Economics Questions

Re: Corporations, good or bad?

Pablo — Thu, 23 Jul 2009 04:58:40 GMT

ivanfoofoo:
Here's some stuff to read:

I would really love to see more posts just like this. I really get tired of reading through 100+ posts of people ranting one way or the other on issues. I would much prefer to read the original authors ideas right up front prior to discussion.

Thanks!

Re: Corporations, good or bad?

Stranger — Thu, 23 Jul 2009 04:44:44 GMT

Spideynw:
Do we really have to get into this? Do you really have to take what I say out of context? I of course do not mean that as an owner, one is responsible for everything that happens. I am saying as an owner, one is responsible for damages that an owner can control. Like dumping pollutants into the ground that seep onto other people's property. I am pretty sure most people here understand at least that much.

But it is the executives of the corporation that decide this, not the shareholders. The shareholders simply hand their capital to the executives to employ in business.

Re: Corporations, good or bad?

Spideynw — Thu, 23 Jul 2009 02:49:25 GMT

Stephen Forde:
And what damages are shareholders responsible for? What's within their control? It's something that needs to be proven and not just assumed.

It would of course depend on the terms of the contract they sign with the other business owners and the specific situation. That is what the purpose of courts are for, to resolve disputes. To figure out who is the owner of what property and what each parties responsibility is in any particular dispute.

Re: Corporations, good or bad?

Stephen — Thu, 23 Jul 2009 02:14:18 GMT

Spideynw:

scineram:

Spideynw:
As an owner, one is responsible for damages.

I fail to see why. A tornado drops my car on you?

Do we really have to get into this? Do you really have to take what I say out of context? I of course do not mean that as an owner, one is responsible for everything that happens. I am saying as an owner, one is responsible for damages that an owner can control. Like dumping pollutants into the ground that seep onto other people's property. I am pretty sure most people here understand at least that much.

And what damages are shareholders responsible for? What's within their control? It's something that needs to be proven and not just assumed.

Re: Corporations, good or bad?

Spideynw — Wed, 22 Jul 2009 22:57:40 GMT

scineram:

Spideynw:
As an owner, one is responsible for damages.

I fail to see why. A tornado drops my car on you?

Do we really have to get into this? Do you really have to take what I say out of context? I of course do not mean that as an owner, one is responsible for everything that happens. I am saying as an owner, one is responsible for damages that an owner can control. Like dumping pollutants into the ground that seep onto other people's property. I am pretty sure most people here understand at least that much.

Re: Corporations, good or bad?

Stephen — Wed, 22 Jul 2009 22:39:44 GMT

JAlanKatz:

Stephen Forde:
If it is reasonable to believe that the workers will flood oil onto your property in the course of employment and the owner takes insufficient action that is within his power to prevent this occurrence, you might have a case against him and the workers. If he does take reasonable steps to prevent such a foreseeable occurrence and oil is still spilled on your property, then your beef is with the workers only.

Then we can't have a general principle that owners never have liability for "actions of the corporation" since your analysis presumes that we have to look at each case.

Stephen Forde:
Whether you agree with me or not, you need a theory of torts and causality to make these kinds of judgments. By and large, I haven't seen one from the anti-corporatists. Although Hessen and Kinsella have both supplied one. Ultimately, I think that whether or not someone should be punished for damage done by their property depends on proving intent, in criminal cases, and negligence, in cases of tort.

I agree with this. I'd add that we don't need a special theory for corporations, just to apply a general theory. However, I fully agree with your last sentence - but again, to have a policy like this would be to throw out the notion of limited liability.

And I think that "foreseeable" and "power to intervene" imply that managers as a category are responsible for lack of oversight and owners only to the extent that they are managers. In the case of normal businesses, the owners are managers. In the case of corporations, while members of the board of directors (managers) are usually shareholders as well, this is not necessarily the case. And in the case of shareholders who have nothing to do with the day to day management of a firm, it is unclear how they can be negligent. So, I don't agree. I think we can make a categorical distinction between classes of actors who can and can't be held responsible for torts based on their function within a firm and what it means to be negligent.

Re: Corporations, good or bad?

JAlanKatz — Wed, 22 Jul 2009 22:26:29 GMT

Stephen Forde:
If it is reasonable to believe that the workers will flood oil onto your property in the course of employment and the owner takes insufficient action that is within his power to prevent this occurrence, you might have a case against him and the workers. If he does take reasonable steps to prevent such a foreseeable occurrence and oil is still spilled on your property, then your beef is with the workers only.

Then we can't have a general principle that owners never have liability for "actions of the corporation" since your analysis presumes that we have to look at each case.

Stephen Forde:
Whether you agree with me or not, you need a theory of torts and causality to make these kinds of judgments. By and large, I haven't seen one from the anti-corporatists. Although Hessen and Kinsella have both supplied one. Ultimately, I think that whether or not someone should be punished for damage done by their property depends on proving intent, in criminal cases, and negligence, in cases of tort.

I agree with this. I'd add that we don't need a special theory for corporations, just to apply a general theory. However, I fully agree with your last sentence - but again, to have a policy like this would be to throw out the notion of limited liability.

Re: Corporations, good or bad?

JAlanKatz — Wed, 22 Jul 2009 22:26:24 GMT

Stephen Forde:
If it is reasonable to believe that the workers will flood oil onto your property in the course of employment and the owner takes insufficient action that is within his power to prevent this occurrence, you might have a case against him and the workers. If he does take reasonable steps to prevent such a foreseeable occurrence and oil is still spilled on your property, then your beef is with the workers only.

Then we can't have a general principle that owners never have liability for "actions of the corporation" since your analysis presumes that we have to look at each case.

Stephen Forde:
Whether you agree with me or not, you need a theory of torts and causality to make these kinds of judgments. By and large, I haven't seen one from the anti-corporatists. Although Hessen and Kinsella have both supplied one. Ultimately, I think that whether or not someone should be punished for damage done by their property depends on proving intent, in criminal cases, and negligence, in cases of tort.

Re: Corporations, good or bad?

JAlanKatz — Wed, 22 Jul 2009 22:26:24 GMT

Stephen Forde:
If it is reasonable to believe that the workers will flood oil onto your property in the course of employment and the owner takes insufficient action that is within his power to prevent this occurrence, you might have a case against him and the workers. If he does take reasonable steps to prevent such a foreseeable occurrence and oil is still spilled on your property, then your beef is with the workers only.

Then we can't have a general principle that owners never have liability for "actions of the corporation" since your analysis presumes that we have to look at each case.

Stephen Forde:
Whether you agree with me or not, you need a theory of torts and causality to make these kinds of judgments. By and large, I haven't seen one from the anti-corporatists. Although Hessen and Kinsella have both supplied one. Ultimately, I think that whether or not someone should be punished for damage done by their property depends on proving intent, in criminal cases, and negligence, in cases of tort.

Re: Corporations, good or bad?

JAlanKatz — Wed, 22 Jul 2009 22:24:02 GMT

Stephen Forde:
Also, I don't know why you quote me as saying that when I was quoting Rothbard and left a link so you or anyone reading could understand the full context of his argument. In the ERE creditors and shareholders would earn the same rate of return on the capital they invest in a firm.

I apologize, I quoted it that way because I didn't know to quote the sentence I wanted to comment on but still have it be labeled as coming from Rothbard.

Stephen Forde:
Both creditors and shareholders are suppliers of capital, and owners of a firm. There is only a slight difference in the arrangement. Creditors have the first claim to the firms assets in the event of bankruptcy. They also receive none of the firms profits and do not elect the board of directors. Shareholders do earn profits and losses in the form of dividends and take more risk than creditors because their claim to the firms assets comes after creditors. But both are owners of the firm and it makes no sense to arbitrarily single one out as being liable for lawsuits and consider the other shielded from legal liabilities.

This description makes it sound as if it's an arbitrary idea that shareholders get a share of profits and creditors don't. It isn't arbitrary, though, these are just signs of an underlying institutional arrangement which is well understood by shareholders and creditors alike. If I buy more stocks, I can acquire enough shares to fire the board and take over the company directly. If I buy all outstanding bonds, will I have that ability? This is the key difference to focus on, I think. Since owning 100% of the stocks is for sure owning the company (this is what happens when I own a fruit store, I just haven't formally issued the stocks) and owning 100% of the bonds is for sure not owning the company (my credit card company does not own me, even if I'm fully in debt) how can we say that stocks have nothing more to do with ownership than bonds do?

Incidentally, while I think I understand your argument above, it seems to me to be different from what Rothbard said, and in my mind, it seems to contradict what Rothbard said. For the record, I agree with your position more than with Rothbard's - at least as I understand it from the post presented.

Re: Corporations, good or bad?

scineram — Wed, 22 Jul 2009 22:21:01 GMT

Spideynw:
As an owner, one is responsible for damages.

I fail to see why. A tornado drops my car on you?

Re: Corporations, good or bad?

Stephen — Wed, 22 Jul 2009 21:54:44 GMT

Spideynw:
In the current environment, shareholders are not allowed to make business decisions. In a free market, they would be allowed to make business decisions.

What government intervention currently prevents them from 'making decisions', something which you haven't qualified?

Spideynw:
Creditors are never allowed to make decisions.

They're allowed to set the conditions for loans. Isn't that a decision?

Spideynw:
And no, creditors are not owners, but shareholders are.

Is this self-evident; axiomatic? Cause if not then why is it true? Someone could just as easily assert the opposite, as is done above in the quote from Rothbard which claims that creditors are owners because they have legal title over a firms assets.

Spideynw:
As an owner, one is responsible for damages.

Same criticism. Self-evident? Axiomatic?

Re: Corporations, good or bad?

Spideynw — Wed, 22 Jul 2009 21:18:03 GMT

In the current environment, shareholders are not allowed to make business decisions. In a free market, they would be allowed to make business decisions. Creditors are never allowed to make decisions. Yes, ownership has to do with semantics. And no, creditors are not owners, but shareholders are. As an owner, one is responsible for damages.

Re: Corporations, good or bad?

scineram — Wed, 22 Jul 2009 20:41:22 GMT

JAlanKatz:
If you choose to buy an equity, and therefore benefit from a share of the profits, it makes sense to me that you should be liable for assaults on others as well.

It makes zero sense to me.

Re: Corporations, good or bad?

Stephen — Wed, 22 Jul 2009 20:34:49 GMT

JAlanKatz:

Stephen Forde:
Is this whole idea that shareholders are liable for torts caused by unforeseeable events from their own p.o.v. axiomatic? Or is there a justification for it starting from first principles? In other words, can you prove it?

Am I responsible for damage I do to others? If I buy a car and the car rolls down the hill, am I responsible? What reason do you see why owners should not be responsible if they tell their workers "Maximize my profits" and the workers, with the knowledge of the owners, do dangerous things that then cause oil to flood my property?

You are responsible iff your action can foreseeably harm someone and you still take it anyway. If you forget to put the parking break on in a public space, yeah, I guess so. If it is reasonable to believe that the workers will flood oil onto your property in the course of employment and the owner takes insufficient action that is within his power to prevent this occurrence, you might have a case against him and the workers. If he does take reasonable steps to prevent such a foreseeable occurrence and oil is still spilled on your property, then your beef is with the workers only.

Whether you agree with me or not, you need a theory of torts and causality to make these kinds of judgments. By and large, I haven't seen one from the anti-corporatists. Although Hessen and Kinsella have both supplied one. Ultimately, I think that whether or not someone should be punished for damage done by their property depends on proving intent, in criminal cases, and negligence, in cases of tort.