A Free Market Flaw?

[forsmant]

There is no, has been no, and never will be any free market. Markets are influenced by the limits we put on the individual and collectively. We should focus on selling common sense regulation that criminalizes fraud and selling alcohol to kids.

 

[Fox McCloud]

There is no, has been no, and never will be any free market. Markets are influenced by the limits we put on the individual and collectively. We should focus on selling common sense regulation that criminalizes fraud and selling alcohol to kids.

then you already have the justification for any size government.

 

[forsmant]

That is why we created a government with limits (supposedly) Do you not govern your own actions? Do you not govern your children? The market is not and will never be free from human manipulation and control as we are the ones who created the market in the first place. Rather than bring out the tired phrase "free market" we should be talking about common sense regulation and protections that advance commerce not impede it. If you question the need for rules then you will be against everything.

 

[robert68]

That is one view. But here is another:

Exiting corporate law allows you to create an imaginary person who can do your bidding, enter into contracts, own property, hire and fire people, operate polluting industry, operate dangerous machinery, use resources, and occupy land indefinitely, while turning the profits over to you. But if things go bad - a breached contract, an injured bystander, a looted pension plan, a polluted piece of land - then the corporation can dissolve and disappear leaving no living being to take responsibility for its actions.

While you can simulate some of these effects on a contract by contract basis in a free market, I think it is a huge reach to say that the existing corporate business form could be reproduced in a free market.

The corporate business form promotes short-term thinking, hides important name recognition and reputation information from the market, discourages loyalty to customers, workers and communities, and encourages cooking the books and shuffling corporate shells to make things look profitable rather than making an effort to improve goods and services provided.

You’re not providing any basis for your contentions. The legal realities are what are relevant. Stephan Kinsella happens to be a libertarian attorney, and has addressed the subject on many occasions, including responding to questions on it; and Robert Hessen taught business history and universities. Anyone who wants to can compare their writings to your baseless narrative. Also, Murray Rothbard wrote the same thing.

 

[Mini-Me]

Limited liability is just a contractual arrangement between the shareholders and others; the state isn’t necessary for it.

This is untrue. You're improperly focusing on contractual arrangements with creditors, when there are plenty of situations that statutory limited liability affects that are unrelated to contracts. For instance, consider real instances of corporations dumping toxic waste and damaging neighboring properties, or BP screwing up the gulf with an oil spill. To up the ante, consider a hypothetical situation where a corporation hires thugs to murder competitors or critics and gets caught. In cases like that - i.e. every case except for mutually prearranged creditor relationships - the aggrieved parties never signed a contract with the corporation guaranteeing its shareholders limited liability. Rather, the shareholders' limited liability here is solely statutory and enforced by the state...and it is totally bullshit.

 

[Mini-Me]

That is why we created a government with limits (supposedly) Do you not govern your own actions? Do you not govern your children? The market is not and will never be free from human manipulation and control as we are the ones who created the market in the first place. Rather than bring out the tired phrase "free market" we should be talking about common sense regulation and protections that advance commerce not impede it. If you question the need for rules then you will be against everything.

According to the government, literally every overbearing regulation they create is a "common sense" regulation. This is what we get when we grant the government the power to create arbitrary regulations and make its own subjective value judgments on what is and isn't "common sense." Limits on government power must be hard and absolute - not fuzzy - or they do not exist at all.

 

[robert68]

This is untrue. You're improperly focusing on contractual arrangements with creditors, when there are plenty of situations that statutory limited liability affects that are unrelated to contracts. For instance, consider real instances of corporations dumping toxic waste and damaging neighboring properties, or BP screwing up the gulf with an oil spill. To up the ante, consider a hypothetical situation where a corporation hires thugs to murder competitors or critics and gets caught. In cases like that - i.e. every case except for mutually prearranged creditor relationships - the aggrieved parties never signed a contract with the corporation guaranteeing its shareholders limited liability. Rather, the shareholders' limited liability here is solely statutory and enforced by the state...and it is totally bullshit.

Yes, there’s limited liability for passive shareholders when a tort or crime has been committed by an employee or manager(s). But why shouldn’t there be? They bare no responsibility for the tort or crime. There’s no libertarian or free market basis for holding people liable for actions they didn’t commit. The same argument for doing so could be made for all people with passive connections to the company: vendors, other employees, creditors, customers.

 

[Mini-Me]

Yes, there’s limited liability for passive shareholders when a tort or crime has been committed by an employee or manager(s). But why shouldn’t there be? They bare no responsibility for the tort or crime. There’s no libertarian or free market basis for holding people liable for actions they didn’t commit. The same argument for doing so could be made for all people with passive connections to the company: vendors, other employees, creditors, customers.

The company is in reality not its own person (as you have agreed) but merely a joint profit-making venture of the shareholders. These passive shareholders ARE the company, which is why they receive the dividends when the company is doing well. Why should they not be financially responsible for the company's non-exempt obligations when the company goes bankrupt? If the company is held financially responsible, that responsibility should ultimately apply to its constituent shareholders, by extension. Otherwise, this is just another manner of privatizing profits and socializing losses.

I'm not suggesting to make someone criminally responsible for the actions of someone else: If company executives hired hit men to kill critics, the individual executives should be held criminally responsible, not the corporation or any shareholders who weren't in on it. However, the corporation may very well be held civilly responsible. If so, shareholders should ultimately be financially responsible for any obligations that the company still has upon bankruptcy, which have not been specifically waived by creditors/victims/etc. by mutual contract.

 

[Acala]

okay

You’re not providing any basis for your contentions. The legal realities are what are relevant. Stephan Kinsella happens to be a libertarian attorney, and has addressed the subject on many occasions, including responding to questions on it; and Robert Hessen taught business history and universities. Anyone who wants to can compare their writings to your baseless narrative. Also, Murray Rothbard wrote the same thing.

I am also a libertarian attorney, if that makes any difference. And I deal with corporations in the real world on a regular basis. My narrative describes the law as it currently exists. Is there some specific aspect of it that you think is false?

 

[Acala]

yes

Your complaint is baseless because there are remedies. Hold the bad actors personally responsible for their criminal decisions and you would see immediate cessation of most such activity. Perhaps we should hold shareholders responsible for the actions of their boards of directors.

But this is the entire reason corporations exist - to allow people to invest their money and make a profit but avoid responsibility if things don't go well. It is rather like a milder form of the "privatize the profits and socialize the losses" philosophy of American fascism. If you want to get rid of the corporate shield (as it is known in the law) then why not just get rid of corporations entirely?

 

[Disconsolate]

That is why we created a government with limits (supposedly) Do you not govern your own actions? Do you not govern your children? The market is not and will never be free from human manipulation and control as we are the ones who created the market in the first place. Rather than bring out the tired phrase "free market" we should be talking about common sense regulation and protections that advance commerce not impede it. If you question the need for rules then you will be against everything.

The "common sense regulation" is the market.

The market is simply voluntary interactions. Coercive regulation implies force and involuntary interaction. That is not freedom.

 

[forsmant]

If you don't believe in punishing fraud and violence then we cannot have a discussion. Attempting to divorce coercion from human interaction is gonna be as easy as trying to get humans to only have sex for procreation. It goes against our natural tendencies.

 

[Fox McCloud]

If you don't believe in punishing fraud and violence then we cannot have a discussion.

congratulations on completely distorting and warping what a number of us here have been trying to say, all the while ignoring are arguments! We have a winner, folks!

 

[Sola_Fide]

If you don't believe in punishing fraud and violence then we cannot have a discussion. Attempting to divorce coercion from human interaction is gonna be as easy as trying to get humans to only have sex for procreation. It goes against our natural tendencies.

But government intervention itself is the source of fraud and violence....

 

[forsmant]

congratulations on completely distorting and warping what a number of us here have been trying to say, all the while ignoring are arguments! We have a winner, folks!

A winner of what? All I am saying is that the term free market is a misnomer and improperly used. Free from what? From human rules? From coercion? Free market and capitalism are corrupted words that mean corporatism to most people.

The market is kinda like a garden. Left to its own devices the weeds will take over, but if we insert a few regulation we can get rid of the weeds, or at least have some sort of control. The weeds I see in the market are created by government collusion with business. Rather than foster cartels, the regulations need to be written to keep people honest and preserve small business.

I understand that most regulations have been passed are believed to be common sense. That does not make it so. Every do good liberal who thinks safety is the requirement of international corporations may have a good heart. What they don't see is that the rules they wish to create are for corporations playing on an international or national level. When all businesses have to conform to these regulations they become counter productive to what the liberal really wanted. In the case of egg producers its egg safety. Small business and big business are not playing the same game. They may resemble each other but they are in way different leagues. Its like a pick up football game on the playground being forced to play by the rules of the NFL. If the market was truly free the rules would be adjusted.

You're rhetoric is tired and idealistic. Lets move on.

 

[forsmant]

But government intervention itself is the source of fraud and violence....

what intervention? They all exist within the framework of the market.

 

[Mini-Me]

A winner of what? All I am saying is that the term free market is a misnomer and improperly used. Free from what? From human rules? From coercion? Free market and capitalism are corrupted words that mean corporatism to most people.

The free market means a market free from violence, coercion, and fraud, just like free people means people free from violence, coercion, and fraud. (I could add "free from theft, vandalism, etc." if you don't consider them implied by the above. The very concept of a market is dependent upon an individualist view of property.) Just because the term has been corrupted, does not mean the word "free" should be abandoned. It is still a concise way of expressing an extremely important concept. We have to have SOME term to describe the kind of market we desire, and "free" is simply the best known way to describe it.

The market is kinda like a garden. Left to its own devices the weeds will take over, but if we insert a few regulation we can get rid of the weeds, or at least have some sort of control. The weeds I see in the market are created by government collusion with business. Rather than foster cartels, the regulations need to be written to keep people honest and preserve small business.

I understand that most regulations have been passed are believed to be common sense. That does not make it so. Every do good liberal who thinks safety is the requirement of international corporations may have a good heart. What they don't see is that the rules they wish to create are for corporations playing on an international or national level. When all businesses have to conform to these regulations they become counter productive to what the liberal really wanted. In the case of egg producers its egg safety. Small business and big business are not playing the same game. They may resemble each other but they are in way different leagues. Its like a pick up football game on the playground being forced to play by the rules of the NFL. If the market was truly free the rules would be adjusted.

You're rhetoric is tired and idealistic. Lets move on.

What people here are trying to say is that it is a misnomer to call prohibitions against violence, coercion, and fraud, "regulations." Those prohibitions are a matter of the most basic criminal law, and they've been a practically universal part of common law for centuries. Such laws hold precedent dating back several millenia across numerous vastly different civilizations, and they're as old as history, if not older. In contrast, "regulations" include any arbitrary statutory intervention imaginable, including the ones just now forming this morning at the edges of Henry Waxman's mind. Do you really think it's wise not to distinguish the two from each other, and to instead insist on lumping them into the same category under the term "regulations?" I sure as hell don't.

 

[AlexMerced]

Hi

I've been a long time supporter of Ron Paul and agree with him on most of his political points (especially concerning the FED), however talking from a strictly theoretical point of view, I see a problem with the unregulated free market. I'll try to make it as clear as possible here, just why that is:

I think we all agree that money is power, and I think we also agree that the purpose of a company/corporation is to generate a profit i.e. money. So by nature, successful corporations will (over time) accumulate great power. How can we then - as a people - feel safe, knowing that the corporations are the ones with the power?
How can we secure ourselves from their propaganda and even direct interference with politics (lobbyism for example)?
Isn't the free market flawed by design, when the wealth and power will eventually end up with corporations and not the people?

This is a question that has haunted me for quite some time, and I'd really appreciate some feedback on this.

Thanks a lot.

We always assume capital accumulation is perpetual, but as a particular corporation or family accumulates wealth from one generation to the next, the question becomes with the next generation have the same perspective.

Most far along the accumulation process tend to unwind as you get farther and father away from the beginning due to regime change (example: TrustFund babies blowing their whole wealth)

So like birth and death, one accumulates knowledge throughout life, but if eventually towards the ends leaves.

 

[Acala]

Good Point

We always assume capital accumulation is perpetual, but as a particular corporation or family accumulates wealth from one generation to the next, the question becomes with the next generation have the same perspective.

Most far along the accumulation process tend to unwind as you get farther and father away from the beginning due to regime change (example: TrustFund babies blowing their whole wealth)

So like birth and death, one accumulates knowledge throughout life, but if eventually towards the ends leaves.

This is a good point and yet ANOTHER problem with the corporate business form. The laws of nature being what they are, any particular individual's accumulation of property MUST change hands within a generation. Now the original accumulator MIGHT be able to keep his property concentrated in a single heir. And at least in theory THAT heir might choose a single heir. But each time the owner dies, the chance of keeping the accumulation together gets more remote. Venerable common law prevents a person from using his will to keep his estate together after he dies. It is called the rule against perpetuities and the purpose was to prevent any individual from keeping resources off the market beyond their lifetime.

Corporations, on the other hand, being fictional beings, are eternal. They can keep accumulating property forever, getting bigger and bigger, unrestrained by the laws of nature that tend to disperse and recirculate the wealth of mere mortals.

 

[AlexMerced]

This is a good point and yet ANOTHER problem with the corporate business form. The laws of nature being what they are, any particular individual's accumulation of property MUST change hands within a generation. Now the original accumulator MIGHT be able to keep his property concentrated in a single heir. And at least in theory THAT heir might choose a single heir. But each time the owner dies, the chance of keeping the accumulation together gets more remote. Venerable common law prevents a person from using his will to keep his estate together after he dies. It is called the rule against perpetuities and the purpose was to prevent any individual from keeping resources off the market beyond their lifetime.

Corporations, on the other hand, being fictional beings, are eternal. They can keep accumulating property forever, getting bigger and bigger, unrestrained by the laws of nature that tend to disperse and recirculate the wealth of mere mortals.

I think it's fine for an estate to accumulate, cause the next generation will only be able to consume so much, so the rest that's being saved is being put to production. If you force dilution of estates it create a production/consumption mismatch cause now more people are consuming but less production is going on since that estate has been diluted.

If they don't save it in a bank, then that money leave the money supply and the value of the money everyone else has increases. There is nothing wrong for people passing down their assets and wealth it's the reason why we don't have to re-invent the wheel every generation.

Although there is legitimate problems with C Coportations in particular which is ownership of Liability, no individual actually owns the liability, all the owners/shareholders have surrendered title to their liability to a fictitious entity. Which would be fine if the entity makes the decisions, but individuals make the decisions and with not stake in the liability moral hazard ensues.

This is why I think Limited Partnerships is the most ideal corporate structure since to make business decisions you must have title to liability. Only limited partners are able to relieve title to liability.

It's a bit more complicated... but that the basic idea.


That's not a problem with the free market but a problem with a monopoly on the legal system which government owns. If you had competing legal systems the amount of court cases that occur from overly complicated laws would bankrupts the legal system so only those that employ the basic neccessary laws would win out.