Here is the landmark case and summary that gave corporations personhood:
http://en.m.wikipedia.org/wiki/Corporate_personhood?wasRedirected=true
Doubteth ye not Rothbard…on this one at least. Limited liability with third parties is government-created, not with second parties.
Doubteth ye not Rothbard…on this one at least. Limited liability with third parties is government-created, not with second parties.
Bingo! And this was a point that Rothbard made in the same text that people are quoting. There should not be limited liability for torts. Of course, in a free world, stock holders could purchase limited liability insurance.
Why? All this is is just assertion.
Limited liability of anyone(anything) vs anyone(anything) is the state of nature. There’s no such thing as unlimited liability. As with most things involving more than one human, actual limits to liabilities are the result of prevalent subjective valuations and norms of the market agents. If you (with no assets but your own self) accidentally destroy my $500k Ferrari, can I assume no limits to your liability and legitimately enslave you for the rest of your life?
I might be wrong but I think corporate personhood was an obiter dictum in Santa Clara County v Southern Pacific Railroad.
Limited liability of anyone(anything) vs anyone(anything) is the state of nature. There’s no such thing as unlimited liability. As with most things involving more than one human, actual limits to liabilities are the result of prevalent subjective valuations and norms of the market agents. If you (with no assets but your own self) accidentally destroy my $500k Ferrari, can I assume no limits to your liability and legitimately enslave you for the rest of your life?
OK, you’re right, there’s no such thing as ‘unlimited’ liability. But there’s a world of difference between knowing exactly how much t you could lose (value of your shares) and potentially loosing everything.
Now practically I’d say that if I get my 500k Ferrari out there without insurance I’m looking for trouble. I see liability insurance as a way of overcoming the problem of limited liability…to a large degree.
But of course, because I can’t pay, I would not (I believe) be reduced to a servile status. I’d just find it difficult to be accepted anywhere in the future, without proper insurance.
An LLC with $10mil capital and no insurance is indistinguishable from an unlimited liability firm with $0 assets (owned by a person with $0 to his name) and a $10mil liability insurance policy. Entities with enough capital (LLC or not) are practically self-insured. We already concluded that all liabilities are inherently limited, governments/states notwithstanding.
An LLC with $10mil capital and no insurance is indistinguishable from an unlimited liability firm with $0 assets (owned by a person with $0 to his name) and a $10mil liability insurance policy. Entities with enough capital (LLC or not) are practically self-insured. We already concluded that all liabilities are inherently limited, governments/states notwithstanding.
I fully agree that there is no such thing as unlimited liability. But of course for the 90% of guys without 10 mil of capital, liability insurance is the only way to make sure that, say, 90 % of damages will be covered.
Dude, huge equivocation! Imagine my corporation breaks your ferrari and has $0. LL would give you well $0. Now imagine I have $10M in a personal account. LL would still give you 0. No LL on torts would surely give you the 500k.
The options are not LL and UNLIMITED liability.
From a property rights perspective, IMHO, there is a such thing as “limited liability”, in the sense that there is a limit to what an individual can legally claim from another individual.
“The theory of contract enforcement should have had nothing to do with “compensation”; its purpose should always be to enforce property rights, and to guard against implicit theft of breaking contracts which transfer titles to alienable property.” (Rothbard, M. The Ethics of Liberty, p.140)
I concede that the tort (third party) case may not be as clear cut as I previously thought. The question is whether a free market would allow the existence of firms that limit the liabilities of their owners only to the firm’s capital + insurance or those liabilities would proportionally flow through to the owners themselves. To the extent that the firm is considered as a separate responsible entity (person) by the market, those liabilities would be allowed to remain contained to a firm level. If so, the market would be seen as a set of persons (humans and firms, alike) each carrying (or not) their own capital + insurance.
I still have a feeling that this containment of liabilities (LL) to a firm level is more a result of the market (resulting in more entrepreneurship, more business, more transactions, more prosperity) rather than a governmental decree, hence I predict it would still be recognized as beneficial in a non-regulated market. If I’m right, markets that do recognize it would flourish better than the ones that don’t, but that’s just a guess.
LL for torts does indeed lead to more business, but not more prosperity. Sure you can build more polluting factories if not all pollution costs have to be paid to third parties - doesn’t mean it increases overall welfare.
As long as it is fully voluntary, welfare does increase.
Agreed, but than it’s not a liability anymore anyway. Maybe we’re discussing semantics. Corporations are a product of the state to the extent that people suffer from negative externalities and want to but can’t claim damages due to LL laws.
I think it makes sense to stress this part of libertarian theory, especially to the leftist save-a-forest crowd.
More business = more voluntary exchanges => more prosperity. You are making a straw-man by conflating limited liability with non-existent liability. As I previously wrote, all liabilities are limited. They lay somewhere between non-existent (“My damages to you are not my business”) and absolute (“Your firm caused $XXX Billion of damage to me and since you have no way of repaying me, you become my slave until you fully reimburse me.”). Both extremes are detrimental to prosperity, and there is no objectively derivable (moral) spot in between. IMO, the “sweet spot” for liability limitation is (would be) determined by the subjective preferences and norms prevalent in the market.
Yes, and my point is that those subjective preferences don’t find their way in the gov’t LL system.
Edit: Voluntary exchanges can have negative externalities, so only under a free market law system can you conclude more business == more prosperity. Now, obviously most businesses add to the welfare, but not every aspect of their operation does when they can’t get the right price signals in a failing gov’t LL system. E.g. an entrepreneur who has to sell his garbage to the maffia to dump in the ocean because his competitors are doing it too, etcetera.