economics free market freedom

Thinking in aggregates (corporations aren’t people)

Mit Romney has been getting some press for his “Corporations are people” blurb. Lots of people are mocking him, pointing out the obvious, that corporations are not people. The irony is that the people mocking him are missing the point. Not only that, they are assuming that corporations are people after a fashion. Let me explain…

What Romney was trying to say was that corporations are made up of people and anything that is done to a corporation eventually ends up affecting the people that make up that corporation. The people mocking him are essentially assuming that a corporation is a stand alone entity. They think they can tax it and regulate its speech without affecting actual people. To my mind it is yet another example of being sucked into the fallacy of aggregates being tangible things. And like all of the other examples of that fallacy, acting against that fiction causes problems for actual people.

Paul Krugman is another great example. Whenever he claims that an alien invasion, or 9/11 would be good for us, he is thinking of GDP. GDP is an aggregate of production in a country. It is a loose proxy for economic activity. What he overlooks, and we should never forget, is that GDP is an aggregate measure that doesn’t tell us the first thing about prosperity. Trying to boost GDP can in fact have effects, and it might even make that measurement go up, but what does it really mean for all of us? If GDP gets a boost from rebuilding from a disaster, will anyone care?

I myself am guilty of talking about aggregates. How often do I rail against “the government” as if it were a single, monolithic thing? I should be more precise and bemoan the laws passed by congress, the unilateral action of the executive team in the White House, or the actions of the board of the Federal Reserve. It’s important to remember just how few people are actually moving things around for the rest of us. All of those groups try to co-opt us by saying that they are doing what they do for “the American people.” As if there were a simple group mind that is happy with the same things. They do what they do for the benefit of what they think the American people are, but how often do you or I agree with them?

And of course the most common aggregate fallacy of them all is all of the talk about “the economy.” There is no such thing. We are the economy. Each one of us, each action we take, every transaction we do, every act of cooperation with someone else, that’s what the economy is. There is no way we can sum all of that up with a single concept let alone a word. When you look at it like that, phrases like “The economy is depressed,” or, “The economy needs to be boosted” stop making sense. We need to respect the enormity of what we are summing up in that aggregate. The idea that a single action can improve all of the things that make up the economy is pure hubris.

Things are complicated. We like to sum things up for the sake of being concise, but we quickly lose what is actually being discussed. Language has a funny way of shaping our thoughts, we need to be careful about lumping too much into neat, orderly concepts because that rarely exists in the real world.

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