TT's Lost in Tokyo — by TokyoTom

UK enviro-journalist-commentator George Monbiot has an interesting post in the Feb. 20 Guardian that explains his why he now believes that “A kneejerk rejection of  nuclear power is not an option“, and why he’s willing to take heat from others by raising the topic.

Reasonable (even if partly so) enviros?  What’s the world coming to?

Is the Progressive Policy Institute signalling an Interest by Obama in making greater use of nuclear power? 

A November 7 press release, the PPI specifically urges in the headline that “Dealing with Nuclear Waste; America Must Emulate France’s Model of Reprocessing Waste into Usable Energy”.

The press release describes the latest in the PPI’s (PPI) Memos to the Next President series, “America’s Nuclear Waste and What to Do with It,” a study by Bill Magwood, Principal of Advanced Energy Strategies, and Mark Ribbing, PPI Director of Policy Development.  The study calls on the next president to “begin investing in options that can reduce and recycle nuclear waste, noting that benefits of nuclear energy are often outweighed by concerns over the waste produced”.

John P. Holdren, an MIT and Stanford-trained nuclear physicist who is professor at Harvard’s Kennedy School of Government and the Department of Earth and Planetary Sciences and director of Harvard’s Woods Hole Research Center, former President and Chairman of the American Association for the Advancement of Science (AAAS), and consultant for the past 35 years at the Magnetic Fusion Energy Division of Lawrence Livermore National Laboratory [yes, this is an appeal to authority] had a short but interesting op-ed in the August 4 Boston Globe.

I think he’s trying to be sensitive, but Holdren may come off a bit arrogant; he’s certainly insensitive to those who are concerned that government may bungle any climate “solution”.  Given his technical knowledge and experience, I hope readers will understand where he’s coming from and encourage them to read the whole thing – which really isn’t too long.

But since I have you here, allow me to quote liberally:

skeptics about [climate change] tend to move, over time, through three stages. First, they tell you you’re wrong and they can prove it. (In this case, “Climate isn’t changing in unusual ways or, if it is, human activities are not the cause.”)

Then they tell you you’re right but it doesn’t matter. (“OK, it’s changing and humans are playing a role, but it won’t do much harm.”) Finally, they tell you it matters but it’s too late to do anything about it. (“Yes, climate disruption is going to do some real damage, but it’s too late, too difficult, or too costly to avoid that, so we’ll just have to hunker down and suffer.”) …

The few with credentials in climate-change science have nearly all shifted in the past few years from the first category to the second, however, and jumps from the second to the third are becoming more frequent.

Their arguments, such as they are, suffer from two huge deficiencies.

First, they have not come up with any plausible alternative culprit for the disruption of global climate that is being observed, for example, a culprit other than the greenhouse-gas buildups in the atmosphere that have been measured and tied beyond doubt to human activities. (The argument that variations in the sun’s output might be responsible fails a number of elementary scientific tests.)

Second, having not succeeded in finding an alternative, they haven’t even tried to do what would be logically necessary if they had one, which is to explain how it can be that everything modern science tells us about the interactions of greenhouse gases with energy flow in the atmosphere is wrong.

Members of the public who are tempted to be swayed by the denier fringe should ask themselves how it is possible, if human-caused climate change is just a hoax, that:

US polls indicate that most of the amateur skeptics are Republicans. These Republican skeptics should wonder how presidential candidate John McCain could have been taken in. He has castigated the Bush administration for wasting eight years in inaction on climate change, and the policies he says he would implement as president include early and deep cuts in US greenhouse-gas emissions. …

The extent of unfounded skepticism about the disruption of global climate by human-produced greenhouse gases is not just regrettable, it is dangerous. It has delayed – and continues to delay – the development of the political consensus that will be needed if society is to embrace remedies commensurate with the challenge. The science of climate change is telling us that we need to get going. Those who still think this is all a mistake or a hoax need to think again.

(emphasis added)

Holdren is focussed on arguments regarding science, and so fails to address questions as to the efficacy of proposed solutions involving government action, which questions are of course important.

Although Austrian and libertarian observers may have very useful things to add to the policy discussion, it seems fair to say that, except for a few such as Jonathan Adler, Gene Callahan, Edwin Dolan, Sheldon Richman and Bruce Yandle, many have preferred not to discuss policy but to focus either on climate science or on the motives of those self-deluded religious, fascist creeps who think that there may be a problem.

While concerns about science and motives are perfectly legitimate, let me add a few points that Austrian “skeptics” ought to consider:

– Austrians tend to view “environmental” problems not as harms to a disembodied “environment”, but as real problems involving conflicts in individual/firm plan formation that arise because of a lack or clear or enforceable property rights in particular resources or large information, transaction or enforcement costs that make contracting difficult. 

– Are there clear or enforceable property rights with respect to emissions of GHGs, or the atmosphere or climate more generally?

– Is private contracting a practical way for individuals and firms with differing preferences as to climate or GHG emissions to meaningfully express such preferences?

– What lessons does history teach us about the exploitation of open-access resources that are not protected by accepted rules among the relevant community of users?  If there are problems with such resources, how have such problems been addressed in the past, with what degree of efficacy?

[cross-posted from The Anti-Establishment Center Community on Facebook]

A few thoughts on the notion of Govt-owned “property”, in connection with the radical misanthropes who have been ranching in Nevada for 100+ years on “Federal land”.

I’m afraid it’s turtles all the way down, with respect to corrupt “Govt ownership,” particularly with respect to the politics and special interests relating to the Bundy Ranch and Gold Butte:

http://www.infowars.com/breaking-sen-harry-reid-behind-blm-land-grab-of-bundy-ranch/

[Note: Kiyoshi Kurokawa, one of the co-aothors of the op-ed described below, headed up a recent and criticasl report regarding the Fukushima accident.]

Have the concatenation of the Fukushima meltdows on the heels of the Tohoku earthquaketsunami disaster FINALLY spurred ordinary Japanese to act after nearly three decades of disastrous bungling and irresponsible economic management by the Japanese government? The answer appears to be a modest yes.

The Japan Times ran an interesting article on December 1, by two policy wonks at Japan’s National Graduate Institute for Policy Studies (Hiromi Murakami, assistant professor and Kiyoshi Kurokawa, M.D., an academic fellow) (emphasis added):

Fukushima crisis fueling the third opening of Japan

Prime Minister Yoshihiko Noda’s announcement that Japan would join talks on a Pacific free trade agreement (FTA) triggered a nationwide debate over whether to open Japan’s market.

While this is certainly a useful discussion, the issue facing Japan is far larger. The Fukushima nuclear power plants crisis further exacerbated the problems Japan already had: an aging society, the hollowing out of manufacturing industries, a huge fiscal deficit, a widening income gap, and the sustainability of its governing system.

The fundamental question is thus not one of joining FTAs. Rather it is how we Japanese can carry forward a third “opening” and depart from our aging, dysfunctional system.

The Fukushima disaster has shaken the foundations of our system as it has proven all of its fundamental assumptions false. Fukushima turned Japanese citizens from believers into skeptics of the government.

Deep disappointment in the government has transformed people from apathetic bystanders to proactive citizens, creating innovative financial schemes without relying on the government and committing themselves to energy conservation and reduced dependence on nuclear energy by shifting their priorities and preferences.

Neither the shock of the Lehman bankruptcy, the asset and stock bubble collapses, nor 20 years of stalled economic growth, have had much of an impetus to change, but Fukushima ignited in Japan a great transformation at the grass-roots level. Just as the “Spring” movements have been demanding change in the systems of Arab countries, so civil society has finally started to blossom in Japan. Because Japan’s rather unhealthy one-party-dominated “democracy” has lasted over a half-century, the country is still inexperienced in translating fragmented individual voices into balanced public policies. Thanks to the spread of tools like Twitter and YouTube, and the catalyst of foreign nongovernment organizations, linking these voices may eventually lead to long-overdue domestic reform, altered voting patterns and changes in Japan’s outlook.

Since the Meiji Era, we have had complete confidence in our bureaucratic system and the strong policymaking institution of the “Iron triangle,” backed by strong economic growth. This iron triangle continued to survive until today partly because people continued to trust in bureaucracy and political/social institutions. This myth was completely broken after the Fukushima disaster, which revealed to everyone that there was no functioning system in place to deal with the crises. People watched as politicians produce lists of excuses for not cooperating and bureaucrats fought for jurisdiction while failing to make decisions, terrified of taking risks in such an unprecedented situation.

Instead of relying on the government, people started to act independently through grassroots and civil movements in various parts of Japan. In other words, the third opening, or the great transformation in values and social norms, is finally occurring in Japan.

Led by the governing class of samurai, Japan experienced its first opening during the Meiji Restoration, triggered by the threat posed by Commodore Matthew Perry’s Black Ships. The second opening was led by Gen. Douglas MacArthur, when the Allied occupation government initiated reforms and political purges after our disastrous defeat in World War II. While the past two openings were driven by external factors in a top-down fashion, the third opening has been triggered internally by the Fukushima disaster. It is a civil-sector-driven, bottom-up transformation.

While the authorities failed to deliver substantive action, individuals started to act. Many donated money for the first time and participated in voluntary activities; scientists gathered to offer credible information and explanations via Twitter; voluntary individuals in various regional areas monitored radioactivity levels and gathered data through the Internet that they made immediately made public; and parents organized and demanded that the authorities measure ground and food radioactivity levels in kindergartens and schools, which quickly became the norm. Japanese citizens now strongly demand transparency, so that they can judge how to protect themselves.

Energy shortages due to the Fukushima disaster have had a profound impact on individuals’ priorities and lifestyles. Households and corporations achieved 18 percent energy conservation last summer in Tokyo through various efforts. How to better preserve the environment for future generations has now become a part of our thinking. LED lights, expensive household fuel cells and wood-burning stoves are selling surprisingly well; and the demand for solar panels is exceeding supply.

Innovative trials are now taking place that will have even greater effects on a larger social and economic scale. The “2:46 Quakebook,” promptly published online worldwide, established new ways to donate money to Tohoku. Innovative microfinancing schemes have been operating to help small businesses that are desperately in need of cash at a time when traditional financial institutions are reluctant to take risks. The Tomodachi Initiative, a public-private partnership led by the governments of Japan and the United States, whose programs include the fostering of entrepreneurship, is also making an impact.

Fukushima gave us a great opportunity to transform our way of life and recognize that individuals can make difference in the society if they act together. Long-overdue reforms are possible today as established barriers weaken and room for innovation emerges. For its democratic system to truly function, Japan’s infant civil society still needs to learn from other societies by establishing horizontal links in various sectors, including NGOs, researchers and scientists. This is a chance to get globally connected and gather global expertise.

In the wake of the recent deaths and illnesses in Germany from a dangerous strain of E. coli, thinker and former banker Matt Ridley – who’ve I discussed before in the context of nuclear crony capitalism –  has an article in the June 11 Wall Street Journal on “When Precaution Trumps Public Safely“.

As I thought Matt’s post to be curiously uncurious as to the factors driving the ‘precautionary principle’, I ventured to address the deficiency with a thought or two of my own, and left the following comment at Matt’s blog:

Matt, ever wondered where the ‘precautionary principle’ comes from?

Ever heard of ‘once burned, twice shy’?

It seems clear to me that the insistence of many on the precautionary principle has it roots in massive externalities (pollution) by government activities and by corporations, those great pools of anonymous and irresponsible capital who shareholders, freed by the government grant of limited liability from downside risks, decided to turn a blind eye to risk management.

If we want more risk-taking, we should demand more responsibility by investors. Saying that it’s the common man who has to have the greatest skin in the game is a recipe for continued stonewalling.

Tom

Daniel P. Aldrich is an up-and-coming political scientist who got interested in disaster recovery when New Orleans was hit by Hurricane Katrina a few months after he had moved there with his family.

He has also spent quite a bit of time living and studying in Japan; I ran across him recently in connection with my reading and blogging on post-earthquake, post-tsunami and post-Fukushima nuclear power plant disaster Japan; he’s mentioned prominently in the NYT article excerpted in my preceding post.

According to his bio at Purdue University, Aldrich:

received his Ph.D. and M.A. in political science from Harvard University, an M.A. from the University of California at Berkeley, and his B.A. from the University of North Carolina at Chapel Hill. Daniel has focused on the ways in which state agencies interact with contentious civil society over the siting of controversial facilities such as nuclear power plants, airports, and dams. His current research investigates how neighborhoods and communities recover from disasters. He has published a number of peer-reviewed articles along with research for general audiences. His research has been funded by grants from the Abe Foundation, IIE Fulbright Foundation, the National Science Foundation, the Reischauer Institute at Harvard University, the Weatherhead Center for International Affairs, and Harvard’s Center for European Studies. He has been a visiting scholar at the Japanese Ministry of Finance, the Institute for Social Science at Tokyo University, Harvard University, the Tata Institute for Social Science in Mumbai, the Institut d’etudes politiques de Paris (Sciences Po), and the East West Center in Honolulu, Hawaii. He has spent more than three years conducting fieldwork in Japan, India and France.

His research and writing on disasters and resilience is very interesting and speaks to the importance of strong communities of the type that governments and their corprate agents frequently do their best to seek to erode. Here is his own description and set of links to that work:

Externalities of Strong Social Capital: Post Tsunami Recovery in Southeast Asia forthcoming in Journal of Civil Society

Much research has implied that social capital functions as an unqualified “public good,” enhancing governance, economic performance, and quality of life (Coleman 1988; Cohen and Arato 1992; Putnam 1993; Cohen and Rogers 1995). Scholars of disaster (Nakagawa and Shaw 2004; Adger et al. 2005; Dynes 2005; Tatsuki 2008) have extended this concept to posit that social capital provides nonexcludable benefits to whole communities after major crises. Using qualitative methods to analyze data from villages in Tamil Nadu, India following the 2004 Indian Ocean tsunami, this paper demonstrates that high levels of social capital simultaneously provided strong benefits and equally strong negative externalities, especially to those already on the periphery of society. In these villages, high levels of social capital reduced barriers to collective action for members of the uur panchayats (hamlet councils) and parish councils, speeding up their recovery and connecting them to aid organizations, but at the same time reinforced obstacles to recovery for women, Dalits, migrants, and Muslims. These localized findings have important implications for academic studies of social capital and policy formation for future disasters and recovery schemes.

Social Science Perspectives on Disasters in Perspectives on Politics

In this extended review, I discuss three recent books on disaster: Governing after Crisis: The Politics of Investigation, Accountability, and Learning edited by Arjen Boin, Allan McConnell, and Paul ‘T Hart, Learning from Catastrophes: Strategies for Reaction and Response , edited by Howard Kunreuther and Micheel Useem, and The Next Catastrophe: Reducing Our Vulnerabilities to Natural, Industrial, and Terrorist Disasters by Charles Perrow. All three books invoke the market and state as core forces at work in mitigation and disaster recovery, overlooking the critical role of social capital.

Separate and Unequal: Post-Tsunami Aid Distribution in Southern India published in Social Science Quarterly

Objective. Disasters are a regular occurrence throughout the world. Whether all eligible victims of a catastrophe receive similar amounts of aid from governments and donors following a crisis remains an open question. Methods. I use data on 62 similarly damaged inland fishing villages in five districts of southeastern India following the 2004 Indian Ocean tsunami to measure the causal influence of caste, location, wealth, and bridging social capital on the receipt of aid. Using two-limit tobit and negative binomial models, I investigate the factors that influence the time spent in refugee camps, receipt of an initial aid packet, and receipt of 4,000 rupees. Results. Caste, family status, and wealth proved to be powerful predictors of beneficiaries and nonbeneficiaries during the aid process. Conclusion. While many scholars and practitioners envision aid distribution as primarily a technocratic process, this research shows that discrimination and financial resources strongly affect the flow of disaster aid.

The Power of People: Social Capital’s Role in Recovery from the 1995 Kobe Earthquake forthcoming in Natural Hazards

Despite the regularity of disasters, social science has only begun to generate replicable knowledge about the factors which facilitate post-crisis recovery. Building on the broad variation in recovery rates within disaster-affected cities, I investigate the ability of Kobe’s nine wards to repopulate after the 1995 Kobe earthquake in Japan. This article uses case studies of neighborhoods in Kobe alongside new time-series, cross-sectional data set to test five variables thought to influence recovery along with the relatively untested factor of social capital. Controlling for damage, population density, economic conditions, inequality and other variables thought important in past research, social capital proves to be the strongest and most robust predictor of population recovery after catastrophe. This has important implications both for public policies focused on reconstruction and for social science more generally.

Fixing Recovery: Social Capital in Post-Crisis Resilience in The Journal of Homeland Security June 2010

Disasters remain among the most critical events which impact residents and their neighborhoods; they have killed far more individuals than high salience issues such as terrorism. Unfortunately, disaster recovery programs run by the United States and foreign governments have not been updated to reflect a new understanding of the essential nature of social capital and networks. I call for a re-orientation of disaster preparedness and recovery programs at all levels away from the standard fixes focused on physical infrastructure towards ones targeting social infrastructure. The reservoirs of social capital and the trust (or lack thereof) between citizens in disaster-affected communities can help us understand why some neighborhoods in cities like Kobe, Japan, Tamil Nadu, India, and New Orleans, Louisiana displayed resilience while others stagnated. Social capital – the engine for recovery – can be deepened both through local initiatives and interventions from foreign agencies.

Aldrich Presentation on 25 March 2010 BUILDING RESILIENCE conference

Despite the clear and present danger from disasters, social scientists have yet to provide strong, quantitative evidence about which factors influence the pace of recovery. Using data from four megadisasters over the 20th and 21st century – the 1923 Tokyo earthquake, the 1995 Kobe earthquake, the 2004 Indian Ocean tsunami, and the 2005 Hurricane Katrina – Aldrich argues that social infrastructure is the critical factor in recovery.

The Crucial Role of Civil Society in Disaster Recovery and Japan’s Preparedness for Emergencies in Japan aktuell 3/28

This article is concerned with the empirical puzzle of why certain neighborhoods and localities recover more quickly than others following disasters. It illuminates four mainstream theories of rehabilitation and resilience, and then investigates a neglected factor, namely the role of social networks and civil society. Initial analyses underscore the important role of trust and connectivity among local residents in the process of rebuilding. After examining the role of civil society in Japan’s preparedness for emergencies, the article concludes with some policy recommendations for governments and nongovernmental actors involved in disaster relief.

This paper, entitled the The Need for Comparative Research, was prepared for a conference at the Jamsetji Tata Centre for Disaster Management in February 2008, and sets out some initial ideas which have motivated this project.

Some of Aldrich’s newspaper articles are linked here.

I expect I’ll be commenting further on his work.

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

3. TokyoTom June 5, 2011 at 7:14 pm

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:

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:

 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

Rob Bradley has up a post at the fossil-fuel cheering “free-market” Master Resource energy blog on April 25 that shows Ayn Rand’s familiarity with the mis-regulation of the energy industry. The post itself is fairly apt, except that while it paints the energy producers as victims of erratic government regulations it ignores those whose health and property were damaged by the energy industry and gives little play to the role of major firms in pushing for and benefitting from regulation.

But the chief point I wish to make is that Bradley’s post ends with a quote from Rand that is intended to criticize government but actually resonates because of the statism and poor decision-making of the major industry players themselves: (emphasis added)

There is no “natural” or geological crisis; there is an enormous political one. It is in the nature of a mixed economy that its policies are rationally inexplicable, that there are no identifiable causes, no accountable initiators, no ascertainable villains — and that you are losing your jobs, giving up your automobiles, catching pneumonia in unheated bedrooms, not because some giant evildoers are plotting your destruction, but because some seedy hack wanted an unearned salary, and some crummy professor wanted an undeserved prestige, and some measly shyster wanted a chance to fish in muddy laws, and none of them cared to or could watch the state of the country’s economy, and the sum of such termite aspirations has eaten through the pillars of the structure so that one kick from a sheik was sufficient to make it crumble.

Hundreds of thousands of people’s livelihoods and thousands of businesses have been disrupted along the Gulf Coast and nearby TEPCO’s Fukushima nuclear power plants, and millions of power consumers in and around Tokyo have been and will be affected for several years, not because of “giant evildoers”, but because major energy firms –  protected by government from full liability and with weak shareholder classes – are themselves highly bureaucratized with no clear locus of responsibility, with executives who look out for their own  interests but have no personal responsibility or liability for the damages resulting from lightly considered but materialized risks.

As I noted in March, F.A. Hayek (in an essay that Jeffrey Tucker has since kindly tracked down and made available generally) noted that:

Where previously perhaps only the aristocracy and its servants were strangers to the rules of the market, the growth of large organisations in business, commerce, finance, and ultimately in government, increased the number of people who grew up without being taught the morals of the market which had been developed in the course of the preceding 2,000 years.  …

People are losing faith in the market because large energy firms themselves are partially insulated from the market and as a consequence are not fully subject to its “taut discipline” – and, as a result, are making decisions that are highly damaging.

One can rightly protest that such firms are creatures of government and have been cosseted by government, so that government is responsible for skewed decision-making. But pointing this does not address the problem posed by institutionalized moral hazard.

Only reforms that restore responsibility and market discipline will do that. Such reforms should include not simply increasing competition and ending government ownership of resources and oversight of corporate risk-managment, but finding ways to ensure that there are real principals who are incentivized to hold corporate agents accountable. Otherwise, pervasive moral hazard and risk-shifting will persist.