Limited liability in a free market society...

[erowe1]

Do what? Lend out money?

That's what banks do.

Lend out money under the circumstances you described.

I don't know if you've ever gotten a loan. But you don't just walk into a bank, say you want a loan, and have a guy give you a bunch of money and say, "We're a bank, that's what we do."

[Bohner]

I don't think that means it's not a corporation.

Saying that corporations wouldn't exist unless they were registered by the government and regulated by the same kinds of laws they are now is like saying that marriage wouldn't exist without marriage licenses.

Doesn't really matter. A corporation protects string pullers from liability whether the ones that were harmed were willing participants or not. This couldn't possibly happen in a free market. I guess you could still call it a corporation but the liability protections could only be between consenting parties in the form of a contract.

[erowe1]

Doesn't really matter. A corporation protects string pullers from liability whether the ones that were harmed were willing participants or not. This couldn't possibly happen in a free market. I guess you could still call it a corporation but the liability protections could only be between consenting parties in the form of a contract.

You seem to be saying that there could never be any such thing as corporations except for corporations that "protect string pullers from liability."

I don't buy that.

[Bohner]

You seem to be saying that there could never be any such thing as corporations except for corporations that "protect string pullers from liability."

I don't buy that.

That's basically what a corporation is. If incorporating didn't protect string pullers from liability, there would be no point in incorporating to begin with.

Whether you buy it or not is irrelevant.

[erowe1]

That's basically what a corporation is. If incorporating didn't protect string pullers from liability, there would be no point in incorporating to begin with.

There would be lots of reasons people would want to form corporations apart from limiting liability. And I don't think it would be possible for people not to do that unless the state forcibly banned it, which would not be a free market.

Saying that a corporation isn't a corporation unless it is regulated the same way our current laws regulate corporations is like saying that a marriage isn't a marriage unless there's a state marriage license.

You've already seen free market economists at mises.org arguing this. And yet you still say that it's incompatible with a free market. Do you have any other sources that you think do a better job of presenting what you think the free market perspective is?

[Bohner]

There would be lots of reasons people would want to form corporations apart from limiting liability. And I don't think it would be possible for people not to do that unless the state forcibly banned it, which would not be a free market.

Such as?

Saying that a corporation isn't a corporation unless it is regulated the same way our current laws regulate corporations is like saying that a marriage isn't a marriage unless there's a state marriage license.

The argument for marriage in the free market is that is basically a contract between two consenting parties. The court only needs to recognize the contract between the two (or more) parties, and not necessarily the marriage itself.

The difference with a corporation is that the courts recognize it as a legal person, regardless of whether or not a contract was in place with the people harmed. One of the key free-market principles is that you are responsible for your actions. A corporation is basically a state-sponsored entity that effectively removes this responsibility.

You've already seen free market economists at mises.org arguing this. And yet you still say that it's incompatible with a free market. Do you have any other sources that you think do a better job of presenting what you think the free market perspective is?

How is a state sponsored entity compatible with the free market? Marriage in it's current form certainly isn't.

[Bohner]

Lend out money under the circumstances you described.

I don't know if you've ever gotten a loan. But you don't just walk into a bank, say you want a loan, and have a guy give you a bunch of money and say, "We're a bank, that's what we do."

No... They check your credit, and maybe require you to put down some assets as collateral. Maybe raise the interest rate if they view your loan as a risky one.

Doesn't really change anything though. There's more of an incentive to bankrupt a company and squeeze every penny you can out of it before hand if

1) You know you aren't personally liable for the debt.
2) The creditors can't go after you personally for every penny you squeezed out of the company before the bankruptcy.

[idiom]

It is also a firewall against unlimited liability. Without some sort of limitation on liability you risk total destruction from minor offences under the current American arbitration system.

[osan]

I was looking on Mises and was surprised that there is even a debate as to whether limited liability should be legal. Limited liability (ie. corporate personhood) is completely incompatible with libertarian philosophy IMO.

Limited liability and personhood are not the same things. But let us work from the bottom up.

I believe that corporations stand in complete violation of personal liberty and justice for several reasons, the strongest being that it relies on the force of the state to give implementation any substantive meaning. As such they ought not exist. The standard reasons given for allowing them are pure nonsense, the ostensible goals touted being as readily achievable using other means.

But we do have them and they will not likely be going away in our lifetimes, barring a monumentally revolutionary event that would most likely have to involve a tremendous natural calamity or aliens landing in Central Park. Even then, in the latter case, I would not bet the farm because for all we know such aliens might be using a similar psycho-legal instrument. The depths of insanity to which we are sinking have reinforced my long-standing belief in not taking anything for granted.

Give that we have them, and assuming that they are here to stay, I would recommend some changes in their conceptual structure and specific legal status. For example, limited liability is a nothing better than a bald-faced special dispensation for certain people to behave in ways that would put the individual behind bars. One of the standard arguments in favor of this lunacy is that were the officers of a corporation not shielded from liability, innovation would suffer and therefore business and the economies of nations because nobody would be willing to assume the risks of being held accountable. This is, of course, a great steaming pile. People want to make money and many are into whatever their game is for even more noble reasons. Liability is not going to ruin economies. It might slow them down a bit, but who is to say that this is a bad thing? Would it really have been that bad were we living in an early 19th century culture if it meant that we had not polluted the planet as we have? What we would not have known we would not miss. How many of us really pine for Star Trek style transporter technology? None of us who are sane and rational do.

So I would eliminate limited liability yesterday. If it slows progress, that is just fine with me when the benefits are weighed against the liabilities. Ford with their exploding Pintos would not likely have ever come to pass had the corporate officers known that long prison terms were to be their reward, not to mention financial ruin for them and their families. Let them shiver and shake at the idea of their products bringing harm to others. Let them slow down. Let prices rise if they must. I'd rather pay more for food, knowing it is not poisoning me. YMMV, of course.

Corporate personhood... a different matter. Personhood as today practiced in law is also pure crap, but if we are to have corporations then certain aspects of human rights should apply to them. Police should not be able to waltz into a corporate office and seize, say, documentation without due process. That sort of thing would likely damage an economy - set in chaos in fact. We know police cannot be trusted, and therefore this protection should remain... in part.

The idea that company's like Bain can buy a company, rip away and sell off all it's assets piece by piece...

...is perfectly legitimate. They bought the assets, own them rightfully, and are entitled to dispose of them as they would.

have the company take out loans in order and use that money to pay themselves and then bankrupt the company, rinse and repeat while taking no personal responsibility for the bankruptcies sounds like crony capitalism at it's finest.

Here you appear to be talking about fraudulent acts, which should be punished with weighty prison terms.

This is not really crony capitalism, it is rigged-market capitalism wherein cronyism almost certainly plays a part.

Most of the problems associated with unlimited liability could easily be negated through liability insurance anyways.

Not "unlimited" liability, but rather "unbounded". There is a difference, subtle as it may be. "Unlimited" carried with it a vague connotation that leaves a bad taste in one's mouth and that connotation is the basis for complaint against it. It implies that a company could go under if an error on their part is discovered, resulting in a legal spooge-fest with everyone getting on a bandwagon to slice off their pound of corporate flesh. This is a very real and legitimate concern by corporations, that judicial imprudence would lead to disaster for a corporation and perhaps economies as well.

"Unbounded" liability connotes something slightly different, the more complete descriptive phrase being "limited but unbounded". It implies that there are limitations on one's ability to sue, but that in clear cases of actual liability for conduct, if the damages are sufficiently extensive the company could indeed be wiped out.

So the difference here is one of proper v. improper justice. If a corporation has earned being wiped out by its decisions, then let it be so. But let no corporation be punished beyond its deserts as the mere distaste or even hatred one may hold for a given company or the notion of the corporation in general is no just basis for bringing it to harm.

I would also add that if a corporation's damages outstrip its ability to pay, it should perhaps be preserved and allowed to continue to operate with the sole objective of restoring equity, at which time it is put down and its assets liquidated. I might go so far as to award to the plaintiffs some proportion of stock commensurate with their losses, to be surrendered once the corporation has satisfied judgments against it so that it can then be dissolved.

The corporate deal has gone out of control. If we do not roll it back, it is going to roll us flat as pancakes into the asphalt.

[osan]

It is also a firewall against unlimited liability. Without some sort of limitation on liability you risk total destruction from minor offences under the current American arbitration system.

If our so-called "judicial" system worked properly, limited liability would not be necessary for the reasons you state. If a corporation does so much damage, I see no reason that they should not go bankrupt and its officers to prison for decades of introspection from the comfort of a dank cell. There should be NO refuge from such liability. By the same token, anyone caught filing a fraudulent suit should also spend some time up river to contemplate the errors of their way. The blade cuts both ways and IMO we need to stop thinking like petty criminals and get back to some solid principles of individual conduct.