Last month, as you’ve probably heard, a closely divided Supreme Court ruled that corporations with religious owners cannot be required to pay for insurance coverage of contraception. The so-called Hobby Lobby decision, named for the chain of craft stores that brought the case, has been both praised and condemned for expanding religious rights and constraining Obamacare. But beneath the political implications, the ruling has significant economic undertones. It expands the right of corporations to be treated like people, part of a trend that may be contributing to the rise of economic inequality.
The notion that corporations are people is ridiculous on its face, but often true. Although Mitt Romney was mocked for saying it on the campaign trail a few summers ago, the U.S. Code, our national rule book, defines corporations as people in its very first sentence. And since the 19th century, the Supreme Court has ruled that corporations are entitled to a wide range of constitutional protections. This was a business decision, and it was a good one. Incorporation encourages risk-taking: Investors are far more likely to put money into a business that can outlast its creators; managers, for their part, are more likely to take risks themselves because they owe nothing to the investors if they fail.