I am not afraid to keep on living

An observation:

I intend to “boycott” the Beijing Summer Olympics, in the same way I “boycotted” the 2006 Turin Winter Olympics, the 2004 Athens Olympics, the 2002 Salt Lake City Olympics, and the 2000 Sydney Olympics, and the 1998 Nagano Olympics, and NASCAR racing, and most professional basketball, and all hockey on the professional level, and Pirates/Brewers games, and strongman competitions unless it’s Saturday afternoon and I’ve got nothing to do for at least four hours and really there’s nothing else good on, not Shawshank, not Trading Places, nothing.

To be serious for a moment (but just one): were the Olympics that much of a ratings draw that we can call any form of boycott meaningful? Beijing sits twelve hours ahead of the East Coast of the U.S. – their early games will start just as you’re finishing dinner, the late games will end just as the clubs let out. Would anyone in the U.S. really have had the fortitude to watch the Olympics live in the absence of a boycott? Or were you just going to get your Olympiad coverage from CNN and ESPN recaps, which you’re going to do anyway – thus making any form of boycott silly?

Then again, China remains perhaps one of the most despicable tyrannies in the modern world, except (to paraphrase Churchill) for all the others. So I suppose a mild objection to a nation’s censorship trumps none at all.

A quandary:

Free exchange is pretty objectively good, if you know the theory behind it. If you have something I want and I have something you want, a trade profits both of us even if no one creates anything new. In fact, no one can come up with a better way to make as many people as wealthy as possible than by allowing them to trade freely with each other. Just as pointing out gaps in the fossil record does not discredit evolution, pointing out the side effects of profitable behavior – pollution, monopoly, etc – does not discredit free trade.

Corporate behavior is pretty objectively bad, if you know the history behind it. Even the best corporations engage in rent-seeking and bureaucratic makework, with communication stifled through so many layers that success becomes an accident and incompetence becomes assured. And the worst among them bungle, cheat and get away with it. That’s not counting the ones that used to hire Pinkertons to shoot strikers, either.

The quandary: explain the (apparent) contradiction between the obvious benefits of free trade and the obvious failings of the modern corporation. Serious responses will be answered seriously; frivolous responses, frivolously. Show your work.

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9 Responses

  1. The modern corporation is run, at its highest levels, by people whose primary concern is not to maximize either the value created by the corporation, nor the value of the corporation itself, but rather the value of their *stake* in the corporation, at least until such time as they can cash out, as well as no small amount of the thrill of power itself. This encourages behavior that is personally beneficial to the executives.

    Further, any executive of a big-enough corporation knows that he (I would say or she, but I am realistic about the state of corporate America) is essentially bulletproof. A CEO who fails miserably still collects millions upon millions in severance pay. A CEO who fails spectacularly gets a government bailout. See, e.g., Bear Stearns. This encourages those executives to take risks that are, in layman’s terms, stupid. Their situation is all upside and no downside.

    So, American businesses of a sufficient size are run by people who reap the upside, are effectively insured against any downside, and are primarily interested in their own personal influence, power, wealth, and glory.

    And we worry about the moral hazard effect of forgiving people’s mortgage debt!

  2. Excellent answer Tom.

    Also, from an information perspective, free trade is based on the principle of perfect knowledge between trading partners – complete information about the transaction and how it benefits both sides. It does not take into account the entities who actively seek to obfuscate and misinform (whether through legalese, marketing, or lobbying) as part of their profit-maximizing strategy.

    In that sense, free trade is one of our simplest models, and most easily broken when adding additional factors.

    But step over here and speak to my friends Nash and Bayes…

  3. For another perspective, my boyfriend wants to get cable just so he can watch the summer Olympics this year.

  4. Seriously? That is bizarre.

  5. I think you’re question presupposes that there ought to be, in theory, some kind of harmony between the idea of free exchange and the modern American-style (in the sense that it has 14th Amendment rights) corporation. The corporation isn’t concerned with freedom of trade, expression or organization. If tariffs, import ceilings, and export quotas can be had, through political influence, for less than the marginal profit they create, then why would there be any compunction against doing so? Indeed, they have a fiduciary responsibility to do so. The deadweight loss certainly doesn’t fall on them. The corporation is miles closer to Tony Soprano than John Galt.

  6. It’s the state’s fault. (A frivolous response is all I can muster this morning.)

    And boycott the Olympics all you like, but NASCAR? That’s inexcusable, commie.

  7. Brian – I am the wrong demographic.

  8. The goal of corporations isn’t to make “as many people as wealthy as possible”; it’s to make certain people as wealthy as possible (as Tom pointed out). Where’s the conundrum?

    (I thought your conundrum was going to be “explain the failure of ‘free trade’ agreements.”)

  9. Sam – I attended a talk at BC, many many years ago, given by a Federal Reserve banker. He made a comment that’s stuck with me. “If the WTO were really about free trade,” he said, “the WTO charter would be one sentence long.”

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