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Fun exploration of limited liability corporations, and of anarchist community, with “principled libertarian” Stephan Kinsella

February 20th, 2014 No comments

I haven’t been in communication with anti-IP stalwart and occasional sparring partner Stephan Kinsella for some time (I lost my appetite for his hostility), but I saw him recently on Facebook, where he had reposted a review he had done of the movie “Avatar”; as I had liked his review, I stopped by to say hello. [Note: my various #Avatar-related posts, from my blogging/commenting days at the Mises Institute, are here: http://tokyotom.freecapitalists.org/?s=avatar.]

What follows are his Facebook post and our ongoing dialog to date (some other persons also appear; cross-links after the name); stay tuned!

1. Kinsella (Feb 12 at 10:54 pm)

I confess, I am not the a very good movie reviewer. When I occasionally do one, they start looking dated within months. Anyway, I remember this one from 2009. I got tons of grief for it from fellow libertarians, e.g., if I recall, Michael Barnett.

http://www.lewrockwell.com/lrc-blog/avatar-is-great-and-libertarian/

2. TokyoTom (Feb 13 at 2:52 pm)

I didn’t give you any grief about it, Stephan – in fact I praised you for it – but then I’m a good statist, like you:
http://tokyotom.freecapitalists.org/2009/12/22/envirofacist-avatar-comments-quot-avatar-quot-resources-property-rights-corporations-government-enabled-theft/

3. Andy Katherman (Feb 13 at 11:51 pm)

Great movie review Stephan. I wrote something very similar back in 2010 on my blog (http://www.libertyforlaymen.com/…/natural-law-take-on…). Mind you, I was in my anarcho-libertarian “infancy” and more of a minarchist/Constitutionalist back then.

It’s funny James Cameron is probably more of a pinko-commie-ish-enviornmentalist than a libertarian, but I had the same reaction in that he actually presented a brilliant case for the necessity of property rights and lockean homesteading than pretty much any other movie that comes to mind… all the while doing it with great visual effects and a pretty decent plot!

4. TokyoTom (Feb 14 at 8:32 am)

Andy, Cameron wasn’t presenting a brilliant case for the necessity of property rights and lockean homesteading, but an allegory for the reality of corporate resource development around much of the world where native title is ignored, and a fantasy of natives fighting back. Of course it’s a more tangled reality, with governments frequently involved, wanting royalties, and arrogating rights to balance interests. BP and the Gulf of Mexico and the Kochs, Albertan oil sands and Keystone, for example.

5. Kinsella (Feb 14 at 8:43 am)

why add the word “corporate” Tom? What does that add to anything. There is nothing inherent in corporations that makes them more likely to violate rights. It’s just a form of business organization.

6. Andy Katherman (Feb 14 at 3:30 pm)

Disagree “TokyoTom”. I concede Cameron is probably an eco-nut of the “watermelon” variety (green on the outside, commie red on the inside) and has disdain for commerce, free markets, and “Capitalism” (properly understood)… and may not even care about property rights. But, the movie really is a terrific demonstration why property rights are a vital normative concept to reduce conflict over scarce resources. And, it also provided a case why aggression is Bad and why self-defense of homesteaded land/property/resources (Home Tree) is good and JUST. Yes, it is an allegory and it gets a bit weird at times (mystical-ish) but so what. It’s a frickin’ movie not a revisionist documentary. I still hold it is a great work of fiction and a mostly libertarian one at that.

7. Kinsella (February 15 at 12:32am)
Tom has long been a gadfly type. He supports all manner of unlibertarian proposals, but wants to fly the libertarian radical flag, and of course people like him start to feel uncomfortable so they start attacking anyone wiht principles. They basically become useless nihilists.

8. TokyoTom (February 17 at 12:01pm)

Stephan, that last comment is a very impressive demonstration of confused, unprincipled, unconstructive blatheration. It’s the kind of reflexive, self-satisfied hostility I expect to see of statists, but am a bit embarrassed to see from self-ascribed ‘anarchists’/libertarians. Nice show.

9. Kinsella (February 17 at 12:03pm)

apparently the existence of principled libertarians drives the pragmatists and minarchists and middle-of-the-roaders nuts.

10. TokyoTom (February 17 at 12:04pm)

Andy, thanks for the comment. Dunno why you feel the need to bash Cameron as a “watermelon” “eco-nut”, when he has made it clear in other contexts that he is standing up for the rights of native peoples.

The struggle he addressed in Avatar is still very much underway; see this from recent news? “To get the gold, they will have to kill every one of us”

11. TokyoTom (February 17 at 12:08pm)

Stephan suggests that “There is nothing inherent in corporations that makes them more likely to violate rights. It’s just a form of business organization.”

I imagine Stephan can likewise not see the moral hazard trainwrecks that have also been set in motion by governments insuring deposits, protecting the shareholders of listed companies, owning and developing resources, or in regulating on the basis of pollutions or public health and safety, either.

12. Kinsella (February 17 at 12:12pm)

Governments violate rights when they insure deposits. You see, Tom, that is what libertarians are against–aggression, rights violations. People who privately organize their business arrangements in a certain way do not inherently or necessarily do this. See, so it’s irrelevant whether there is a “moral hazard” or not. Libertarians are not opposed to “moral hazards.” We are opposed to aggression.

13. Kinsella (February 17 at 12:16pm)

And the state does not “protect shareholders.” I have explained this in depth already. http://www.stephankinsella.com/…/kol100-the-role-of…/

and http://www.stephankinsella.com/…/kol115-mises-canada…/

14. TokyoTom (February 17 at 12:26pm)

Stephan suggests that I am a “gadfly” “unlibertarian” who “attack[s] anyone wiht principles” and who is a “useless nihilist” whom he has “principled libertarians” (AKA, himself) has “drive[n] nuts.”

I think that, unfortunately, what we have here is Stephan demonstrating the roots of property lie not in principles, but in the reflexive, bristling defense of what people (individuals and groups) regard as valuable enough to defend.

Calm down, Stephan.

15. TokyoTom (February 17 at 12:52pm)

Stephan is the kind of Bootlegger-Baptist critic who himself is a vociferous Baptist who is uncomfortable looking at how Govt sets up the Bootleggers who are gaming the system.

In free, voluntary markets, there is no Get-Out-of-Personal-Liability-for-Harms-Caused-to-Others-Free Card.

Limited liability for shareholders is a state-granted favor that is demonstrably at the bottom of the dynamic of people forever running to a gamed “democratic” government to make Govt make its creations behave more nicely (with the regulations then serving to protect the big, to limit competition, and to fuel corruption and further govt capture). As soon as governments began creating corporate monopolies and/or limited liability cos, then then judges followed suit by rejecting strict defense of property in favor of a pollution-/corporation-favoring “balance” of equities that Block noted.

16. Kinsella (February 17 at 2:28pm)

I explained in detail in the talks and blog post linked, why this is wrong. There is no reason to assume passive shareholders ought to be liable for torts committed by others. In a private law society, there is no reason to think shareholders would be liable in the first place.

17. TokyoTom

Stephan consistently attacks arguments I don’t make. It must be because he is more principled than I am:
http://tokyotom.freecapitalists.org/?s=limited+liability+kinsella

18. Kinsella (February 17 at 2:51pm)

Tom, you just stated your view that state limited liability for shareholders is some kind privilege. that implies it is giving someone a limitation on liability that they otherwise would have in a free market. It’s not a privilege unless it changes the situation.

19. TokyoTom (February 17 at 2:56pm)

Stephan: “In a private law society, there is no reason to think shareholders would be liable in the first place.”

In a private law society, one finds ALWAYS individuals and associations of individuals who may negotiate liability caps with voluntary counterparties, but remain potentially personally liable up to the remainder of their personal assets for harms that their activities (and those of their agents) caused to others.

While the persons who actually directly caused harms would of course be liable, their principals would try to limit their own potential exposure by either closely managing their agents or making sure that others were independent contractors.

Stephan defends a state-created order where it is now extremely difficult, if not impossible, for us (and tort victims) to determine WHO in fact acted and is responsible for vast harms, such as those produced by BP, WVa’s “Freedom Industries”, TVA, TEPCO and the like. Instead, Stephan grotesquely calls polluting companies “victims”.

20. Dan Cotter (February 17 at 3:17pm)

Does anybody else find it strange when people write their comments as if they are speaking to an audience rather than just directly speaking to the person they’re conversating with?

21. TokyoTom (February 17 at 3:44pm)

Dan, I’ve been talking with Stephan Kinsella for several years – putting me a ten-foot-pole distance has too often been one of his penchants, because his principles mean I stink. We’ve had a bit of a hiatus, so when I visited here, you can see that I addressed him directly; he shifted to the third person here: https://www.facebook.com/nskin…/posts/10151972701413181….

22. Kinsella (February 17 at 9:22pm)

haha, are you really criticizing me for using third person…? come on dude.

23. Kinsella (February 17 at 9:25pm)

“remain potentially personally liable up to the remainder of their personal assets for harms that their activities (and those of their agents) caused to others.”

This is almost right. You are liable for harms (some types anyway) caused by your *actions*. (“activities” is intentionally vague)

But shareholders do not act to cause the harm caused by employees of the company they have stock in.

“While the persons who actually directly caused harms would of course be liable, their principals would try to limit their own potential exposure by either closely managing their agents or making sure that others were independent contractors.”

Calling shareholders “principals” is question-begging. They are passive. I have explained this. So have other that I linked to–e.g. rothbard and pilon and hessen.

“Stephan defends a state-created order where it is now extremely difficult, if not impossible, for us (and tort victims) to determine WHO in fact acted and is responsible for vast harms, such as those produced by BP, WVa’s “Freedom Industries”, TVA, TEPCO and the like. Instead, Stephan grotesquely calls polluting companies “victims”.”

How is this supposed to be an argument that shareholders are causally responsible for torts of employees? Everyone seems to simply assume this respondeat superior type vicarious liability.

24. TokyoTom (Feb 19 at 4:52pm)

“‘activities’ is intentionally vague”

This is intentionally hair-splitting obfuscation; one “acts” – we call what people do both “activities” and “actions”.

– “shareholders do not act to cause the harm caused by employees of the company they have stock in.”

It is not my premise that they always/necessarily do — though of course, sometimes shareholders may be actively involved in torts tied to the business activities conducted by the corporation they own shares of. When judges “pierce the corporate veil”, they essentially treat shareholders as principals/partners/sole proprietors.

– “Calling shareholders “principals” is question-begging. They are passive. I have explained this.”

Suggesting I was calling shareholders principals is either stupidity or a deliberate misreading; I was clearly referring to private law orders/contractual arrangements outside of corporations, not state-made corporations: https://www.facebook.com/nskin…/posts/10151972701413181… (PS–I really don’t like this attack style, but perhaps tit-for-tat is the best approach with anarchists who prefer to set examples of disrespect.)

But yes, of course now, within the state-made corporate form — and especially within listed companies, shareholders MAY be (but are NOT necessarily) “passive”. But this is itself quite problematic, though not my chief point.

– “How is this supposed to be an argument that shareholders are causally responsible for torts of employees? Everyone seems to simply assume this respondeat superior type vicarious liability.”

You attack arguments that I do not make. This is your style is your wont, Stephan — I find it wanting. I have NEVER argued that “shareholders are/should be causally responsible for torts of employees” or just “assumed respondeat superior type vicarious liability”.

Partners and sole proprietors were/are not deemed automatically responsible for torts committed by their employees, yet the risk and expense of potential lawsuits has always served to have them pay attention to risks that their employees and agents might harm others. An artificial state-made liability cap freed shareholders from downside risks, and incentivized blind eyes to practices that were costly to others.

It is clear that respondeat superior doctrine was expanded judicially and by law as firms left the realm of private businesses and became favored creatures of the state.

I am glad you are paying some attention to questions of individual responsibility, though of course you have NOT done so consistently, when you persisted in calling “BP” a “victim” and ignoring the corporate problem of discerning who it is who acts:

“It is one of the salient features of corporations that they confuse themselves and everyone else as to WHO, precisely, is responsible for their actions and the harms they cause others, and it is time for Austrians to examine such features closely. – See more at: More about “the biggest victim”, BP, and how we can help it end its “victimization”

Poor statists! If we close our eyes tightly enough, we can see clearly that Corporations are innocent VICTIMS, of governments that foist on them meaningless grants like limited liability & IP, and of malevolent, grasping citizens

Thanks for playing, and for your decent Avatar post.

25. Kinsella (Feb 20 at 2:24 am)

“It is not my premise that they always/necessarily do — though of course, sometimes shareholders may be actively involved in torts tied to the business activities conducted by the corporation they own shares of. When judges “pierce the corporate veil”, they essentially treat shareholders as principals/partners/sole proprietors.”

I am at a loss to identify the coherent libertarian principle you are trying to invoke. Who cares about the modern positive state law of ‘piercing the corporate veil,’ for example–what possible relevance has this for justice?

“Suggesting I was calling shareholders principals is either stupidity or a deliberate misreading;”

oh, i assure you, I am merely stupid, not dishonest.

–Wait.

“I was clearly referring to private law orders/contractual arrangements outside of corporations, not state-made corporations: ”

Wasn’t clear to me, kemosabe, but then I don’t have your IQ or whatever.

“Partners and sole proprietors were/are not deemed automatically responsible for torts committed by their employees, yet the risk and expense of potential lawsuits has always served to have them pay attention to risks that their employees and agents might harm others. An artificial state-made liability cap freed shareholders from downside risks, and incentivized blind eyes to practices that were costly to others. ”

What does this frenetic screed of incoherent babble have to do with libertarian principles? Answer: not much.

“It is clear that respondeat superior doctrine was expanded judicially and by law as firms left the realm of private businesses and became favored creatures of the state. ”

So… you are in favor of respondeat superior. well Rothbard, Pilon, Hessen and I are not. Congratulations on your glomming onto the state schema.

26. TokyoTom (Feb 20 at 5:35 pm)

You disappoint by never failing to disappoint, Stephan.

1. “I am at a loss to identify the coherent libertarian principle you are trying to invoke. Who cares about the modern positive state law of ‘piercing the corporate veil,’ for example–what possible relevance has this for justice?”

You are at a loss to understand the libertarian principle that a man — even a shareholder — might be called to account for his own acts? I agreed that shareholders should not be liable qua shareholders, and simply indicated that they might be liable based on their own actions. Corporate “veil piercing” is justified if based on a fact-finding that a shareholder directed a tortious act.

2. “Wasn’t clear to me, kemosabe, but then I don’t have your IQ or whatever.”

Real gentlemen don’t find admissions of error so difficult, and sneering, gratuitous contempt and off-handed offensiveness so easy. Whatever.

3. Me: “Partners and sole proprietors were/are not deemed automatically responsible for torts committed by their employees, yet the risk and expense of potential lawsuits has always served to have them pay attention to risks that their employees and agents might harm others. An artificial state-made liability cap freed shareholders from downside risks, and incentivized blind eyes to practices that were costly to others. ”

You: “What does this frenetic screed of incoherent babble have to do with libertarian principles? Answer: not much.”

Kindly demonstrate that this is both babble, and babble not related to libertarian principles. Austrians are keenly attuned to moral hazard, and I was describing what I perceive as dynamics, not a principled position on liability rules (though LvMI has published pieces calling for a prohibition on corporations in the banking sector). But if I recall correctly, you too have indicated that you oppose the state structuring of/stamp of approval on corporations.

Your own frothing has nothing to do with libertarian principles, and in fact demeans them.

4. Me: “It is clear that respondeat superior doctrine was expanded judicially and by law as firms left the realm of private businesses and became favored creatures of the state. ”

You: “So… you are in favor of respondeat superior. well Rothbard, Pilon, Hessen and I are not. Congratulations on your glomming onto the state schema.”

Congrats on another false and unjustifiable conclusion. Par for your course. Austrians Mises, Hayek, Rothbard, Block, Cordato etc. all describe what they discern of the dynamics of human action within institutional structures; please congratulate them too for glomming onto the state schema.

Ad hom is a shameful game, Stephan. It discredits your good work that you that you thrill to it so much.

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Block/Huebert/Kinsella revisit corporations, beg Qs of grant of limited liability towards persons involuntarily injured and resulting fight to influence state action

September 10th, 2009 No comments

I left the following comment at a recent Mises Blog post by Stephan Kinsella, but the number of links included apparently triggered the spam filter and held up the comment.  According, I post it here, so I can re-comment with a cross-link here.

Stephan, we have extensively discussed this matter previously, focussing mainly on the point that Vincent Cook raises, namely, the consistency with libertarian principles of the state grant of limited liability as against parties who become unwilling “creditors” of the firm as a result of being injured by the actions of the firm.

You continue to dodge this point just as Block and Huebert have explicitly begged the question in their latest effort (emphasis added):

“As long as there is no fraud, as long as all those who deal with corporations know full well that in case of any dispute, they will only be able to sue for an amount up to the full capitalization of the corporation and not have access to the shareholders’ personal assets, there can be no problem with the libertarian legal code.”

It goes without saying that injured persons don`t choose ahead of time who will injure them, much less the whether the liability of their tortfeasors will be limited to corporate assets. [IOW, when it comes to limited liability corporations, there IS a fairly glaring problem with the libertarian legal code.]

Our previous discussions on the Mises Blog took place here and here

And an earlier related discussion on the Mises Blog was here:

I have commented extensively myself on the consequences of this grant – which I see as fuelling risky corporate behavior and a cycle of “rent-seeking” fights with private interests seeking to use the state as a check against corporations – in a number of blog posts, such as the following:

http://mises.org/Community/blogs/tokyotom/archive/2008/11/26/corporations-amp-the-state-some-criticisms-of-huebert-and-block-s-criticisms-of-long.aspx

http://mises.org/Community/blogs/tokyotom/archive/2009/03/03/when-will-tom-woods-and-other-quot-free-market-quot-intellectuals-have-second-thoughts-about-limited-liability.aspx

http://mises.org/Community/blogs/tokyotom/archive/2009/02/26/the-curse-of-limited-liability-wsj-com-executives-traders-of-big-financial-corporations-generate-risky-businesss-while-smaller-partnerships-are-much-more-risk-averse.aspx

http://mises.org/Community/blogs/tokyotom/archive/2007/10/16/fighting-over-the-wheel-of-government.aspx

http://mises.org/Community/blogs/tokyotom/search.aspx?q=limited

http://mises.org/Community/blogs/tokyotom/pages/legal-resources-on-the-state-creation-of-limited-liability-for-shareholders.aspx

 

Yes, Tom Woods; Corporations ARE Unlibertarian. And the Massive Regulatory State and Rampant Crony Capitalism Are the Result.

June 12th, 2015 3 comments

[Note: this started as a Facebook post, which is also open for comment.]

I have been bugged by friends to share some thoughts on the recent discussion (January 2015) between Tom Woods​ and Stephan Kinsella on the “libertarian-ness” of corporations, which was held on the Thomas Woods​ Show, and which they have respectively posted, with supporting references:

http://tomwoods.com/podcast/ep-325-are-corporations-un-libertarian/
http://www.stephankinsella.com/paf-podcast/kol170-tom-woods-show-are-corporations-unlibertarian/

I’ve had countless discussions with Stephan on this topic, chiefly when the Ludwig von Mises Institute ran an open blog; many great conversations were lost when LvMI closed down the blog, but the interested reader can find some of my own conversations here (I backed them up to a personal LvMI blog, and further migrated them when those too were closed by LvMI):

Here are a few thoughts that I shared privately with someone, both in advance of listening to Stefan and as the talk show proceeded:

He’s missing how the state provision of the legal entity structure, and especially the limited liability aspect, has, by risk socialization flowing from shareholders’ incentives to turn a blind eye (to NOT be involved in decisions that hurt others) fuelled the growth of the snowballing and ever-more captured regulatory state.

He mis-states here completely how corporations came about — they were all one-off, special purpose and limited-duration monopolies created in the public interest, not charters that the government let you file that were just like limited partnership agreements.

I am happy that he says state incorporation statutes (and government-made corps, presumably), should be done away with.

His statement that legal entity status is a convenience for the benefit of creditors is basically hogwash — without entity status, creditors could sue ANY (all if they wanted) partners and employees, and let THEM either bring others in as co-defendants or let them work out indemnification arrangements. Entity status is not favor to creditors.

He’s finally making some of the arguments that I did years back — that the favors granted in creating corporations are an excuse/justification for endless meddling by governments in business affairs.

I’ve proposed marked deregulation of non-corporate businesses and of corps whose owners keep a risk tail (i.e., in the case that equity is only partially paid-in, so that directors would have a capital call on shareholders if claims were to exceed assets), but Kinsella instead is trying to say that all government “favors” are meaningless, so government regulations of the corporations they create were never justified. —

It’s an argument that entirely ignores the easily accessed history of harms that, because corporations were made in the “public interest”, courts let corporations get away with, so that people had to go running to legislatures to beg government to “do something” about the corporate Frankensteins that the government had set loose. And it ignores that corporations drive regulatory capture and that the big ones are the partners of government — so much so that it has long been damned-near impossible to tell where business ends and government begins.

He says it would be a good thing if we removed legal entity status — I appreciate this, but in fact, of course, everyone (and Stephan himself) uses Stephan’s argument to deflect criticism from corporations and crony capitalism.

He speculates that “that wouldn’t lead to unlimited liability” for shareholders, but that’s largely a strawman — shareholders could be sued, and would have to bear costs of defense, which would make them quite interested in making sure the execs/manages/employees weren’t running around creating risks/hurting people. Just POTENTIAL exposure to risk gets people’s attention, and cutting that off is a massive subsidy to corporations.

Of course business firms that aren’t corporations could outlive their founders — through a gradual handover to younger generations, bringing in others, etc. But the natural, common law methods of business organization (partnerships, family businesses, cooperatives and associations) keep the owners very, very interested in making sure possible successors are brought up within the firm and understand employees, customers, suppliers, community members, etc., and in carefully monitoring the activities of such possible successors.

The artificial, statist corporation form loosens the bonds of mutual accountability  among owners, and between employees/other community members.

As for limited liability; he’s right about voluntary creditors — that voluntary counterparts can agree to limit each other’s liability to “business assets” only, and to exclude the personal assets of owners.

But as for the involuntary tort creditors, creating the corporate form and eliminating any possible liability of shareholders has had the clear consequence of totally muddling WHO it is that is acting and who should be responsible for torts — so we ended up totally eviscerating the old doctrines of privity of contract, grossly expanding the notion of “respondeat superior” (so corporate assets are on the hook, even when it isn’t clear what INDIVIDUALS ought to be liable for harms) and a lessening of accountability within firms. (Witness the confusion of Stephan and Lew Rockwell regarding the catastrophic BP Horizon blow out a few years ago, when they proclaimed that “BP” was the “biggest victim” of the catastrophe, without identifying whether the victims were those killed, workers generally, managers, execs or shareholders, and that “accidents happen”.)

I agree that “ownership” shouldn’t necessarily imply personal responsibility when innocent persons are harmed in the course of corporate business activities — my point is that shareholders should NOT be automatically excluded from POTENTIAL liability. By excluding them entirely for liability the effect has to been fashion unnaturally large pools of assets and capital that are managed by executives who are agents for no principals whatsoever, leading to a host of nonsense, including not simply a massive Regulatory State and rampant crony capitalism, but to nearly powerless shareholders in listed companies whom themselves claim to be “victims” whenever Bad Shit “happens.”

His argument that shareholders aren’t “owners” is garbage; it’s another post facto argument, and itself statist. Until this point, he argued that shareholders were just like partners/limited partners (who just have indemnity agreements that spread out individual liability for claims by making each other mutually responsible) –now he’s arguing that, hey, because the shareholders BY LAW have no responsibility, they shouldn’t be considered “owners”.

He then makes the point — which I made to him years ago — that if shareholders were exposed to risk, they would just buy INSURANCE — so the world would NOT collapse and everything would just go on as before. Well, not so fast — if shareholders had potential risk exposure and wanted insurance, it would be a COST that they would have to bear — and what he’s actually doing is acknowledging that, at least as to the cost of such insurance (which would vary company by company, industry by industry), government is now currently SUBSIDIZING corporations (or at least being shareholders in them).

As a result, his “net of causality” for torts has been totally confused.

His argument that shareholders may not contribute a dime directly to the corporation is technically true, but that’s another post facto argument. If there was no corporation, then any new partner in a partnership would certainly, if not also be making a partnership contribution, be directly undertaking obligations to the other partners.

All of the D&O and other liability insurance that Kinsella refers to have real costs; the bigger the firm, the more government-afforded protection, and the less important these costs are. Further, of course, thanks to the government-granted “get out of potential liability free” card (in the form of limited liability), shareholders in corporations don’t have to face costs and risks of monitoring, insuring or self-insuring for potential liability or hassles of being sued by injured persons if damages exceed the assets of whoever proximately caused them or the insurance coverage and business assets of the firm. These things matter, and we face greater risks and reduced incentives (and corresponding markets) to monitor and manage risks as a result.

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Why Some Anarchists Hate Anarchy (hint: they love corporations)

September 21st, 2011 1 comment

Just saw a post by Stephan Kinsella from last month on the main blog, and couldn’t resist a little fun with his closing paragraph, which I tweaked slightly: http://blog.mises.org/10479/why-objectivists-hate-anarchy/comment-page-4/#comment-801811

So: limited liability corporations are the most important of all capitalist organizations.

And you can’t have corporations in anarchy, since corporations (and their essential characteristics like limited liability of shareholders) come from artificial edicts by the legislature of a state.

So, we must have a state. QED.

(Just playing.)

TT

Some further thoughts on corporations are here: http://mises.org/Community/blogs/tokyotom/search.aspx?q=corporation

 

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Scrupulosity IV: Corporations are the Health of the State (thanks to institutionalized moral hazard)

June 6th, 2011 2 comments

I copy below some more of my dialogue with Stephan Kinsella and others, regarding Jeffrey Tucker‘s unhappiness that not all libertarians are cheerleaders for our current model of “capitallism” (see my eariler posts on “scrupulosity“).

Stephan does a great job at wrestling with strawmen, attributing to me positions that I have expressly argued against, and questioning my forthrightness and my dislike for the state:

{Folks apologies if you are seeing disordered paragraphs; the blogging software seems to do that frequently when one copies in various blocks of text. I have added a few numbers to make chronological order clear.)

1.  Stephan Kinsella June 5, 2011 at 8:33 am

Calling shareholders “passive” might be a fair representation of the existing, government-created system – especially for listed, “public” companies, but that’s pretty much my point. This is NOT true of partnership or other traditional types of business organization,

See Hessen et al.–it is true of limited liability partnerships, where you have limited partners who are passive, and general partners who are active.

But even for a general partner–why is he automatically liable for what torts employees commit? this hoary, feudal notion of respondeat superior–you are responsible for your “servants’” actions–is a bit insulting and elitist.

” and the grant of limited liability itself deliberately signals shareholders that they can turn a blind eye to activities that profit the company while posing costs and risks to others.”

If they would not be liable in the first place then it’s not a grant, any more than you, as a Walmart customer, are “granted” limited liability just b/c the law does not currently make you jointly reponsible for torts committed by Walmart employees. I suppose you could argue this “grant” of limited liability to you as customer makes you as customer turn a blind eye to its risky activities. As I said in my post, this broad view of causal responsibiltiy would make everyone in society liable for everyone else all the time, without exception, which is why I analogized it to socialized medicine/Obamacare.

Sure, it’s probably not now “fair” to passive shareholders to “attribute vicarious liability to them … for torts committed by employees”, but that is both a strawman and besides the point. The point is that the government grant of limited liability MAKES A DIFFERENCE;

You keep saying it’s a grant but this is question begging, as this assertion assumes that absent this legal rule they would be liable vicariously under some libertarian principles of causation. I deny that they would. So if you say it’s grant you are arguing dishonestly by assuming your premise.

the strawman is that I am certainly NOT proposing a new rule that shareholders be assigned liability for acts by corporate employees, but simply that the limitation on liability be eliminated

WElt he state should be eliminated of course. There should be no laws whatsoever regarding corporations. I agree with this. The limitation of liability law should be abolished. I of course agree, which shoudl be apparent from reading what I have written since unlike many left-libertarians who are vague and maunder and equivocat and are disingenuous I try like Rothbard to be clear and upfront, and am very openly anti-state. I simply disagree with people like you who explicitly or implicitly propose that in a free society it would be appropriate to automatically hold the equivalent of passive shareholders (whatever you call them) vicariously responsible for others’ torts. If you think removing limited liability would make a difference, this is your implicit view. This is what I disagree with; your distractions seem to be an attempt to cloud the water to make it hard to see that this issue is at the heart of our disagreement.

– just as other grants by the government of liability limits (nuclear power, offshore oil drilling, and pollution permitting generally) should be eliminated.

Yes, I agree, but that is a bad analogy b/c those ARE real limits that do have an effect, unlike the shareholder case which does nothing IMO but ratify the situation that would obtain anyway.

Your assertion that limited liability of shareholders “would also be present in a free society in which private contractual ‘corporations’ arose” is totally unsupported. Can you point to where Rothbard, Hessen or Pilon argue that private contracts that limit liability of investors against voluntary creditors could serve to limit their personal liability against INVOLUNTARY creditors, viz., tort victims?

It’s not contracts that do it. It’s simply the fact that tort victims can pursue the tortfeasor, and the shareholder is not the tortfeasor; and there is no ground for making the shareholder liable vicariously for the employee’s torts.

And yes, see: Rothbard on Corporations and Limited Liability for Tort; Legitimizing the Corporation and Other Posts; Defending Corporations: Block and Huebert; Pilon on Corporations: A Discussion with Kevin Carson; Corporations and Limited Liability for Torts; In Defense of the Corporation

For example, see pilon http://www.stephankinsella.com/wp-content/uploads/texts/ga-l-rev-1979_6.pdf pp. 1310-. for Hessen, see this excerpt,http://www.lewrockwell.com/blog/wp-content/uploads/2004/04/Hessen+corporation+tort+liability+excerpts.pdf , pp. 18-20
and http://www.stephankinsella.com/2010/02/rothbard-on-corporations-and-limited-liability-for-tort/ — this last post also quotes Rothbard: “Similarly, if a corporate manager committed a wrong and damaged the person or property of others, there is no reason but “deep pockets” to make the stockholders pay, provided that the latter were innocent and did not order the manager to engage in these tortious actions.”

So, Rothbard, Hessen, Pilon–all hold that passive shareholders are not automatically liable vicariously for torts committed by employees, any more than limited partners would be.

Just as you, surely, have no objection to private agreements between parties to protect the information created by one of them (private “intellectual property”)

I would not call it that. “Intellectual property” is a propaganda term invented recently to justify state grants of monopoly privilege (patent and copyright)http://blog.mises.org/14914/intellectual-properganda/

but simply oppose state-created IP, so too should you (as a lawyer!) be able to understand that in principle, of course, I have no objection to contract-based companies, but oppose the obvious and important favors granted by the state in the case of all corporations?

You are confusing the case for contractual limited liability of shareholders for contractual debts, with the case for shareholders not being liable vicariously for others’ torts. The latter is not based on contract.

2. Not to be missed is that the grant of limited liability is extremely important and consequential:

See: The Cliff Notes version of my stilted enviro-fascist view of corporations and government – TT’s Lost in Tokyo http://bit.ly/9oBkC7

It has allowed owners to divorce themselves from formal reponsibility for the acts of their agents/employees, to divorce themselves from the communities in which their firms act, and to dodge claims of moral responsibility.

So what? this is not a justification for a law. It’s just some “policy” musings.

So we are left with massive corporations which are massively entangled with government

That’s b/c there is a state (which you favor, not me; I’m the anarchist), not b/c of the way people would create firms on the free market

and are powerful buyers of favors, which citizens forever clamor for “more control!”, and which lack any clear locus of responsibility — and in which we find anarchist libertarians like yourself and Lew Rockwell acting as their lawyers, and calling them and their shareholders “the biggest victims” (not the little people on the short end of the stick of projects like Gulf oil drilling, nuclear reactor meltdowns or even mundane health/air/water/soil damage from pollution)

Emotivism. You are not making an argument. It is not unlibertarian to have a view as to who is victimized by a given state policy. In fact the central state whose legitimacy you yourself support claims the overlord/landlord status in the offshore continental shelf; BP held a lease. It was your central state that is the landlord whose tenant had the oil spill. By your principles of vicarious responsibilty where you want to willy nilly say some old lady holding a single share of BP stock should be personally liable for this tort, of course the landlord should be too, right? I.e., your state is responsible, so why are you blaming me for favoring private investors in a free society, when you support the very state’s existence, the state that is responsible for the BP spill in the first place? And of course the nuclear industry is heavily distorted and corrupted by the state; Chernobyl was teh state’s fault, and the entire meltdown-prone western nuclear industry was corrupted by your beloved state for military reasons — instead of safe Thorium we needed the current system to produce nuclear weaponshttp://www.libertarianstandard.com/2011/04/01/the-states-corruption-of-nuclear-power/

So blaming this on private investors is rich. It’s the state’s fault, as usual. You think that getting rid of one of the few state laws that happens to mimic the likely result on a free market (limited liability for passive shareholders) is what you should focus on?!

As Mises long ago noted, moral hazard matters.

This is how statists and law professors reason. It is not how libertarians reason. We believe in individual rights–property rights–and have principles. we don’t run around “weighing” various “policy reasons” to tweak and fine tune statist positive law.

3. While in principle any partnership can keep going even when one partner dies or decides to leave and new partners are added, surely you are aware that this is a very cumbersome process, not in small part because of the concerns that the partners and its lenders, suppliers and customers all have about who, precisely, is managing the business and who has liability for potential losses?

Nonsense. SEe the Hessen excerpt above, p. 17, regarding how partnerships or firms can easily make the firm effectively immortal by use of continuity agreements. This is not hard.

Just as for limited liability,

More question begging, as I have explained

the grants of legal entity status,

this is not a gift but an unnecessary status that the state uses to justify regulation and double taxation of shareholders. In a free market firms would not have legal personality nor do they need to. Hessen has already explained this almost 30 years ago.

unlimited life,

See Hessen, last mention above. This can be done contractualy.

unlimited purposes and the ability to own subsidiaries are all substantial AND consequence-laden gifts from the state.

The purpose is whatever the shareholders agree to. It has nothing to do with the state just as marriage should not. Ownign a subsidiary is not a privilege but just another contractual private scheme. Nothing you described is a gift fromt he state. All these features are doable privately and contractualy, except for entity theory which is not a gift but a penalty.

Show me a partnership that has any of these, without a grant from the state.

This is like asking me to show you a 100% reserve bank. They are not used now b/c the state’s fractional reserve/guaranteed system outcompetes it. If I want a perpetual firm I just use a corporation b/c the state provides this mechanism. In a free market people would have to do it privately contractually, on their own; I have no idea if they would be called limited partnerships, LLP, LLC, or what. Who cares? IT’s just a detail. Get the state out of the way, and we’ll see.

Waht i object to is your clamoring for shareholders to be liable, when you have no theory whatsoever undergirding this.

The state creation of corporations has do much to muddle who, exactly, is responsible for injuries to third parties caused by “the corporation”.

So what, really? In most cases the corporation pays the victim, and has assets to do so.

Getting rid of limited liability would do much to provide moral clarity,

Again, this is question begging, b/c you are assuming there would and should be liability for shareholders absent the limitation of liability law.

I would note that, just as if deposit insurance were eliminated, market actors would step up to advise on which banks are safe and to provide deposit insurance, so too would insurers step up if limited liability were ended.

We are NOT talking about bringing down capitalism.

I know, but this still does not justify your claim that shareholders should be liable vicariously for the torts of others. What is your theory of causal responsibility? I have tried to sketch one out — http://mises.org/journals/qjae/pdf/qjae7_4_7.pdf — and see no way to hold passive shareholders liable; confirming the reasoning on the same lines of Hessen, Pilon, and Rothbard.

TokyoTom June 5, 2011 at 10:00 am

Stephan, of course the state is also at fault when statist corporations do stupid s**t like in the case of BP and TEPCO, and I’ve been arguing the case against the state as landlord loudly here for years now.

” claim that shareholders should be liable vicariously for the torts of others.”

You keep asserting this, even though I’ve made careful efforts to make it clear that I make no such claim. Do you anarcho-capitalists have such a difficult time reading? (By the way, since the boxes you want to put people in matter so much to you, I’m not by my own consideration “left” anything.)

I simply want to end the state creation of corporations, in particular the grant of limited liability to shareholders. You think it doesn’t matter and fight tooth and nail to defend corporations that lack any clear personal moral locus, while I think it has mattered and still quite profoundly, not the least in providing the rationale for the regulatory state.

Just as deposit insurance is at the root of rampant moral hazard in our financial sector, so too is limited liability at the root of corporate statism.

Sorry, but it’s late and I have a full day tomorrow. But I’ll ask, what INDIVIDUALS would you hold responsible for the BP oil spill and TEPCO bad decisions?

nate-m June 5, 2011 at 10:49 am

I simply want to end the state creation of corporations, in particular the grant of limited liability to shareholders. You think it doesn’t matter and fight tooth and nail to defend corporations that lack any clear personal moral locus, while I think it has mattered and still quite profoundly, not the least in providing the rationale for the regulatory state.

” claim that shareholders should be liable vicariously for the torts of others.”You keep asserting this, even though I’ve made careful efforts to make it clear that I make no such claim.

?
So you do not think that share holders should be liable for actions of employees, but you think that the legal framework that prevents share holders being liable for the actions of the employees should be removed?

It seems that these two statements are diametrically opposed under the current system. If you do not think that share holders should be liable then the way you achieve this is via LLC.

The only alternative is to go full AnCap with a contract-based legal framework, but that’s not going to happen any time soon.

If you remove LLC protections then your making shareholders liable vicariously for the torts of others.

 

2. TokyoTom June 5, 2011 at 6:47 pm

I suspect that Stephan’s lack of my response to my most recent comment to himhttp://blog.mises.org/17179/scrupulosity-and-the-condemnation-of-every-existing-business/comment-page-1/#comment-785116
indicates that he finally understands the difference between (1) a government rule absolving shareholders from personal liability for acts of the corporate legal fiction or its agents and (2) the absence of such a clear limitation of risk, which would leave shareholders subject to the risk of claims and a possible finding of liability.

There is quite a difference, and it can be seen in the choice of corporate founders to use the limited liability form, as opposed to alternatives that leave shareholders/investors on the hook, such as partnerships, corporations where shareholders expressly have no liability limitations (Amex was one such when it was created) or where shares are not fully paid in (and the corporation has a capital call), and in the continuing pressure by owners of partnerships to get governments to create entity forms that absolve owners of liability for damages to involuntary creditors.

nate-m, does this help understand my point? http://blog.mises.org/17179/scrupulosity-and-the-condemnation-of-every-existing-business/comment-page-1/#comment-785121

I am not saying we should have a rule that automatically makes shareholders liable for acts by the corporation and its agents, but that we should end the government rule that frees them from risk – and the incentives to oversee and monitor that risk.

The consequence of limited liability has been the steady growth of the regulatory state, and of use of the regulatory state by corporations (via CEOs who have slipped shareholder control) to create barriers to entry.

Just like we can end financial regulation by ending deposit insurance and forcing depositors to monitor banks, so too can we end the regulatory state by making shareholders pay attention to the risks created by corporations.

http://mises.org/Community/blogs/tokyotom/archive/2011/05/12/immodest-thoughts-to-fix-capitalism-we-must-get-govt-out-of-corporate-risk-management-rent-selling-business-and-get-shareholders-to-stop-playing-39-victim-39-amp-start-paying-attention-to-risks.aspx

REPLY

Stephan Kinsella June 5, 2011 at 7:35 pm

Your comments are incoherent, Tom. waht in the world are you trying to say.

REPLY

TokyoTom June 5, 2011 at 9:14 pm

I’ll make it simple, so even a non-lefty, non-stupid and non-dishonest anarcho-cap lawyer can understand:

The state grant of limited liability to shareholders, besides simply being unjustifiable under libertarian principles, has, by reducing the need of shareholders to monitor risk, had a profound affect on the development of what we now call ‘capitalism’ and on the growth of the regulatory state in response to complaints about corporate excesses.

I restated this position last September in the comment thread to a post by Geoffrey Plauche:

“Your uncertainty here is a manifestation of the confused discussion over liability for “corporate torts”that Stephan Kinsella refers to. His position is that only humans act, and not corporations (though they are given “legal entity” status), so only particular persons who actually injured someone else (and those who directed/ordered their actions) should be liable for any tort – not the corporation itself (and certainly not shareholders, unless they were personally involved somehow). I agree that granting corporate status has greatly confused discussions over whom should be liable for corporate torts, and think Stephan too lightly brushes back the enormous and anonymous torts that our now massive corporations commit — precisely what individuals, for example, is responsible for the BP disaster, for the damage to health and property caused by pollution, or for injuries resulting from faulty products?

“Rolling back limited liability should not mean that shareholders SHOULD be held liable for corporate torts in the same way that executives, managers and employees (the first two benefiting from company-purchased insurance policies) and sometimes lenders are; it would just mean that they would get no government-provided “get out of jail free” card. In this way, common shareholders would be put on a similar footing to partners in a partnership that acts through paid managers.”

The facts that the state now makes the corporate form widely available and that we have huge, statist corporations do not make the status quo acceptable, just as the state’s generosity in making IP widely available and that many are now invested in the status quo doesn’t justify IP or validate all the damage it’s causing.

But despite your ancap identity, you (and Lew Rockwell) keep rushing out to defend our system of amoral and anonymous pools of capital, rather than real people:

http://mises.org/Community/blogs/tokyotom/search.aspx?q=kinsella+victim

Thankfully, others are seeing this re limited liability:

Finally an LvMI commentator who sees the elephant in the room: effective reform to rein in rampant moral hazard at banks means removing limited liability! – TT’s Lost in Tokyo http://bit.ly/atelEr

The Curse of Limited Liability; WSJ.com: Executives/traders of big financial corporations generate risky business, while smaller partnerships are much more risk averse – TT’s Lost in Tokyohttp://bit.ly/8nlWr7

Best,

Tom

REPLY

3. TokyoTom June 5, 2011 at 7:14 pm

Block points to corporate moral hazard as a dynamic behind the rise of the regulatory state:

Limited liability produces both pollution and political meddling: Block on Environmentalism – TT’s Lost in Tokyo http://bit.ly/mvV4Qn

Ludwig von Mises on laws that cap risks: http://mises.org/Community/blogs/tokyotom/archive/2007/10/11/draft.aspx

“The laws concerning liability and indemnification for damages caused were and still are in some respects deficient. By and large the principle is accepted that everybody is liable to damages which his actions have inflicted upon other people. But there were loopholes left which the legislators were slow to fill. In some cases this tardiness was intentional because the imperfections agreed with the plans of the authorities. When in the past in many countries the owners of factories and railroads were not held liable for the damages which the conduct of their enterprises inflicted on the property and health of neighbors, patrons, employees, and other people through smoke, soot, noise, water pollution, and accidents caused by defective or inappropriate equipment, the idea was that one should not undermine the progress of industrialization and the development of transportation facilities. The same doctrines which prompted and still are prompting many governments to encourage investment in factories and railroads through subsidies, tax exemption, tariffs, and cheap credit were at work in the emergence of a legal state of affairs in which the liability of such enterprises was either formally or practically abated.”

“Whether the proprietor’s relief from responsibility for some of the disadvantages resulting from his conduct of affairs is the outcome of a deliberate policy on the part of governments and legislators or whether it is an unintentional effect of the traditional working of laws, it is at any rate a datum which the actors must take into account. They are faced with the problem of external costs. Then some people choose certain modes of want-satisfaction merely on account of the fact that a part of the costs incurred are debited not to them but to other people. …

“It is true that where a considerable part of the costs incurred are external costs from the point of view of the acting individuals or firms, the economic calculation established by them is manifestly defective and their results deceptive. But this is not the outcome of alleged deficiencies inherent in the system of private ownership of the means of production. It is on the contrary a consequence of loopholes left in this system. It could be removed by a reform of the laws concerning liability for damages inflicted and by rescinding the institutional barriers preventing the full operation of private ownership.”

REPLY

Stephan Kinsella June 5, 2011 at 7:36 pm

What is your question, exactly?

REPLY

TokyoTom June 5, 2011 at 9:18 pm

Not a question, but a response to your claim that my concern about “moral hazard” and CONSEQUENCES and somehow taints me and is non-libertarian:

“This is how statists and law professors reason. It is not how libertarians reason. We believe in individual rights–property rights–and have principles. we don’t run around “weighing” various “policy reasons” to tweak and fine tune statist positive law.

Balderdash: we all care about consequences, which is the chief reason why people are paying the slightest attention to your ‘principled’ ragings about IP.

 

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Scrupulosity II: A note to Stephan Kinsella on growing statism. limited liability, deposit insurance, and rampant moral hazard (and moral confusion)

June 5th, 2011 No comments

In addition to the comment that I blogged the other day regarding Jeffrey Tucker’s June 2 post, Scrupulosity and the Condemnation of Every Existing Business, I posed a question to Jeffrey in response to this further comment by him:

But Rothbard was not just an anarchist. He was an anarcho-CAPITALIST. From what I can tell, Rothbard has yet to win THAT victory among libertarians. They have learned from his anti-state writings, but have they learned from his economic writings on the absolute centrality of capital accumulation for the advance of civilization?

My question:

TokyoTom June 4, 2011 at 7:20 am

Jeffrey, are state-created corporations – the ones that embody moral hazard via a gift of limited liability to shareholders, have an eternal life, and in which responsible persons are fairly anonymous and bear little or no direct obligations to the outsiders they affect – are “absolutely central to capital accumulation and for the advance of civilization”?

Did we have no capital accumulation in the days of business partnerships and associations, before governments started giving away the store to their own little Franskensteins? Didn’t all businesses once have a rather clear set of owners, where the buck stopped?

Please clarify.

Tom

Stephan Kinsella kindly jumped in; his response to me on June 4 is here.

I use this blog post to copy my response to Stephan:

TokyoTom June 5, 2011 at 5:58 am

Thanks for your comments, Stephan.

1. Calling shareholders “passive” might be a fair representation of the existing, government-created system – especially for listed, “public” companies, but that’s pretty much my point. This is NOT true of partnership or other traditional types of business organization, and the grant of limited liability itself deliberately signals shareholders that they can turn a blind eye to activities that profit the company while posing costs and risks to others.

Sure, it’s probably not now “fair” to passive shareholders to “attribute vicarious liability to them … for torts committed by employees”, but that is both a strawman and besides the point. The point is that the government grant of limited liability MAKES A DIFFERENCE; the strawman is that I am certainly NOT proposing a new rule that shareholders be assigned liability for acts by corporate employees, but simply that the limitation on liability be eliminated – just as other grants by the government of liability limits (nuclear power, offshore oil drilling, and pollution permitting generally) should be eliminated.

Your assertion that limited liability of shareholders “would also be present in a free society in which private contractual ‘corporations’ arose” is totally unsupported. Can you point to where Rothbard, Hessen or Pilon argue that private contracts that limit liability of investors against voluntary creditors could serve to limit their personal liability against INVOLUNTARY creditors, viz., tort victims?

Just as you, surely, have no objection to private agreements between parties to protect the information created by one of them (private “intellectual property”) but simply oppose state-created IP, so too should you (as a lawyer!) be able to understand that in principle, of course, I have no objection to contract-based companies, but oppose the obvious and important favors granted by the state in the case of all corporations?

2. Not to be missed is that the grant of limited liability is extremely important and consequential:

See: The Cliff Notes version of my stilted enviro-fascist view of corporations and government – TT’s Lost in Tokyo http://bit.ly/9oBkC7

It has allowed owners to divorce themselves from formal reponsibility for the acts of their agents/employees, to divorce themselves from the communities in which their firms act, and to dodge claims of moral responsibility.

So we are left with massive corporations which are massively entangled with government and are powerful buyers of favors, which citizens forever clamor for “more control!”, and which lack any clear locus of responsibility — and in which we find anarchist libertarians like yourself and Lew Rockwell acting as their lawyers, and calling them and their shareholders “the biggest victims” (not the little people on the short end of the stick of projects like Gulf oil drilling, nuclear reactor meltdowns or even mundane health/air/water/soil damage from pollution) whenever bad decisions resulting from government-institutionalized buck-passing results in unfortunate “accidents”.

As Mises long ago noted, moral hazard matters. Mises on fixing externalities: progress along the Kuznets curve is not magic, but the result of institution-building – TT’s Lost in Tokyohttp://bit.ly/cM4iVb

Clearly, our continuing crises in our banking sector are due not simply to money-printing by the Fed, but to massive moral hazard within banks, investment banks and other advisers, all of which can be laid at least in part at the foot of government. Government’s role in guaranteeing deposits has the effect of telling them they get a free lunch, and don’t need to worry about how well the banks invest their deposits – and of shifting to our wonderful government the risk of failure. Government responds by imposing “prudential rules” (like “investment-grade” requirements and capital standards that are always gamed by insiders to put bonuses in pockets, while leaving risks to the banks and thus the government. Somehow – inevitably – the government is always late to diagnose the gaming and to tighten up rules – which, like Sarbanes^Oxley and other rules imposed on super-duper “public” companies, serve to further raise barriers to entry and to distance managers from shareholder control.

Tell me again that the massive games that a fairly insulated managerial class is engaged in at mega-firms are both natural and inconsequential?

3. While in principle any partnership can keep going even when one partner dies or decides to leave and new partners are added, surely you are aware that this is a very cumbersome process, not in small part because of the concerns that the partners and its lenders, suppliers and customers all have about who, precisely, is managing the business and who has liability for potential losses?

Just as for limited liability, the grants of legal entity status, unlimited life, unlimited purposes and the ability to own subsidiaries are all substantial AND consequence-laden gifts from the state.

Show me a partnership that has any of these, without a grant from the state. Precisely because all of these matter, business people of all stripes clamor to incorporate (or to adopt a new, state-created limited partnership form that makes pass-through tax treatment possible).

4. Your long paragraph of the entity theory that “the state has foisted” on us has much I agree with. The state creation of corporations has do much to muddle who, exactly, is responsible for injuries to third parties caused by “the corporation”. In fact, this is one of my points about limited liability and other benefits that the state bestowed on individual investors – and you and Lew exhibited the same confusion yourself last year when you were stumbling over yourselves to feel sorry for BP’s shareholders, executives and employees:

Corporations uber Alles: Conveniently inconsistent on “abstractions” like “the environment”, Austrians overlook their preference for “corporations” over individuals,& their lack of interest in problem-solving – TT’s Lost in Tokyo http://bit.ly/lWpvol

http://mises.org/Community/blogs/tokyotom/search.aspx?q=kinsella+victim

Getting rid of limited liability would do much to provide moral clarity, and to end not simply risk-shifting and purchase of government favor, but demands by citizens for preventative regulation by government.

5. I would note that, just as if deposit insurance were eliminated, market actors would step up to advise on which banks are safe and to provide deposit insurance, so too would insurers step up if limited liability were ended.

We are NOT talking about bringing down capitalism.

Thanks for the substantive engagement.

Best,

Tom

 I note my related earlier posts on deposit insurance and moral hazard:

http://mises.org/Community/blogs/tokyotom/search.aspx?q=deposit+insurance

http://mises.org/Community/blogs/tokyotom/search.aspx?q=moral+hazard

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A handy list of TT posts on BP, the Tragedy of the Government-Owned Commons, Corporations and Oil Serfdom

June 18th, 2010 No comments

For a preceding post, I put together an index to my posts to date, and  thought it might be useful to bump it up to a more neasily accessible stand-alone post.

In case anyone has missed it, I’ve done quite a bit of posting on the BP problem, in a manner intended to be fruitful (and not simply a noodge). Here are my posts, in chronological order:

Risk-shifting, BP and those nasty enviros (a response to Lew Rockwell)

Poor statists! If we close our eyes tightly enough, we can see clearly that Corporations are innocent VICTIMS, of governments that foist on them meaningless grants like limited liability & IP, and of malevolent, grasping citizens

Sheldon Richman doesn’t feel sorry for BP, either

Corporations uber Alles: Conveniently inconsistent on “abstractions” like “the environment”, Austrians overlook their preference for “corporations” over individuals,& their lack of interest in problem-solving

Persons-R-Us? Here’s someone’s interesting thought experiment: “What If BP Were A Human Being?”

Does it make any sense to treat corporations as “persons”, given the differences in incentives structures?

As BP’s oil spills into one of those inconvenient “ecosystems”, now even Reason TV rants about “dying oceans”

Time-out for some light humor on BP’s “ecosystem”: The BP Oil Spill Re-Enacted By Cats in 1 Minute!

Who’s at the short end of the stick when Government “Play[s] Fast and Loose with Civilization” in the Gulf of Mexico?

Ed Dolan on Other People’s Money: Government, Oil Spills, Financial Crises & Limited Liability

Scott Sumner misses government role in “sh*t happens”; epitomizes discussions of BP/offshore oil development

Kevin Carson says, “In a Truly Free Market, BP Would Be Toast”

More useful discussion by Carson, both on BP’s fate in a free market, and on the inept, feckless and captured regulatory state

Matt Yglesias, like many Austrians, misses the role of government in “Agency Problems and Corporate Misconduct”

A BP Reader: statist corporations, “the environment” and the Tragedy of the Government-Owned/-Managed Commons

Sheldon Richman joins Gene Callahan in naively arguing that, IF man’s activities are responsible for climate change, we need not government but simply louder and more obnoxious enviros

As Callahan and Richman laud consumer/moral pressure on polluters, others tell us a BP boycott is stupid

Rand Paul: a caricature of libertarian views on energy

BP: Unless we are to get lost in legal fictions, like Harry Shearer we must look beyond the shareholder curtain

Such a big crisis, yet so few words? Scratching my head over sporadic, thin drive-by postings at LvMI on our growing BP/Gulf disaster

Oil-Serfs-R-Us or the Tragedy of the Government-Owned Commons: the puny Lousianna “Shrimp King” humbled by BP & the Feds

“Economic insight and analysis”? Statist voicepiece WSJ headlines Broken Window Fallacy nonsense: Oil Spill May End Up Lifting GDP Slightly!

Sad: in a numbskull post, “libertarian” Ron Bailey touts cost-benefit analysis as justification for offshore oil drilling, ignores issues of who benefits, who loses & who decides

On ocean drilling, it’s time for Ron Bailey, oil flack (and other libertarians), to meet Ron Bailey, “tragedy of the commons” guru and to stand up for the Oil Serfs

The Eve of Destruction: Excellent post on how Government and statist corporations like BP are stifling community responses to the unfolding Gulf disaster

Disturbing news/views on the manageability of the BP gusher

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Corporations uber Alles: Conveniently inconsistent on "abstractions" like "the environment", Austrians overlook their preference for "corporations" over individuals,& their lack of interest in problem-solving

May 16th, 2010 No comments

I have already criticized Lew Rockwell’s May 5, 2010 piece, “Feel Sorry for BP?”; and commented on a response that I received from Stephan Kinsella; I’d like here to  focus on a curious inconsistency.

1. I note that Lew Rockwell asserted that: (emphasis added)

The abstraction called the “ecosystem” — which never seems to include mankind or civilization — has done far less for us than the oil industry, and the factories, planes, trains, and automobiles it fuels.”

and

the environmentalists went nuts yet again, using the occasion to flail a private corporation and wail about the plight of the “ecosystem,” which somehow managed to survive and thrive after the Exxon debacle.”

While I questioned whether Lew really intended to assert that resources like air, that we use freely from the atmosphere are “far less” important to us than the oil-derived energy we use and disagreed with his facts about the continuing effect s of the Exxon Valdez spill), I agreed with him that the “ecosystem” is an abstraction that may often be unhelpful (emphasis added):

Austrians understand that focussing on the “ecosystem” is often an unhelpful abstraction and distraction from the fact that there are competing and conflicting interests held by people in resources that are not effectively owned or managed. The Austrian focus is on how to enable those with conflicting desires to coordinate their planning …

This perspective was neatly summarized by Roy Cordato, who said (emphasis added)

“by placing environmental problems within the context of personal and interpersonal plan formulation, we discover that they are not about the environment per se but about the resolution of human conflict.”

“The “social cost” approach to environmental economics has led to the “dehumanization” of issues related to the environment [where] [p]ollution or “tragedy of the commons” problems are not problems because of the damage that some people may or may not be inflicting on others, but because they create what amounts to disembodied harms. A problem occurs because some goods are “overproduced” while other goods are “underproduced.” In its more extreme form this has led to a separation of the concepts of costs and harm from human beings completely, substituting notions such as “costs to the environment,” and damage to the ecosystem.”

“pollution problems …  create an interpersonal conflict over the use of means and therefore obstruct efficient plan formulation and execution. Pollution is therefore not about harming the environment but about human conflict over the use of physical resources.”

“Humans cannot harm the environment. Instead, they can change the environment in such a way that it harms others who might be planning to use it for conflicting purposes.”

Even while I agree with Cordato about he focus on plan formation, concepts such as “ecosystems” and the “environment” may still be useful, and are often simply short-hand for resources “in the commons”, that is, resources that people value but are either unowned, partially-owned, commonly-/community-owned or government-owned. Some readers may recall that Elinor Ostrom the winner of the Nobel Prize in Economics last year, is a political scientist in the Austrian tradition who has devoted her career to studying human management of common resources? Lew himself expressly recognized the usefulness of “environment” in this case:

in a world in which government owns vast swaths, and the oceans are considered the commons of everyone? It becomes extremely difficult to assess damages to the environment at all.

2. Despite Lew’s focus on the abstraction of the “ecosystem”, it was curious that Lew (a) asserted that BP is by far the leading victim” (my emphasis)  and that “The incident is a tragedy for BP and all the subcontractors involved while (b) severely castigating what I referred to in my post as “those nasty enviros” and their nature-loving, misanthropic motives. Lew’s words:

torrents of environmental hysteria.

the environmentalists went nuts yet again

he environmentalists, with their fear mongering and hatred of modern life [are happy about the disaster]

The environmentalists are thrilled because they get yet another chance to wail and moan about the plight of their beloved marshes and other allegedly sensitive land

The main advantage to the environmentalists is their propaganda victory in having yet another chance to rail against the evils of oil producers and ocean drilling. If they have their way, oil prices would be double or triple, there would never be another refinery built, and all development of the oceans would stop in the name of “protecting” things that do human beings not one bit of good.

But as I noted in my response, Lew fails to follow the Austrian insight that the focus should be on human plan formation and conflict resolution. What does he mean by the abstract term “environmentalists” – just who are they and what do they want, and how can Austrians provide advice on how to enable parties with conflicting goals and preferences to resolve their conflicts? In the case of the BP oil spill, there is very ;little room between the “environmentalists” and ordinary Gulf coast resident. In any case, as I noted previously,
Surely any clear-thinking Austrian can see that, just as Austrians hate our modern kleptocratic, incompetent and moral-hazard-enabling government, many enviros are relatively well-off people who dislike how “modern life” seems to take for granted the way government-ordered “capitalism” enables a systemic shifting of risks from manufacturers to those downwind and downstream, and to all who enjoy what remains of commons or government-owned property.
The Austrian focus is on how to enable those with conflicting desires to coordinate their planning, not to engage in some muddle-headed balancing of collective “utility” that says one powerful group of users is “right”, so other claimants should be scoffed at and chased away.
Lew, of course, is entitled to his own preferences, but it is fairly clear that his purposes are NOT to aid conflict resolution, but to bash one group of people whose preferences regarding common and government-owned resources conflict with those of another group whose interests he favors.
3.  And so I arrive at my principal point:  In pushing his preferences, Lew has not only failed to help any of us understand who “environmentalists” are and what they want, but he has also fail to identify just who  “BP” is, that we are supposed to feel so sorry for.
“BP” is corporation – a legal entity created by the state – and is not itself any one person, but a complex organization of very many people. Sure, we should feel sorry for the families  those who lost their lives (employees of contractors) – but they receive only passing mention from Lew. Who is left to feel sorry for –  BP’s highly paid executives, who like those of Halliburton and Transocean, are busy trying to find someone else to blame for the blowout, failed shutoff valve, lack of response preparation, and resultant enormous and continuing spill (that even now – with the complicity of the Administration) – they continue to low ball by orders of magnitude)? Other employees, some of whose routine has been interrupted by the damage control efforts, but remain gainfully employed? Or are we to feel sorry for the mass of shareholders, whose dividends might be cut, but not by the full amount of losses that others will suffer? Employees who feel some psychic pain at the blow to their company’s reputation (direct or indirect moral suasion from those injured or who feel enough stake in the matter to be upset)?
Lew refers to the government viewing “every capitalist producer as a bird to be plucked” – but none of BP’s shareholders is a capitalist producer. Someone may be plucked by government from time to time, but this time, pray-tell who is plucking whom?  Sure, Obama’s press secretary, Robert Gibbs, can make unsavory boasts like the government plans to keep “its boot on BP’s neck” but as BP HAS no neck, a little specificity as to whom the government may be oppressing would be helpful in weighing Lew’s arguments.
Without any specificity of whom we are to see as they “biggest victim”, it seems that Lew’s complaint amounts to little more than sympathy for executives and shareholders under our current system of statist corporations, firms that exploit government and then whine about the groups of citizens who inevitably feel they have to seek redress from government. If this is the defense that Lew intends, then it is one I’d be grateful to see him elucidate more carefully, in response to my reply to Stephan Kinsella. I think Sheldon Richman and Kevin Carson would also be grateful.
While corporations are composed of people, they themselves are not people. Accordingly, while I certainly agree with Lew that “there is every reason to express great sadness for what has happened”, Lew is ALSO right that “the idea that BP should be hated and denounced is preposterous” – because BP is just a thing, a legal fiction, and not any particular person. For that reason, the very idea that BP is the “leading victim” or that we should “feel sorry for BP” is, as Lew says, preposterous.
4. In this context, let me note my ongoing strong disagreement with Stephan Kinsella about the state grant of limited liability to shareholders. Stephan seems to think that the grant is irrelevant (despite the fact that it is one of the chief reasons why investors choose the corporate form) since, under the system of large public corporations that has arisen as a result, it would be unfair to ascribe any liability to shareholders who did not personally direct any action that damages others. (This, is of course, besides the point – the grant itself is cannot be justified on libertarian grounds, and it clearly affects choices of corporate form and subsequent corporate behavior and oversight dynamics.)  I agree with Stephan that it is crucial that libertarians not lose their focus on individuals when examining any organization – but note that the slippage in focus from individuals to large, impersonal organizations where personal responsibility is extremely difficult to locate is precisely one of the salient consequences of the state grant of limited liability corporate status.
I also note that despite Stephan’s insistence that only managers and employees who caused damage to third persons or their property should have any liability (and individual shareholders carry no burden of responsibility without any direct involvement in particular decisions), Stephan too falls easily into defending an impersonal”BP” while bashing the perennially undefined “enviros“, whom he sees generally as “cancer on the earth … anti-human, anti-industrialist sickos [who] are the real enemies of humanity.”  Is it too hard to expect some consistency in focus on individuals, both in and out of corporations, instead of a lumping of groups into “good” and “evil”?
5. Let me make a final reference to Cordato, who states (emphasis added):
“The Austrian focus is on how to enable those with conflicting desires to coordinate their planning …”
“Under … Austrian approaches to welfare economics, therefore, the solution to pollution problems, defined as a conflict over the use of resources, is to be found in either clearly defining or more diligently enforcing property rights.”
“This is not to suggest that the clear definition of property rights is an easily achievable goal in all situations. It is not. But, while the Austrian approach to solving pollution problems may face implementation problems at the margin, i.e., with certain “tough cases,” defining and enforcing property rights already stands as the fundamental way in which interpersonal conflicts of all kinds are avoided or dealt with. This approach is clearly operational as it has been in operation, to one extent or another, throughout human history. The challenge for Austrians is to explain how we apply the theory in certain tough cases, not to explain, in reality, how it can be applied at all.”
In the case of the BP spill or other “environmental” issues, are either Lew Rockwell or Stephan Kinsella remotely interested finding ways to solve interpersonal conflicts over common resources or resources with poorly defined property rights? Or are they simply engaged in a reflexive tribal defense of “corporations” against malevolent, grasping citizens – the so-called “enviro-fascists”?
And am I the only one who thinks it is no small disgrace that so many Austrians prefer “smashing watermelons” to hard work, and is left wondering – if we must use terms like “misanthrope” – just who the misanthropes are?
Scratch that last thought – clearly peppering one’s speech with fulminations about the evil intentions or actions of other is not an effective approach to discourse, trust-building or problem-solving. This misanthrope refuses to further cloud his own mind or to impair his feeble powers of persuasion.

 

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Poor statists! If we close our eyes tightly enough, we can see clearly that Corporations are innocent VICTIMS, of governments that foist on them meaningless grants like limited liability & IP, and of malevolent, grasping citizens

May 10th, 2010 1 comment

I pulled out my peashooter the other day and levelled a few criticisms (“Risk-shifting, BP and those nasty enviros“) at  Lew Rockwell‘s Feel Sorry for BP?.  I don’t imagine that Lew noticed, but my buddy Stephan Kinsella did.

I have long noted the reflexive defense of corporations by prominent Austrians and the stubborn unwillingness to closely examine the role that the special grants to corporate investors that lie at the core of the problem of snowballing corporate statism, spiralling politicized rent-seeking battles, incompetent government and concupiscient and grand-standing politicians. So Stephan’s comments come as no surprise:

1.  Stephan chooses to set the stage with a bunch of labels –  “enviro-global-warming anti-corporation libertarian”. Whatever makes you happy, Stephan. I know you and others have a hard time resisting the urge, which is why I often playfully sign off as the resident friendly enviro fascist! Nah, couldn’t possibly be a “real” libertarian.

On corporations, the “environment”, and climate – as on central banking, fiat currency and the whole mess of banking and capital markets regulation – I’m simply anti-un-contracted-for-risk-shifting-and-government-enabled-moral-hazard and arguments against rent-seeking that ignore existing special deals.

But if it’s easier, just keep calling me”anti-corporation” and continue to lump me in with “enviro-fascists”.

 2.  I had wondered: 

Even if one concedes that some criticisms of BP will be unfair, how can BP possibly be cast [by Lew] as the LEADING victim – as opposed to all of the others whose livelihoods or property are drastically affected by this incident, which they had no control over whatsoever?

Stephan’s lame response?

BP is a victim in the sense that a terrible tragedy just happened to it, and it’s gonna cost it dearly. It’s the leading victim assuming the others damaged are going to be compensated from BP. The point is it’s a bad thing that’s happened to it.Why not feel sorry for them?

Really, Stephan?  BP deliberately measures and takes risks as part of its business; no one else who has been or maybe injured had a clear concept of such risks or either assumed them or had any ability to control them. Clearly, BP is the one that has interfered with others’ use and enjoyment of their own property, of common property and of government-owned property; in law, we call them “tort-feasors”.  They are not a “victim” in any sense that we commonly apply in situations like this. Empty word games like yours turn reality in its head. Right, Toyota is a victim when its cars’ brakes have problems, TVA is a “victim” when its coal fly ash dams break, and so are others who “unintentionally” injure the health or damage the property of others – when latent risks materialize or they are caught at it and suffer some economic loss as a result.

It’s hard to believe you want to further support Lew’s absurd claim that BP is the leading victim now – we simply have assume that in the future, BP or someone else will throw some compensation at all of those other unworthy, insignificant passive victims. Nice.

Sure, it’s too bad that this happened, all around. BP gambled (heroically?) to make money; everyone has lost. Poor BP!

3. Lew: “The incident is a tragedy for BP and all the subcontractors involved. It will probably wreck the company”

Me: 

The incident will certainly be costly for the firms involved, but the firms will survive the death of employees, and there is certainly very little risk indeed that BP will be “wrecked” by the spill. Far from it; it is unlikely that BP will even bear the principal costs of cleanup efforts, much less the economic damages to third parties that federal law apparently caps at $75 million.

Have you not heard of “INSURANCE”? A little thinking (and Googling) would tell you that BP (and its subcontractors) has plenty of it. To the extent BP is NOT insured, it has ample capability to self-insure, unlike all of the fishermen, oystermen and those in the tourist industry who are feeling significant impacts. Insurers will bear the primary burden, not BP.

Stephan:

Obama has threatened BP and they have caved in, agreeing to pay above the $75M cap. And the cap was in exchange for a tax on oil companies to be put into the Oil Spill Liability Trust Fund for such emergencies–do you think that BP will be able to get that tax refunded? Naah.

Sounds like you’re agreeing that this incident is unlikely to “wreck”BP, given insurance, self-insurance and the $1.6 billion Oil Spill Fund. But it sounds like you also are suggesting that BP has every right to negotiate with government for liability caps. Interesting.

4. Lew:   “we might ask who is happy about the disaster: 1. the environmentalists, with their fear mongering and hatred of modern life”

Me:

Sorry, but this is perverse: enviros might feel that they have been proven right – and you might be annoyed that they can make such a claim – but they certainly aren’t “happy” with any of the loss of life, damage to property or livelihoods of the little guy (or of bigger property owners), or to a more pristine marine environment that they value.

Stephan: 

Aren’t happy? Have you seen, say, Spill Baby Spill, Boycott BP! ? And another tolerant, caring liberal on Slate’s Political Gabfest Facebook page said, “I don’t get the calls for pity. Boohoo another oil giant might have bankrupted itself.” These misanthropic sickos oppose nuclear power, which makes fossil fuels necessary. They act like they hate BP. Why? For making a mistake? Mistakes are inevitable. For drilling for oil? Why? We need oil.

Let me repeat: some might feel vindicated and be eager to use this incident to bash BP, etc. – people/firms certainly are fighting over government – but that doesn’t make them “happy” that disaster has occurred.

You apparently missed it, but there were plenty of “misanthropic sickos” on Lew’s comment thread who expressed thoughts similar to “I don’t get the calls for pity. Boohoo another oil giant might have bankrupted itself.”

The rest of this is also packed with nonsense.  Funny that Austrians fail to overlook that enviro opposition to nukes and to other fossil fuels is more than a little related to government’s dirty role in the industries, including liability caps like those present here. Do Austrians “hate” banks, securities firms and AIG for making “mistakes”? But aren’t mistakes “inevitable”? And don’t we need lenders and insurers? And a domestic auto industry?

Just what do these utilitarian arguments have to do with libertarian principles, anyway?

5.   Me:

[Lew’s] projection of happiness at damages to common resources/private property and hatred of modern life is especially perverse, given your own explicit recognition that government ownership/mismanagement of commons, and setting of limits on liability both skew the incentives BP faces to avoid damage, and limit the ability of others (resource users and evil enviros) to directly protect or negotiate their own interests. Why is the negative role played by government any reason to bash others who use or care about the “commons”?

Stephan: No libertarian is in favor of liability caps. What is he talking about?

Simple, Stephan. Lew explicitly recognizes that government has screwed up  the ability of enviros and others who have conflicting preferences about the use of resources to engage in voluntary transactions that would advance mutual welfare – yet he chooses to bash those whose preferences are frustrated by government, while feeling sorry for those whose preferences are favored. What is remotely even-handed – or Austrian – about this imbalance? Is it simply that it’s okay for those who make omelets to take eggs from others, since the omelet “makers” are being “productive”?

6.  Me:

We have seen Austrians – sympathetic to the costs to real people in the rest of the economy – rightly call for an end to a fiat currency, central banking and to moral-hazard-enabling deposit insurance and oversight of banks. In an April 9 post by Kevin Dowd on the financial crisis, we even had a call “to remove limited liability: we should abolish the limited-liability statutes and give the bankers the strongest possible incentives to look after our money properly” – but Dowd’s comments simply echoed in the Sounds of Silence. Why do you and others refuse to look at the risk-shifting and moral hazard that is implicit in the very grant of a limited liability corporate charter – not only in banking, but in oil exploration and other parts of the economy?

Stephan:

Removing artificial caps on liability has nothing to do with the limited liability of passive shareholders in a corporation. Their liability is limited simply because they are not causally responsible for the torts of employees of the company in which they hold shares.

I suspect this is the key reason why Stephan troubled himself to respond, but surely he can see it is not only counterfactual, but dodges any consideration of the consequences of limited liability in terms of fuelling industrialization and fights over using government to check corporate excesses. Investors then and now deliberately choose to conduct business activities through corporations precisely because government absolves owners from any liability in excess of enterprise assets.  While it is possible for voluntary counterparties (employees, lenders and others doing business with the firm) to agree in advance to limit their resources solely to enterprise assets, those who are injured by acts of companies or their employees and agents do not in advance choose the nature of the those who are responsible for harming them. Accordingly, the broad blanket grant of limited liability to corporations is clearly anti-libertarian.

Accordingly, dividends received by shareholders from risky activities are not clawed back if risks are realized and claims exceed corporate assets. Further, shareholders are given disincentives from too closely directing manage risk (for fear of claims that they have direct responsibility for torts). When combined with other corporate attributes (unlimited life & purposes, relative anonymity of ownership, remoteness of owners from communities in which the firms operate, and ability of powerful firms and wealthy investors to influence judges, legislators, bureaucrats and other officials), we have seen a steady erosion of common law and growth in the regulatory state – as citizens fight to limit the risks and costs that corporations impose on individuals and communities. Is Stephan unaware of the central role of corporations in rent-seeking battles? In the perversion of the 14th Amendment – designed to protect emancipated slaves and Chinese coolies – into a weapon to elevate corporations over the states, and to permanently shift power to the Federal government?

Just as most commentators overlook the massive moral hazard and risk-shifting that is part and parcel of the federal oversight of banking (necessitated by deposit insurance and fractional banking), so do Stephan and Lew insist on keeping their eyes closed to the legacy of risk-shifting, statism and escalating fights over increasingly incompetent and corrupt government. Why?

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Thoughts of an envirofacist avatar on "Avatar"; or Resources, Property Rights, Corporations & Government-Enabled Theft

December 22nd, 2009 1 comment

My pal Stephan Kinsella has a remarkably enviro-friendly post (“Avatar Is Great and Libertarian”) up regarding the new movie “Avatar”; his remarks and others on the thread prompted me to leave a few comments, which I copy below (in furtherance of my nefarious and/or insanely misguided agenda .

Many thanks to Stephan for aiding and abetting this. Ive added a bit of emphasis, fixed a typo or two, and a few additional comments, in brackets.

Published: December 22, 2009 2:38 PM

TokyoTom

Stephan, I welcome you to the dark, enviro-facist side!

– “you have to fight for and use might to protect your rights”

I see you are starting to buy into my real-world view of property rights, that “principles” and force are just two different ways we seek to protect what we consider ours, with the first being most efficacious within a community [and recourse to the later perhaps being necessary]. As I noted on a previous thread of yours,

“The deep roots of “property” are not in principle but in simple competition, physical defense of assets valuable enough to make the effort worthwhile, and in the grudging recognition by others – more willingly offered by those who share bonds of community – that yielding to others’ claims may be more productive than challenging them. This is as true for rest of creation as it is for man. While we have developed property to a very sophisticated degree, at its core property remains very much about the Darwinian struggle to survive and prosper, violence, theft and calculations as to when challenging control over an asset is not worth the effort.”

http://tokyotom.freecapitalists.org/2009/12/21/quot-property-quot-weird-thoughts-evolution-society-quot-property-rights-quot-quot-intellectual-property-quot-principles-structure-justify/

Sounds like this struggle over resources is at the core of Avatar, along with a boatload of Western guilt over our historical theft of land and assets from indigenous peoples, whom of course have also been involved for eons in bloody battles for resources with other tribes.

Far from being simply a dead relic of the past, however, the often violent struggle to take resources from indigenous peoples continues in many places, though out of sight from most of us (not simply those who are trying hard not to see) – oil & gas, minerals, timber, ranching, soybeans, oil palms, World Bank-funded dams and roads, fisheries – you name it, a violent conflict that the natives are losing to kleptocratic governments & elites can be found.

Western corporations are often in the thick of such conflicts, but even where not, modern technology (and growing consumer markets) provide the key tools and incentives for such conflicts, in which natives may be more or less hapless. Local governments typically either “nationalize” the resource or turn a blind eye, with the result that resource exploitation frequently takes on the appearance of a tragedy of the commons.

Western liberals sometimes exacerbate these problems – not simply by seeing “greed” and capitalism as the problem, and not kleptocratic regimes (often supported by the West and by aid money) or the lack of enforceable property rights – but also by demanding misguided policies such as “biofuels” incentives, which lie behind tropical forest destruction in much of SE Asia.

Libertarians should be familiar with these problems, which are a large part of the dynamics in petroleum-cursed nations and elsewhere. Such problems are also linked generally to “aid” efforts and to other centrally-directed development schemes. Elinor Ostrom was awarded the Nobel Prize in part for her work in showing that local communities, if their rights are respected, can generally do a good job of managing their own resources [and how government efforts frequently go astray].

I’ve commented on these issues a number of times, but here are a couple of links for those who might care to scratch the surface:

http://mises.org/Community/blogs/tokyotom/archive/2007/09/28/too-many-or-too-few-people-does-the-market-provide-an-answer.aspx

http://mises.org/Community/blogs/tokyotom/archive/2007/12/16/bison-markets-the-tragedy-of-the-commons-and-the-indian-war.aspx

http://mises.org/Community/blogs/tokyotom/archive/2009/11/26/theft-and-the-tragedy-of-the-commons-mother-jones-ponders-quot-conservation-indigenous-people-s-enemy-no-1-quot.aspx

http://mises.org/Community/blogs/tokyotom/archive/2009/05/24/capitalism-the-destructive-exploitation-of-the-amazon-and-the-tragedy-of-the-government-owned-commons.aspx

http://mises.org/Community/blogs/tokyotom/archive/2009/01/07/somali-piracy-flows-from-the-greater-and-continuing-western-theft-and-abuse-of-somali-marine-resources.aspx

http://mises.org/Community/blogs/tokyotom/archive/2008/06/02/environmental-damage-as-theft-report-by-prominent-enviros-quot-highlights-the-need-for-secure-ownership-of-wildlife-resources-by-poor-people-quot.aspx

http://mises.org/Community/blogs/tokyotom/archive/2007/10/12/libertarian-reticience-other-than-to-bash-enviros.aspx

Stephan, if youve made it this far, let me remind you of our conversations about corporations [most recently here], which have very unfortunately been inescapably tainted with statism from the get-go, in ways that play out negatively both abroad and at home. Ive devoted a fair amount of time to examining the entanglement of corporations and government: http://mises.org/Community/blogs/tokyotom/search.aspx?q=limited

  • Our state governments were wrong to get into competition with each other to grant corporate status to investor-owned enterprises, in exchange for fees and later taxes. Corporate status freed owners from down-side risk, by limiting liability to the amount of capital contributed. This incentivized investors to encourage corporations to embark on risky activities that shifted costs to innocent third parties; the concentration of wealth in corporations (that now have unlimited lives and purposes, subject to survival in the market); the corruption of the court system that once protected third parties from damages caused by others (by replacing strict liability with balancing tests); and the ensuing battle over legislatures and courts to check corporate abuses.What happens abroad at the “Avatar” is pretty basic, but the same nonsense, with taxpayers, investors and consumers playing the role of victim, can be seen at home. Has anybody seen the jaw-droppingly appalling report that the WSJ has run on “Fixing Global Finance”, based on their “Future of Finance Initiative”, in which they cheerlead a bunch of financial firms in their efforts to abandon free markets and to structure global regulation and regulators, to be staffed by a revolving door of themselves? [I think Im being fair to see this as posing a threat to markets and freedom at least as great as what others see in the more multi-faceted climate change muddle.] Even Paul Volker was appalled, not at their willingness to create more regulation, but at their unwillingness to confront the moral hazard problems (tied to regulation of public corporations and the financial sector) that lie at the core of the financial meltdown. [Volker seems to overlooked the crucial role of government in driving and feeding the moral hazard problems.]Heres the link, for those of you who missed it:
    http://online.wsj.com/public/page/future-of-finance-121409.html

 

Property rights, corporations and government-complicit theft? Hmm. [Sounds familiar. Maybe some of those who want to battle corporate excesses might not be so crazy after all, even if they neglect to understand the risks of negative consequences of seeking help from government. And maybe someday libertarians will get a little more serious about addressing the festering concatenation of corporate-linked problems that are generating so much rot at the core of our government and public company/financial company sector.]

 

Oh, I almost forgot to remind everyone for the need for group holiday cheer (as alternative to productive engagement on a libertarian, Austrian-based climate agenda):

http://mises.org/Community/blogs/tokyotom/archive/2007/12/16/holiday-joy-quot-watermelons-quot-roasting-on-an-open-pyre.aspx