Home > Uncategorized > Note to Larry Lessig on his "Anti-Corruption Pledge": Limited liability corporations are the taproot of both growing government and anonymous rent-seeking.

Note to Larry Lessig on his "Anti-Corruption Pledge": Limited liability corporations are the taproot of both growing government and anonymous rent-seeking.

I refer to the very recently-launched “Anti-Corruption Pledgehere, which is the latest project by prolific Larry Lessig, now a Harvard Law prof and head of a corporate reform center there (and whom I have introduced and discussed in a number of preceding posts).

Larry further describes the purpose and motivation of the Pledge at his blog. (I note that I’m strongly in favor of pledges, as I noted in this blog post discussing the Kochs.)

I left the following comment on the discussion page of the wiki that Lessig created for The Anti-Corruption Pledge:

Larry, you aren’t really attacking the chief problem, which the role that STATE-Created limited liability corporations play in centralization and aggrandizement of power in Washington, which then further attracts rent-seeking by increasingly anonymous (who owns and runs these corporations, anyway?) organizations that wish to use a bloated government to receive favorable inside deals and to raise barriers to entry in their respective markets.

Corporations drive the growth of government because their LIMITED LIABILITY aspect means government protects shareholders from liability in the event of tort damage to workers/others/society. Citizens tired of holding the bag then must continually push legislatures and courts for “reform” that perversely helps to entrench the largest firms against newcomers.

Corporations are not simply the “Health of the State”, but they’re created in STATES, which accordingly MUST be a main venue to seek to rein them in. States can stop creating limited liability companies, can deregulate for non-limited liability firms (where owners retain a large tail of risk), etc.


Anonymity is not per se bad – the Federalist Papers and Anti-Federalist Papers were written anonymously – it’s the anonymity afford to those whom have already received important government privileges (viz., limited liability) that renders them and their agents unaccountable that is the problem.

Thus I don’t see that public funding or limiting and requiring transparency of your broadly worded “political expenditures” (contributions? campaign ads?) really address the root problem.

Fortunately, there are 50 states in which to start campaigning for responsibility owned businesses whose owners are NOT protected by governments from the communities in which they operate.

Large, entrenched public companies are already seeing across-the-board declines in profitability and market capitalization (ask Robert Monks); they can be brought down by Schumpeter’s process of “Creative Destruction”.

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  1. TokyoTom
    October 9th, 2012 at 08:49 | #1

    Thanks for your comment, Ron; we are thinking quite similarly.

  2. morleron
    June 16th, 2012 at 02:35 | #2

    Couldn’t have said it better myself. People fail to realize that allowing the government (any government, but I’m mainly concerned with the U.S. Federal gov’t) to treat one party more favorably than another – for whatever reason – leads to others demanding the same favors for themselves. This was recognized by the framers of the U.S. Constitution who deliberately limited the areas in which the Federal gov’t could operate so as to limit the opportunities for mischief.

    However, politicians and lawyers being what they are the limitations were eventually cast-aside as being too “limiting”, “slow”, “awkward”, or “restrictive” for the modern world. The result – a Commerce Clause which is now read so broadly as to allow the Federal gov’t to regulate anything it wishes under the theory that whatever is being regulated may somehow affect inter-state commerce. The solution, as many Americans are slowly (let us hope not too slowly) coming to realize is to put the Federal gov’t back inside its constitutional box. This would take care of the issue of unwarranted government expansion and the corruption which goes along with it. After all, no one will bribe a politician who cannot provide favors because he has no legal authority to do so. I hope that Dr. Lessig’s proposal fails as adding yet more regulations simply provides the politicians with more opportunities to provide “constituent services” (read favors in exchange for campaign donations) and, in the end, exacerbates the problems the new rules were supposed to solve.

    Just my $.02,

  1. October 11th, 2013 at 06:17 | #1