The Nanny Corporation

Individuals in common pools—for example, employees in firms and citizens in a jurisdiction—want managers of those pools to act paternalistically toward others because this lowers the costs of participating in the pool. The nanny state and, increasingly, the nanny corporation are simply responding to this demand. These two can be thought of as competing in the “market for nannyism” to deliver nannyism to individuals who demand it.

Where nannyism is inevitable, as it is in a world in which others pay, the question then becomes which of the two sources of nanny rules—the state or the firm—is the most efficient supplier of nannyism. This Article describes numerous reasons why corporate nannies are superior to their state analogs. For instance, corporate policies are subjected to more instantaneous feedback from labor markets, which reduces overreaching but also helps solve information problems in ways likely to reduce the sum of decision and error costs.

There is, however, no theory under which the state or firm will always be superior at imposing nanny limitations on behavior. Because of this, we might expect firms to supply nanny rules when it is efficient for them to do so, say because of better monitoring, lower agency costs, or the like, and not to do so when government rules could be supplied at lower cost for a given efficacy level. The problem, however, is that there are government rules, regulations, statutes, constitutional provisions, and case law that may distort the market from efficiency. This Article makes the case for corporate nannyism and shows how government regulation may be biased without justification in favor of the nanny state.