Consequentialist reasons to give evil firms money

What if compromise with sin was good, actually?

Very few people interested in social change are strict consequentialists.¹ Intuitively, guilt is a stronger motivator than abstract utility increases. An example: some nonprofits have been able to convert people to vegetarianism for very low costs, with one claiming to convert one person to vegetarianism for one year for a $100 donation.² It’s entirely plausible that the imputed costs of not eating meat are much higher for some individuals than $100, yet few make the bargain to eat meat but offset that sin with an annual indulgence payment. Most people are interested in discharging complicity, not maximizing utils.

This suggests, then, that activists will underinvest in strategies that compromise with sin for util-positive outcomes. Bracket concerns about guilt, and effective marginal advocacy strategies may include directly rewarding evil actors.

Rent-seeking and regulatory capture

An economic rent is a profit that derives from value capture instead of productive wealth creation. Standard Oil was an exemplary case: although it certainly created value for consumers, it was able to extract an additional margin, a monopoly rent, as it had no competition for customers to turn to. Regulatory capture is the practice of carving out rents through state intervention, as when a firm lobbies the government to impose restrictions that protect its profits. Generally, policymakers should try to eliminate rent-seeking behavior and prevent regulatory capture; however, in the case of fundamentally unethical industries, the interests of individual firms and anti-industry activists can align to make rent-seeking beneficial to both. Activists may therefore want to boost the lobbying efforts of large firms to decrease the total production of an evil product. Aligning one’s movement with corporate interests is a way of swimming with the tide and might be more cost-effective than antagonistic approaches.

Protectionism

One scheme would be to increase protective tariffs. The United States already protects against foreign beef and animal feed, and intensifying these policies might help both domestic beef producers and animal rights activists. Tariffs increase the profits of domestic firms at the expense of foreign firms and consumers. In most cases, they are an ineffective and distorting way to generate revenue; as a way of generating inefficacy and distortion, though, they have an obvious appeal, as they pit domestic against foreign industry. It could benefit an American animal rights group to align itself with the domestic cattle industry at the expense of Brazilian ranchers and domestic consumers. Although the American firms might invest more into production to capture the customers lost by the Brazilians, it seems likely that, in the absence of Brazilian retaliatory subsidies (still a concern), deadweight loss would benefit the cows.

Decreased antitrust scrutiny

Another policy that might reduce production while benefiting incumbents would be a lower antitrust scrutiny. For example, the American meat-packing industry is extraordinarily concentrated, with four major players controlling 85% of the market. As monopolies are price makers, and stop producing when marginal revenue, not price, equals marginal cost, concentrated markets often have less overall production at higher prices than competitive markets. There are risks to this proposal, especially with regard to meat: economies of scale might make production more efficient or more brutal, so concentration could ultimately be counterproductive. For industries like defense, though, there is recent evidence that low antitrust scrutiny has reduced efficacy.

In the 1990s, as the Department of Defense’s budget was (temporarily) lowered after the Cold War, regulators allowed unprecedented concentration among arms manufacturers. Concentration allowed a few firms to reap immense rents, likely at the expense of efficiency: it seems less likely that the US would have invested in Lockheed’s decade-late, 80% overbudget F-35 if the firm had faced meaningful competition. It is also possible that in the counterfactual, smaller firms would have made less effective lobbyists—and the defense industry, a state monopsony, might have seen lower profits as well as lower production. Still, lobbying for increased concentration is a plausible means to increase the rents of incumbents at the expense of output.

Increasing patent durability

There is an extent to which protecting an inventor’s right to exclusivity spurs innovation: there is little incentive for firms or individuals to invest in new technology if they cannot capture some of the value they’ve created. There is, though, a limit. The corpse of Walt Disney, whose company was built on adaptations of popular stories, does not need the incentive of lifetime plus 70 years of protection, and the fact that it receives it stifles artists looking to iterate on his work. The application of this idea to patents in sin industries might do the same. Lobbying to grant Juul the exclusive right to produce e-cigarettes would allow them to extract monopoly rents while stalling industry progression and harming consumer adoption.

Licensing and other regulatory capture

Today, liquor stores capture monopoly rents through a fixed supply of licenses. This has a variety of effects: liquor is further from consumers and more expensive, reflecting entry costs and reduced competition and reducing overall consumption; there are fewer liquor stores, which reduces blight in neighborhoods; and liquor stores are effectively money printers, as the state prevents competitors from entering their markets. Activists could lobby to grant the existing large sports gambling firms “responsibility licenses,” which would prevent new firms from entering their market without paying a significant certification fee and reduce engagement as consumers are forced to pay higher prices.

Drawbacks

These strategies are not without risks. There are, of course, many avenues of regulatory capture that increase production, like subsidies, and raising the status of industry lobbyists, or increasing their budgets, might ultimately be harmful. There are also adjacent issues for which these strategies are counterproductive. Although meat meat-packing oligopoly is probably good for cows, as it keeps prices high and decreases demand, it harms workers, who have fewer firms to sell their labor to.

Investing in evil firms and industries

Other underutilized ways of effecting change could involve direct investment in evil firms. I see two ways to invest in companies to their industry’s detriment:

Activist investing

First, straightforwardly, some classes of stock grant the owner voting rights. Coalitions of activist investors have forced companies to change their practices in the past, although the amount of capital necessary to execute this strategy is often prohibitive.

Hedging

Second, it can be useful for activists to hedge against bad outcomes. For example, in a future where there is a mass increase in meat production in the developing world, money for anti-meat activism might be more important than in a future where Beyond Meat crowds out all real meat. One might therefore want to take bets that the meat industry will grow, and the easiest way to do that would be to invest in those firms.

The evident complicating factor is that an increase in a company’s stock price benefits the firm, not just investors. A higher stock price makes access to capital easier and may attract more investors to the industry, leading to more capital deployment and ultimately more harm. Therefore, this strategy only makes sense when the effect of the activist dollars in the future would outweigh any damage in the present. It’s not obvious to me that there are no cases where this would be true. Investing a marginal amount of money that does not significantly change a firm’s stock price but could have high returns in bad futures might be beneficial for many activist groups.

This strategy would be most counterproductive in undercapitalized industries. This probably does not include weapons or fossil fuels, but it might include agribusiness or the sin industries that have already experienced investor flight or divestment. It would have been bad to invest in De Beers in the 1980s, and it’s probably bad to invest in young industries like e-cigarettes and app-based sports gambling. It might be possible to defer bad consequences using financial derivatives like call options, which would largely only affect stock prices once the company has appreciated and is no longer undercapitalized;³ but this strategy, like all of the others, is not without significant risks.

Conclusion

Regardless of their efficacy, these strategies foreclose the possibility of coalition, as pro-industry lobbying or investment is categorically off-limits to almost all mainstream organizations and donors. In cases where a united front is important for public relations, muddying the waters with facially evil activism could be consequently harmful. In addition, these tactics only really make sense in cases where only marginal change is possible: evil industries will never be abolished by the promotion of select evil firms. For industries like meat that have been entrenched for millennia, though, meaningful marginal change might be all that we can hope for.

I have not engaged with any empirical data that would suggest if these strategies would work. I am also not a strict consequentialist and would not want to bracket deontological concerns: I don’t believe that donating to offset eating animals is coherent, just as I don’t think that purchasing an indulgence for a future murder from a murder-prevention charity is coherent. Still, given how repellent these strategies seem, I am fairly confident that they, like shrimp welfare, have been underprovided.

1. If they were, maybe we would have achieved shrimp liberation already.

2. William MacAskill, Doing Good Better, 101.

3. Another risk is that call option sellers might hedge by buying the firm’s stock, driving up the price, but this would only be a risk in large trades and the majority of the purchase (assuming that the bet pays off) would still be postponed.