Moment of Silence for Absent Classmates: paper deadlines are not excuses for class absences.

”The Folklore of Capitalism,” Arnold

• Some Principles of Political Dynamics: Personalization of Organizations:
  • 4th Principle, p. 152
    • Organizations do not own the people who make up the organization, although they may claim to.
    • The equity of businesses is prediction of future earnings. Businesses evaluated by its present book value is a company in bankruptcy – good businesses are evaluated by their estimated potential/future earnings. To call this property, and to say that someone owns it, is absurd.
      • Example: Facebook. Estimated to be worth much more than what it earned last year because Microsoft was willing to pay a massive amount for 2% of the company.
      • Stock is a right to future earnings of company.
    • We allow companies to create property out of lies about future earnings. We legally protect this “property.” We don’t do anything similar for the work force.
    • Effect: Injustice, but necessary to maintain our flawed capitalist society.
      • Example: Suppose we say that the value of your house today is the future worth of your house. Your house is assumed to continue to be worth more and more value over time, so we let you get the cash for it today. So you convert all of the value of the house that you would have made over time into consumer crap. But what if the house doesn’t continue to increase in value? The predicted value that we converted to cash and gave to you, which you converted to crap consumer items manufactured overseas (thank you free trade) and made by people who pay their workers low wages, was a lie, a fraud, and we lose that value forever to the crap product producers you spent the money with. We cover this issue with the mythology of capitalism.
    • Change: There is an exit from this. Arnold accepts this system as necessary to our current social structure, however reform can be accomplished. Must redistribute wealth. Must revise our view of intangible property. Idea of future earnings as property might make sense if there were deductions for future risks.
      • Note that in Arnold’s time the unemployment rate was 3 times our current rate.
      • Note increase in interest in stock market after WWII, when we invested working people’s pensions making those people’s participation compulsory, although indirect.
      • Ideas: stop the stock system, selling as property predicted future earnings. Instead finance businesses through retained earnings. Stop artificially valuing businesses. Evaluate worth of business by actual fixed value of business instead, as an example. This is the old method used in the 1800’s. Or future earnings as property might make sense if there were deductions for future risks. Need to understand risk factor to do this. We currently chose to ignore the risks.
      • Today’s Property = Predicted Future Value - Value of the Ignored Risk
    • Why Do We Believe This? Arnold says we need a new subject, social dynamics. Need to ask, why are the smart so gullible?
      • Because we’re human beings and flawed. Easy to convince yourself of lies the smarter you are. It’s also your role, so when you can’t convince yourself, you adhere to the idea anyways.
      • Give Arnold credit for the fact that the phenomenon he’s talking about is happening now. If we filled in the 1937-2007 gap in the world of American finance, we would see his principles go on marching.
        • Car loans in the 1990s, pooling upside down car loans that people are known to never walk away from
        • Mortgages in the recent decade, pooling upside down mortgages did not work similarly, because people do walk away when this happens to their homes. (Not referring only to sub prime mortgages. All mortgages, housing prices in general are starting to drop.)
  • Summary: We imbue organizations as individuals, and endow them with animal characteristics and these organizations therefore become owners of rights and we treat their earnings as property.
    • Sustainability of this System: This society will expand until it reaches a limit where its environment can no longer sustain it and then collapse. The question is of time scale. The US is an empire going through a moment when in the span of one bad empirical leader a system can collapse, but it’s not clear. We are about to have a serious recession.
    • Malleable: Arnolds suggests that the society is strong, but can be changed with the introduction of factors that fall within the bounds of the creed.
    • Adaptability: We are the only species able to conceive of adaptability. To other species that is a hidden property. But our knowledge of this ability, we try to ignore because its work, and we do not like to change.
  • Hypothetical: Arguendo, let’s assume Arnold is right and that his following ideas on society are true:
    • root of org success is the continued cohesion of the individuals that comprise the organization
    • habits of action allow us to collaborate without designing collaboration schemes
    • the habits of estimation of self and others which allow us to believe in our local space as opposed to others (they can all go to hell except for my place)
    • capacity for drawing an arbitrary lone between self and other and believing in it fervently (the “Chosen People,” as an example)
    • the unconscious habits of collaboration and the mechanism for symbolic but firm conviction about the relation between self and other, there is also this tendency in organizational life towards the reduction of the organization to the symbolic state of a person.
    • If this is what society is, how things work, than what is law?
      • Law has a characteristic of spontaneous compliance
      • Law is communication from an organization to an organization. Most of the law we make, whether in public legislature or private contracting, is tokens exchanged between organizations.
    • What is freedom? Does it exist?
    • How do you evaluate progress?
      • Continual struggle to find meaning in a human life, hard to say if progress has been made, maybe there are no steps forward and back.
      • Good lawyers seek to effect change and recognize that beyond their belief that doing so is a good thing, there may not be an outside justification do to so.

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