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- Newsgroups: sci.econ
- Path: sparky!uunet!gatech!news.ans.net!cmcl2!panix!jk
- From: jk@panix.com (Jim Kalb)
- Subject: Re: Corporations (was Re: Libertarians live in Virtual Reality)
- Message-ID: <1992Aug26.225818.20462@panix.com>
- Date: Wed, 26 Aug 1992 22:58:18 GMT
- Distribution: usa
- References: <183122@pyramid.pyramid.com> <1992Aug19.230241.4339@panix.com> <183160@pyramid.pyramid.com>
- Organization: PANIX Public Access Unix & Internet, NYC
- Lines: 64
-
- pcollac@pyrnova.mis.pyramid.com (Paul Collacchi) writes:
-
- >A consequence of incorporation was that it directed litigants to go
- >after the fictitious entity, the corporation, rather than persons who
- >performed the alleged dirty deeds. This is a deflection of direct
- >feedback.
-
- The persons who actually perform the dirty deeds are still liable. By
- making very large business concerns possible incorporation gives
- litigants another very deep pocket to reach into, though. Most of them
- do just that and don't bother with the individual malefactors. You're
- right that it's a deflection of direct feedback and to that extent is a
- bad thing. On the other hand, big businesses are often in a position to
- reduce risks in a more systematic way than small businesses.
-
- >Under unlimited [I believe "limited" is meant] liability, a certain
- >segment of corporate participants, "owners" are more protected from
- >the consequences of their actions, which are to choose to give their
- >money to (potentially) unscrupulous persons and to not supervise same.
- >As you correctly point out, it encourages the participation of someone
- >who "won't know much about or have much control over what goes on..."
- >It doesn't support the mindful, engaged participation of owners who
- >might otherwise stand to lose their shirts. Losing your shirt, like
- >gravity, wakes you up real quickly in my opinion. The game is to wake
- >ourselves up, to act responsibly, not to give ourselves excuses for
- >going to sleep. Let the owners police their own corporations.
-
- One could extend this line of thought by making lenders, customers and
- suppliers liable for claims against businesses as well. After all,
- lenders and customers also give their money to potentially unscrupulous
- persons and don't supervise them, customers ask for high-quality
- products and services at a low price and don't inquire how that miracle
- is achieved and suppliers give businessmen the materials they need to
- engage in potentially unscrupulous acts and don't supervise how the
- materials are used.
-
- If you don't accept my extension of the line of thought, then it seems
- you think there's something special about advancing risk capital
- (compared with lending money, selling supplies or placing an order) that
- in and of itself makes the investor personally responsible for what the
- people who get the advance do with it. I don't see why that should be
- so. If you do accept it, then it seems that you just don't like modern
- economic life, which is based on world-wide markets with lots of
- participants who really don't know or care much about the people they
- have dealings with. Of course, you might be right to reject modern
- economic life. Lots of people have objections to it, although few would
- be willing to give up the goodies it provides.
-
- >If there were no fictitious 'catch-all' entities, one would seek
- >damages from specific, personal entities. Again, the effect -- direct
- >feedback loops for the participants. What you do comes back to you not
- >the corporation [ . . . ] Bigness would diminish, I agree, unless it was
- >capable of sustaining its level of risk, i.e. acting responsibly.
- >Maybe certain big things are just too risky. Maybe we ought to not
- >undertake them.
-
- I understand the first three sentences better than the last three. In
- the absence of limited liability, businesses would be smaller so risky
- things would be done by people with fewer resources to pay claims than
- (say) IBM has. As a result, claimants would be worse off than they are
- today.
-
- --
- Jim Kalb (jk@panix.com)
-