>From: Wei Dai <weidai@eskimo.com>
>Subject: Re: Bugs in free markets.
>Date: Sun, 3 Sep 2000 17:32:44 -0700
>
>On Sun, Sep 03, 2000 at 05:27:09PM -0400, James Wetterau wrote:
> > Hal wrote:
> > ...
> > > Corporations are a matter of people getting together cooperatively to
> > > organize their efforts. How can it be evil for a group of people to
> > > voluntarily organize, and to offer jobs to others? Every aspect of
> > > the process, from the formation of the corporation, to the job offer,
> > > to the acceptance, is voluntary and agreed to by all concerned.
> > ...
>
>There must be opportunities in the world for making profits while doing
>evil. The corporation as a form of relatively efficient organization
>allows more of these opportunities to be accessed.
>
>A lot of evil contributed to big corporations seem to consist of
>situations where two parties voluntarily cooporate on some effort, but
>because one of the parties is in a significantly weaker bargaining
>position (because of market conditions, lack of information, or
>whatever), most of the benefit deriving from the effort goes to the other
>party (i.e. shareholders of the corporation). Is it evil to take
>advantage of other people, even though they would prefer that you did?
>
> > The only difference in the two instances could be that in the first
> > case the business might be a simple partnership, and in the second
> > case it was a corporation, having duly filed "articles of
> > incorporation" with the secretary of state of the state of
> > Massachusetts. And therefore in one case I can recover damages from
> > the business owners and in the other case I might not. This strikes
> > me as something which materially affects me to which I never agreed.
>
>That is true, but what is your proposed alternative? Do you seriously
>suggest eliminating liability limitation for corporations? What about
>the liability limitation represented by personal bankruptcies?
One way to deal with limited liability - other than by state fiat, which I
would claim is the real problem - is thru prior contract. Insurance could
also be a reasonably good buffer, but when you see $billion+ awards being
handed out by juries who are probably not anywhere nearly qualified to make
judgements in such cases, you realize that the legal system, and the
uncertainties it introduces due to the open-ended or ill-informed judgements
that it can produce, is a key element of the problem.
THE SOLUTION, then, would be to have a universal contract, specifying
methods by which disputes would be resolved. Subcontracts, such as one
involving limited liability, would then not be a problem, as they are now
because of the difficulty of contracting with each customer separately. So
long as a company was dealing with customers who had agreed to a generic
subcontract that specified, for example, that any company with ".ltd" in its
name had assumed some kind of limitation in its liability, which they could
investigate further if they chose, then they would have effectively limited
their liability just as with a state fiat corporation. Operations that
certified safety - Underwriters Laboratory, for example (UL) - could add
additional layers of security for all parties.
Bottom line: it is an invitation to corruption - and an inherent assault on
the public and their rights to compensation for losses caused by
irresponsible or criminal actions - to allow the state to create limitations
on liability by fiat, as is now the case. Market mechanisms to accomplish
the same ends would be limited and guided by the criteria of actual
profitability - for all parties.
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