Feb 9, 2014

Love, Law and the Christian Understanding of Corporate and Intellectual Property Law

I am just returning from Pepperdine University Law School and participating in an excellent Nootbaar Institute conference on Love and Law. It was organized by one of the most seminal figures in the development of contemporary Christian legal theory, Prof. Robert Cochran, whose significant scholarship and wonderful graciousness are in even competition. There are a number of excellent papers available at the link.

Among others, I heard excellent papers from Profs. Bainbridge, Johnson and Berg on how Christian love informs corporate and intellectual-property law during a session which was engagingly named "Finding Love in Law Where You Would Not Expect It." (Of course, as Christians committed to the idea that love is a summary of the law, we would expect love to structure all legitimate norms but we might have a hard time imagining how.)

The papers focused on how various structure of corporate or IP law might be more or less loving. For example, we might want to increase or decrease the duty to "love" of directors or officers with respect to shareholders by imposing liability for greater or lesser degrees of selflessness upon them. Or, we might want to structure corporations so that the directors owed duties of love not only to shareholders but also to other "stakeholders," e.g. employees or local communities, etc. With respect to IP, we might want to structure IP so that the distribution of the benefits of innovation were more easily available to the poor, e.g., through better defined fair use law or broadened TRIPS exceptions for developing countries.

That is, the papers -- quite worthily -- compared how one form of IP or corporate structure might compare with another in terms of better encouraging or reflecting love.

But, in my estimation, they failed in the more revealing project of considering whether these legal forms themselves replaced other forms based more on love. It is not enough to ask whether one form of corporate law or another is better at reflecting love; we must ask, e.g., whether corporate law as opposed to other laws of association is better at reflecting love.

Consider: before the rise of the modern corporate form of association in the 19th century, the dominant form of association for economic activity was the family, a community of love. Around the natural love of the family and its recognized rights of succession and mutual spousal and parental-filial duty, almost all ownership of capital and economic cooperation was organized. Farms were family farms. Businesses were family business.

This buttressed the family by rewarding family formation/maintenance with a superior means of producing wealth compared to the associations available among strangers. (e.g. contracts and partnerships.) With the rise of the business corporation, the family as a legal association for economic purposes was heavily disadvantaged in comparison with this unnatural form of association, a forms not based on the natural love arising among men, women and children.

Before the 19th century, the law did not facilitate strangers aggregating capital for their own private advantage; previously, it took a special legislative act, based on a determination that there was a public advantage in a particular activity, for shareholders to gain the right to use the corporate form. But after that, corporate law created this new universal form of association of shareholders with many advantages over the familial form, especially unlimited size and duration. Unlike the family form of association which is limited to one man/woman pair and their children, the corporation can include infinite numbers of shareholders and never dies. When a family member dies, he faces inheritance taxes and other expenses related to succession. But, corporations have no necessary limitations on duration and across time, never have to pay taxes on the succession of capital across time.

We should ask not only what is the best way to structure corporate law so that it is fair or loving or efficient with respect to its own members. We should also ask whether we want to center economic activity around anonymous associations of shareholders, aggregating capital without responsibility for management of corporate activities or interest in anything the corporation does except producing profits.

Rather, would we not prefer for economic activity to be centered around associations of husbands, wives and their children who have connected their lives in naturally loving patterns and taken responsibility for certain assets and activities? Shareholders do not love each other; husbands, wives, parents and children naturally do. If we really want to promote love, we ought to equalize the family form as an association for economic purposes in comparison with the advantages and privileges doled out by our government to societies of anonymous strangers. If we really wanted love, we would make the family the primary holder of property -- as it was in the law of Moses.

Similarly, the idea of copyright and patent law is to promote certain forms of intellectual creation by granting a limited monopoly over certain uses of the work or invention. This monopoly is believed to stimulate creation because of the economic incentive it provides when the monopoly is exercised to force those desiring the work to pay for a license. Patent and copyright law have indeed stimulated the production of new works, like Hollywood movies and profitable pharmaceuticals.

But the extra works created are those that are stimulated primarily by a special economic incentive. Those who generate works for love, love of art, love of science, love of the subject, love of their community, love of God are now competing with those whose love of art, science, God would have been inadequate to generate the work without the added economic incentive of IP law. When men could not make money from creating art or new inventions, the works and inventions created were those that men made for the love of the activity itself. Of course, this was never pure; men worked for glory, patronage etc. But it was purer. The law did not seek to whip up a crowd of those writing solely for the sake of money. The work of the altruistic artist or scholar stood in a less crowded field and hence was more prominent. The altruist today must not only create his work but pay to fight for attention among the purely mercenary.

In both the cases of IP law and corporate law, we are dealing with forms of law that have produced marvelous results. But to understand them, we should understand that they are forms which create competitors to activities based more on natural love. This may not mean that they should be abolished, but it does mean that we should do more to compensate for the negative externalities falling on families and altruistically motivated creators.

That is, it would mean that if we care about love.

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