>Why should individuals not in general be liable for the choices they make?

To quote: "You're playing an excluded middle"

Investor invests in building. Lightning burns it down. Should that investor be legally liable for their entire worth, or just the value invested?

There is some medium ground between being liable without bound and not having any liability whatsoever. Limited Liability Corporations are just that - you can be held liable beyond the LLC if you do illegal things. But the limitation is to be liable for only the assets relevant to the business. This seems perfectly like a reasonable middle ground.

And it's listed often as one of the best inventions enabling a modern economy [2]."To the economist the
concept is essential, for without limited liability capital acquisition would be difficult indeed." [3] The historical evidence is that limited liability corporations enabled using excess capital far more efficiently than previously, which is why pretty much every country in the world has adopted it. It was clear early on that those countries not adopting it were falling behind economically.

>Even without limited liability, those with assets will assume risks if the potential returns are commensurate. Always have, always will.

Before limited liability, unlimited liability was the norm. If a merchant invested some of his profits in a ship, and the ship sank, then those with cargo on the ship could sue the merchant for all the merchant was worth, far surpassing the value the cargo was worth. This disincentivized merchants investing.

So yes, investors invest commensurate with the risk. If the risk goes up, they invest less. This was the norm. Excess capital was not being used for fear of losing not only that capital but all capital.

The Dutch invented limited liability in the 1600s in order to tap this unused capital. " The innovation in the case of the VOC was that the liability of not just the participanten but also of the bewindhebbers was limited to the paid-in capital (usually, bewindhebbers had unlimited liability). The VOC therefore was a limited liability company" [1]

This proved so successful economically that all neighboring nations adopted it soon thereafter, enabling a boom in shipping.

Now, back to mortgages, etc. Mortgages are lent by banks (more or less). Before limited liability, the bank was owned by one or more people, and they were liable for any business deals they got involved in that went wrong, and not just for the amount invested in the business, but for all their assets. If they lent a mortgage, and something was wrong, even by acts of God, then the bank and any shareholders could be sued for everything - their entire set of assets, their houses, and even their families houses.

If you don't see how this disincentivises investment or risk taking, then I don't know how else to explain it. I'm far more likely to invest $100 if I know I'll at most lost $100. If I'm possibly liable for $1,000,000, I'm not likely to ever invest that $100.

> Even without limited liability, those with assets will assume risks if the potential returns are commensurate. Always have, always will.

We agree on that. When the risks are tremendous, there will be less investment. And this is historical fact.

[1] https://en.wikipedia.org/wiki/Dutch_East_India_Company

[2] https://www.bbc.com/news/business-40674240

[3] https://www.bus.umich.edu/KresgeLibrary/resources/abla/abld_...