John R. Commons’s Foundations of Progressive Change
Saturday, Jan. 4, 2020 2:30 PM - 4:30 PM (PST)
- Chair: David Zalewski, Providence College
Toward Reasonable Capitalism: The Role of John R. Commons's Price and Business Cycle Theories
AbstractIn Institutional Economics (1934), Commons supported not the “profit-share theory,” which regarded insufficient consumption as the main cause for depressions, but the “profit-margin theory,” which regarded insufficient profit as the main cause. What was important here was the relationship between price fluctuations and profit margins. He argued that a general fall in prices could reasonably be expected to reduce the margin for profit 33% through a fall of 1% in the selling prices. That is, as prices fall, debt payments such as interest do not change, so the profit margin falls sharply. Therefore, in order to understand Commons’s business cycle theory in more detail, it is necessary to analyze the influence of prices on the economy.
Commons featured relative scarcity (law of supply and demand), proprietary scarcity (withholding), efficiency (labor productivity), and profit as factors affecting prices. Commons’s pricing theory is characteristic in that it is explained within the context of the historical development of capitalism. That is, in a period of “Scarcity” in merchant capitalism, the law of supply and demand in the market affects prices. Employer capitalism after the industrial revolution is a period of “Abundance:” Production efficiency and the proprietary scarcity in addition to the law of supply and demand affects prices. In a period of “Stabilization,” such as banker capitalism, profit has an essential relationship with prices. Furthermore, I will show how Commons’s three kinds of transactions (bargaining, managerial, and rationing transactions) affect prices.
John R. Commons, Subsidiarity and the Corporation
AbstractCorporate power has not been constrained by financial disclosure regimes, such as the Sarbanes-Oxley Act, by regulation of financial innovation, or by antitrust enforcement. Nevertheless the popular response to corporate power is stricter antitrust enforcement which is a backward-looking institution. The history of failure with financial disclosure law and antitrust enforcement should instruct the development of social control policy for today.
The role of ultra vires as the means by which states kept corporations within the boundaries of their purposes was swept aside by the replacement of special charters with liberal general incorporation laws but remains a useful instrument for social control by the states. Corporate charters and state corporation laws can restore the social purpose to the corporation as social artifact. John R. Commons described the process by which the state personified the corporation by imposing rights, duties, liberties and exposures. With Commons' attention to the future, he observed that the working rules established through this process were the rules governing the future behavior of the corporation. The inconsistent manner in which the U.S. Supreme Court has applied the Commerce Clause suggests reliance on federal regulation may be undermined by a conservative Court. Given the long-standing practice of states chartering corporations, the principle of subsidiarity supports exercise of social control at the more local level by the state. The states give 50 laboratories in which forms of social control can be tested and 50 regulatory bodies to enforce the working rules of social control through such methods as requiring broader representation of stakeholders on the boards of directors and the consideration of constituencies beyond shareholders.
John R. Commons and Government as Employer of Last Resort: Three Paths to a Progressive Right to Work
AbstractToday in the United States, a number of congressional Democrats endorse proposals that would establish a job guarantee for all Americans seeking work. Arguments for such a policy can be traced back at least to the work of John R. Commons, one of the first institutional economists. This paper demonstrates that there are actually three arguments in Commons that provide a case for government to hire the unemployed by serving as employer of last resort. These arguments represent a legal, financial, and historical path to public provision of work for the jobless—government employment that Commons considered part of “the right to work.” Each argument is considered in turn (each was highlighted at a different point in Commons’s career); and the paper calls for greater attention to Common’s writings on this subject and for reclamation of the right to work as a progressive cause.
Institutions, the Economy and Politics: The Debate between Commons and North
AbstractThis paper explores the relationship between old and new institutionalism through a comparison between John R. Commons and Douglass C. North. Both scholars strongly criticize the orthodox theory. In this way, they justify the role of institutions by referring to cognitive issues. Moreover, they emphasize power relations among human beings as a key concern. However, their perspectives are radically different. North focuses on the barriers that prevent the emergence of « open-access orders » in developing countries. The existence of impersonal norms is supposed to resolve violence in society. Each individual or group may participate in the competition which leads to an economically efficient system. On the other hand, Commons is a progressist who is preoccupied with the survival of capitalism. The rise of inequalities makes the system unstable. The economy has to be framed. The rules set at the political level must ensure that « unreasonable » coercion does not take place under the guise of liberty.
F. Gregory Hayden,
University of Nebraska-Lincoln
- B5 - Current Heterodox Approaches
- K3 - Other Substantive Areas of Law