The Corporate Form, Limited Liability, and the State

December 24, 2007 8:09 AM by Brad Edmonds

A common complaint of anticorporate libertarians and self-described anarchists is that corporations are creatures of the state. The limited-liability feature of the corporate form, they claim, and the ability of corporations to raise large amounts of capital are state-granted privileges.

Two important replies to such claims must make their way into cultural awareness: (1) we need corporations if we want any decent standard of living; and (2) these corporate powers would exist without the state. FULL ARTICLE

The (Free) Market for Corporate Control

December 12, 2007 8:30 AM by Brad Edmonds

The market for corporate control, exemplified by mergers, acquisitions, hostile and friendly takeovers, and all manner of complicated transactions — reverse triangular mergers, statutory short-form mergers, cash buyouts, etc. — designed to skirt otherwise-mandatory shareholder votes and statutory obstructions, often is the only incentive for managers to pursue diligently corporate efficiency and profitability.

Reputation and credibility are often enough to induce managers to perform well. When this is not the case, the threat of losing one's job certainly lights a fire under even the most complacent corporate officer.

And yet, in the guise of coming to the rescue of hapless shareholders (who, incidentally, rely on the expertise of analysts who buy securities for large institutional investors such as retirement funds, mutual funds, and insurers), in gallops the valiant SEC and state legislatures to save the day. FULL ARTICLE

The Wrong Lessons of the Bridge Collapse

August 6, 2007 6:03 AM by Brad Edmonds

How interesting that rather than blame those who are at fault, we are supposed to bemoan our "nation's collapsing infrastructure." The correct message from the bridge collapse which was allowed to happen with full knowledge of the bridge's structural problems, is that government cannot get the job done. The government lacks the incentive to fix problems. And even with the incentive, there is a core calculation problem associated with prioritizing the use of resources. This is where private markets excel. They are not perfect but resources are used efficiently to solve the most urgent demands as revealed in the system of profit and loss. The government lacks this mechanism, so everything becomes arbitrary at best and political at worst. FULL ARTICLE