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I'm working on a system for a world where individuals are traded like publicly owned companies on a stock market - but I know nothing about economics. Besides ethical consequences, is there anything that I'm missing that would result from the following system?

  1. Tradable Assets: Individuals are incorporated as tradable assets, with shares representing their potential future earnings, skills, and contributions to society.
  2. Registration at Birth: Many parents incorporate their children at birth, creating a unique corporate identity for the child, which allows parents and investors to own shares in their future success.
  3. Share Trading: Individual shares are traded on a regulated market, with their value fluctuating based on factors like education, achievements, and earning potential, similar to a stock exchange.
  4. Dividends and Earnings: A portion of an individual’s earnings is distributed as dividends to shareholders, aligning personal financial success with shareholder profits.
  5. Index Funding: Investors can buy shares in groups of individuals based on shared characteristics, such as occupation or location, creating "packages" of people to trade as a collective investment.
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    $\begingroup$ Please edit the question to limit it to a specific problem with enough detail to identify an adequate answer. $\endgroup$
    – Community Bot
    Commented Sep 5 at 3:47
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    $\begingroup$ Other than earning a percentage of a incorporated person's income, what rights are associated with share ownership? Conversely, what rights does an incorporated person lose? As @workerjoe says, the purpose of releasing public shares is to raise money - how is "incorporating" substantially different from simply taking out a loan? You need to provide more information before the consequences can be assessed. $\endgroup$
    – KerrAvon2055
    Commented Sep 5 at 4:09
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    $\begingroup$ Corporations are legal persons, just like individuals are natural persons. A coporation, by definition, is a different person than any natural person. It is not clear to me at all what is the relationship between the individual and the corporation. Is the individual an employee of the corporation? They can always quit. Is the individual a shareholder? They can always sell. Is the individual a director? Is the individual a manager? One thing is for sure, the individual cannot possibly be an asset of the corporation, because as far as I know current law does not allow slavery. $\endgroup$
    – AlexP
    Commented Sep 5 at 7:08
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    $\begingroup$ Related, especially the top-voted answer: worldbuilding.stackexchange.com/questions/241847/… $\endgroup$
    – Kyyshak
    Commented Sep 5 at 9:41
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    $\begingroup$ Just so you know, The Unincorporated Man is a whole scifi novel that explores this very idea in minutest detail. You might want to read it first before you put months of your life into writing more or less the same thing. $\endgroup$
    – Going Durden
    Commented Sep 5 at 12:56

2 Answers 2

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You would have to ask yourself, where does the initial stock offering come from and what does it mean? When a company 'goes public' it is trying to raise money, presumably for further investment and expansion, or perhaps to recoup the initial investment of a venture capitalist who is looking for fresh high-risk, high-gain opportunities.

Your incorporated person received money from the financial markets, e.g. for education, and promises to pay the investors back in the future.

  • Any future repayment is by definition uncertain. If somebody promises me €1 next year, that promise isn't worth €1 today -- the person making the promise might die or might go bankrupt, inflation might reduce the anticipated value of €1, and in any case I have to discount for interest and the hassle of collecting.
  • This fluctuates even more wildly if the promise is a percentage of earnings, or all earnings above a certain deductible. The value of that is a bet both on the individual and the economy in general.

So imagine a 20-year-old, about to enter university, writes a contract which says "you give me this amount for my education now, and starting in five years I will pay you that percentage of my annual income until the age of 65."

And imagine the contract can be re-sold. From that, your stock market, index funds, etc. naturally follow.

Issues with your proposal:

  • Age of majority, and adults trying to get out of contracts signed by their parents. In a dystopia, they cannot.
    • Could a person contract to get a child, raise and educate that child, and repay the loan to themselves out of the future earnings of their yet unborn child?
      • What if two parents with slightly different contracts like that have a child.
    • Could there be investor-funded schools and universities which only take students of parents who 'incorporated' their child to that specific investment bank? Are there even any 'unaffiliated' schools left? Are they any good?
  • Investors trying to influence the management of their asset. ("We paid you to go to law school. Good. You specialized on tax law. Very good choice. But now put those skills to practice by helping legal tax evasion, not fighting it, because helping pays better.")
  • Contracts locking people into no-longer-viable choices, and renegotiations stalling because of corporate bureaucracy. ("You agreed to learn COBOL and to get a job programming mainframes. Nothing here about Java and cloud computing." "But the client is going to the cloud, what can I do?" "I'm not authorized to change your contract.")
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    $\begingroup$ +1 Investors trying to unethically influence the management of their asset is very much a real-world problem as it is. The other issues seem solvable, on the other hand, if left unsolved all of them are ready-made plot points. $\endgroup$
    – user111403
    Commented Sep 5 at 7:20
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    $\begingroup$ Unfortunately for OP, the very premise, including everything you just wrote in your answer is already covered in a 2009's sci-fi novel, the Unincorporated Man. I don't imagine OP will get any more thorough answer than just reading UM which explores the idea in almost pedantic level of detail. $\endgroup$
    – Going Durden
    Commented Sep 5 at 12:59
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    $\begingroup$ @user111403, then there are investors legitimately trying to influence the management of their asset, or at least what would be legitimate if the asset was a business. $\endgroup$
    – o.m.
    Commented Sep 5 at 16:39
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    $\begingroup$ @o.m. True, and all this actually touches on an interesting point: selling shares in your future income creates an ethical obligation to maximize that income (within reason), while simultaneously taking away the incentive to actually do so... $\endgroup$
    – user111403
    Commented Sep 5 at 17:37
  • $\begingroup$ about a half of those problems would be eased by: - parents owning 51% of the child's stock until they reach majority - Incorporated People selling their remaining stock to many friends, family acquaintances and corporations, to dilute the power of the main stockholder. In effect, the life the Incorporated would have, would be one most of their stockholders agree on, based on common sense, not some narrow, often insane path a single majority holder could funnel them into.(ie: we all agree Steve should be a lawyer, but what kind of a lawyer does not matter as long as its profitable enough) $\endgroup$
    – Going Durden
    Commented Sep 6 at 7:17
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Freemen make bad corporations

Many of the laws and bylaws that give investors power over a corporation do not apply to human corporations. For example, investors generally do not have the power to make executive decisions, but they do have the power to appoint executives to run the business on their behalf, and to set the salary of those executives. Choosing appointees is a matter of trust because EOs have a lot of authority to screw over the investors if they so choose. Part of why publicly traded corporations are run by a Board of Directors (BOD) instead of individuals is to specifically ensure the trustworthiness of the leadership. So, if you do not like the choices an EO is making, you just replace them, but you can not do that with an incorporated human. Not being able to fire the executive officer or appoint a BOD significantly limits the authority of an investor over the incorporated person.

At most an investor could threaten the incorporated person's salary if they make unfavorable choices, but if you raise your dividends above the standard interest rate, then the person could just do a "leveraged buyout" (LBO). IE: as the sole executive officer, the person has unilateral authority to take out a loan and buy a 51% share hold over himself. In this case, he could change any bylaws he wants and set his own salary to 100% of profits and leave the other shareholders with nothing of value. For the individual, this replaces the shareholding with a fixed interest loan that they can eventually pay off which would be much more manageable. Banks knowing that this could be a major source of revenue would heavily advertise their LBO services the same way that they advertise refinancing loans now.

The only way I could see incorporated humans working in any general since is to make the dividends much smaller than normal corporate dividends (which makes them less worth trading), or to make parents the de facto 100% shareholders over their children. Society could see this as an alternative method to Social Security. It would strengthen the incentive for parents to not be abusive pricks because their chances of seeing a retirement income out of their kids will be based on if their kids liking them enough to not do an LBO at the first possible opportunity. Parents in severe economic circumstances could sell their rights to a child's income to another person, but probably at some highly devalued rate because of the risk and low payout compared to other investments.

This would work much "better" with slaves

In order to make trading in human corporations a safe investment, you have to have a legal system that takes away many of their rights that exist for both humans and corporations in a modern context. First and foremost, you need to take away a person's right to make financial decisions for himself to prevent LBOs, Devaluations, and other things that are normally only manageable (to a degree) via a system of distributed trust and replaceable management... and if a person can not make their own choices about how they manage their resources, then you have people who are by every reasonable definition slaves to their investors. Now investors can take whatever % in dividends they want, and force their investments to do whatever they want under the threat of increasing dividends, and the human corporation has no authority to force an equitable relationship with the investor.

But just because this is the law does not mean that people will comply to such abuses. If they can't make an honest living, they will just switch their activities to illegal, untraceable income. It's better to be an undocumented handiman, a drug dealer, or a prostitute than to be a licensed doctor who can't afford to eat. So, incorporating humans would incentivize a major surge in crime rates and civil unrest. This means that the legal system also needs a way of keeping investment dodgers from pursuing alternative incomes. But an imprisoned investment can't work which mean you need to build labor camps where you can force investments to make a traceable income for their investors and/or you will need to rely on violence to harshly punish investment dodgers for not following the rules. This will inevitably lead to a system of people living in cages under armed guard to make sure that they honor their investors... at which point this just becomes a slight variation on chattel slavery. But, instead of plantationers owning their slaves, they are just the investor appointed EOs for the slaves.

If you want to make humans as corporation slaves in the most humane way possible, see this Related Post.

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  • $\begingroup$ I think you are missing the carrot and focusing on the stick too much. Inventors do not need to "punish" the Incorporated Person and trigger a buyout, they are better off incentivizing their IP to make certain choices, by leveraging their stock in other people and institutions to sweeten the deal. Say, you really want Steve to become an architect? It just so happens that you also own stock in a person who owns a great apartment across from the Architecture School, and in that school's Dean. You can make Steve's college years smooth and fun, even if he is not that much into Architecture. $\endgroup$
    – Going Durden
    Commented Sep 6 at 7:09
  • $\begingroup$ @GoingDurden That is great in concept, but how do you get either person to do what they would otherwise not want to do. You either need an incentive to get Steve to go to a school he does not want or appartment guy to give a discount he would not otherwise give. And why invest in something that takes that much work to manage when most other investments are passive income? $\endgroup$
    – Nosajimiki
    Commented Sep 6 at 13:13

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