Reply To: Limited Liability


On the courts thing, I would add that private arbitration has boomed because hardly anyone wants to use the supposedly awesome government courts that we’re supposed to be so grateful for.

On limited liability, this is a principle that could and would exist in the absence of government. Creditors would agree contractually that in case of bankruptcy, etc., they would have access to the firm’s assets but not to the shareholders’ assets. The company would have to borrow at a premium in exchange for this provision. That’s how the market would sort it out.

This, by the way, is how church congregations work. If the pastor breaks the law, no one would think an individual congregant ought to be at risk of losing his house.