From: pcollac@pyrnova.mis.pyramid.com (Paul Collacchi)
Newsgroups: sci.econ
Subject: Re: Corporations (was Re: Libertarians live in Virtual Reality)
Date: 27 Aug 92 16:46:22 GMT
Reply-To: pcollac@pyrnova.mis.pyramid.com (Paul Collacchi)
Distribution: usa
Organization: Pyramid Technologies, Mt. View, California.

In article <1992Aug26.225818.20462@panix.com>, jk@panix.com (Jim Kalb) writes:
|> pcollac@pyrnova.mis.pyramid.com (Paul Collacchi) writes:
|> 
|> 
|> You're right that it's [,limited liability is,] a deflection of direct
|> feedback and to that extent is a bad thing.

Thank you for getting the point.  It's really just that simple -- that
the feedback loop gets deflected.  I'm not even saying that I think its
"bad" (or at least ALWAYS bad), but that it simply has consequences, and
A, B, and C might be those consequences.

|>   
|> 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,

I do accept your extension, (in part).  I apparently wasn't clear in the
original post when I referred to it being a "two-way" street.  If the
original notion was that irresponsibility is encouraged by deflected
feedback loops, this would hold for any deflected feedback loop.  
Including consumers, lenders, money savers, suppliers, etc., Though I
wouldn't hold suppliers or money lenders responsible for dirty deeds 
performed by others, even if those others used things provided by
them.

 
|> >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.
|> 

I think you understood it well.  (I am "claimant" neutral.  I don't think
having bigger or smaller things to sue is better or worse.)

One point that might not have been clearly.  Bigness would re-emerge, I
think, but concomitant with management's ability to manage the potential
risk that arose simultaneously.  In other words, bigness which survives
will do so because it is responsible.  It will be "responsible bigness."
Nothing "wrong" with that at all.

Paul Collacchi


Newsgroups: sci.econ