Archive for November, 2011

WSJ: Palin Attacks Corruption In Washington D.C., Urges #OWS and #TeaParty Cooperation: "How Congress Occupied Wall Street"

November 20th, 2011 No comments
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Unwinding limited liability: Can we roll back the regulatory state by shifting ultimate responsibility for managing risks to enterprise owners?

November 15th, 2011 No comments

[This is an edited re-post.]

Libertarians have not quite focussed on how the state grant of limited liability to shareholders – something that cannot be obtained merely by voluntary transactions) has set in motion and greatly fuelled the growth of the state and battles over the wheel of government — battles in which insider elites, generally acting through corporations, have the overwhelming advantage.

I have posted extensively on limited liability; for the interested reader perhaps the following post will be a quick introduction:

The Cliff Notes version of my stilted enviro-fascist view of corporations and government

For those of you who prefer NOT to let their fingers do the walking, I have noted elsewhere that (ed: some slight revisions):

I am NOT arguing FOR a general rule that shareholders SHOULD be liable for corporate torts; rather, I have:

(1) pointed out that limited liability itself has served to muddle the question of whom, exactly, should be responsible for the very real harms that corporations frequently cause,

(2) noted that the limited-liability corporate form has enabled risk-generation and -shifting on a massive scale, with innocent third parties frequently being stuck holding the bag (not simply when liabilities exceed assets, but more generally since the cycle of escalating government interventions to rein in corporations perversely ends up raising barriers to entry and giving corporations “rights” to engage in activities that damage others, which rights curtail recourse even when sufficient assets are available),

(3) argued that libertarians should reconsider the grant of limited liability for torts (as opposed to limited liability as to those who contract with the corporation on a voluntary basis) not simply because it is clearly non-libertarian to begin with, but because it has had profound consequences in feeding the snowballing and increasingly centralized regulatory state– consequences at a serious enough level that state-loving libertarians concede simply by troubling themselves to argue against curtailing limited liability,

(4) noted that the most efficiacious way to roll back the regulatory state lie in the direction of shifting ultimate responsibility for managing risks to enterprise owners (and ending the counterproductive regulatory risk-management experiment), and

(5) noted that a curtailment of limited liability for torts could be hedged by shareholders via insurance, and could be achieved by state governments and the federal government offering more lenient regulation to busness enterprises that operate as partnerships, unlimited liability corporations, or in cases where shares are NOT “fully paid up” so that calls for signifcant additional capital could be made against shareholders if needed to pay claims. “Creative destruction” by new firms will eventually bring down the limited liability firms.

It is perfectly appropriate to examine the justifications FOR and the consequences of the state grant of limited liability; for this purpose, I disagree with Kinsella that one must first “provide a theory of liability that coherently distinguishes shareholders from any other patron of the company”.

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