacific Railroad (1886). In that case the court affirmed that a corporation should be construed as a person and thus entitled to the protections of the 14th amendment of the U.S. Constitution. That Amendment states, in part:

All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside. No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States; nor shall any State deprive any person of life, liberty, or property, without due process of law; nor deny to any person within its jurisdiction the equal protection of the laws.

The Amendment had been adopted in 1868 specifically to protect the rights of newly-freed slaves from arbitrary State laws, and to integrate the disparate immigrant groups in the United States into a single people defined by their citizenship. Nowhere in any of the debate surrounding passage of the amendment, or in early Supreme Court judgements in cases touching on it, was there any suggestion that it might be applied to corporations. (The U.S. constitution does not mention corporations, although they were of course known at the time of its drafting.)

The notion of corporate personhood is at least as old as the seventeenth century, when corporations were sometimes spoken of as artificial persons because of certain obvious similarities between these legal entities and real persons: both could be parties to a civil lawsuit, both were subject to law, both could be taxed. Lawyers for early English corporations argued that their clients could not be held culpable for certain violations of law because those laws were invariably worded, …no person shall….  Their clients, the lawyers pointed out, were not persons at all, merely artificial persons.

The personhood advantage

By the 1870s, with the explosion of industrial and commercial power in the United States, business interests began to see that under the Constitution as newly altered by the 14th Amendment, corporate personhood held real advantages in terms of freedom from State regulation. The argument became a popular one in State courts at all levels, and in four separate Supreme Court cases in one year alone, 1877, corporate lawyers argued that their clients were, as persons, entitled to the Constitutional protections granted by the 14th Amendment.[18] Each of these cases dealt with the objections of railways (the biggest corporations of the era) to attempts by state or local governments to regulate their fares and tariffs. And in each case the court chose to ignore the delicate personhood issue, ruling merely that the 14th Amendment was not meant to prevent governments from regulating commerce. In another case in the same year, in Munn v. Illinois,[19] the Court ruled that the 14th Amendment did not prevent the State of Illinois from regulating fees charged for the use of the business’s grain elevators, once again ignoring the question of whether the business was a person. The question remained open for nearly a decade more.

In the landmark case of Santa Clara County v. Southern Pacific Railroad Company[20], the railroad had argued up through the lower courts for its rights to 14th Amendment protection, in a case that involved about $45,000 in unpaid taxes and penalties. Those arguments were submitted in writing to the Supreme Court justices. However before oral arguments took place, Chief Justice Waite announced: “The court does not wish to hear argument on the question whether the provision in the Fourteenth Amendment to the Constitution, which forbids a State to deny to any person within its jurisdiction the equal protection of the laws, applies to these corporations. We are all of the opinion that it does.”

Without ever being argued before the highest court, the notion of the corporation as person was made law by the simple acceptance of the argument by the justices, “like an article of faith, the roots of which were not explained and the consequences of which were not explored.” [Flynn, 133] Before many more years had passed, the Court had also begun accepting arguments that, as persons under the 14th Amendment, corporations were also to be afforded protection under the 5th Amendment.[21]

Responsible in part for the change in attitude was the prevailing intellectual spirit of the 19th century with its sanguine belief that the Newtonian model of natural science would also hold for the social sciences. The study of law was not immune to this new wave of rationalism and reductionism and the ‘sociological jurisprudence’ movement of the nineteenth century saw the study of law come under the influence of the emerging social sciences. The historical jurist and German nationalist Otto von Gierke heavily influenced the movement with his anti-formalist emphasis on the importance of the inner dynamics of groups and associations as sources of law and other binding social norms. A proponent of corporatism (as a balance to centralized state power), von Gierke argued strongly against the view that associations, including business corporations, exist only at the sufferance of the state and with only such powers as it has given them in law. Associations, he observed, had existed long before national states had appeared. [von Gierke, 1979]  This was of course an argument against the ancient theory of ‘artificial’ corporate personhood, and in favour of ‘natural’ personhood.

With  von Gierke and his followers’ weighty intellectual support behind them, “judges now had a respectable reason to overturn legislation helping workers, farmers, consumers, and the public. When state legislators interfered with corporations’ constitutionally-recognized rights, the Supreme Court simply invalidated their efforts” [Fox, 4] Under the pressure of continuing litigation, the strength of corporate personhood made steady gains throughout the twentieth century. By mid-century, the natural entity theory had gained decisive ascendance over earlier artificial entity doctrine, with corporations gaining many new constitutional protections in the process. [Mayer, 580.] The implications were profound: “Resembling contemporaneous social psychological speculation concerning the existence of a ‘group mind’… this new [natural entity] perspective claimed the corporation was a self-directed organism. Its behaviour was legally distinct from the personal predilections of its shareholders, managers, or employees The state no longer created corporations. It merely acknowledged their existence.” [Fox, 1996]

U.S. Supreme Court justices Hugo Black and William O. Douglas have both argued against this interpretation of the 14th Amendment, in dissenting opinions. Black said:

…A constitutional interpretation that is wrong should not stand. I believe this Court should now overrule previous decisions which interpreted the Fourteenth Amendment to include corporations. Neither the history nor the language of the Fourteenth Amendment justifies the belief that corporations are included within its protection [303 U.S. 77, 86]. …This amendment sought to prevent discrimination by the states against classes or races. We are aware of this from words spoken in this Court within five years after its adoption, when the people and the courts were personally familiar with the historical background of the amendment. … Yet, of the cases in this Court in which the Fourteenth Amendment was applied during the first fifty years after its adoption, less than one-half of 1 per cent invoked it in protection of the negro race, and more than 50 per cent. asked that its benefits be extended to corporations.

If the people of this nation wish to deprive the states of their sovereign rights to determine what is a fair and just tax upon corporations doing a purely local business within their own state boundaries, there is a way provided by the Constitution to accomplish this purpose. That way does not lie along the course of judicial amendment to that fundamental charter. An amendment having that purpose could be submitted by Congress as provided by the Constitution. I do not believe that the Fourteenth Amendment had that purpose, nor that the people believed it had that purpose, nor that it should be construed as having that purpose.[22] 

Corporate persons and the Bill of Rights

Toward the end of the twentieth century a change took place which reinforced and solidified corporate claims to the rights of personhood. The U.S. Supreme Court abandoned both the earlier artificial and natural theories in a radical change of approach that has meant that, “every Bill of Rights guarantee requested by corporations has been granted.” [Mayer, 661] American corporations have gone from having essentially no protections under the U.S. Bill of Rights in 1950 (with the exception of the property-oriented fifth amendment due process clause), to having gained broad recognition of their personhood rights under several sections of the Bill of Rights.  [Mayer, 600] Critics have characterized the supreme Court’s response as amounting to a revival of the “substantive due process” employed by the court of the Reform era in imposing its own economic views by blocking federal regulation of business enterprise.[23] [24]

The dramatic change in the Supreme Court’s approach coincided with an increase in the scope of government regulation of business activities. During the New Deal and Progressive eras, regulation mainly had concerned property rights, tariff rates and anti-trust initiatives. Increasingly, however, in the 1970s and 1980s, federal regulation increasingly was imposed for broadly social reasons such as environmental protection, limiting scientific experimentation and so on. Corporate opposition to such reforms, often passed at the behest of labour, consumer and public interest groups, focused on “aggressive assertion of Bill of Rights protections for corporations.” [Mayer, 603] [25]

Bill of Rights protections currently enjoyed by corporations include those granted by the courts under the First, Fourth, Fifth, Sixth and Seventh Amendments, as follows:

• 1st Amendment right to political speech: First National Bank of Boston v. Bellotti.[26] The 1978 trial centered on the corporation’s right to spend money to influence the outcome of a referendum on instituting a graduated personal income tax in the state of Massachusetts. It was brought by a  consortium of Boston corporations: First National Bank; New England Merchants National Bank; Gillette Co., Digital Equipment Corp. and Wyman-Gordon Corporation. In this landmark case, the U.S. court abandoned both the artificial and natural entity theories of the corporation and relied instead on its interpretation of the intent of the amendment. The question became not whether the corporation was entitled to free speech protections originally intended for human persons, but whether assertion of the right furthered the amendment’s goal of free and open debate. The Massachusetts Supreme Court had employed the artificial entity theory to rule that humans enjoy broader first amendment protections than corporations, which enjoy only fourteenth amendment property protections. The majority of the Supreme Court “dismissed this reasoning as an artificial mode of analysis and radically changed the terms of the debate”[27]:

The Court below framed the principal question in this case as whether and to what extent corporations have first amendment rights. We believe that the Court posed the wrong question. The Constitution often protects interests broader than those of the party seeking their vindication, the fist amendment, in particular, serves significant societal interests, The proper question therefore is not whether corporations ‘have’ first amendment rights, and if so, whether they are coextensive with those of natural persons. Instead, the question must be whether [the statute] abridges expression that the first amendment was meant to protect. We hold that it does…. [quoted in Mayer, 633]

• 1st Amendment right to commercial speech. Central Hudson Gas and Electric Corp. v. Public Utilities Commission 1980 [28] (corporations’ right to commercial speech protected). The court held that a state regulation  responding to the mid-1970s energy crisis by banning all promotional advertising by electric utilities violated the corporation’s first amendment rights. “Relying on Bellotti, the majority found that the paramount right of the consumer to hear overshadowed any question about the right of the speaker to speak.” [Mayer, 634]

• 1st Amendment negative free speech right. Pacific Gas and Electric Co., v. Public Utilities Commission 1986[29] (corporations have a negative free speech right not to be associated with the speech of others). The judgement overturned a state regulation allowing a ratepayer advocacy group to enclose inserts in a public utility monopoly billing envelope. “The plurality’s reasoning followed Bellotti, noting that corporations are no less able than other speakers to contribute to  the ‘discussion, debate, and dissemination of ideas that the first amendment seeks to foster.’” [Mayer, 634]

• 4th Amendment freedom from unreasonable searches. Hale v. Henkel 1906 (an overly broad subpoena for corporate documents constitutes and unreasonable search).[30]

• 4th Amendment freedom from regulatory searches without warrants. Marshall v. Barlow’s Inc. 1978 [31]The court struck down federal Occupational Safety and Health Administration regulations involving unannounced safety inspections of corporate premises—in this case the premises of an Idaho electrical and plumbing corporation. Many inspection provisions in federal statutes were rendered presumptively invalid by the decision. The court found that corporations enjoy privacy rights equivalent to those of human persons and that commercial buildings should be treated in the same way as private homes under the amendment’s protections.

Filing amici curiae briefs in support of the federal government were the AFL-CIO and the Sierra Club, and on the other side, the Mountain States Legal Foundation and the Pacific Legal Foundation (law firms representing corporate interests), the National Federation of Independent Business, the American Conservative Union and the Chamber of Commerce of the United States.

• 5th Amendment freedom from double jeopardy. In United States v. Martin Linen Supply Co. (1977) the Supreme Court ruled that acquittal of a corporation in accordance with the Federal Rules of Criminal Procedure could not be appealed because of fifth amendment protection against double jeopardy. In a 1962 case, Fong Foo v. United States,[32] a lower court had ordered a directed verdict of acquittal in a fraud trial citing improper conduct by the prosecuting attorney. The Supreme Court held that the double jeopardy clause barred retrial of the defendants, including the corporation.

• 6th Amendment right to trial by jury in a criminal case. Lower court decisions have specifically extended sixth amendment rights to corporations, citing, “…the fundamental principle that corporations enjoy the same rights as individuals to trial by jury.”[33] In another case a corporate defendant, convicted of violating a federal racketeering statutes, was considered an “accused” for sixth amendment purposes. The corporation claimed it had been denied its sixth amendment right to counsel because the same lawyer had represented both the corporation and its principal officer. Following the Bellotti principle, the court stated:

The sixth amendment describes the class of persons protected by its terms with the word ‘accused.’ This language does not suggest that the protection of sixth amendment rights is restricted to individual defendants. Furthermore, an accused has no less a need for effective assistance due to the fact that it is a corporation. The purpose of the guarantee is to ensure that the accused will not suffer an adverse judgment or lose the benefit of procedural protections because of ignorance of the law…. A corporation would face the same dangers unless the agent representing it in Court is a competent lawyer.

United States v. Polk and Co., in 1971[34] asserted the “fundamental principle” that corporations enjoy the same rights as human individuals to trial by jury.

• 7th Amendment right to trial by jury in a civil case. In Ross v. Bernhard 1970, the court implied that a corporation has a right to a jury trial in civil cases because a shareholder in a derivative suit would have that right.[35]

In sum, these decisions amount to a sweeping endorsement of a kind of corporate personhood that is for most purposes indistinguishable from human personhood. This status has been achieved entirely through persistent litigation by corporations on their own behalf, and without every having received political sanction. The enormous power held by the modern business corporation is, in other words, a power achieved without reference to democratic processes. It is, in a word, illegitimate.

The Corporation as Machine

The dichotomy of the corporation’s dual machine-like and person-like aspects has been highlighted by the U.S. Supreme Court’s wholehearted acceptance of the essential personhood of the corporation. But at the same time, new theories of he nature of machines and their potential for intelligence and even life emerged to blur the distinction, and help to resolve the paradox of a thing that has characteristics of both living and machine entities.

As an ancient, well-worn word ‘machine’ has many definitions. Most obviously, it is an assemblage of parts…that transmit forces, motion and energy one to another in some predetermined manner and to some predetermined end.[36] There are two key concepts here— predetermined manner and predetermined end. The first means simply that a machine operates according to rules. In fact it is a truism that if a machine fails to follow its operating rules it breaks down and becomes non-functional. The idea of predetermined ends also seems to be central to the idea of a machine. (The word machine is derived from a Greek root meaning expedient.) A machine-like entity that performed according to predetermined rules of operation but produced unexpected ends would be classified as a toy, or a curiosity. Machines, in a word, are intended to be useful.

This idea of usefulness is central to one further definition of machine:  A device, having a unique purpose, that augments or replaces human effort for the accomplishment of work.[37]  An important purpose of machines, thus, is to do work that would otherwise have to be done by humans.[38]

To summarize, a machine is typically characterized by the following:

• an organized structure;

 • rules of operation;

• a predetermined product or outcome;

• the ability to replace or augment human effort.

The modern business corporation fulfils each of these conditions and is therefore properly to be considered a machine.

It is worth recalling that the evolution of the corporation in its modern form coincided with the intellectual revolution that found a focus in Darwinism. As a conception, the newly-minted modern business corporation was inevitably flavoured with the prevailing ideas of evolutionary struggle and survival of the fittest, along with the related theory of utilitarianism and with a vision of laws of economic behaviour as immutable as the laws of Newtonian physics, determining social outcomes with Malthusian inevitability. In shaping the modern business corporation to reflect the nineteenth century understanding of the unfolding of evolutionary progress, lawyers and judges, regulators and entrepreneurs consciously, and in the face of resistance, created an entity that operated on machine principles derived from what were understood to be the natural laws governing societal processes. It was a creature of the nineteenth century ethos of economic liberalism.

It would be a mistake to underestimate the sophistication of the nineteenth-century  understanding  of the concept of machine. Recent biographers of Darwin point out, for example, that computer prodigy Charles Babbage’s ideas of determinism in nature  as  being analogous to programs run on a computer influenced Darwin in his construction of the origins of species in an evolutionary system that conformed to natural laws without divine intervention. [Desmond and Moore, ch. 15.] It is therefore not anachronistic to argue here that the corporation in its modern form was designed through both governmental regulation and judicial interpretation  as a self-regulating machine, Its purpose, it can further be stated, was to further the operations of the market economy by representing, and in a sense automating, those human attributes (self-interest, perseverance)  that classical economists had identified as being responsible for economic progress.

Adam Smith’s Wealth of Nations and works of  succeeding classical economists provided a solid theoretical base for the corporate business enterprise as a basic economic unit through which the dynamic interactions of the market economy were facilitated. Corporations were agents of the “invisible hand” and, like Smith’s economic man, engaged in the pursuit of self-interest, defined as material well-being. The efficient pursuit of corporate self-interest in turn served the self-interest of owners or shareholders, who prospered along with the business.

It is commonly supposed that nineteenth-century liberal economics was based on a philosophy of utilitarianism, but it is more precise to say that the underlying philosophical system was ethical egoism: Adam Smith’s economic man is an ethical egoist. Ethical egoists hold that an individual’s one and only basic obligation is to promote for himself the greatest possible balance of good over evil. They believe, further, that all people ought to be ethical egoists: they must be prepared to universalize or else the theory is not truly a moral system. But when this is done, theory seems designed to lead to a Hobbsian jungle. The only way out of this paradox is to postulate a pre-established harmony in the world, an embedded system within which individual self-interest promotes the welfare of the community. This is precisely the move made by Smith and later liberal economists. The market assumes egoism on the part of economic agents, and it further assumes that market institutions, if left alone, will ensure that individual egoism will result in general welfare. This is Smith’s “invisible hand”.[39] There is of course no empirical evidence for this pre-established harmony—beyond the tautological assertion that “the system works”— and there is a great deal of evidence against it.[40] Nevertheless, the fact remains that liberal economic theory was founded on and remains wedded to a highly dubious moral philosophy.[41]

The market as machine

Economists, whether explicitly or not, tend to think of the market economy as a cybernetic system, a complex of relationships regulated through feedback.[42] [Mirowski, 2002.] An early and influential example of this kind of thinking predates Norbert Weiner’s cybernetic insights by nearly a century and a half. It is David Ricardo’s[43] “iron law of wages”:

Labour, like all other things which are purchased and sold, and which may be increased or diminished in quantity, has its natural and its market price. The natural price of labour is that price which is necessary to enable the labourers, one with another, to subsist and perpetuate their race, without either increase or diminution…. Like all other contracts, wages should be left to the fair and free competition of the market, and should never be controlled by the interference of the legislature. [Ricardo, 1820.]

Ricardo’s theory was based on an earlier ‘law’ proposed by Rev. Thomas Malthus[44], who argued that, since population expands faster than agricultural land can be developed, humans are doomed to live on the brink of starvation unless stern limits on reproduction are put in place. He concluded that such limits are fortuitously imposed by the automatic processes of the market, if left to itself.

In the same mechanistic vein, Jean Baptiste Say[45] proposed a Law of Markets (c. 1830), which holds that an economy always provides sufficient demand to purchase its own output. Revenue produced by production would either be spent, or it would be saved and used for investment, in which case it would also be spent. There could never be any shortage of purchasing power. The obvious implication was that legislative interference in the market was unnecessary and counterproductive. Say’s Law represented consensus opinion in economic theory for more than a century, into the Great Depression of the 1930s.[46]

Out of this system of natural law would grow the laissez-faire market system, an allegedly self-regulating miracle of economic benevolence:

World trade now meant the organizing of life on the planet under a self-regulating market, comprising labour, land and money, with the gold standard as the guardian of this gargantuan automaton. Nations and peoples were mere puppets in a show utterly beyond their control. [Polanyi, 226.]

The corporation as cybernetic system

The import of these and other laws of the market economy (and there were many, most of which we now classify under the rubric of social Darwinism) is the idea that the market is an automatic system regulated by negative feedback—in other words, a cybernetic system. Within this environment, the evolving corporation fit perfectly as a sub-system operating on cybernetic principles, acting as an aggregator of information of the kind the market requires in order to regulate itself. The corporation, too, could be seen as a self-regulating device, designed to facilitate market operations. Like the wider market in which it operated, it functioned optimally in the absence of legislative or regulatory interference. To that end, courts on both sides of the Atlantic bolstered the idea of corporate personhood, empowering corporations to effectively resist burdonsome regulation. The corporation was designed for the single-minded pursuit of profit. That single-mindedness was most forcefully expressed in law as an overarching fiduciary responsibility to shareholders: until the mid-twentieth century American business corporations could be sued by their shareholders for donating money to charity. [Hacker, 1964, 29.]

The dynamics of the corporation’s operations within the capitalist market resulted in an implicit but powerful imperative of continuous corporate growth. Growth was recognized by Smith and classical economists to be the one way to avoid the grip of the Iron Law of wages, as well as a means of justifying economic disparity: the earlier, traditional view had seen wealth purchased at the expense of the poor in an essentially zero sum game, so that one person’s gain was another’s loss. In a growing economy, both the poor and the rich might expect to gain. With the rise of the modern business corporation, an even stronger incentive to growth (in order to maintain or increase market share in a growing market) was added in the need to provide competitive returns to shareholders who might otherwise depart in search of more dynamic opportunities. In this case, failure to grow can mean death. Corporations have proved remarkably resourceful in pursuing this Darwinian imperative. If traditional market-share growth is forestalled for any reason, they will grow through intra-industry merger, pursuit of overseas markets, or both. If these routes are in turn forestalled, they will grow as conglomerates.

Finally, the corporation as an entity representing human acquisitiveness in the market has one very substantial economic advantage: its desire for wealth is not bounded by human psychological factors such as satiation. There is no limit to corporate ‘desire’. This makes it anomalous to Adam Smith’s foundational system, in which human economic actors in the market were restrained to some extent by institutional limits to greed, acting through such psychological restraints as shame. [Muller, ch. 8] It also makes it a somewhat grotesque representation of human beings, whose alleged compulsion to barter, truck and exchange in the pursuit of personal profit is in any case more myth than reality. [Polanyi, 45-6.] It may, however, effectively represent economic man as engineered by two centuries of industrialization under various shades of liberal economic coercion.

The Corporation as an Autopoietic Life-form.

We can at this stage define the modern business corporation as a tool designed to function tirelessly within the (capitalist) economic market place. It purpose, we can say provisionally, is to act as an extension of the self-interest of its owners, or shareholders—it is a machine for maximizing the value of the assets it controls. (See below, “Managing the Corporation.”)[47] [48].  Since WW2 a great deal of research has been done on the nature of machines, broadly defined, and their internal processes.  A brief survey of some of that work and its implications for an understanding of the modern business corporation follows.

Corporations and operations research

The discipline of operations research (OR) defines bureaucratic institutions such as business corporations as cybernetic machines. OR developed out of the collaboration of physical scientists—the discoverers of radar—and military strategists prior to and during WW2. The invention of radar so profoundly changed military assumptions about air defense that the scientists responsible for the technology were invited to help develop replacement strategies, in a planning experiment that proved enormously successful. The goal of OR is to “discover the nature of the underlying system that generates the particular situation under study.” The payoff for such a discovery is the ability to act constructively in situations of incomplete knowledge, such as warfare or commercial competition. “If we know what (the) system is, how it is characterized by quantity, what are its logical relationships internally and with the rest of the world, then we acquire predictive power….Although OR begins with the measurement of variables, it ends by computing in probabilities about future events.”[49] [Beer, 24.]

Operations Research pioneer Stafford Beer has provided a useful paradigm for the corporation as a single-minded entity in his discussion of the need for “variety attenuation” in viable systems, including bureaucratic institutions such as business corporations. Beer asserts that, “Our institutions [produce] the social benefits of their activities simply as by-products of their major bureaucratic undertaking, which is to produce themselves.” [Beer, 1974, 77.] Institutions which are successful at reproducing themselves have managed to achieve continuing homeostasis, according the Beer. The homeostatic corporation—the “viable” corporation in Beer’s terms— in fact operates according to a  regulatory  model of itself. 

…viable systems are bombarded continuously with high-variety stimuli, the variety of which has to be attenuated if the system is not to be overloaded. The attenuation must be done according to a pattern, if it is not merely an arbitrary discard. If that pattern is to have survival value (which is necessary for a viable system) then it must be a regulatory model of whatever is regulated. Then it follows that his must be a central function for the system, because only the system as a whole can have a model of its own relationship with its own environment….All homeostatic systems hold a critical output at a steady level. But some of them [i.e. bureaucracies] have a very special feature. It is that the output they hold steady is their own organization.  Hence every response they make, every adaptation that they embody in themselves, every evolutionary mutation that they spawn, is directed to survival. So their special trick rather well defines the nature of life itself. It also rather well explains why we cannot change our institutions very easily. Their systematic organization is directed, not primarily to our welfare, but to their own survival.” [Emphasis added. Beer, 1974, 71.] 

To the extent, then, that corporations are directed by internal bureaucracies (and the larger the corporation, the more likely this is to be the case), they are focused singlemindedly on profit, for the following reason: survival for the directorship of the modern business corporation (the corporate bureaucracy) demands that they achieve the optimization of return on assets, which in practical, colloquial terms means maximum profit. If managers cannot do this, they will be replaced. If boards of directors fail to discharge their responsibilities for corporate oversight by replacing unsuccessful managers, they, too, are subject to dismissal and may be culpable before the law.

Corporations as Automata

Operations Research is just one of several new theories to have challenged neo-classical analysis and formal mathematical equilibrium analysis based on models from Newtonian physics with a more stochastic, probabilistic approach based on consideration of economic systems and entities as automata. [Mirowski] Mathematical formalism of the kind pursued by neoclassical economists has been found to be insupportable in light of intractable problems, notably the satisfactory mathematical definition of “the rational agent”—a necessity in the formal systems proposed by game theory—and Gödel’s incompleteness theorem.[50] Economic systems are now more commonly seen as “mechanisms that display various properties that resemble computers.” [Mirowski, 292.] In other words, automata. Since an automaton is by definition the machine representation of a formalized set of rules (algorithms) for a computation, it is presumed that the operations of those elements of the economy identified as automata may be duplicated by electronic computers. John von Neumann, who originated automata theory in the context of cold war military operations research, was alert to its potential as a tool of economic analysis:

If social relations could be conceptualized as algorithmic in some salient aspects, then it would stand to reason that institutions should occupy the same ontological plane as computers: namely, as prostheses to aid and augment the pursuit of rational economic behavior. The theory of automata would further instruct us, however, that these were prostheses of an entirely different character than hammers, and more Promethian than fire: they have the capacity to reconstruct themselves and to evolve. [Mirowski, 537.]

Von Neumann further speculated that the theory could be extended beyond examination of individual economic entities to provide useful information about whole systems and their growth and decay:

In the same sense that there could exist a formal theory of evolution abstracted from its biological constituent components (DNA, RNA, etc.), there could likewise exist a formal theory of institutions abstracted from their fundamental intentional constituents (namely, the psychological makeup of their participants). [Mirowski, 537-8.]

Von Neumann only briefly sketched his thoughts on theoretical economic aspects of automata theory and there is continuing controversy over which economic entities can best be treated as automata.[51] Some theorists (reaching back to Leibniz and Hobbes) have regarded man himself as essentially a computational device, while economists view economic man as seeking continually to advance his individual interest through rational— that is, computationally sound— choices within the range of options offered by the market. On the other hand von Neumann, “consistently maintained that his theory of automata should be deployed to assist in the explanation of social institutions.” [Mirowski, 537.] However, he apparently left no guidance as to what specific institutions he had in mind. One recent historian of economic theory has suggested that while it is technically inaccurate and therefore not instrumentally useful (and probably unethical) to treat the individual human actor as an automaton, the markets themselves fit the description, so that, “…the logical apotheosis of all the various cyborg incursions into economics…resides in a formal institutional economics that portrays markets as evolving computational entities.” [Mirowski, 539.] We can suggest further that von Neumann’s automata theory can be applied to the modern business corporation with equal, if not greater, success.

As we have seen, corporations, as large bureaucratic organizations, are in principle amenable to mathematical formalization through well-established techniques of operational research and general systems analysis.[52] In other words, they may be described as logically defined entities that can be embodied in the form of a machine. It would also appear to be a straightforward empirical observation that they reproduce themselves in various ways. A closer examination suggests that they reproduce in ways which meet von Neumann’s criteria; that is, their operational algorithms rather than any outside forces are responsible for their self-replication (see Note 51). Thus they would appear to meet the criteria for inclusion in the class of von Neumann automata.

The human role within corporate automata

AI theorist Herbert Simon has made a suggestive observation in this context: “An important aspect of the theory of automata…[is that] rationality in the organisms often exhibits an hierarchical character. A frame of reference is established, and the individual or social system behaves rationally in that frame.” [quoted in Mirowski, 459.]

This would suggest that, if corporations are automata, the humans within the corporations operate within a hierarchy of rationality—that is, within the rational “frame of reference” established by the automaton. Human behaviour that might seem irrational or destructive (or immoral) in another framework would thus be seen as rational within the frame of reference provided by the automaton.

One of the issues we are exploring here is whether the corporation/automaton controls the humans it employs. The question may to be answerable in terms of von Neumann’s idea of evolution among automata. Evolution implies (by definition) that automata are capable of producing entities more complex than the ‘parent’. History suggests that such increasing complexity resulting from evolutionary reproduction among corporations is commonplace. No better example could be offered than the recent reorganization of Canadian Pacific Railways, one of Canada’s oldest business corporations. The details are touched upon in this corporate press release, which is redolent of the language of birth and regeneration:

“Starburst” creates five new public companies from one

Formal trading begins on Toronto and New York Stock Exchanges

“Calgary, October 3, 2001 – Canadian Pacific Limited today marked the successful completion of its reorganization process. The Corporation’s five operating businesses became fully independent companies with their formal listing and commencement of trading on the Toronto and New York Stock Exchanges.

“In a listing ceremony at The Toronto Stock Exchange (TSE) where he officially opened the day’s trading, David P. O’Brien, Chairman, President and Chief Executive Officer of Canadian Pacific Limited said, “This marks a new beginning for five wonderful companies and brings a number of significant investment opportunities to the marketplace.”

“’The starburst process we announced in February culminates today with the formal creation of five widely held public companies from one. Each company is a star in its own galaxy. PanCanadian Energy is one of North America’s largest independent oil and gas producers. Fording is the world’s second largest producer of metallurgical coal for export. Canadian Pacific Railway is one of North America’s most efficient railways. CP Ships is one of the ten largest container shipping companies in the world and Fairmont Hotels & Resorts is the largest luxury hotel company in North America. Their newfound independence provides these companies with the flexibility and the resources with which to realize their full potential.’”

“Mr. O’Brien added, ‘Canadian Pacific has had a strong presence on the TSE since 1892. Additionally, in 1883, Canadian Pacific was the first company from outside the United States to list on the New York Stock Exchange. I am pleased that Canadian Pacific’s legacy will be the addition of these strong industry leaders to the list of companies participating in both of these important and influential marketplaces.'”

Each of the five Canadian Pacific spawn has the potential to become more complex than the parent. Indeed, the imperatives of corporate growth and efficiency that reside in the competitive market suggest that, in time, each one very likely will do exactly that. This has been the case observed with past disvestitures of a similar nature, for example, the forced break-up of AT&T into a clutch of “baby Bells,” each of which has grown enormously in size and complexity in succeeding years. There would seem to be nothing in principle to prevent corporate automata from achieving the necessary complexity (assuming that this is some finite level) to control their human functionaries in their work lives, if not in their broader social lives as well.[53] Observation would suggest that this is in fact the case, as will be  argued below in “The Corporate Manager: Who’s In control?”

Corporations and autopoiesis

Given the biological character of the modern business corporation as exemplified in its ability to self-replicate and evolve, can we also define it as an autopoietic entity in the modern theoretical sense of a life form? Are corporations in some sense living entities?

It has often been observed that complex cybernetic machines can bear strong resemblances to biological organisms. This may be expressed, as in Descartes, as a naïve mechanistic notion of animate life as literally mechanical rather than just machine-like. A more sophisticated approach is taken by Humberto Maturana and Francisco Varela in their theory of autopoietic entities. [Maturana and Varela.] Their theory takes up where von Neumann left off, providing a theoretical explanation of how automata can reproduce, but it goes much farther. Maturana and Varela propose that living organisms are self-constructing, or autopoietic, and further that autopoietic entities are alive (although there is of course no logical necessity for the second statement). As with Beer’s bureaucracies, or von Neumann’s automata, the one goal of autopoietic entities is survival, which they ensure by to producing and reproducing the organization that defines them. “The living organism is a circular organization which secures the production or maintenance of the components that specify it in such a manner that the product of their functioning is the very same organization that produces them.” [Maturana and Varela, 48]

The authors draw a careful distinction between an organism’s structure and its organization. A human being born a female has, at different ages, different bodily structures generated by the autopoietic entity’s circular (recursive) processes. But throughout her life, through puberty and maturity and in sickness, she has the same organization—that which is characteristic of a living human. Only with death does organization change. [Hayles, 138] The ability of organisms to preserve their organization is what, for the authors, defines them as living systems. Living systems always behave exactly as they should. That is, because they are structure-determined, their operation “follows a course determined only by neighbourhood relations in its structure and by nothing else. It is only in  a referential domain, such as the domain of behaviour, that an observer can claim that an error has occurred when his or her expectations are not fulfilled.” [Matruana, 59] My computer ‘works’ even when it crashes; my body ‘works’ even when it is diseased. Only to an outside observer might it appear otherwise.

Maturana and Varela treat autopoietic organisms as closed systems, arguing that it is in fact their organizational closure that causes them to be alive and guarantees that they will operate as autonomous individuals. “Reproduction and evolution are not essential for living organisms,” [Maturana and Varela , 11] nor should life be defined in terms of genetic codes and DNA. Matrurana writes, “I claim that nucleic acids do not determine heredity and genetic phenomena in living systems, and that they are involved in them, like all other cellular components, according to the particular manner in which they integrate the structure of the living cell and participate in the realization of its autopoiesis.”[54],[55]

As “closed” systems, autopoietic entities must respond to their environments in ways that are determined by their internal organization. The environment does not affect them directly, but merely triggers responses within the system. [Hayles 10] The classic experiment in support of the theory involved the frog’s eye and brain, demonstrating that what a frog sees is not so much a representation of its environment as a construction of an environment undertaken by the animal’s neurophysiological system. [Hayles 135-136][56] Organisms nonetheless must be structurally coupled to their environment in order to survive. (They must breathe air, eat food, etc.)

“In the autopoietic account, there are no messages circulating in feedback loops, nor are there any genetic codes. These are abstractions invented by the observer to explain what is seen: they exist in the observer’s ‘domain of interactions’ rather than in autopoiesis itself.” [Hayles 139] This is antirealism with a vengeance: a critique of traditional scientific empiricism far beyond the speculations of modern anti-realists such as Thomas Kuhn.[57]

The genetic and nervous system are said to code information about the environment and to represent it in their functional organization. This is untenable. The genetic and nervous systems code processes that specify series of transformations from initial states, which can be decoded only through their actual implementation, not descriptions that the observer makes of an environment which lies exclusively within his cognitive domain. [Maturana and Vargas, 53]

The profound implications for epistemology are paralleled by radical, inescapable conclusions about teleology, according to the authors:

A living system is not a goal-directed system: it is, like the nervous system, a stable state-determined and strictly deterministic system closed on itself and modulated by interactions not specified by its conduct. These modulations, however, are apparent as modulations only for the observer who beholds the organism or the nervous system externally, from his own conceptual (descriptive) perspective, as lying in an environment and as elements in his domain of interactions. [Maturana and Vargas, 50][58]

The theory of autopoiesis is sometimes said to have important implications for theories of the subject and the autonomous individual— for traditional humanist ideas that involve self-possession or self-ownership as essential to emancipation. However the theory would seem to reinforce rather than challenge traditional eighteenth century humanism, which sees the subjugation of the human to a machine as an abomination, while at the same time arguing that autonomy is consistent with laissez-faire capitalism. [Smith, 1789.] Autopoietic theory proposes that one of the crucial effects of autopoiesis “is to secure for a living system the crucial qualities of autonomy and individuality.”[59] [Hayles, 142] To account for the case of an entity nested within a larger entity, the authors propose a distinction between the autonomous autopoietic entity and the allopoietic subsystem, such as a cell within a larger living structure. Both are autopoietic systems, but the allopoietic system’s functioning is subordinated to the larger entity—its goal is not simply to produce its own organization. In place of the liberal humanist fear of human subjugation to the machine (or to the human overlord), autopoietic theory finds morally objectionable the case of the nominally autopoietic entity being forced to operate allopoietically.

Autopoiesis in social systems

Of direct interest to the study of the modern business corporation is autopoetic theory’s expanded concept of life, which makes it possible to classify social systems as living entities. “The paradigmatic cyborg for autopoiesis is the state, not the kind of mechanical human imagined by Bernard Wolfe or Philip K. Dick.” [Hayles, 149] The leading theorist in extending autopoietic theory into social systems is Niklas Luhmann.[60] According to Luhmann, autopoietic social systems interact through structural couplings based on communication, which is defined as a recursive process involving first-order and second-order observations. First order observations are observations directly about things being observed; second order observations are ways of more systematically communicating about observations of the first order, in other words, (recursive) observations about first order observations. “Meaning processes”—communication between systems in society—are not seen as purely linguistic or rhetorical but are integral to viability of the systems themselves. Thus, structural couplings are forms of co-evolution, and can be seen in such processes as collective bargaining, contractual agreements, legislative procedures etc. These linkages lead to close interdependencies between the systems which may both advance and retard new evolutions. [Lehmann, 1992] The link between corporations and the market might also be seen as such a structural coupling. (As indeed might be the symbiotic relationship between the Monarch butterfly and the milkweed.)

The examination of the modern business corporation in terms of autopoiesis theory of Maturana, Varela, Lehman and others[61] provide fertile ground for further resrearch. However some tentative observations may be made here:

• The corporation is an autopoietic system. As such, it operates as an autonomous individual.

• As an autopoietic system the corporation may be considered a living entity.

• The corporation may usefully be analyzed in terms of organizational relationships rather than structural (human) elements. In other words, it is at least possible to infer that humans do not run corporations; corporations run their human functionaries.

• Humans function as allopoietic entities within corporations. This is, in principle, a morally objectionable circumstance.

• As autopoietic entities, corporations are intent on preserving and reproducing themselves above all other considerations.

• The structural coupling of the corporation with the wider market (another autopoietic system) is a synergistic relationship in which the nature of the corporation has important effects on the evolving nature of the market (and vice-versa). [62]

AL and the corporation

Corporations may be described as life-forms, not merely in autopoietic sense, but within the conceptual framework of the science of artificial life as well. AL entities constructed in computer laboratories begin with a few simple local rules governing structures that are highly recursive—they involve complex feedback loops—and then allow complexity to emerge spontaneously. The notion of emergence suggests that properties come into being which were not anticipated by the experimenter and which develop on their own. In AL, reality is seen (in a Platonic way) as form rather than matter, just as allopoietic theory sees life in terms of continuity of organization. More radical AL proponents such as Edward Friedkin seen nothing to distinguish biological life from AL programs run on computers: both are complex phenomena generated by underlying code (in Fredkin’s view the binary code of cellular automata). The essence of life is independent of the medium in which it exists, and reality is a software program running on a cosmic computer. [Hayles, 11.]

Ethical Behaviour, the Market and the Corporation

We will return presently to the central question of whether or not human managers can be said in any real sense to control corporate automata. Any such discussion inevitably centres on moral issues, if only because it is in the response to moral circumstance that the machine is most reliably distinguished from the human. It has historically been the opinion of most moral philosophers that humans have an innate moral consciousness, something that is absent in automata.[63] This suggests that it should be possible to distinguish those actions taken by automata from those taken by humans by gauging their moral content. Of course, this assumes that humans always act according to their moral precepts, which is not the case, especially for human functionaries operating within corporate automata. But as we have already argued, humans within corporate automata tend to act in accordance with the demands of the automaton. For present purposes we will classify such behaviour as corporate rather than human. A further difficulty is that a kind of morality is often attributed to the market, which is said to be an expression of utilitarian ethics. We will argue below that, to the extent that it can be said to have any ethical content, the market is actually an expression of ethical egoism, which, it is often argued, is not a moral theory at all since it relates to the selfish individual rather than being other-directed. In fact ‘ethical egoism is an apt, if anthropomorphic, description of the singlemindedly self-serving behaviour of corporate automata.

The corporate shareholder, active and passive

Individuals are involved with corporations not just as employees and managers—as functionaries—but also as shareholders. We have suggested above that the main purpose of the modern business corporation is to represent the interests of shareholders as effectively as possible within the market. By this is meant both material and psychological interests in the sense of accumulating material wealth and in satisfying desires. Shareholders are also sometimes thought to play a more active role within corporations, as overseers and ultimate arbiters of policy in much the same way as voters in a representative democracy ultimately control the policies of the state.[64] We will be examining the first of these roles at some length, but a few words on the second, on the ‘active’ role of the shareholder, may also be in order.

At one time, shareholders controlled corporations, but this has not been the case in any real or general sense for at least a century. Throughout the twentieth century the shareholder has been progressively shunted to the background and today the vast majority of annual shareholder meetings (mandated by ancient law) are strictly pro forma affairs at which shareholders are represented by corporate managers exercising proxies. Furthermore,

…approximately a third of all stock purchases are held for less than six months. Thus an appreciable fraction of those who are the legal owners of corporate America are not on-going constituents of the firms in which they happen to hold shared but rather transient investors with no sustained interest in the fortunes of the companies bearing the names of their stock certificates. More important, it is no longer true that the significant owners of corporation stock are human beings whose interests are represented in the exercise of corporate power. Stockholders are now more and more not people but instead institutions, many of them also corporate in structure, If it is proposed that a corporation ‘represents’ the owners of its shares sit will soon emerge that man y of these owners are insurance companies, universities, banks, foundations, pension funds, and investment houses. These institutions do, of course, have interests. But…they are not the interests of people. [Hacker, 6.]

The role of the shareholder has been further compromised by the erosion of legal liability (or bolstering of legal protection) of shareholders that has been a feature of twentieth century corporate jurisprudence. An important characteristic of the modern corporation in this respect is the total immunity it grants its shareholders from legal liability. This is a modern development, and was seen as a radical departure from past practice. [Gabaldon, 1992] Prior to the 20th century, corporate owners were expected to supervise the use of their money. When harm was done, the law extracted damages from shareholders, proportional to their holdings. This was the concept of limited liability.

The modern condition of complete immunity from legal prosecution allows shareholders to invest in and earn money from corporations while being free from liability for harm caused by the corporation in the course of its activities. This removes the shareholders’ interest in supervising the corporate decision-making process. “This presumably means that more risks will be taken (by the corporation).”  [Gabalon, 1992, 1408] The effect is reinforced by the fact that corporations themselves are often shareholders in other corporations. This further distances the human actor from corporate risk-taking.

Gabalon notes that “regardless of the legal effect on policy, the fact that limited liability is enshrined in the law can inflict a separate harm by shaping values and social reality.” [Gabalon, 1992, 1429] The doctrine contains implicit within it Adam Smith’s contention that in a market economy individual vice (acquisitiveness) leads to social virtue (wealth among nations).

Fox writes of “the psychological costs when real persons are motivated only by profit, undeterred by either legal or moral constraints.” He argues that limited liability doctrine has served to narrow the distinction between real and corporate persons:

Just as corporations have escaped the legal requirement that they serve a public function, individuals under corporate capitalism are encouraged to seek profits despite the public good. The parallel should not be surprising, perhaps. If the amoral corporate person is a social good, after all, then why not the amoral individual motivated only by higher dividends.” [Fox, 5]

Here Fox raises the central question of economics as a moral science: what is the nature of the moral idea on which economic theory is based, and what is the role of the corporation within that moral structure? Finally, what is the position of the human functionary within the corporation?

Economics as moral science: corporations as moral entities

For its earliest practitioners, economic science was seen as a moral science[65], in the sense that it described the ways in which economic institutions coaxed and coerced individuals into acting for the general welfare. The question then is raised: If corporations behave as human surrogates representing human desires in the marketplace, are they not also subject to the benign influence of market institutions, and are their self-serving actions not automatically turned into public benevolence? The answer, we argue here, is no, in part because of the differences between the corporation and the individual, and in part because of the way in which the market economy operates.

Like the rest of the social sciences, economics was strongly influenced by nineteenth century notions of evolution that seemed to put biological, and even societal, processes in an epistemological category similar to the physical sciences. That is, they were seen to be governed by natural laws that were accessible to rational (mathematico-scientific) understanding. As laws of nature, these rules of operation were considered to be morally neutral in the same sense as were the laws of physics. Economics, however, was never entirely able to leave behind its moral baggage, because it deals at its most basic level—the distribution of scarce goods—with questions of justice: who deserves how much? This problem was solved when economic science early in its development made the happy ‘discovery’ that moral considerations were in fact automatically dealt within the capitalist market’s self-regulating, cybernetic processes.

Adam Smith was recognized in his time as both an economist and a moral philosopher, and published important works in both disciplines. His economic theory was deeply informed by his moral thought.[Muller.] Smith believed that if what he called “commercial society” is to thrive and yet remain within the bounds of decency and civility, certain virtues must be fostered. The virtues of prudence, self-control, respect for life and property in particular must necessarily be widespread, in order to counteract the alleged egoism of economic man.[66] The most successful way to promote them was not through the persuasion of religion or the coercion of the state (both approaches had been tried and found wanting), but through economic institutions—the “institutional direction of passions.”

His purpose was to make people more decent by designing social institutions which draw the passions toward socially and morally beneficial behaviour. This is the thread that runs through all his works: how the market can be structured to make the pursuit of self interest benefit consumers; how the passion for the approval of others can make us act more selflessly; how public institutions can be structured to ensure that they deliver the services they are mandated to provide; how our desires for sex and progeny can be structured by the law to create family institutions that foster self-control ….” [Muller, 6-7.]

For Smith, the greatest benefit of the commercial society was that, through the incentives it provided, it encouraged people to “develop what he termed ‘imperfect but attainable virtues’ which provided the basis for a decent society: self-control, the ability to defer gratification, and the propensity to orient one’s actions to the needs of others.” [Muller, 8.]

It was clear to Smith, as it was to contemporary moralists, that most of the passions that were destructive of “decency” in society could be reduced to one form or another of pride, the non-rational and deep-seated desire to be admired. Smith believed that this desire, though in no way virtuous in itself,[67] could be harnessed by the market to ensure conformity to socially approved forms of behaviour:

He devoted The Wealth of Nations primarily to showing that self-interest, when properly channeled by social institutions, can produce socially beneficent effects and behaviour. In The Theory of Moral Sentiments, he focussed on the role the desire for approbation plays in producing propriety and virtue. In both works, as well as in his lectures in jurisprudence, he explored the institutional direction of the passions toward morally and socially beneficent ends. Though persuaded by writers of the seventeenth and eighteenth centuries that self-love and self-interest may lead to socially positive effects, he was aware that whether or not they actually do have such effects depends on the institutions through which they are channeled and directed. [Muller, 98.]

This Smithian perspective was adopted by succeeding generations of political economists including Thomas Malthus and David Ricardo, and Stanley Jevons who defined economics as “the mechanics of utility and self-interest…to satisfy our wants to the utmost with the least effort—to procure the greatest amount of what is desirable at the expense of the least that is undesirable—in other words, to maximize pleasure, is the problem of economics.” [Jevons, p.101.] It survives in modern textbooks as an account of “the economic way of thinking”:

It is, most fundamentally, an assumption about what guides human behaviour. The theories of economics, with surprisingly few exceptions, are simply extensions of the assumption that individuals take those actions they think will yield them the largest net advantage. Everyone, it is assumed, acts in accordance with that rule….” [68]

Another example, from the widely-used  McGraw-Hill textbook Economics:

Capitalism presumes self-interest as the fundamental modus operandi for the various economic units as they express their free choices. The motive of self-interest gives direction and consistency to what might otherwise be an extremely chaotic economy….[69] [70]

      In Smith’s view, pursuit of self-interest beyond the bounds of propriety and decency—the control of “our mutinous and turbulent passions”—was ultimately restrained by conscience, a phenomenon he relates to the interaction of two psychological factors: our egoistic need for the approval (or “sympathy”) of others and our ability to imagine ourselves in the place of others. These are the elements of social psychology that make it possible for the market and other social institutions to guide us to self-control, the exercise of virtue and even altruism.

Though we are naturally inclined to prefer our own interests to the interests of others, our egoism is restrained to the extent that we learn to judge our actions as they must appear to outsiders who do not  share our egoistic partiality toward ourselves. Moral consciousness, for Smith, is a process of internal conversation, of talking to ourselves. In that process, our natural egoism is partially restrained by our awareness of an external standard, the standard which we would use to judge our actions if we were a spectator who was biased neither toward ourselves nor toward those affected by our actions. [Muller, 1993, 102-3.]

Corporations as economic agents

The question arises whether corporations, in acting as proxies for large numbers of individual, self-interested, shareholders,  are also restrained in name of  some Smithian conception of social decency or public good. For without that restraint, Smith believed, the market could not function in the interest of human welfare.[71]

In its influence on individual entrepreneurs, the market was presumed to provide clear disincentives to immoral behaviour along with the positive reinforcement of altruistic tendencies. According to Smith, “The real and effectual discipline which is exercised over a workman…is that of his customers. It is the fear of losing their employment which restrains his frauds and corrects his negligence.” [Smith, 1976, 146.] The behaviour this fear engenders he called “propriety,” which he listed among those virtues promoted by commercial society. Corporations would appear, in principle, to be constrained by analogous concerns (losing market share), and might be said to be exercising propriety on behalf of their individual shareholders.

But if corporations represent the commercial “virtues” of their shareholders, they also represent their vices. Where self-interested acquisitiveness is concerned, the corporation does more than simply act as agent for the individual shareholder. It collectivizes this self-interest, and amplifies it enormously. In effect, the corporation “improves” on the human self-interest it represents because in the hands of the corporation this becomes in principle limitless, whereas it may be presumed that there are finite limits to individual human desires (Smithian or otherwise).

Given the generally approving (or at least forgiving) attitude of Smith and succeeding generations of economists to human acquisitiveness as a necessary engine of economic progress, this amplification effect might be regarded as a good thing. However its unrestrained nature is problematic. In individuals, excessive acquisitiveness was curbed by the psychological need for the approval of others. Corporations, of course, have no psychological needs. Where humans have limits to their economic drives, corporations have none. Where humans tire, corporations, as machines, have infinite endurance. Where humans may exhaust their acquisitive imaginations, corporations are inexhaustible.

Moreover, modern corporations are equipped with arsenals of legal and political weapons which render them highly resistant to legislative regulation which might be proposed as a stand-in for human propriety. The corporation is thus much more than a mere organization for managing assets—it is an engine of growth whose operations create markets far bigger than those that would evolve if the process were left in human hands.

Another way to put this is that economic science’s fundamental premise—that economic agents are egoistic—was never entirely true of humans, but is unequivocally true of corporations. Corporations, thus, are superior economic agents because their behaviour is more consistently in accord with the assumptions of economic models.

It is doubtful that Adam Smith would have approved of the extent to which the modern corporation dominates economic intercourse. In the second edition of The Wealth of Nations he said:

Consumption is the sole end purpose of all production; and the interest of the producer ought to be attended to only so far as it may be necessary for promoting that of the consumer. The maxim is so perfectly self-evident that it would be absurd to attempt to prove it. [Emphasis added.]

He goes on to decry the distorting impact of mercantilist, protectionist restrictions on trade and commerce that interfered with the free functioning of the market, to the benefit of a few wealthy monopolists:

But in the mercantile system, the interest of the consumer is almost constantly sacrificed to that of the producer; and it seems to consider production, and not consumption, as the ultimate end and object of all industry and commerce. [Smith, 1976,  660.]

Corporate power has in the early 21st century both extended and amplified the mercantilist bias in favour of the  producer. This is further evidence that the Smithian “negative feedback” loops provided by human psychology to regulate and moderate the market fail to function when human desires are delegated to corporations. In Harold Innis’ terms, it may be seen as evidence of the highly “space-biased” nature of the corporation, whose interests lie not in community but in expansion. [Innis, 1951]

Nevertheless modern neo-classical economic theory continues to posit moral outcomes from self-directed behaviour.

It is a basic feature of our contemporary culture that neo-classical economics continues and sharpens the ethico-scientific frame of the classical tradition. Put in summary terms, neo-classical general equilibrium theory implies that if individual producers and consumers are left free to act in a solely self-regarding fashion to maximize their own profits and utility in a perfectly competitive market economy, then, as a consequence, the common good or social utility will be “Pareto” maximized. More precisely, “common good” is here defined as the satisfaction of the totality or aggregate of given individual consumer desires, but as consistent with the Paretian distributive constraint—namely any movement from the “Pareto-optimal” state would make some consumer worse off in terms of the satisfaction of his de facto wants. [Hodgson, 2002.]

Contemporary neo-liberal economic and political thought is premised on this view. One influential advocate, Robert Gauthier has argued that such an economic order does away with the need for moral restraint from either inside or outside the system: “[T]he coincidence of utility-maximization and optimization in free interaction removes both need and rationale for the constraints that morality provides…”. [Gauthier, 93.] In this modern neo-classical view, the moral perspective has been newly re-integrated into economic theory, only to be dismissed as an unnecessary and redundant complication that, following Ockham’s dictum, is best eliminated. Like classical economists who believed they had discovered operative laws of nature that effectively coerced men into correct behaviour, neo-classicists like Gauthier define moral outcomes simply as a necessary product of the free market.

Philosophical critiques of current neo-classical economic theory have recently pointed to systemic flaws in the underlying theoretical rationale, while at the same time inadvertently shedding light on the current, often puzzling, advocacy of increased corporate involvement in every aspect of social life.[72] The pro-corporate argument, in brief, is that the market system distributes justice, but only if it operates efficiently. It can operate efficiently only if populated by ‘rational’ economic agents. Corporations, as automatons, will operate in a more consistently ‘rational’ manner than humans (consistency being the sine qua non of rational behaviour). Therefore corporations are to be preferred as economic actors to humans, because they will bring about more just economic outcomes. Ironically, perhaps, for a discipline that prides itself in its moral detachment, it is a normative rationalization more appropriate to an ideology than a science.

The rationale is deeply suspect from a philosophical point of view, as the following argument demonstrates:

1. Justice is an extension of the first principle of rationality—consistency. Justice does not permit of exceptions, on behalf of oneself or anyone else.

2. Neo-classicists take an Aristotelian view of distributive justice: “All workers (indeed all factor services) are considered to be treated in an impartial egalitarian manner in that unequal return for the service of different kinds of workers is to be in exact proportion to the unequal desert of such workers as calculated by the value of their marginal product—i.e. the increase in revenue from total output [realized by] the addition of one worker of that type.” [Hodgson, 2002.]

3. But it is clear on even perfunctory examination that a worker’s productive contribution has much to do with his or her physical productive assets, as well as his or her intellectual abilities, talents and other uncontrollable social and genetic contingencies. Thus, the awarding of unequal distributive shares according to marginal product is inconsistent and morally arbitrary.

4. Neo-classical economics cannot, while remaining consistent, recommend extra-market corrections for these unjust outcomes[73], because these would constitute the kinds of interference with the automatic functioning of the market that will lead to imbalances and inefficiencies. In particular, they would erode the incentive of material gain (self-interest) on which the system is based. “If such attempts are made to superimpose equity on the competitive equilibrium then its efficiency is jeopardized. If income transfers are achieved by progressive taxation, then the marginal conditions of optimality that follow from the motivational assumptions of the competitive model are violated.” [Winch, 99]

5. Neo-classical commentary, while recognizing that the system produces distributive injustices, is unable to recommend measures for integrating redistributive justice within the system (or outside it). This being the case, it is impossible to call the neo-classical commentary ethically neutral from the point of view of social equity.

6. Neo-classicists and their supporters sometimes resort to characterizing the market system as “essentially just”, in the sense that there is widespread popular consent to the  distributive inequities on the grounds that extra incentives to highly talented, privileged or productive persons produces such abundant wealth that everyone benefits. In other words, the worst off in society are better off than they would be under any other economic arrangement. But this offends against the meaning of justice as a fundamental axiom, a categorically desirable human trait that inclines individuals to render unto to others that which is their due.[74]

Hodgson’s response to this commentary is typical of many other critics of the market system, and it is worth quoting here because it makes an unstated point of some consequence in the present context:

“In real life terms, highly driven market maximizers, favourably positioned in the possession of external capital or productive talent, can be, and typically are, completely indifferent to what is due, as a matter of moral justice, to those who occupy other kinds of competitive positions. There is no disposition by such self-regarding maximizers to respect a baseline of equality in their dealings with other market actors unless a relevant difference in desert of the latter can be identified to warrant unequal treatment. There is simply the single-minded pursuit of the greatest obtainable utility or profit by individual market maximizers; indeed, whatever inequality obtains in the distribution of capital resources or consumer goods is expected as the foreseeable consequence of such pursuit.” [Hodgson, 2002.]

Hodgson’s “maximizers” can only be corporate automata: human economic agents, it is safe to say, are never so single-minded, nor free of conscience.

The human economic agent

Human economic agents, in fact, do not always seek to maximize their individual benefits. They are not (at least not always), the desiring machines of neo-classical theory. If optimal economic outcomes can be said to amount to the fulfillment of desires in order to produce Utiltiarian happiness, then it is an observable fact that many people chose to reach a balance in distinctly ‘uneconomic’  fashion. That is to say, they behave Stoically, and seek to achieve a high ratio between desires and their fulfillment by simply restricting the quantity of their desires. Or else (or additionally) they govern their actions from an ethical perspective, in which case they do not act in response to immediate desire, but out of enlightened self-interest, which is concerned more with needs than wants.[75]

 It is not the case, as neo-classical theory proposes, that all people always want more.[76] In fact, humans who do fall into this category of desiring machines are often said to be mentally ill. Aristotle described such behaviour as pleonexia, a pathological acquisitiveness that is characteristic of unjust men. [Hodgson, ch. 5.]

 It is in this sense that human economic agents behave “irrationally” in the economists’ mind: Gautiher’s canonical assertion that “Appropriation has no natural upper bound. Economic man seeks more,”[Gauthier, 318] must be incorrect. And here the advantage to having corporations act as surrogates for such irrational creatures is clear. Pleonexia is the fundamental driving force behind the mechanism of the neo-classical market economy—it is of vital importance that it not be undermined by human virtue in the form of either Stoicism or justice. Corporate automata are the chosen instruments for ensuring that this does not happen.

But as we have already noted, Smith, Mill and other classical economists insisted that the system depends for its functioning of certain internalized moral standards or social norms. As Fred Hirsch observes:

[C]onventional, mutual standards of honesty and trust are public goods that are necessary inputs for much of economic output….Truth, trust, acceptance, restraint, obligation—these are among the social virtues grounded in religious belief which are now seen to play a central role in the functioning of an individualistic, contractual economy…. An extreme but pertinent example illustrates the wider point. If judges were regularly to sell their services and decisions to the highest bidder, not only the system of justice but also of property would be completely unstable….If everything can be privately appropriated, including judges, then nothing can be—for who will save the system from the first entrepreneur to be able to raise enough credit to buy the judge and everything else through him?[77] [Hirsch, p. 141.]

It follows that, if corporations are to act as market avatars for humans, they must be made to conform to the same social standards that have been internalized by human economic agents. If they do not, the market cannot function properly (a point that is daily being made in the news). (See Appendix 1, below, for a different moral argument leading to the same conclusion.)

Corporate Management: Who’s In control?

The corporate functionary

To return, then, to the question of the relationship of human functionaries to the business corporations they serve: who controls whom? Automata theory suggests that it is at least possible to conceive of a corporate automata sufficiently complex to be capable of controlling its human functionaries rather than vice-versa. This is particularly clear when it is realized that human functionaries working within corporations voluntarily submit to contracts, real or implied, that limit the scope of their actions to narrowly-defined parameters that serve corporate interests. It follows that it is at least possible that the point of corporate control has already been reached.

A great deal of puzzling human behaviour can be explained if the idea of the control of human functionaries by corporate automata can be shown to be valid. One overarching example will suffice to make the point: it is a truism that if consumer products were made to last for as long is technologically feasible, a number of serious human problems would be alleviated. Both pollution and resource exploitation would be minimized, and (assuming a stable population) allocation of wealth would over time would trend toward equality. In time (all things being equal) there would be enough of everything for everyone. Justice would be served. However the current economy operates in exactly the opposite way, using various means (disposable products, planned obsolescence, etc.) to deliberately maximize economic throughput, at the same time maximizing pollution and resource exploitation. These are production decisions made almost entirely by corporate automata. One would presume that if human beings were controlling the decision-making process, those choices would reflect human interests—yet they do not. Corporate interests are advanced, in fact, at the risk of human survival. This suggests not human control, but control at a higher level by the corporate automata.[78]

As one popular critic has put it,

“The leaders and institutions that promised a golden age are not delivering. They assail us with visions of wondrous new technological gadgets….Yet the thing things that most of us really want—a secure means of livelihood, a decent place to live, healthy and uncontaminated food to eat, good education and health care for our children, a clean and vital natural environment—seem to slip further from the grasp of most of the world’s people with each passing day.” [Korten, 18-19.]

The fact that corporations routinely act unethically and with blatant disregard of the interests of human society can be explained in two ways: corporate managers are (in these cases of unethical behaviour) immoral or sociopathic people; or, alternatively, they are typical of ordinary people in their community, family and private lives but are constrained to act in these ways. The incidence and scale of corporate misbehaviour is too widespread to make the first explanation tenable. A more probable reason is therefore that corporations demand of the quite ordinary persons they employ that, whatever their moral standards may be in their private lives, they operate according to corporate ‘ethics’ at work. The constraint may be either internal or external. That is, corporate managers may be coerced by sanctions into adopting corporate behaviour, or they may act willingly, in accordance with internalized beliefs. In the either case—by coercion or by persuasion—the corporation is imposing its will on its human functionaries.[79] The system must needs be imposed because it is essentially inhuman, that is to say, unnatural in a human context. [Polanyi, ch. 4.] What seems at first a kind of moral schizophrenia on the part of corporate workers might be better seen in terms of Deleuze and Guattari’s notion of “paranoia” as “an absolute system of belief where all meaning [is] permanently and exhaustively defined by a supreme authority…”. [Holland, 3.] Conformity of workers and managers to the ‘ethical’ standards of the corporation is a kind of self-repression or paranoia engendered by the capitalist system. Schizophrenia, in this framework, would represent a solution to this kind of destructive conformity and an opportunity for re-connection of private and corporate lives.[80]

According to Coleman, people employed within corporations act not as individual decision-makers but as agents of others—ultimately, of the corporate entity—and in this way avoid feelings of personal responsibility. Managers make decisions and give orders in the name of the corporation and not in keeping with their personal standards and values. [Coleman, 1982]. Kelman and Hamilton report on how “the psychology of giving and following destructive orders and making dangerously risky decisions takes on added import within a legal framework that assigns responsibility not to real individuals but to an intangible entity.” [Kelman and Hamilton1989] According to Mitchell, “No feelings of guilt are required, no attributions of moral blame permitted, when the stream is polluted, the baby food is diluted, or the Pinto explodes. The institution defines the moral role, and in the case of the corporation, the moral role is narrow indeed.” [Mitchell, 1995, 523-524]

Tomkins, Victor and Adler have summarized the large literature on “psychological realities” of corporations that lead to increased risk taking on the one hand and failure to acknowledge moral and legal responsibility for harm on the other. These include diffusion of responsibility; role specialization; incomplete information; organizational culture; and management’s ability to punish nonconformity and disobedience. [Tomkins, Victor and Adler 1992]

(These sociological analyses, however, merely beg the question being asked: what is the nature of the ‘moral role’ to which employees are asked to conform; and why is it so ‘inhuman.’?)

To the extent that the corporation, as automaton, can be said to possess a psychological makeup independent of its individual human actors, that psychology can be characterized as exhibiting obsessive, limitless acquisitiveness, and a high predilection for risk-taking combined with an indifference to external consequences of its actions. In Freudian psychological terms, the modern business corporation might be described as narcissistic; in philosophical terms it is egoistic.

Erich Fromm’s discussion of group narcissism is descriptive of the relationship between the narcissistic group and the individual player. To the extent that a corporation may be considered such a narcissistic group (and ‘team-building’ management technique aims explicitly at creating such an atmosphere), it helps to explain why antisocial activities that further the goals of the corporation may be condoned both at the individual and the corporate level.

When, in group narcissism, the object is not the individual but the group to which he belongs, the individual can be fully aware of it, and express it without any restrictions. The assertion that ‘my country’ (or nation, or religion [or corporation]) is the most wonderful, the most cultured, the most powerful, the most peace-loving, etc., does not sound crazy at all; on the contrary, it sounds like the expression of patriotism, faith, and loyalty. It also appears to be a realistic and rational value judgment because it is shared by many members of the same group. This consensus succeeds in transforming the phantasy into reality, since for most people reality is constituted by general consensus and not based on reason or critical examination. Group narcissism has important functions. In the first place, it furthers the solidarity and cohesion of the group, and makes manipulation easier by appealing to narcissistic prejudices. Secondly, it is extremely important as an element giving satisfaction to members of the group and particularly to those who have few other reasons to feel proud and worthwhile….An individual, unless he is mentally very sick, may have at least some doubts about his personal narcissistic image. The member of the group has none, since his narcissism is shared by the majority….Group narcissism is one of the most important sources of human aggression, and yet this, like all other forms of defensive aggression, is a reaction to an attack on vital interests…. [Fromm, 230-231]

Corporations as cyborgs

Despite the theoretical basis for describing corporations as life-forms (artificial or otherwise) it remains problematical whether corporations can credibly be described as living entities in public discourse. Is the sense in which corporations are alive the same sense in which the idea of life is normally expressed? This is mainly a cultural question (discussed exhaustively, for example, in the critical literature surrounding Dr. Jekyl and Mr. Hyde and Frankenstein). The idea of an intelligent robot is not alien to the Western, Cartesian mind, accustomed as it is to thinking of all living creatures as complex machines, either mechanical or biological. In Jewish folklore, the golem is a robotic entity endowed with life, whose only fault is in carrying out his master’s orders too literally. However, we have no examples of autonomous life-forms that are made up of collectivities of other living, autonomous entities, except perhaps the ecologist’s Gaia. The living, cybernetic corporation is a unique hypothesis.

There may be a useful analogy to be drawn between the corporate automata and the notion of intelligent behaviour exhibited by the hive or swarm created by social insects such as bees and ant. The very limited intelligence of each member of the hive, when networked to others like it through some form of communication (dance, pheromones), becomes a part of an emergent meta-intelligence that makes complex decisions about when to split the hive, where to relocate, how to mount a defense, and so on.[81] In a similar way, individual ‘dumb’ neurons in the human brain, when networked together, combine to constitute consciousness and intelligence. In both of these cases, the individual elements of the hive entity are relatively dumb—in the case of the neuron, radically so.[82] Could a corporation be so constituted?

It might be argued that the humans who compose the corporation are a far cry from the dumb constituents of a typical swarm or hive. They are autonomous, intelligent, purposeful creatures in their own right, and so the hive analogy does not hold. However, while it is obviously true that humans are more intelligent than ants or bees (or individual neurons), and are capable of a much wider scope of autonomous action, it is also true that when they are employed by a corporation, they contractually submit to corporate rules, policies and cultural conditioning that severely limit the acceptable and even possible range of behaviours. Sanctions against stepping outside these boundaries are severe.

It may be acknowledged that, within the behavioural limits prescribed by corporate culture and policy, individual workers are expected to exercise autonomous judgement in their areas of responsibility. Without this ability on the part of their employees, most corporations could not survive because they are far too complex to be micro-managed from above. In the same way, ants and bees exhibit limited local autonomy. [Hölldobler and Wilson] Nevertheless it is a fact that most corporate jobs, including management positions, as so mechanical in their essence that they can be automated:

Humans fill the roles in productive processes that are uneconomical to mechanize. This should not be a shocking statement, for if any of our jobs could be done at a lower cost by a machine there is no doubt that this would come to pass. Similarly, there is no doubt that each day technology closes in on new intellectual tasks that previously required human intelligence, which is just another way of saying that the tasks is being rationalized to the point that it can be reduced to formal description and performed by an algorithm. If there is not at this very moment someone formulating a plan for displacing all or part of your labour with machinery, then the sad fact is that you make too little money to make it worthwhile. [Kennedy, 156.]

If the idea of the ‘dumb’ human functionary is accepted, the swarm analogy makes it possible to conceive of corporate automata that are not only classifiable as living entities, but are also possessed of an emergent meta-intelligence based on the networked, lower-level activities of its human workers and managers. How do we recognize this ‘mind’? In the same (and only possible) way we recognize and acknowledge mind in any creature: by observing its behaviour. As we have argued, corporations do appear to exhibit intelligent behaviour in their roles as economic agents, and that behaviour is frequently at odds with human goals and interests—including the interests of the workers and managers whose collective activities create the ‘hive’ mind. Corporations do seem to have ‘minds of their own.’

To further clarify the vision of the corporation as cyborg, we can imagine a business corporation in which all positions formerly occupied by human workers have been taken over by robots. To the extent that it can be achieved without endangering profits, this in fact seems to be a strategic goal of most business corporations, since it reduces the cost of a key factor of production. We would have no difficulty defining such an entity as a robot or automaton. (It would in fact qualify as a complex ‘expert system.’) It would continue to exhibit all of the characteristics of both intelligence and artificial life, as discussed above. And there is no reason in principle to think that its behaviour would seem any different to an outside observer than it had previously. As corporations approach this goal, it would seem reasonable to describe the interim human-machine hybrids as cybernetic entities—part human, part machine.

Public policy issues

Scenarios such as these raise important epistemological issues which have policy and governance implications. The principle question raised is, who is represented in the exercise of corporate power and influence? One can imagine a case in which a corporation owns its own shares (having purchased them on the market) and in such a casee hypothetical case above, the only possible answer is, the corporation represents its own interests. In reality, of course, corporations are owned by a diversity of shareholders. However, as we’ve seen, these are often other corporations,  and individual human shareholders rarely have the inclination or ability to exercise voting influence over corporate policy. In practice, most corporations most of the time act in accordance with corporate interests as opposed to those of shareholders, directors or the public at large. The phrase ‘as opposed to’ may be challenged here, with the argument that pursuit of corporate interest—that is, profit—ultimately serves the public interest through the “pre-established harmony” of the market. This is true if and only if the public’s interest is defined in terms of personal material wealth, which is too narrow a definition to be either accurate or useful.

Public policy implications raised by the existence of corporate automata may be summarized as follows:

The model

 In classical and neoclassical economic theory, rational human economic agents are presumed to be motivated solely by material self-interest (ethical egoism).

• The pursuit of individual self interest is presumed to lead, via the market, to collective welfare.

• Modern business corporations are designed to serve as avatars for human agents in the market. They are intended to be ‘perfect’ rational economic agents, efficiently pursuing their material self-interest.

• The self-interest of the corporation is presumed to coincide with the self-interest of the humans it represents in the market., and thus lead to human welfare. That is, corporations, in pursuit of their own self-interest, are presumed to be acting in the interest of human welfare.

The problem

• Complex modern business corporations have evolved into powerful automata that pursue basic interests other than profit—namely self-preservation and continuous growth.

• In the pursuit of these interests, corporations often act in ways that are detrimental to human welfare. Even in their pursuit of material wealth, corporations are often at odds with human welfare, because there is no limit to their acquisitiveness. There is nothing built into the model to  ensure that corporations, in pursuit of their self-interest, do not harm human interests. Avoidance of harm can in principle be accomplished by state regulation—regulation, however, is deemed to be counter-productive in liberal economic theory.

• The model does not function as was intended, (that is, does not maximize human welfare) because corporate interests often differ from those of the humans the corporations represent in the market. This should not be surprising, since corporations are different from humans.[83]


Economics is by definition a moral science. Whereas other sciences, particularly the so-called hard sciences, are focused primarily on the acquisition of knowledge, economics sees as its primary goal the promotion of human welfare—that is, with the production of “good”. Its philosophical foundations in this regard, however, are singularly unsound.

The ethical system usually attributed to economics is utilitarianism, in that economic policy judgments are normally made in terms of that which produces the greatest balance of good over evil. Early economists such as John Stuart Mill were also declared Utilitarians. However a serious flaw in Utilitarian thought has long since discredited it as a sound moral basis for market theory. The flaw is that it is possible to imagine cases of two (or more) policies that will produce exactly the same quantity of good over evil, but where one policy will involve some immoral or unjust act (such as confiscating property). Or it may be the case that one policy distributes most of the good to some small, undeserving minority, while the others distribute it equally. In both cases the Utilitarian (both Act and Rule) will have to accept that the policies are equally good, even though one is clearly morally superior to the other. [Frankena, p. 33.] To the extent that economic policy-makers follow moral precepts, then, they cannot, ultimately, be Utilitarian. Alternatively, if they follow Utilitarian principles, their decisions will not be consistently moral.

In response to the second of these paradoxes—that of unequal distribution—Mill argued that utility really means the promotion of the greatest good for the greatest number of people. Understanding this, we would chose the policy option that is most equal in distribution. However, this is no longer a strictly utilitarian principle, since it tells us to a) achieve the greatest balance of good over evil, and b) distribute the good as widely as possible. This is a combination of utility and justice. Justice, however, is an absolute or deontological principle, as we saw above in the discussion of Hodgins. (There appears to be no coherent response to the first paradox, in which one policy involves the use of immoral means to the utilitarian end.) It is clear from this that for Utilitarianism to be an adequate moral theory on which to base economic policy it has to be bolstered by a theory of justice. However theories of justice are not prominent in modern market theory.

In practice, the moral outlook adopted by economic science since its inception is not Utilitarianism, but ethical egoism.  Economic agents are universally characterized (usually tacitly) as ethical egoists. This view states that “an individual’s one and only obligation is to promote for himself the greatest possible balance of good over evil.” [Frankena, p. 16.] This implies further that not only as an actor, but as an observer and advisor, the economic agent makes moral judgements and dispenses moral observations according to what is to his own advantage.

Within the ethical egoism system ‘good’ outcomes can be defined any way the agent wishes. The definitions could involve pure hedonism, as with Epicurus, or pleasure as with the early Utilitarians, or Plato’s mix of pleasure, knowledge and other good things. In each case, evil would be the opposite. Modern economic theory defines good as material wealth and the egoistic economic agent therefore seeks to promote for himself the greatest possible material wealth. This he does for its own sake and not because it in some way benefits others (though it may do that).

The standard philosophical criticism of ethical egoism remains persuasive. It is that it is self-contradictory.  From a Kantian perspective, the argument is this: Since it cannot be to one’s advantage that all others should assiduously pursue their own advantage, one cannot will the egoistic maxim to be a universal law (a “categorical imperative”). To do so would be to will what is against one’s own interests. Hence, the contradiction.

Despite this criticism, ethical egoism is not logically unsound if it can be shown that what is to one’s personal advantage coincides with what is advantageous to others. If this is the case, one can without contradiction will the egoistic maxim to be universally acted on. Philosophers have found this a dubious assumption, “since it postulates a kind of pre-established harmony in the world.” [Frankena, p. 17.] Without this innate harmony the position of the ethical egoist seems to involve one in a clash of wills—a world in which each is at war with the other in Hobbsian terms—and this makes it difficult to maintain as a moral theory.

While philosophers have great difficulty in accepting the postulate of a “pre-established harmony” that would allow ethical egoism to be logically sound. Such a notion is based on discredited ideas of how the world works, usually characterized as naïve materialism or naïve realism. The more modern view is that such “pre-established” relationships in nature, or ‘laws of nature’, are actually projections of subjective opinion onto the portion of the world under examination. Nevertheless, market theorists from Adam Smith to the present day have based their models on exactly such a “pre-established harmony,” one that converts individual acts of selfishness into general welfare. This is Smith’s “invisible hand,” or the modern economist’s  optimizing Pareto  equilibria.

It is worth restating the point just made—without the invisible hand assumption another cornerstone of market theory, the egoistic economic agent, becomes an ethically dubious postulate. That causes serious problems for market theory. At a minimum, it must relinquish its claim to ethical authority. If it is the case, as it seems to be, that ethical egoism is not really an ethical theory at all, but merely a description of prudent behaviour, then market theory loses its moral underpinnings. But without the egoistic economic agent, market theory would be jeopardized for lack of the acquisitive motivation which is at its very foundation.

Even if we accept that the economic agent as ethical egoist is possible despite the improbability of “pre-established harmony” in the market, the notion remains highly suspect. (Some of the reasons why have been discussed in the context of Hodgson , above). It simply does not seem to be the case that people always behave selfishly. This apparently sound empirical observation has however been challenged by the theory of psychological egoism, according to which we are all hard-wired so as to always seek our own advantage or welfare: self-love is the only basic principle in human nature. This is Freud’s “pleasure principle.” As an ethical argument, this observation is extended by the assertion that if this is the case, we must face facts and recognize it in moral theory, and infer that our basic ethical principle is self-love. It may, as has been proposed, be a very thoughtful and rational self-love, but it will be self-love nonetheless. Any other theory would fly in the face of the facts. Ethical egoism generally presupposes psychological egoism.

The psychological notion of man as pleasure machine has come under increasingly critical scrutiny during the past half-century by both philosophers and psychiatrists.[84] But it the criticism of Bishop Butler that remains most trenchant.[85] He observed that the question is not whether egoism is a strong element in human nature, but whether we ever have any disinterested desire for the welfare of others—that is to say, if we ever behave altruistically. The psychological egoist usually argues that, yes, we do things for others, but we get satisfaction out of the process and that is what we are really after. Thus, even when we do something altruistic like taking someone to the seaside, we are seeking our own good.

To this Butler responds that the argument is putting the cart before the horse. We do not want to do altruistic things because of the satisfaction we expect; we get satisfaction out of them because we wanted to do them. Suppose Alice is unable to get Jane to the seaside or that Jane does not enjoy it once she gets there. Alice will experience frustration, but no one would suppose that frustration was her goal. She experiences frustration because her goal was to have Jane enjoy herself.

To this, the ethical egoist may respond that Alice wanted Jane to enjoy herself because that would give Alice pleasure: egoism is still true.

However, if this is all the psychological egoist is claiming, then the reality of genuine altruism remains unchallenged, as Butler says. For what the altruist means in asserting that there is altruism in human nature (and that not all action is self-serving) is simply that we sometimes want to do something for someone else, and that we are so constructed as to get satisfaction from doing so. So long as the psychological egoist accepts this, then the altruist’s position stands, In David Hume’s words, it remains the case that:

…there is some benevolence, however small… some particle of dove kneaded into our frame, along with the elements of the wolf and the serpent. [86]

Given the philosophically dubious nature of market theory, it is reasonable to ask serious questions about its real-world utility. For purposes of this essay, one relevant question might be: are corporations serving the individuals they represent in a constructive way? Corporations clearly are very good at accumulating wealth on behalf of their shareholders, but the accumulation of wealth is not the only, or even the main, goal of those individuals. Given their pervasive influence at all levels of society, should corporations be modified so as to represent other aspects of human desire, such as altruism? Is such modification feasible, and if so, what form should it take? If modification is not feasible, should corporations be legislatively disempowered, so as to make them more amenable to regulation in aimed at ensuring that human goals are supported in their operations?


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[1] Herbert Heaton, Economic History of Europe (New York, Harper and Bros., 1936, 592.)

[2] President Abraham Lincoln: “Corporations have been enthroned…. An era of corruption in high places will follow and the money power will endeavour to prolong its reign by working on the prejudices of the people… until wealth is aggregated in a few hands…and the Republic is destroyed.” President Rutherford B. Hayes: “This is a government of the people, by the people and for the people no longer. It is a government of corporations, by corporations, and for corporations.” [both quoted in Wasserman, 89-90, 291.]

[3] Summary descriptions were routinely ignored by corporations, despite several court rulings that “object clauses”  must be adhered to.  In 1966 the courts abandoned this position when the Court of Appeal in “Bell Houses Limited v City Wall Properties Limited” approved an objects clause giving the Corporation power to: Carry on any other trade or business whatsoever which can, in the opinion of the board of directors, be advantageously carried on by the company in connection with or as ancillary to any of the above businesses or the general business of the company…”. In 1989 a new Companies Act effectively eliminated the requirement to state the firm’s intended sphere of activity in its charter. The power to determine what activities a corporation might legally engage in was transferred from the courts to the corporation.

[4] Similar laws were enacted in France in 1867 and in Germany in 1870. [Heaton, 592.]

[5] Encyclopedia Britannica 1982, v5, 183.

      [6] Hacker, 1965, 113.

[7] The same year saw publication of J.S. Mill’s Liberty and Herbert Spencer’s Essays and Reviews.

[8] That model, which owed most to Galileo, Descartes and Newton for its conception, “was conceived primarily in mathematico-physical terms. It envisaged the world as a vast mechanism, determined by mechanical forces, working according to rational laws comprehensible to the human reason.” [Hearnshaw, 254.]

[9] Or, apparently so. The inherent subjectivity of the inductive method has been exposed by many authors, including Thomas Kuhn in The Nature of Scientific Revolutions.

[10] “Behaviorism is a psychology derived from the principle of the conditioned response. It uses models which apply equally to pigeons, rats, apes and humans, Behaviorism regards man as a reactive unit, an organism to be stimulated from the outside. The clear intent of behavioristic psychology is to manipulate, be it to coax a person to buy a certain product, to feel a certain way, to accept killing, to return to hazardous duty, or to accept certain beliefs. Behaviorism denies man his soul, excepting as it can be programmed from the outside, It denies that man’s most valuable trait is his capacity for spontaneous activity, that he can be guided from within regardless of the pressures exerted from without.” Nicholas D. Rizzo, “The Significance of Von Bertalanffy for Psychology,” in Ervin (ed.), 142.

[11] Bagehot suggested a three-stage process: the primitive age, the fighting age and the age of discussion. Following a Hobbsian primitive pre-political stage, warfare, in the second stage, did much to advance the cause if civilization by providing for the dominance of the strongest—and therefore best-adapted. The (modern) age of discussion provided a moral substitute for war and an alternative method of ensuring that the best adapted remained ascendant.

[12] Liberal economic theory had already ‘dehumanized’ human workers by reducing them to factors of production identical to minerals and other raw materials for purposes of policy-making (or the avoidance thereof). [See, e.g., Polanyi, 232-3.]

[13] Webster’s Third International Dictionary

[14] Alfons J. Beitzinger, Edward G. Ryan: Lion of the Law (Madison, The State Historical Society of Wisconsin, 1960, 115-116). From an 1873 address to the graduating class of the University of Wisconsin Law School.

[15] Grover Cleveland, “Fourth Annual Message to Congress, 3 Dec. 1888,” in Messages and Papers of the Presidents, Vol. 8, pgs. 773-4 (James D. Richardson, ed., 1989)

[16] Brandeis, in Liggett v. Lee, 288 U.S. 517 (1933).

[17] Trustees of Dartmouth College v. Woodward, 17  U.S. 518 (1819). Note that Justice Marshall is here using the implied definition of the corporation as artificial, rather than natural, entity. The corporation as he defines it is created at the sufferance of the state and given the privilege of operating within those boundaries permitted by its state charter.

[18] 94 U.S. 155, 94 U.S. 164, 94 U.S. 179, 94 U.S. 180 (1877)

[19] 94 U.S. 113 (1876)

[20]118 U.S. 394 (1886)

[21] Corporate personhood is widely recognized among industrial nations. For examlpe in Australia it is codified in the Corporations Law, Section 16(1), which provides: “A company has both within and outside this jurisdiction, le legal capacity of a natural person…”. [Malcolm, ch. 3]

[22] Hugo Black, dissenting, Connecticut General Life Insurance Company v. Johnson [303 U.S. 77, 1938]. The unedited text reads:

…But it is contended that the due process clause of the Fourteenth Amendment prohibits California from determining what terms and conditions should be imposed upon this Connecticut corporation to promote the welfare of the people of California.

I do not believe the word ‘person’ in the Fourteenth Amendment includes corporations. ‘The doctrine of stare decisis, however appropriate and even necessary at times, has only a limited application in the field of constitutional law.’ This Court has many times changed its interpretations of the Constitution when the conclusion was reached that an improper construction had been adopted. Only recently the case of West Coast Hotel Company v. Parrish, 300 U.S. 379, 57 S.Ct. 578, 108 A.L.R. 1330, expressly overruled a previous interpretation of the Fourteenth Amendment which had long blocked state minimum wage legislation. When a statute is declared by this Court to be unconstitutional, the decision until reversed stands as a barrier against the adoption of similar legislation. A constitutional interpretation that is wrong should not stand. I believe this Court should now overrule previous decisions which interpreted the Fourteenth Amendment to include corporations.

Neither the history nor the language of the Fourteenth Amendment justifies the belief that corporations are included within its protection [303 U.S. 77, 86]. The historical purpose of the Fourteenth Amendment was clearly set forth when first considered by this Court in the Slaughter House Cases, 16 Wall. 36, decided April, 1873-less than five years after the proclamation of its adoption. Mr. Justice Miller, speaking for the Court, said:

‘Among the first acts of legislation adopted by several of the States in the legislative bodies which claimed to be in their normal relations with the Federal government, were laws which imposed upon the colored race onerous disabilities and burdens, and curtailed their rights in the pursuit of life, liberty, and property to such an extent that their freedom was of little value, while they had lost the protection which they had received from their former owners from motives both of interest and humanity.

‘These circumstances, whatever of falsehood or misconception may have been mingled with their presentation, forced … the conviction that something more was necessary in the way of constitutional protection to the unfortunate race who had suffered so much. (Congressional leaders) accordingly passed through Congress the proposition for the fourteenth amendment, and … declined to treat as restored to their full participation in the government of the Union the States which had been in insurrection, until they ratified that article by a formal vote of their legislative bodies.’ 16 Wall. 36, at page 70.

Certainly, when the Fourteenth Amendment was submitted for approval, the people were not told that the states of the South were to be denied their normal

relationship with the Federal Government unless they ratified an amendment granting new and revolutionary rights to corporations. This Court, when the Slaughter House Cases were decided in 1873, had apparently discovered no such purpose. The records of the time can be searched in vain for evidence that this amendment was adopted for the benefit of corporations. It is true [303 U.S. 77, 87] that in 1882, twelve years after its adoption, and ten years after the Slaughter House Cases, supra, an argument was made in this Court that a journal of the joint Congressional

Committee which framed the amendment, secret and undisclosed up to that date, indicated the committee’s desire to protect corporations by the use of the word ‘person.’ Four years later, in 1886, this Court in the case of Santa Clara County v. Southern Pacific Railroad, 118 U.S. 394, 6 S.Ct. 1132, decided for the first time that the word ‘person’ in the amendment did in some instances include corporations. A secret purpose on the part of the members of the committee, even if such be the fact, however, would not be sufficient to justify any such construction. The history of the amendment proves that the people were told that its purpose was to protect weak and helpless human beings and were not told that it was intended to remove corporations in any fashion from the control of state governments. The Fourteenth Amendment followed the freedom of a race from slavery. Justice Swayne said in the Slaughter Houses Cases, supra, that: ‘By ‘any person’ was meant all persons within the jurisdiction of the State. No distinction is intimated on account of race or color.’ Corporations have neither race nor color. He knew the amendment was intended to protect the life, liberty, and property of human beings.

The language of the amendment itself does not support the theory that it was passed for the benefit of corporations.

The first clause of section 1 of the amendment reads: ‘All persons born or naturalized in the United States, and subject to the jurisdiction thereof, are citizens of the United States and of the State wherein they reside.’ Certainly a corporation cannot be naturalized and ‘persons’ here is not broad enough to include ‘corporations.’

The first clause of the second sentence of section 1 reads: ‘No State shall make or enforce any law which shall abridge the privileges or immunities of citizens of the United States.’ While efforts have been made to persuade this Court to allow corporations to claim the protection of his clause, these efforts have not been successful.

The next clause of the second sentence reads: ‘Nor shall any State deprive any person of life, liberty, or property, without due process of law.’ It has not been decided that this clause prohibits a state from depriving a corporation of ‘life.’ This Court has expressly held that ‘the liberty guaranteed by the 14th Amendment against deprivation without due process of law is the liberty of natural, not artificial persons.’ Thus, the words ‘life’ and ‘liberty’ do not apply to corporations, and of course they could not have been so intended to apply. However, the decisions of this Court which the majority follow hold that corporations are included in this clause in so far as the word ‘property’ is concerned. In other words, this clause is construed to mean as follows:

‘Nor shall any State deprive any human being of life, liberty or property without due process of law; nor shall any State deprive any corporation of property without due process of law.’

The last clause of this second sentence of section 1 reads: ‘Nor deny to any person within its jurisdiction the equal protection of the laws.’ As used here, ‘person’ has been construed to include corporations. [303 U.S. 77, 89] Both Congress and the people were familiar with the meaning of the word ‘corporation’ at the time the Fourteenth Amendment was submitted and adopted. The judicial inclusion of the word ‘corporation’ in the Fourteenth Amendment has had a revolutionary effect on our form of government. The states did not adopt the amendment with knowledge of its sweeping meaning under its present construction. No section of the amendment gave notice to the people that, if adopted, it would subject every state law and municipal ordinance, affecting corporations, (and all administrative actions under them) to censorship of the United States courts. No word in all this amendment gave any hint that its adoption would deprive the states of their long-recognized power to regulate corporations.

The second section of the amendment informed the people that representatives would be apportioned among the several states ‘according to their respective numbers, counting the whole number of persons in each State, excluding Indians not taxed.’ No citizen could gather the impression here that while the word ‘persons’ in the second section applied to human beings, the word ‘persons’ in the first section in some instances applied to corporations. Section 3 of the amendment said that ‘no person shall be a Senator or Representative in Congress,’ (who ‘engaged in insurrection’). There was no intimation here that the word ‘person’ in the first section in some instances included corporations.

This amendment sought to prevent discrimination by the states against classes or races. We are aware of this from words spoken in this Court within five years after its adoption, when the people and the courts were personally familiar with the historical background of the amendment. ‘We doubt very much whether any action of a State not directed by way of discrimination against [303 U.S. 77, 90] the negroes as a class, or on account of their race, will ever be held to come within the purview of this provision.’ Yet, of the cases in this Court in which the Fourteenth Amendment was applied during the first fifty years after its adoption, less than one-half of 1 per cent invoked it in protection of the negro race, and more than 50 per cent. asked that its benefits be extended to corporations.

If the people of this nation wish to deprive the states of their sovereign rights to determine what is a fair and just tax upon corporations doing a purely local business within their own state boundaries, there is a way provided by the Constitution to accomplish this purpose. That way does not lie along the course of judicial amendment to that fundamental charter. An amendment having that purpose could be submitted by Congress as provided by the Constitution. I do not believe that the Fourteenth Amendment had that purpose, nor that the people believed it had that purpose, nor that it should be construed as having that purpose.

[23] A classic example of substantive due process is the case of Lochner v. New York (1905)[23] in which in which “the Supreme Court held unconstitutional a New York State statue limiting the number of hours employees could work in a bakery. The challenge was brought by a bakery owner who maintained that the statue interfered with his freedom to contract and was therefore invalid under the fourteenth amendment. [Mayer, 588]

[24] The impact of this is being felt in Canada where, for example, tobacco companies have taken the Government of Canada to that country’s Supreme Court arguing that government regulations on tobacco advertising are an infringement of the corporations’ rights to freedom of expression under the Canadian constitution’s Charter of Rights and Freedoms.

[25] The distinction between the old and new regulatory regimes has been framed this way: “Economic regulatory agencies govern prices, outputs, terms of competition and entry/exit. Social regulations are concerned with the externalities and social impact of economic activity.” [Vogel, 162-3] The former are represented by agencies like the Federal Communications Commission (FCC) and the Securities Exchange Commission (SEC), and the latter by newer agencies like the Environmental Protection Agency (EPA) and the Occupational Safety and Health Administration (OSHA).

[26] 447 U.S. 765 (1976)

[27] Corporations thus achieved, “precisely what the Bill of Rights was intended to prevent: domination of pubic thought and discourse.” [Hawken, 109]

[28] 447 U.S. 557 (1980)

[29] 475 u.SS. 1, reh. Den. 475 U.S. 1133 (1968)

[30] 201 U.S. 43 (1906). But see also United States v. Morton Salt Co., 338 U.S. 632 (1950) (an overly broad subpoena is not considered an unreasonable search.

[31] 436 U.S. 307. See also Colonnade Catering Corp. v. United States, 397 U.S. 72 (1969) (exception for the liquor industry); United States v. Biswell, 406 U.S. 311 (1977) (exception for firearms industry); Donovan v. Dewey 452 U.S. 594 (1981) (exception for mining industry). Exceptions in these cases were based on the long prior history of government regulation.

[31] 369 U.S. 141 (1962).

[32] 369 U.S. 141 (1962

[33] United States v. R. L. Polk & Co., 438 F.2d 377, 379 (6th Cir. 1971)

[34] 438 F.2d 377, 379 (6th Cir. 1971)

[35] 396 U.S. 531 (1970).

[36] Webster’s Third New International Dictionary.

[37] Adapted from a definition in the 15th Edition of the Encyclopedia Britannica, vol. 11. The original definition reads …for the accomplishment of physical tasks, but this would exclude such everyday machines as word processors, telephones and calculators.

[38] Or animals, but that is not relevant to the argument here.

[39] Note that ethical egoism generally assumes psychological egoism, the theory that we are all so constituted that we always seek out own advantage or welfare, or always do what we think will give us the greatest balance of good over evil (pleasure over pain). This is not a convincing theory, even for post-Freudian psychologists. It seems to be logically flawed as well. The question is not whether egoism is a strong element in human nature, but whether we ever have any disinterested desire for the welfare of others—that is to say, if we ever behave altruistically. The psychological egoist usually argues that, yes, we do things for others, but we get satisfaction out of the process and that egoistic satisfaction is what we are really after. Thus, even when we do something altruistic like taking someone to the seaside, we are seeking our own good.

But this, opponents argue, is putting the cart before the horse. We do not want to do altruistic things because of the satisfaction we expect; we get satisfaction out of them because we wanted to do them. Suppose Alice is unable to get Jane to the seaside or that Jane does not enjoy it once she gets there. Alice will experience frustration, but no one would suppose that frustration was her goal. She experiences frustration because her goal was to have Jane enjoy herself.

To this, the ethical egoist may respond that Alice wanted Jane to enjoy herself because that would give Alice pleasure: egoism is still true.

However, if this is all the psychological egoist is claiming, then the reality of genuine altruism remains unchallenged, as Butler says. For what the altruist means in asserting that there is altruism in human nature (and that not all action is self-serving) is simply that we sometimes want to do something for someone else, and that we are so constructed as to get satisfaction from doing so. So long as the psychological egoist accepts this, then the altruist’s position stands.

[40] See Polanyi throughout, but esp. Ch. 4, “Societies and Economic Systems.”

[41] “The true criticism of market society is not that it was based on economics—in a sense, every and any society must be based on I—but that its economy was based on self-ibnterest. Such an organization of economic life is entirely unnatural,  in the strictly empirical sense of exceptional…. Actually, as we now know, the behaviour of man both in his primitive state and right through the course of history has been almost the opposite from that implied in this view…The tendency to barter, on which Adam Smith so confidently relied for his picture of primitive man, is not a common tendency of the human being in his economic activities, but a most infrequent one….On the contrary, the market has been the outcome of a conscious and often violent intervention on the part of government which imposed the market organization on society for noneconomic ends….” [Polanyi, 258-9.]

[42] “In the 1940s cybernetics began as a formal approach to the description of any physical system in a framework comprising boundaries, information flows, and goals. Around 1960 an explicit transition occurred as the discipline shifted from examining systems that are physical and objective to those that are psychological and linguistic, while still applying the same framework. As a result, cybernetics has developed the means to model and apply metrics to the otherwise subjective human activities of interaction, conversation, and collaboration.” (Paul Pangaro,

[43] Ricardo (1772-1823) was a highly successful member of the London stock exchange whose fortune allowed him to pursue academic and philosophical interests. Among his friends and intellectual influences were James Mill, father of John  Stuart Mill, utilitarian philosopher Jeremy Bentham and Thomas Malthus, best known as the originator of the idea that population increases faster than food supply, an idea that Ricardo accepted. He is recognized as the thinker who first systematized economic theory.

[44] 1766-1834.

[45] Say (1767-1832) was editor-in-chief of a magazine devoted to furthering the ideas of the French revolution. He was a member of the Tribunate  under the consulate of the revolutionary regime, but was eventually dismissed by Napoleon.

[46] “The error of the classical economists…was in supposing that the impersonal market forces thy were describing had a permanent and universal validity, that in the ancient cities of Sumer and the fastness of medieval Europe identical forces had been at work but were so far undiscovered.” [Jameson, Althusser, Marx: An introduction to the political unconscious, Wm. C. Dowling, Cornell University Press, p. 28.] Erroneous though this thinking may have been it nevertheless played a crucial part in defining the nature and role of the corporation in  the mid-nineteenth century, a definition that remains largely unchanged.

[47] This description of the corporation is in general accord with the notion of rationalization in Marx and Jameson, and with Luckas’ idea of reification: Luckas elected to re-christen the process, in turn, to signal a dimension of it that Marx had described in vivid and impassioned terms: the terrible grinding forces of a market system in which the labour of human beings became simply one more commodity in a world given over wholly to the production and consumption of commodities, so that men became in their relations to society and to each other, nothing more than commodities or things…reification implies a world from which the human being is being eliminated altogether. [Dowling,1984, p. 26-7.]

[48] Note that while maximizing might suggest a finite maximum, in this case it does not. The corporation has no concept of limits of this kind.

[49] OR thus bears strong similarities to information science, in which information is defined as the elimination of uncertainty. Like OR, information science developed out of wartime exigencies, in this case the need to aim antiaircraft guns by ‘leading’ piloted targets. The need was for a computational technique that could successfully predict where a target would be at some time in the near future when a shell could be placed in its vicinity—that is, a way of making successful predictions in an environment of incomplete information. By statistically limiting the options of the aircraft (based on technical knowledge of the aircraft and psycho-physiological knowledge of the pilot), accurate predictions of its near—term movements could be made in part by successively eliminating impossible or highly unlikely moves. It was found that the same statistical techniques could be employed to remove ‘noise’ from message transmissions of all kinds, making them ‘readable’.

[50] “In brief, the notion of rationality used by [neo-classical] economists assumes that agents can decide the logically undecidable. This doesn’t matter much until one gets embroiled in the details of reasoning chains of the form, “If I think that he things that I think…” But when one does, one is led to precisely the sort of self-reference that Gödel used.” Ken Binmore and Nir Vulkan, “Applying Game Theory to Automated Negotiation.” Netnomics, 1:1-9.

[51] The word “best” is used advisedly here, to avoid such terms as “accurately” and “usefully.” The first would imply that the institutions being examined actually are automata; the second would imply that they are not. This is an ontological issue that is unresolvable in scientific discourse. The issue of human reason (as in “the intelligent human agent) and its embodiment is discussed at length in Hayles, 1999: “As I have repeatedly argued, human being is first of all embodied being, and the complexities of this embodiment mean that human awareness unfolds in ways very different from those of intelligence embodied in cybernetic machines.” (284)

[52] See, for example, Laszlo, 1972; Herbert Simon, Administrative Behavior (New York, Free Press, 1947). Also see references to corporate growth imperative, above.

[53] ‘Work,’ by definition, is normally highly structured compared to non-work, and thus more amenable to control. This is especially true of work within a corporation. As well, human workers voluntarily submit to corporate control, a feature of life that has been deemed both acceptable and advisable—even mandatory—since the Industrial Revolution changed the nature of employment. See, eg. “The End of the Job,” —

[54] “Autopoiesis: Reproduction, Heredity, and Evolution,” in Autopoiesis, Dissipative Structures, and Spontaneous Social Orders, ed., Milan Zeleny, AAAS Selected Symposium  (Boulder, Westview Press, 1980), p. 62.

[55] Among the epistemological implications of an informationally closed system is one that has direct relevance to communication and culture. “Its central premise—that systems are informationally closed—radically alters the idea of the informational feedback loop, for the loop no longer functions to connect a system to its environment, In the autopoietic view, no information crosses the boundary separating the system from its environment. We do not see a world ‘out there’ that exists apart from us. Rather, we see only what our systemic organization allows us to see. The environment merely triggers changes determined by the system’s own structural properties… The emphasis is now on mutually constitutive interactions between the components of a system rather than on message, signal or information.” [Hayles, p. 10.] Note, as well, that rational systems (e.g. formal systems) must be closed if they are to operate in a predictable way. Thus, scientific models are typically closed systems.

[56] J.Y. Lettvin, H.R. Maturana, W.S. McCulloch, and W.H. Pitts, “What the Frong’s Eye Tells the Frog’s Brain,” Proceedings of the Institute for Radio Engineers 47, no. 11 (Nov. 1959): 1940-51.

[57] It nonetheless bears a strong analogical relationship to the theory of the observer in quantum physics, in which quanta in a sense are created by the observer’s act of observation. [See,for example, J.A. Wheeler, K.S. Thorne and C. Misner, Gravitation (Freeman, 1973) 1273.]

[58] Note that, in logic, the authors are no more able to say that an organism is not goal-directed than to say that it is goal-directed. They can only describe the system, and can have no direct knowledge of its internal telos (or absence of same). Telos is an issue for metaphysicians.

[59] Organizational closure and recursiveness account for self-consciousness. The system reflects [linguistically] on its response to its environment, and then reflects on its reflections. The autopoietic entity “through orienting [linguistic] behaviour can orient himself towards himself, and then generate communicative descriptions that orient him toward his description of this self-orientation….Thus discourse through communicative description originates the apparent paradox of self-description: self-consciousness, a new domain of interactions.” [Maturana and Varela, 29]

[60] See The Differentiation of Society (New York, Columbia University Press, 1982); Social Systems, tr. John Bednarz Jr. with Dirk Baeker (Stanford, Stanford University Press, 1995).

[61] Robert Crestanza, Frontiers in Ecological Economics: Transdisciplinary Essays by Robert Crestanza (London, Cheltenham 1997); David Bella, “Organized Complexity in Human Affairs,” Journal of Business Ethics. 1997; 16(10): 997-999);Eve, Horsefall and Lee, Chaos, Complexity and Sociology: Myths, Models and Theories (London, Sage Publications 1997); Jane Jacobs, The Nature of Economics (Toronto, Random House 2000); M. Zeleny ed., Autopoiesis: A Theory of Living Organization (New York, North Holland Publishers 1981); Robert E. Ulaowicz, “Life After Newton: an Ecological Metaphysic,” Biosystems, 1999, 50:127-142.)

[62] Althusser’s discussion of Marx’s theories of the reproduction of the conditions of production [Althusser, 100 ff.] perhaps has some relevance here: “As Marx said, every child knows that a social formation which did not reproduce the conditions of production at the same time as it produced would not last a year. The ultimate condition of production, is therefore the reproduction of the conditions of production.” The “conditions of production”, which include labour-power and other elements of Marx’s “base” are analogous to the “organization” of autopoietic entities; the Marxian “superstructure” may be analogous to the autopoietic “structure”.

[63] See, for a summary view, the article on ethics in the classic 11th edition of Encyclopedia Britannica. It defines ethics as “reflection on the moral consciousness.”  Moral consciousness may also, of course, be explained in reductionist, behaviourist terms, but this has no impact on the argument here. It is the behaviour that is of interest, rather than its origin.

[64] With the important distinction that in a political democracy the rule is one person, one vote; in an economic democracy the rule is one dollar, one vote.

[65] See Appendix 1 for a discussion of economics as a moral science.

[66] It must be noted that few, if any, authorities today accept Smith’s view of human nature as it relates to economic life. Self-centered material acquisitiveness as a social norm does not precede the existence of the market, but is rather  an epiphenomenon of the market. Premarket economies were characterized not by material acquisitiveness, but by altruism in various forms. People must be trained to be self-centred; such training is a necessary discipline of survival in a market economy, which arises out of mechanization. See, for example, Karl Polanyi, The Great Transformation:

The outstanding discovery of recent historical and anthropological research is that man’s economy, as a rule, is submerged in his social relationships. He does not act so as to safeguard his individual interest in the possession of material goods; he acts so as to safeguard his social standing, his social claims, his social assets. He values material goods only in so far as they serve this end. [Polanyi, p. 48.]

[67] See Smith’s parable of the ambitious poor man’s son in his Theory of Moral Sentiments[Smith, 1979.]

[68] Paul Heyne, The Economic Way of Thinking, 4th ed., Chicago, Science Research Associates, 1983. P. 4.

[69] Campbell McConnell, Economics, 8th ed., McGraw Hill, 1981, p. 141.

[70] Liberal economists have always presumed that the pursuit of material self-aggrandizement is humanity’s natural condition. As Smith put it, humanity has an innate propensity to “truck, barter and trade.” [Smith, 1776]  John Von Neumann, whose automata theory inspires much modern economic research said: “It is just as foolish to complaint that people are selfish as it is to complain that the magnetic field does not increase unless the electric field has a curl. Both are laws of nature.” [Mirowski, 100.] But in his study of the rise of industrial capitalism Karl Polanyi has argued persuasively that the pursuit of personal material gain was not innate, but a behaviour imposed by economic institutions: “Only in the nineteenth century self-regulating market did economic self-interest become the dominant principle of social life.” [Polanyi, 1957] For the capitalist market system to function (as Smith noted) everyone is required to make the pursuit of material gain their primary goal. Starvation and poverty were the alternatives. Despite its apparent historical specificity, Polanyi  argued, “(t)he pursuit of material gain compelled by laissez-faire is still not seen as a behaviour forced on people as the only way to earn a living in the market system, but as an expression of their inner being, individualism is regarded as the norm, and society remains invisible as a cluster of individual persons who happen to live together without responsibility for anyone other than kin….There was nothing natural about laissez-faire; free markets could never have just come into being merely by allowing things to take their course. Just as cotton manufacturers—the leading free-trade industry—were created by the help of protective tariffs, export  bounties and indirect wage subsidies, laissez-faire itself was enforced by the state. The road to the free market was opened and kept open by an enormous increase in continuous, centrally-organized and controlled intervention. To make Adam Smith’s ‘simple and natural liberty’ compatible with the needs of human society was a most complicated affair.” [Polanyi, 1957, 139-40]

[71] This position is reinforced persuasively and at length by, among other modern economists, Fred Hirsch in Social Limits to Growth. [Ch. 10] Hirsch also argues that in modern industrial economies, individual self-interest results in unavoidable social effects which frustrate the achievement of selfish goals. “The individual who wants to see better has to stand on tiptoe. In the game of beggar your neighbour, that is what each individual must try to do, even though not all can. The only way of avoiding the competition in frustration is for the people concerned to coordinate their objectives in some explicit way, departing from the principle of isolated individual striving in this sphere.” [Hirsch, 10.] One way to achieve such coordinated action is through the adoption of common moral or religious standards. “Adam Smith’s invisible hand has linked individual self-interest with social need. But the conditions in which this link has been achieved over a wide area can now be seen not as stable conditions that can be relied upon to persist or to be readily maintainable by deliberate action. Rather, they can be seen in important respects to have been special conditions associated with a transition phase from an earlier socioeconomic system. The generally benign invisible hand was a favourable inaugural condition of liberal capitalism.” [Hirsch, p. 11.]

[72] Among the best of these critiques is that of Bernard Hodgson [Hodgson 2001]. The discussion that follows relies heavily on his work, The relevance of this critique to the modern business corporation does not, however, appear to have been examined in the literature.

[73] “Standard welfare economics [approaches this problem] in cautious and sensitive fashion. Let us agree that the neo-classical modelling of a market economy leads to a Pareto-optimal general equilibrium. However, it is also demonstrated within neo-classical theory that there will be a set of such equilibria, each member of which is generated by a different distribution of ‘original endowments’—i.e. allocation of ownership of factors of production across the individuals of a particular society. And it is here that the orthodox claim of mainstream economists to their value-neutrality as scientists is invoked. For neo-classicists maintain that a final moral appraisal of the various possible Pareto-optimal social outcomes of a capitalist market economy is beyond the economist’s provenance as a scientist. Indeed, it is contended that such an appraisal demands not only an extra-scientific, but an extra-market judgment of distributive justice by the relevant political community…” [Hodgson, 2002.]

[74] “We see that all men mean by justice that kind of state of character which makes people disposed to do what is just and makes them act justly and wish for what is just.” Aristotle, Nicomachean Ethics, trans. David Ross, rev. J.L. Ackrill and J. O. Urmson (Oxford, Oxford University Press, 1980) p. 106.

[75] For a description of the “ethical perspective” see, for example, Hugh Mercer Curtler, Ethical Argument: Critical Thinking in Ethics (New York, Paragon House, 1993) p. 48ff. In Jeremy Bentham’s words, an ethical perspective is one in which “everybody counts for one, and none of us for more than one.” Also critical is a firm grip on consequences and the ability to imaginatively put oneself in the shoes of another. On the empirical evidence, many people’s economic actions are shaped by the ethical perspective, at least some of the time.

[76] Neo-liberal assertions to the contrary are plainly misguided. Examples are plentiful. Theodore Levitt of the Chicago School states: “What is important is that the pursuit of self interest has become institutionalized…this is of the greatest importance for the future of capitalism.” [“The Lonely Crowd and Economic Man,” Quarterly Journal of Economics (February, 1956, p. 109; quoted in Hirsch, p. 137]. A sympathetic critic of another Chicago School luminary, Milton Friedman, puts it this way: “The idea of bourgeois virtue has been eliminated from Friedman’s conception of bourgeois society.” [Irving Kristol, “Capitalism, Socialism and Nihilism,” The Public Interest (Spring 1973, p. 13)].

[77] Durkheim also stressed the dependence of market functioning on non-market norms: “All in the contract is not contractual.” [Emile Durkheim, The Elemenetary Forms of the Religious Life (London: Allen and Unwin, 1971)].

[78] The argument here is necessarily circular, as are all behaviorist explanations of human conduct. In the end its validity must rest on how closely it corresponds with observation.

[79] It is an interesting, but in this context, perhaps, irrelevant fact that the constraint does not offer escape from moral culpability. The individuals involved remain capable of choosing to do otherwise than follow orders, as was pointed out at the Nuremberg war trials.

[80] There is an opportunity here for a study of why people are willing to act as servomechanisms for a (corporate) machine that denies their deepest personal beliefs, in terms of Deleuze and Guattari and Marcuse, Adorno and the Frankfurt school. Is this behaviour externally imposed? Or is it internally welcomed as an expression of neurotic impulses to desire and gratification brought on by childhood experience of pleasure and denial? Is it, as an expression of paranoia, in some sense a substitute for (discredited) religion? Is the modern business corporation the American Empire’s answer to the Roman Empire’s Roman Catholic Church? Is the apparent absence of moral content in the corporation actually a misunderstanding of what is in reality a positive moral position—the Darwinian reductionism and ethical relativism of consumerism?

[81] See, e.g., Bert Hölldobler and Edward O. Wilson, Journey to the Ants (Harvard, Belknap Press, 1994).

[82] See Kevin Kelly, Out of Control (New York, Viking, 1996) and New Rules for the New Economy (New York, Viking, 1997) for a more complete discussion of swarm behaviour.

[83] Of course, even if corporations perfectly represented human interests in the market, the model would not function well, because it is based on the faulty premise of ethical egoism as the exclusive human economic motivation.

[84] See, esp., François Lyotard, Libidinal Economy, etc.

[85] Joseph Butler, Five Sermons (New York, Liberal Arts Press, 1950).

[86] Hume, An Inquiry into Morals, quoted in Frankena, p. 20]

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