In Enemies of What State?, mutualist Kevin Carson, in yet another strawman attack on “vulgar libertarians” (libertarians I know are not Thatcherites or Reaganites, for example) and “free market” advocates who are really statists or “economic fascists,” writes:
The American corporate economy has been statist to its core since its beginnings in the late 19th century. There wouldn’t even be a national market at all, or national corporations serving it, had it not been for the land grant railroads and other subsidies to long-distance shipping that made possible artificially large firms and market areas.
I disagree with the assertion bolded above. Certaintly, the mutualists and various left-libertarian mutualist-symps have not demonstrated this oft-repeated claim, which his basically a paeen to primitivism and the confused notion of localism, IMO. I think they are letting their personal preference for some kind of agrarian, simple society where people are not “alienated” from labor creep into their social analysis and predictions. To the contrary, in my view, in a free (anarchist) society, there would be even more “national” and indeed international trade, and probably even more “national” and even multi-national corporations and firms.
(For a good short post on the benefits of long-distance trade, see Robert Higgs, Miracles We Take For Granted; for a good critique of the economics of “localism,” see Bob Murphy, The Worst Economics Article Ever?.)
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yes, pml. but djf is painting a scenario without the state-chartered corporation, leaving in the doctrine of “respondeat superior”.
my scenario is based on the premise that neither ltd companies nor “respondeat superior” exists. in my scenario, it’s quite possible that the driver under-insures, or forgoes insurance. then what? the limited liability is effected by personal bankruptcy of the driver.
I replied on Carson’s blog here, to the comments of one “Brainpolice:”
***
Brainpolice: I’m of course open to rational discussion. Like some others, I am not bothered at all at mere preferences different from mine, or mere predictions about what would be. I will say I am not persuaded by assertions that in a free market we’d have localism, etc. Maybe so, maybe not. But they have not persuaded me. Sure, roads are subsidized. Why this helps Wal-Mart more than a local store I’m not sure. I happen to think the state regulations destroy wealth and cause overall harm, and that without them most people and businesses would be better off–yes, some subsidies would disappear, but other, greater penalties would too. I have no reason to think this would mean less international trade and mass production.
But so what–so what if someone wants to think that in a free society a Macy’s could not exist. Good for them. Fine. The problem I have is when self-proclaimed libertarians–those who are against the first resort to violence as a means of resolving disputes–use their personal preferences and half-baked predictions to cobble together some model of the “ideal” so*nociety and to declare that companies like Macy’s are not “really” private because they could never exist on a free market–and, therefore, that they are not the real owners of their property… and thus brick-throwing, worker sit-ins, etc. are not in principle objectionable.
So, if you want to publicize your personal preferences, if you want to give us your off the cuff “predictions” about “what would be”–I have *no* problems with this. I might even agree with some–some–of them. It’s when you take it a bit too far, when you assume you know more than you actually do, when you use this as a basis to justify violence against nominally peaceful people and firms (or when you refuse to condemn it on principled grounds–yes, yes, muttering that maybe “it’s a bad idea” but not really opposing it on libertarian grounds)–this is when I object.
People here seem to be unaware this has been hashed out already. I’d suggest to people who just assume the validity of vicarious liability and respondeat superior review these posts: Corporations and Limited Liability for Torts; Legitimizing the Corporation; and The Over-reliance on State Classifications: “Employee” and “Shareholder”; also Left-Libertarians on Corporations “Expropriating the Efforts of Stakeholders” and In Defense of the Corporation.
DJF:
“But the truck was not stolen and the driver was your employee who was doing the job that you paid him to do. And if you want an employee to take responsibility for $500,000 in damages then that employee is going to have to be paid enough to afford $500,000 in liability insurance. So in the case of the employee you pay one way or another, either directly or through paying the employee enough to pay for insurance. But I already pointed out that insurance alone did not cover the debt.”
First: read the posts above. Second: this buttresses my point. Let’s suppose the anti-industrialist left succeeds in getting the state to impose liability on shareholders, even if in a free society this would not happen. Let’s suppose the limited liability of corporate shareholders vanishes. Big deal. Companies already provide liability insurance to their directors and officers (D&O insurance). With your proposed system, they’d buy D&O&S insurance–a slight increase in cost of doing bidniss, and a slight increase in prices. So what. Who really thinks this would make us start buying bananas locally (or foregoing them) instead of buying them remotely? Puh-lease.
Stephan Kinsella wrote “I replied on Carson’s blog here…”
He is wrong, that is not Kevin Carson’s blog (I think Kevin Carson has another Arkansas-oriented one as well).
I will address the subtler errors in his recent comments later (I think the abuse of spelling and so on is self evident).
Stephan Kinsella writes
“â€â€â€â€With your proposed system, they’d buy D&O&S insurance–a slight increase in cost of doing bidniss, and a slight increase in prices.â€â€â€â€
Who says it will be a slight increase? If its just going to be a slight increase then the risk is tiny and so we could get rid of government granted limited liability today and not even have it in a Free Society since why bother with it if its only protecting against a slight risk. Why bother even defending limited liability if its involved with such a minor risk?
But would it be a slight risk? Would you want to be a shareowner of Enron stock, or AIG or GM without their bailouts? Without limited liability your ownership of those stocks would put you at great risk of owing huge sums of money since these corporations owe huge sums of money.
Without limited liability stock prices would be depressed because the risk is no longer limited for the people buying the stock, with lower stock prices the corporation would be worth less which means it would not have as much advantage over natural person businesses since it would not be able to raise as much money.
Also I disagree with those who say that concerns about limited liability are leftist, since from what I see limited liability is a collectivist idea and often defended with “greater good†arguments saying that it increases business. The biggest user of limiting liability is the government and its employees who also use the “greater good†as its justification for protecting itself collectively under the banner of a paper “person†called government. It comes from the “sovereign immunity†of the king who declared he was above mere liability and then this immunity was first transferred in part to the first limited liability corporation in British legal history, the “British East Indies Company†which consisted of a bunch of British government insiders who got part of the British Sovereigns immunity transferred to their company. So the theory and history of limited liability comes from government.
And as posters above have pointed out, there is no such thing as actually limiting liability, you can shift liability to others but once a liability is created it cannot be limited. Some want to shift the liability to employees, which will result in one of two things. The employee will demand extra compensation for taking on such risk and at the same time open up opportunities for the employee to strike out on his own and take over at least part of the business since if they are going to take the risk why not take the business. The second is to have the employee default on a liability they cannot afford which means that the cost will be born by the person who is owed the money. But as I pointed out this does not end the situation since that person will want his money and you being the employer are an obvious target and especially if you develop a reputation for dumping liability on employees who can’t afford the risk your will in all probability lose business since nobody wants to deal with someone who costs you money.
And I have yet to hear from anyone concerning my question. Does ownership involve only benefits or is ownership a mix of both benefits and responsibilities? In the example I give above does owning a truck and employing a driver entail any liabilities for the owner of the business? Or is the truck driver solely responsible. If a business owned truck ran into your house and was sitting in your living room would you only sue the driver or would you sue the business and owners as well?
DJF: “And I have yet to hear from anyone concerning my question. Does ownership involve only benefits or is ownership a mix of both benefits and responsibilities?”
I pointed you to several other threads that deal with this, and others here have responded to this, e.g. w questions about whether owners are responsible if a thief uses it in commission of a crime, etc. Ownership is right to control. Responsibility flows from action–employing means to achieve an (illicit) end. These are obviously not the same things. Just b/c the state categorizes shareholders as “ultimate owners” (whatever that means) does not mean they are the only owners–there are a vareity of people with the right to control various resources owned by the firm–the truck driver being one.
The issue for responsibility is action: who employed means to violate others’ rights? The kneejerk assumption that “the owner is responsible” confuses and evades this issue. Having the right to control does not mean you caused harm. In fact you can cause harm even if you employ means you have no right to control. In the case of negligence by corporate employees, presumably they are not directed by their managers to commit negligence. If so, why is the corporation itself resopnsible at all? Why are his managers? The directors? Customers? Vendors and suppliers? Creditors? fellow employees? Shareholders? They all have various degrees of influence (control), and they all “aid and abet” the corporation in certain ways. The question IMO is who caused the harm: prima facie, it’s the individual who was negligence. Next in line would be his supervisers, and the executives at teh company–if you can make out a good argument. Next would be members of the board of directors. Maybe. But what did a given shareholder do to cause the harm?
how can mutualists not see the contradiction in demonizing limited liability companies, and yet predicating their arguments on the doctrine of respondeat superior, whose common law origins are in the master/servant relationship?
what possible justification of vicarious liability can there be, unless one presumes that employees are children? isn’t this a little demeaning?
Stephan Kinsella writes
“â€â€â€The kneejerk assumption that “the owner is responsible” confuses and evades this issue.â€â€â€â€â€
I did not give any kneejerk assumptions, you seem however to give the kneejerk assumption that the owner is not responsible. Isn’t ownership ultimate control and therefore ultimate responsibility?
The owner is the one who authorized the driver to drive the truck, he paid him to drive the truck, he chose the route of the truck, he chose what is to be carried on the truck, he chose the time that the truck would be driven, he chose the actual truck itself, and he chose how much maintenance that truck receive, yet you seem to imply that that ownership is of no consequences when determining responsibility for liability
So your idea of ownership is the same as that of kings, they own, yet they have no responsibility, they have total power over what they own, yet they bare no cost when their truck sits in my living room
As to who “who employed means to violate others’ rightsâ€, the owner turned over a truck loaded with vegetables to a driver who ended up with the truck in my living room.
Do I at the very least get to keep the truck and vegetables since after all its on my property and the owner refuses any responsibility for the truck?
As to “shareholdersâ€, the real terminology should be “shareowners†since they actually own the shares. “Shareholders†would be more appropriate for brokers who might hold the actual paper shares for the owners. And as to shareowners responsibility, they are collectively the owners. I did not force them to collectively own that company, they voluntarily did so, and as part of that voluntary collective they agreed that they would vote in boards of directors and management. So they are collectively responsible for who the management is and they are the ones who determine what the goals and business practices will be. If they don’t want to be part of this voluntary collective then they should not be shareowners in that collective.
“â€â€Just b/c the state categorizes shareholders as “ultimate owners” (whatever that means) does not mean they are the only owners–there are a vareity of people with the right to control various resources owned by the firm–the truck driver being one.â€â€’
So this means that the drivers at your company can simply drive off and use that truck whenever they want since they are in control and control = ownership according to you? Or say they don’t want to deliver your vegetables, but want to deliver furniture instead, its their truck since they are driving it, so that must be ok as well. So you buy the truck, fill it with gas and vegetables, pay for the maintenance, yet the truck driver controls it for as long as he drive it and in fact is the defacto owner for that time period. What happens if the driver never returns it, is it his since he controls it?
This is an interesting concept, paper ownership seem not to give much benefit at all, and mere possession is as they say not just 9/10 of the law but 10/10. So I should only deal with the driver and we can make a deal which says that he will pay me as much as he can for damages and he will throw in the truck and the vegetables (which he controls = owns) to sweeten the deal and you have no claim on these.
Personally I think you should rethink your ideas about control=ownership since while this is really great at shifting liability onto others it also shifts ownership to those same others and as you say many people at a company may control something but I don’t think you want them owning it. But if you don’t rethink it, could you hire me as a driver, I would like to possess a new truck.
DJF:
Actors are responsible for their actions–for causing harm to others. Ownership is a right to control a particular resources–the status of “having a better claim to” control a given resource than any other person. I don’t see how having this status ties in directly with causing harm. Harm can be caused by using a variety of means, some owned, some not owned, some owned by others.
My theory is not kneejerk; it is based on my careful theory of causation and responsibility as adumbraged in various articles mentioned in the blog posts I linked above, e.g. my “Causation” article w/ Patrick Tinsley.
I don’t know what you mean by “ultimate.” Ownership is a right to control. It’s not always the ability to control, and it’s not the same *as* control. And just assuming that right-to-control implies “responsibility” is question-begging.
If by “owner” you mean the shareholders–do you really understand what it means to be a shareholder? Do you really think Wal-Mart stockholders make these choices? Do you think that if you own Exxon stock you are entitled to just to take gasoline from one of its gas stations for free, or to just start driving one of its trucks around, or tell its driver what to do?
Someone chose these things–and if they are done negligently, whoever did it ought to be responsible, presumably. Why do you assume this is the shareholders? Just because the law calls them “ultimate owners”? Do you agree with every legal classification the state puts out there?
As I elaborate in my Causation article, of course people are resonsible for border-invasions they cause by their actions.
So… now you want to come in as a newb-amateur and rewrite corporate law and its terminology? What else would you change in the law?
The “So” does not follow–this is question-begging. I gave you examples of others who also influence the company–why single out shareholders?
Kinsella: If by “owner” you mean the shareholders–do you really understand what it means to be a shareholder? Do you really think Wal-Mart stockholders make these choices? Do you think that if you own Exxon stock you are entitled to just to take gasoline from one of its gas stations for free, or to just start driving one of its trucks around, or tell its driver what to do?
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The shareholders are responsible for choosing the board of directors. So yes, the shareholders are responsible for the corporation’s behavior albeit in a very indirect way.
andrew: “#
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Kinsella: If by “owner” you mean the shareholders–do you really understand what it means to be a shareholder? Do you really think Wal-Mart stockholders make these choices? Do you think that if you own Exxon stock you are entitled to just to take gasoline from one of its gas stations for free, or to just start driving one of its trucks around, or tell its driver what to do?
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The shareholders are responsible for choosing the board of directors. So yes, the shareholders are responsible for the corporation’s behavior albeit in a very indirect way.”
Have you read the previous posts on all this? What *exactly* is your theory of causation and responsibility, and your criterion for applying it here? What if you are the owner of a non-voting share? What if you own a share but sell it before the annual meeting? What if you vote for a good directory who is not elected? What if you abstain? What if the vote is 90 to 10 so your vote doesn’t matter?
If voting matters, presumably it’s b/c of the influence it has on who the directors are. What if a major customer, vendor, or creditor pus
andrew: “#
#
Kinsella: If by “owner” you mean the shareholders–do you really understand what it means to be a shareholder? Do you really think Wal-Mart stockholders make these choices? Do you think that if you own Exxon stock you are entitled to just to take gasoline from one of its gas stations for free, or to just start driving one of its trucks around, or tell its driver what to do?
—-
The shareholders are responsible for choosing the board of directors. So yes, the shareholders are responsible for the corporation’s behavior albeit in a very indirect way.”
Have you read the previous posts on all this? What *exactly* is your theory of causation and responsibility, and your criterion for applying it here? What if you are the owner of a non-voting share? What if you own a share but sell it before the annual meeting? What if you vote for a good directory who is not elected? What if you abstain? What if the vote is 90 to 10 so your vote doesn’t matter?
If voting matters, presumably it’s b/c of the influence it has on who the directors are. What if a major customer, vendor, or creditor pushes a company to nominate a given director–that influence is as great as any shareholder’s votes. Are they liable too? What about customers and employees?–they are economically benefitting the company, thus “aiding and abetting” its torts. Where do you draw the line? What are your standards and criteria?
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