So Ryan Avent had an episode of cranky Leninism*:

Matt Yglesias responds with general sympathy but then diverts the stream somewhat, saying “owning stock in the company you work for is a little crazy” and then advocates for more redistribution and maybe a sovereign wealth fund.

Hear, hear. But I dare say he undersells why people might want to own their company, under certain conditions.

Let’s put it this way – if I work for publicly traded company ACME, market cap $500mm, and I want to invest $5000,  I could buy ACME shares giving me ownership 0.001% of the company. In this case, Yglesias’ case for diversification is quite correct.

But if I work for a company and the option is available for the firm’s employees to own 100% of the company, there are very strong reasons to do so.

If I work for a firm that has 101 employees and each owns 1/101th of the company, my workplace is essentially a democracy. We can internally vote on policy and personnel decisions (or vote on to whom those decisions will be delegated) and explicitly balance trade-offs.

For example, giving employees more paid vacation will ceteris paribus reduce profits. When shareholders and employees are distinct groups with no contact or meaningful overlap, and management is mainly accountable to the latter, especially when full or near-full employment is not the prevailing condition, profits will not be reduced.

But if employees and shareholders are the same group, then employees can explicitly weigh the trade-offs between time and money and come to a collective decision using democratic means. Indeed, if such a vote were to select time over money, those who were in the minority could be compensated by a policy allowing them to cash out unwanted vacation, thus mitigating their loss in profits.

In general, people would feel true ownership, control, and voice in their workplace. That would have real, meaningful value to people. But in general it doesn’t happen because the model isn’t culturally prevalent and once a company is publicly-traded the transactions costs and collective-action-problem-solving needed to have workers buy out their own company is basically insurmountable.

So workers may not wish to buy a few shares of stock in their own company, but may wish to work for a company wholly-owned by its workforce. Can we use public policy to make this happen?

In DC, when an apartment building is to be sold, tenants have the first right of refusal, and public authorities provide various forms of assistance to smooth the process to ensure tenants have a real right and opportunity to buy their own building. While this program hasn’t always worked perfectly, it has created 84 co-ops with over 3000 units over the decades, which probably means they house over 1% of DC residents.

What if we had a similar model for firms? Specifically, if a company of X size attempts to either go public or sell over half its outstanding stock, workers would get first right of refusal.

In an equilibrium where workers owned more firms, certainly Yglesias is right that you’d probably have less efficient outcomes from a profit-maximization perspective and compared to a world where individuals were endowed with index funds or received PFD-like payouts from a sovereign wealth fund, there would likely be less overall material wealth. But there might be a lot more happiness.

In general, market-oriented progressives tend to underrate people’s desires to feel independent, empowered, and in control, and therefore overrate the marginal utility of centralized public pecuniary redistribution over less-“efficient” models. I’m a big fan of a guaranteed income, so don’t get me wrong – redistribution is awesome. But there’s more than one way to get wealth into the hands of workers, and some of them can have benefits beyond the dollar sign.

*Best treated with beer and Patton.