Youth is an alien universe

Occupy Brisbane signage: Vaccines? And what are "chemtrails"? What about whales or nukes or live cattle exports? Must be getting old ...

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About Ken Parish

Ken Parish is a legal academic at Charles Darwin University, with research areas in public law (constitutional and administrative law) and teaching & learning theory and practice. He has been a legal academic for almost 12 years. Before that he ran a legal practice in Darwin for 15 years and was a Member of the NT Legislative Assembly for almost 4 years in he early 1990s.

60 thoughts on “Youth is an alien universe

  1. They lost a generation with no morning or afternoon tea.
    Dumb and getting dumber and you can’t blame a generation for wanting to scrap their HECS debt now. Might even be cause for a class action or is it really up to the ACCC to step in?

  2. obs

    I imagine that morning and afternoon tea would be among the more popular “interest groups”, possibly along with a couple of bongs somewhere out of cops’ smelling distance. That at least probably hasn’t changed …

  3. Which kinda goes to my reservations (which don’t seem to be widely shared on the progressive left) about signing up to a protest movement with such ill-defined goals; you get this kind of nonsense, and you end up in an endless round of No True Scotsman arguments.

  4. No doubt it’s possible that the sign is a “piss-take”. It’s in the nature of the blogosphere that that will be revealed before long if true.

    In the meantime it’s worth noting that the original “Occupy Wall Street” list of 8 demands is also weird though in a different way. Seven of them are US-specific, but the 8th is a little doozy:

    ELIMINATE “PERSONHOOD” LEGAL STATUS FOR CORPORATIONS. The film “The Corporation” has a great section on how corporations won “personhood status”. http://www.youtube.com/watch?v=8SuUzmqBewg . Fast-forward to 2:20. It’ll blow your mind. The 14th amendment was supposed to give equal rights to African Americans. It said you “can’t deprive a person of life, liberty or property without due process of law”. Corporation lawyers wanted corporations to have more power so they basically said “corporations are people.” Amazingly, between 1890 and 1910 there were 307 cases brought before the court under the 14th amendment. 288 of these brought by corporations and only 19 by African Americans. 600,000 people were killed to get rights for people and then judges applied those rights to capital and property while stripping them from people. It’s time to set this straight.

  5. So this is one person’s sign reflecting their concerns. You can’t define the Occup y movement by this one sign. Have you seen some of the crazy signs at Tea Party rallies in the US or the anti-carbon tax rallies here – nothing to do with the issues of the day but reflect some misguided personal concerns. So whwt?

    The Occupy movement is happening around the world so inevitably there will be a broad range of issues raised but the bottom line is that those at the bottom who feel disenfranchised are asking to be heard.

    Of course the economic situation in Australia is not yet as disastrous as elsewhere in the world. It doesn’t mean that people can’t feel that they are being left behind and their voice not heard. And when the world economy goes down the gurgler, as it will, Australia will feel the consequences.

    The fact that our economic situation is relatively sound is due to the stirling efforts of the world’s best Treasurer and the excellent Gillard minority government. Oh sorry I forgot, Gillard is hopeless and this is the worst, most incompetent government ever. So which is it as both can’t be right.

  6. I like the occupy movement, it achieves most of the aims of classical leftism in that it allows the justice system to transcend its usual discrimen of race and class. The justice system finally has a reliable method for distributing criminal records on the basis of stupidity.

    Bruce, I ♥ xkcd. xkcd:radiation should be included in the national curriculum.

    My personal favourite is the occasional appallingly ludicrously self-glorifying invocation of the ‘Arab Spring’. That really should be a crime, punishable by exile to Syria.

  7. Only the #OccupyBrisbane movement is concerned about flouride – the rest of us have good teeth.

    Perhaps the #Occupy movement has emboldened the 99% to say they are struggling as they participate in blogs. As an example the comments of Casual Slave following Adele Horin’s article

    http://www.theage.com.au/national/households-struggling-to-pay-bills-20111023-1memh.html

    By contrast last year a friend in a country town was asked to identify families in need of charity Christmas parcels. The comment her parents made was that there probably wasn’t a family in town doing it tougher, but pride is an effective silencer.

  8. What makes #8 a ‘doozy’ compared to the others, Ken? Seems to make sense to me, but I could be missing something. It mostly seems like a slightly broader expansion of point #3, the reversal of Citizen’s United, which declared corps to be people and thus to have the same rights (But somehow not responsibilities) of citizens.

  9. “What makes #8 a ‘doozy’ compared to the others, Ken? ”

    The corporate structure is one of the principal engines of the capitalist system and of growth and investment, and has been ever since Salomon’s case in 1897. Until that time corporations had to be established by legislation or royal charter in order to limit the potential liability of investors. If you didn’t have the legal fiction of corporate personality and the limited liability of shareholders it enables, anyone would be financially suicidal to invest in a business venture that they couldn’t control or even know what was going on.

    Thus charter companies like the British East India Company and (less positively) the South Sea Bubble Company formed the basis of British mercantilism through the 18th and 19th century. they gave investors limited liability protection on a piecemeal basis. However it wasn’t until Salomon’s case in 1897 that capital was “liberated” and the modern corporate structure in effect created, thereby enabling people to invest freely and flexibly without substantial risk that they would lose their entire life savings if the business went bust. In the absence of “corporate personality” an investor might be held personally liable without limit for the debts of a business in which he invests.

    There are some situations where courts will “lift the corporate veil” and make shareholders (and more commonly directors) personally liable for company debts, but they are fairly limited e.g. fraud. In general investors can be confident that they won’t be liable to creditors etc beyond the paid up value of their shares. If that situation didn’t exist (or some other similar system that significantly insulates passive investors from personal liability), capital markets and therefore the entire capitalist system would grind to a halt. That might be something the mung bean Socialist Alliance types would think was a great idea, but for the rest of us it looks rather different.

  10. Not to mention Ken that the teachers, uni lecturers, etc opposing greed benefit from that same protection in their super funds which seek to maximize returns. Ah it’s a funny old world isn’t it.

  11. Hello back. Thing thing that has me totally confusticated is that if this same action was being undertaken by One Nation, Pauline, and the CEC the comfortable left would be all condescending sneers and psychodynamic interpretations.

  12. Patrick: “Bruce, I ♥ xkcd. xkcd:radiation should be included in the national curriculum.”
    I’m a Physics teacher and that is in my curriculum! It made the scale of things so much more understandable for my students. I wonder how many years of students will remember Fukushima? Not that I will want another disaster as a refresher!

  13. Thank you for the explanation, it explains a lot for me. :) I don’t .think. what they mean by it is what you mean by it, so it may be a case of a phrase with an existing meaning being misused. But I could be wrong. But I can’t see how things would function without the base concepts you put forth.

    I am, however, strongly against the recent US swing towards corporations having the political speech rights of an actual person. Citizen’s United is the ultimate expression of it, but not the only one. To me it seems like a 7 point list with one listed twice, at least. But I am also not there, except in spirit. :)

    Fxh, if this exact action was taken by them, I would be there. But it wouldn’t be, because they are nuts and the things they want are racist and unpalatable. But if they had a movement like #ows and conducted themselves with the same peacefulness (Even directly in the face of violent police smackdowns), I would be in line to say that have a right to say it. My problem with the Tea Party rallies (The wingnut equivalent to #ows) to me was always the violence being espoused, down to the way they all came packing heat.

    All of their rhetoric was absolutely packed with violent imagery. It scared the hell out of me. I’m a transsexual lesbian. They actively want me not to exist. I don’t think you can draw a line between that world view and people who want a say in things and say it is unfair we criticized one and not the other. The #ows aren’t telling people they should resort to their ‘constitutional right’ to use ‘second amendment responses’ to fix the problem.

  14. Quite reasonable for people to be angry at super, as advised they have invested a portion of their earnings only to find that capital and returns are diminished due to improper behavior of those entrusted with investment. Nothing to do with Pauline or white shoes. Win or lose fund managers get paid.

  15. I wonder how many years of students will remember Fukushima?

    Yes, for how many years will people remember the horrible death toll and untold human suff….oh wait.

  16. Quite reasonable for people to be angry at super, as advised they have invested a portion of their earnings…

    No, a portion of their earnings was taken by force at the point of a gun and handed over to fund managers.

  17. … if this same action was being undertaken by One Nation, Pauline, and the CEC…

    Well duh! Everyone picks the most oddball whack job in a protest for the purpose of massive publicity, selling newspapers and discrediting any and all free expression of ideas. Sheesh, don’t you pay attention.

    When a bunch of protesters made a display of conspicuous fuel burning just to protest the Carbon Tax, the only thing the media reported was Alan Jones (who largely invited himself).

  18. Yobbo: “Yes, for how many years will people remember the horrible death toll and untold human suff….oh wait.”
    It might seem obvious to you, but ask a 16 year old about Chernobyl and see their response. You can’t even refer to events closer to home such as the Sydney Olympics without quizical looks coming back to you.
    Really, it’s a bit like the reponse of the historically illiterate to the GFC, as if the Great Depression had never happened.

  19. Leinad,
    those who do not study history are doomed to repeat it, and those who do study history are such a tiny handful they might as well give up and get dragged along with the rest *SIGH*.

    Ken,

    The corporate structure is one of the principal engines of the capitalist system and of growth and investment, and has been ever since Salomon’s case in 1897.

    Hmmm, that’s a bold and unsupported statement if ever I saw one. The corporate structure after the advent of limited liability was exactly the same structure before, just that the shareholders gradually got shunted to the back seat and replaced with directors (who are only agents of shareholders). If anything, the intimate relationship between action and consequence is the very essence of the capitalist system, and the very heart of why it works. Limited liability was a step in the wrong direction.

    Beyond that, small business, family business, independent contractors, full liability corporations, charter corporations, and temporary ventures have always been a major part of the engine of capitalism and they remain so to this day.

    If that situation didn’t exist … the entire capitalist system would grind to a halt.

    Piffle.

    The profit motive started in 1897? Prove it.

  20. Tel, are you sure that’s you?

    The primary impact of limited liability was a reduction in transaction costs. Pre-, investment was limited to those who either knew people well enough to be confident of exerting moral/social suasion, or who had enough to lose some, or who could demand security. Vice-versa for obtaining funding – ok for Bill Gates, not necessarily for everyone else.

    I.e. democratisation/popularisation of investing.

    Surely that is an unambiguous good largely along the lines set out by KP?

  21. Tel:

    those who do not study history are doomed to repeat it, and those who do study history are such a tiny handful they might as well give up and get dragged along with the rest

    And of those tiny handful that do study history many will view history through an ideological lens such that it appears to support their preconceptions (e.g. see your comment at 26).

  22. those who do not study history are doomed to repeat it, and those who do study history are such a tiny handful they might as well give up and get dragged along with the rest *SIGH*.

    …and those who study hyperbole are used to the same old breathy cod-Yeatsian bollocks.

  23. My comment at number 26 is literally correct. If you have evidence otherwise you are welcome to present it, but handwaving and claiming hyperbole does not count as evidence. Try not paying your tax and see what happens.

  24. Patrick, your claims of lower transaction costs and broader base from which to draw investment are a lot more reasonable than Ken’s outrageous, “the entire capitalist system would grind to a halt” and yet I’m the one who gets blamed for hyperbole just because I happen to have some understanding of how the tax system operates.

    That said, the benefit of larger investment volume is offset by the penalty of lower investment quality, and lack of responsibility. It is arguable which side of this is more significant, but “unambiguous good” implies you are only looking at one side alone. Although our current process provides for democratisation of investment base, it does not provide for democratisation of decision making to accompany that investment.

    This is only made worse by compulsory superannuation: the individual works a job, the employer selects a fund and is forced to take a fraction of the productive output of that worker and hand it to a fund manager. This fund manager is now two steps removed from the origin of the investment. The fund manager in turn pushes the funds into the stock market where it works its way into the hands of a company director who is three steps removed from the origin of the investment, and this is where the real decision gets made what to do with that money. It’s the “Agency Problem” cubed!

    To attempt to have a capitalist system without an accompanying concept of personal responsibility does not appear to be self consistent.

  25. Literally? We all have guns pointed at us?

    Seriously. Try refusing to pay your tax. If you don’t want to get too badly hurt, just start with something small like not paying rego on your motor vehicle, and be willing to admit you are wrong before the adventure gets too scary.

    You could skip ahead by doing a quick google search and reading the experiences of the people who have given this a go. Some of them manage to hang in there, it’s very enlightening stuff.

  26. My comment at number 26 is literally correct.

    The point isn’t whether you were literally correct or not. The point is that the fact that a democratically elected government enforces its tax legislation is a rather odd fact to focus in discussion about the failings of the market to provide stable and sustainable investment options.

  27. Tel, don’t be so bleedingly ignorant. From the Economist:


    The concept of limited liability, whereby the shareholders are not liable, in the last resort, for the debts of their company, can be traced back to the Romans. But it was rarely used, most often being granted only as a special favour to friends by those in power. Then in 1811 New York state brought in a general limited-liability law for manufacturing companies. Its popularity, and the flight of capital to states with limited liability from those without, led most American states to follow suit. In 1854, Britain, the world’s leading economic power, did so too.

    The Economist disapproved: if limited liability was desirable, we said, market forces would provide it. But by 1926 this paper had been converted, suggesting that the nameless inventor of the concept might earn “a place of honour with Watt, Stephenson and other pioneers of the industrial revolution” [my emphasis].

    Our second thoughts were right. Before limited liability, shareholders risked going bust, even into a debtors’ prison maybe, if their company did. Few would buy shares in a firm unless they knew its managers well and could monitor their activities, especially their borrowing, closely. Now, quite passive investors could afford to risk capital—but only what they chose—with entrepreneurs. This unlocked vast sums previously put in safe investments; it also freed new companies from the burden of fixed-interest debt. The way was open to finance the mounting capital needs of the new railways and factories that were to transform the world.

    There are hundreds of books that explain with reference to voluminous data how limited liability revolutionised capitalism. Ken’s POV is standard fare and well supported by the facts.

  28. Tel, how many large enterprises are not companies? The other big thing about the LL company is liquidity of investment, which is not achievable outside of companies and unit trusts, which are functionally the same thing.

    The better list is the daily activities. I walk past the brisbane dopes a few times each day, and active is the one thing they most certainly are not. At least it hasn’t started to smell yet.

  29. Tel I don’t think it is seriously arguable. I think your premise about investment quality is highly contentious; at the very best that premise is arguable.

    First there is all the reasons mel put forth from the Economist.

    But as to your premise how could a financing market functioning essentially on connections, privilege (of the Ancien Regime type) and social status (i.e. breeding) provide better quality investments??? Please provide one iota or shred of evidence, anecdotal and circumstantial are welcome.

    Finally, even accepting that arguable proposition as to investment quality, the access to investment is dichotomous (I know I mispelled that): the ‘little people’ either have the opportunity to invest or they don’t. I can’t fathom how even potentially crap investment is worse than none.

  30. Depsis, if you read #26 above carefully you will see that it is a reply to Rog at #24 who used the word “advised” implying that super contributions were voluntary and that people were merely misled. My point was that these people were forced, so the outcome was not voluntary.

    Mel, “revolutionised” doesn’t necessarily mean better, it just means different. Stalin revolutionised the food distribution system in the Ukraine, the results were better for some, worse for others.

    Few would buy shares in a firm unless they knew its managers well and could monitor their activities, especially their borrowing, closely.

    Scracious! How dreadful. What would the world come to if managers were monitored closely?

    This unlocked vast sums previously put in safe investments;

    I never doubted that larger sums were mobilised, nor that it facilitated riskier investments, but although modern capitalism has become synonymous with huge risks, huge gains and losses big enough to tear up the fabric of society itself, there’s no particular reason why all capitalism needs to be that way.

    The way was open to finance the mounting capital needs of the new railways and factories that were to transform the world.

    If a railway is profitable at all, then it will always get financed sooner or later, and there’s the possibility of reinvesting its own profits (growing a small business into a big business). So under a risk adverse investment culture it might take a little bit longer, so what? The same investment would go into something more predictable, which would grow other areas of the economy. Big deal. Hardly the end of the world.

    But as to your premise how could a financing market functioning essentially on connections, privilege (of the Ancien Regime type) and social status (i.e. breeding) provide better quality investments??

    That was never my premise, all it requires is that shareholders take their decision making role seriously, insisting that they remain well informed and demanding that they be able to veto any stupid ideas of the management. You are the one who seems to imply that only people of high social status are capable of doing this. If the result is more cautious behaviour (especially in the financial industry) then so be it. However, there will always be some elements of speculative risk takers in any society and no doubt some of those people will do very well.

    … the ‘little people’ either have the opportunity to invest or they don’t. I can’t fathom how even potentially crap investment is worse than none.

    How exactly does unlimited liability prevent anyone from investing?

    Pedro,

    How many large enterprises are not companies?

    Well governments are the obvious example, and in a democratic nation, all citizens are facing full unlimited liability for the actions of their government (and we can sit back and watch the US Social Security system as the lack of financial viability becomes self evident to all concerned). Governments are perhaps a bit special because they just change the rules when it suits them, I guess that’s one way to avoid a specific liability, but changing the rules does not actually pay the debt, it merely tosses the burden in whatever direction is politically convenient at the time. Someone always pays.

    Since government has become the primary large entity of the modern world which cannot use bankruptcy and liquidation as an easy way out, we are finding that more and more of the “buck stops here” roles are just being relegated to government. Somehow I don’t understand why people who advocate capitalism would by implication want to advocate a continuously expanding government.

    Besides that there are the churches, which tend to be extremely cautious with respect to loans, etc. although they do operate in an equivalent way to a business. God knows how much land the Catholic church owns, and He keeps that figure to Himself.

    Lloyd’s of London still has some elements of unlimited liability (although they are trying to get away from it), but this has provided a backstop for other private liability for a long time, and ultimately I suppose governments will end up taking that over.

    But anyhow, just because limited liability is attractive to the companies doesn’t imply that it is good for the system as a whole. It’s like any loophole, once one guy is using it, everyone else wants to use it too. Then they all use each other as justification.

  31. In trying to answer a lot of specific points, I’ve kind of spoiled any attempt to deliver a narrative of my own, but I’d like to present another perspective from a moral and ethical standpoint. Don’t worry I’m not going into any detail on legalistic nitpicking, nor do I expect everyone to have exactly the same ethical opinion. However, I’ll try my luck and claim that wherever you happen to want to stand on moral and ethical points, you would have to agree that there are some rights and responsibilities that intrinsically must apply to individuals. Taking this a small step further, it seems reasonable that whatever these rights and responsibilities might be, they should at least be consistent (or to put that the other way, it seems unreasonable to encourage a system of ethics that is inconsistent).

    So if we consider a particular man, and this man was to do something morally and ethically wrong (whatever that may be) there would be some consequence. But what if the same man formed a limited liability corporation, held one single share, worth one single dollar and then hired himself as an employee to undertake exactly the same action? As an employee he says, “just doing my job mate,” as a shareholder he says, “well I only have one dollar in the company, I’m willing to take that risk”. If you sue the company you might get the dollar, then the same man (wearing his employee hat) says, “Hey that dollar was owed to me in back wages, I’m as much a victim in this as anyone.”

    It’s a scam right? I mean, it’s an obvious scam.

    No one would stand for that crap.

    So what about two men? Is is less of a scam when two men do it? What about a hundred?

    I would think that a hundred men, working as a team, with the benefits of good leadership, structured organization and specialised skills should be able to easily outperform a hundred men working as individuals, without any team structure. So why give the additional advantage of a free pass on moral and ethical concerns?

    I’m upset enough that there are a surprising number of people willing to believe that such an inconsistency is acceptable, but I’m told that not only that it is acceptable, but that it is absolutely essential for capitalism to function at all. Now, I can sort of understand where this would be coming from if it was a socialist perspective (that is I can understand it, but I don’t agree with it). After all, socialists believe that the group is a special entity (bestowed with magical powers) and sacrificing the needs of the individual for the needs of the group is completely normal. From that perspective a socialist would always offer beneficial rights to a group entity, over and above what a bunch of disparate individuals would get. Individuals exist to serve the group and not the other way around.

    So why am I hearing socialist theology dressed up in capitalist language? The capitalist perspective should be the reverse surely? A corporation is nothing more than some number of individuals who happen to choose to work together in whatever way, for whatever reason. If this cooperation happens to be efficient and productive then well and good, but for consistency sake the legal and ethical rights and responsibilities should remain with each and every individual like always.

  32. Tel,

    Manage your own super fund. Take all your money out of limited liability corps and put it elsewhere. No one here gives a shit if you want to wind the rules back to the steam engine era and plunge us all into poverty. I mean, go join #OccupyOz if you like.

    “How exactly does unlimited liability prevent anyone from investing?”

    The link I gave you and about 100,000 others explain in tedious detail how much capital was mobilised subsequent to limited liability laws.

    Instead of simply farting on about how awful it all is why not read some of the vast and readily available literature that explains how capitalism flourished after limited liability was introduced. Also look for the counterarguments. Google is your friend. Come back to us when you’ve educated yourself.

    Meanwhile, I’m heading off to some #StopFluoride #BanCapitalism #WhoShotJR? workshops.

  33. “How exactly does unlimited liability prevent anyone from investing?”

    You’re kidding right? And where exactly is a fairness and equity in your astonishing proposal? So a billionaire with a tiny investment would be just as much at risk in a failure to someone with $100,000 in their super because what you are saying is that each person would have unlimited liability. You couldn’t quantify just how much risk you want to take in investment.

    And example of the damage you want to inflict would be what happened to the Lloyds “names” that were chased for all their net worth when the insurance pools had a claim much higher than the capital they placed at risk.

    What you’re suggesting is making our current system into one of Russian Roulette.

    Where the hell did you grab this idea from? Was it Bird?

    So if we consider a particular man, and this man was to do something morally and ethically wrong (whatever that may be) there would be some consequence. But what if the same man formed a limited liability corporation, held one single share, worth one single dollar and then hired himself as an employee to undertake exactly the same action? As an employee he says, “just doing my job mate,” as a shareholder he says, “well I only have one dollar in the company, I’m willing to take that risk”. If you sue the company you might get the dollar, then the same man (wearing his employee hat) says, “Hey that dollar was owed to me in back wages, I’m as much a victim in this as anyone.”

    It’s a scam right? I mean, it’s an obvious scam.

    No it’s not a scam because people fully appreciate the risks of doing business with a limited liability company. And not only are they aware of the risks, they are also perfectly prepared to take such risks eyes wide open.

    You’re unspeakable idea would create the scams as you simply wouldn’t know the risks.

  34. Tel, churches and governments are not good examples for the replacement of LL corps. None of them are investment vehicles for mass participation in profits. Anyway, why do you think the RCC has heaps of good land? Is it because they scammed it out of believers with false promises of eternal life?

    Also, people can manage the risk of dealing with an LLC, such as by getting directors guarantees or security bonds. It happens all the time.

  35. Tel, you’re still missing my point that the fact that super contribution is mandated by the government has little or nothing to do with why people are or ought to be upset over the loss of value of their super contribution (which is the main point of #24). Your comment at #26 appears to strongly imply you think the government is to blame for the wealth lost due to falls in super. It seems to me that you’re viewing history through the lens of fundamentalist libertarianism, and always seeing government action as the significant problem.

    it requires is that shareholders take their decision making role seriously, insisting that they remain well informed and demanding that they be able to veto any stupid ideas of the management. You are the one who seems to imply that only people of high social status are capable of doing this.

    I think it’s a bit naive to believe that working class people are going to have the time, knowledge and skills in order to be able to review the output and conduct of company managers to the extent they feel comfortable putting their home and life savings on the line for just a small increase in returns on their savings. It’s important to note this isn’t necessarily a rational assessment of risk, but rather an emotional discomfort with being at significant risk of things outside of one’s own control. When such irrational decisions are made economy wide it results in a large portion of the capital in society being stored and utilised in economically inefficient ways. Limited liability allows one to invest in a way where one has control over the potential loss, and it is (generally) in proportion to potential gain.

    Looking at things from the other side, when interacting with a company you’ll likely have no information about the wealth of those who own the company, only information about the company itself. So it makes no sense to depend on the potentially very limited amount of extra damages you might be able to hold the owners liable for when dealing with the company. Limiting the liability of the share owners doesn’t seem like it would significantly harm the ability to have confidence to do business with a company.

    In part I agree with you that there is a problem with the way the capital system handles risk. There’s a possibility for people to do greater harm than they’ll ever be able to pay for, and that creates adverse incentives to attempt to gain by putting others at risk. However, I’m not sure that limited liability is a significant cause of this problem, which would occur naturally regardless. Personally I think we need to look at putting personal liability on corporate directors and executives when the company lacks the capital to cover their liability. The shareholders are too far removed from having any control over the liability creating actions of the company’s employees, but arguably this liability should be transferred to the directors or executives as part of their responsibility to control the company rather than extinguished all together. (Wherever the executives/directors are acting under specific direction of a shareholder(s) or another employer then the liability should follow the chain of control).

    Oh and for what it’s worth, the fact that employers can be held vicariously liable for the actions of their employees in no way absolves the employee of liability of any wrong doing, so you might want to refine your example.

  36. It’s disappointing that so many people claiming to read widely, seem blissfully unaware of the many people who have questioned the person-hood of corporations, the corporatization of natural persons, and the gift of limited liability. Since I’m bringing the idea to the table, I guess I can’t complain about needing to also do other people’s research for them.

    http://www.lewrockwell.com/rozeff/rozeff28.html

    A real free market does not allow one person to damage another person with impunity. For this reason, there can be no limited liability in a free market, a conclusion already reached by both Bob Murphy and Frank van Dun and anticipated by Murray Rothbard’s conclusion that “A libertarian society would be a full-liability society where everyone is fully responsible for his actions and any harmful consequences they might cause.”

    But the approach is not something that the Libertarians weirdly cooked up for themselves, it’s merely a continuation of an old idea into the modern day. You could start by reading this guy:

    http://www.gutenberg.org/files/3300/3300-h/3300-h.htm

    The trade of a joint-stock company is always managed by a court of directors. This court, indeed, is frequently subject, in many respects, to the control of a general court of proprietors. But the greater part of these proprietors seldom pretend to understand any thing of the business of the company; and when the spirit of faction happens not to prevail among them, give themselves no trouble about it, but receive contentedly such halfyearly or yearly dividend as the directors think proper to make to them. This total exemption front trouble and front risk, beyond a limited sum, encourages many people to become adventurers in joint-stock companies, who would, upon no account, hazard their fortunes in any private copartnery. Such companies, therefore, commonly draw to themselves much greater stocks, than any private copartnery can boast of. The trading stock of the South Sea company at one time amounted to upwards of thirty-three millions eight hundred thousand pounds. The divided capital of the Bank of England amounts, at present, to ten millions seven hundred and eighty thousand pounds. The directors of such companies, however, being the managers rather of other people’s money than of their own, it cannot well be expected that they should watch over it with the same anxious vigilance with which the partners in a private copartnery frequently watch over their own. Like the stewards of a rich man, they are apt to consider attention to small matters as not for their master’s honour, and very easily give themselves a dispensation from having it. Negligence and profusion, therefore, must always prevail, more or less, in the management of the affairs of such a company. It is upon this account, that joint-stock companies for foreign trade have seldom been able to maintain the competition against private adventurers. They have, accordingly, very seldom succeeded without an exclusive privilege; and frequently have not succeeded with one. Without an exclusive privilege, they have commonly mismanaged the trade. With an exclusive privilege, they have both mismanaged and confined it.

    Nor is the concept limited to Libertarians either, for example Ha-Joon Chang recognises the dangers of limited liability, and concludes that more government regulation fixes everything.

    If you want to bring Graeme Bird into this discussion, I can only presume that stems from a logical chain of reasoning along the lines of:

    * You dislike Graeme Bird.

    * You dislike my ideas.

    * Therefore the things you dislike must all be equivalent to each other.

    I can understand that if you dislike the man, you probably don’t want to read anything he has to say, but IF you did take the trouble to do that, you would see that Bird consistently comes down in favour of limited liability, so you guys are on his side, or he is on your side. Whatever.

    I’ll try to get a moment to answer the example of the insurance company later.

  37. Right, with regards to insurance. I have seen advocates of limited liability arguing that it wouldn’t be a problem providing there’s an insurance policy — presumably a policy with another limited liability corporation, which in turn has reinsurance, with yet another limited liability.

    So we have people out there who will absolutely not accept that a turtle can swim through empty space. But when the turtle stands on another turtle, which in turn also stands on a bigger turtle, then empty space can support a very large weight indeed. I really blame the education system, or TV shows, or high sugar diets, or post-normal science, or all of the above.

    SCENARIO A: Joe “Lucky” Schmuck walks into a limited liability insurance company (since he is prepared to take such risks eyes wide open) and buys insurance, then sure enough disaster strikes and Joe thinks, “I’m so lucky, I bought insurance to cover this.” Turns out Joe bought from HIH insurance, and when he tries to claim on his policy he gets a lot less than he expected. Joe of course immediately demands his government do something and government becomes the last turtle in the chain (or rather, the taxpayers do).

    SCENARIO B: Joe “Lucky” Schmuck walks into an unlimited liability insurance company, and when disaster strikes Joe and the court system chase down the shareholders (who were prepared to take such risks eyes wide open) for the money.

    Note that the disaster happens either way, earthquakes are a bit like that, they don’t pay attention to liability contracts. One way or another, someone will pay. The risk does not go away, it merely moves around. So this is not a question “Should we have risk?” there’s no choice about that, this is a question “who should rightly pay?”

    The “A” scenario demands that an intimate knowledge exists across the supplier/client boundary, so Joe Schmuck needs to ask such questions as, “Can I please have a written statement of all your potential liabilities, and the assets backing those up, so I can calculate to my own satisfaction how deeply you are leveraged.” You can imagine asking that over the counter at your local insurance branch, they will reach for the security buzzer and have you dragged out.

    The “B” scenario demands intimate knowledge exists across the investor/executive boundary, which is exactly the right place for such intimate knowledge. Shareholders should be asking for clear statements about how deeply they are leveraged. Especially they should be asking about the implications of highly correlated risk — e.g. a chain of earthquakes running down the coast, or an earthquake that triggers a tsunami, that triggers a nuclear meltdown (that would never happen), or a bad flu that goes through a whole city and leaves maybe 20% of the people needing 6 months off to recover from fatigue.

    To expect every customer of every business to get full details of the equity position the business is sitting in, is just ridiculous.

  38. Regarding appetite for risk:

    I think it’s a bit naive to believe that working class people are going to have the time, knowledge and skills in order to be able to review the output and conduct of company managers to the extent they feel comfortable putting their home and life savings on the line for just a small increase in returns on their savings.

    Working class people engage in risky activity all the time. They tend to work the most dangerous jobs, they are more likely to be caught engaging in risky criminal activities, are more likely to take risky drugs and alcohol, are more likely to play poker machines or buy lottery tickets. Besides that, risky sports such as football, boxing, MMA, etc tend to be popular. They know they don’t have much to lose.

    I suspect that by pretending to get all carey feely over the working class, what you really mean is that the moderately well-to-do aging middle class are unlikely to feel comfortable engaging in risk. After all, these people have something to lose, but yet they represent such a tempting equity mine that it seems a crying shame not to take something off their hands.

    Well there’s lots of things such people could invest in… their own home for a start, and other land (very traditional investment, still popular today), they could also invest in precious metals, or even suitably written commodity contracts that have a well-defined liability limit. They could also invest in their kids (you know, education and stuff) or maybe contribute to charity (invest in their community if you like), or even put the money in a bank (an unlimited liability bank of course). The bank in turn would loan the money to corporations (unlimited liability corporations) and those corporate shareholders would be personally liable to pay that back.

    There’s a possibility for people to do greater harm than they’ll ever be able to pay for, and that creates adverse incentives to attempt to gain by putting others at risk. However, I’m not sure that limited liability is a significant cause of this problem, which would occur naturally regardless.

    Well I don’t support the death penalty, and I believe that bankruptcy should put someone into some years of economic hardship but better to keep that person at least in a position where then can work to pay off some of the debt, so no need to put them into too much physical hardship. From that point of view, there is always a “way out” of repayments. The point is that bankruptcy should be enough of a deterrent to discourage the sort of meltdown that the Western world is facing at the moment.

    Even if limited liability was available for every industry *EXCEPT* the financial industry, I’d be a bit happier. At least then we would have a genuine backstop.

    The system of “privatize the gains, socialize the losses” can temporarily work when on average you get mostly gains and hardly any losses. However, it can’t work in the big picture so there are only two self-consistent ideas: socialize both sides of the equation, or privatize both sides of the equation.

  39. Tel,

    SCENARIO A:…Joe of course immediately demands his government do something and government becomes the last turtle in the chain (or rather, the taxpayers do).

    That is by no means an inevitable consequence of limited liability. Limited liability is by no means a method of ‘socialising the losses’. It’s in fact the opposite, trying to restrict the losses to those closing involved in the conduct that resulted in the losses in the first place. Attempting to equate limited liability to ‘socialising the losses’ is a bit of a straw-man.

    SCENARIO B: Joe “Lucky” Schmuck walks into an unlimited liability insurance company, and when disaster strikes Joe and the court system chase down the shareholders (who were prepared to take such risks eyes wide open) for the money.

    You forgot then next stage. After chasing down the shareholders Joe realises that they are all like John “Fall Guy” Smith, whose only assets are the shares in the company. Joe gets nothing more than any value from the liquidated company and Jerry “Master” Rich sits back laughing with all his profits contractual extracted from John.

    There are always ways for the rich and powerful to avoid liability. Formalising limited liability simply makes it accessible to the masses.

    To expect every customer of every business to get full details of the equity position the business is sitting in, is just ridiculous.

    Then it’s even more ridiculous to expect every customer of every business to get full details of the equity position of every shareholder in the business. Do you actually try to get the equity position of every individual you ever interact with? At some stage you’ve just got to accept there is uncertainty in life; limited liability helps reduce overall uncertainty in the system by reducing the ripple effect of corporate bankruptcy.

    The point is that bankruptcy should be enough of a deterrent to discourage the sort of meltdown that the Western world is facing at the moment.

    Unlimited liability would actually make this sort of meltdown more likely. The problem at the moment is that no one quite knows what all their assets are worth and whether they’ll be able to pay off their debt (creating uncertainty about the value of the loans held by others). It’s bad enough given the values could drop to zero. If the some of the values could go seriously negative (due to unlimited liabilities for share investments) the problem of uncertainty would be all that much greater.

    Making bankruptcy a bigger disincentive won’t stop the problem, as you’ve pointed out there are plenty of working class people who would be willing take on significant risk and act as the fall guy. All it will do is put the best investment returns out of reach of the majority of people.

  40. That is by no means an inevitable consequence of limited liability. Limited liability is by no means a method of ‘socialising the losses’. It’s in fact the opposite, trying to restrict the losses to those closing involved in the conduct that resulted in the losses in the first place. Attempting to equate limited liability to ‘socialising the losses’ is a bit of a straw-man.

    Eggsactly. It’s more than likely you will see heavy intervention with unlimited liability than with LL. And how is it not socializing the losses when you could be up for everything you own and your net worth is smaller than another investor?

  41. Attempting to equate limited liability to ‘socialising the losses’ is a bit of a straw-man.

    When the Pyramid Building Society collapsed, every Victorian paid an extra 3c per liter fuel levy for 5 years. That’s no straw man.

    There are always ways for the rich and powerful to avoid liability. Formalising limited liability simply makes it accessible to the masses.

    If you are going to throw away justice altogether then I guess we go off into a different discussion, but I’ll point out that there’s a large number of people who actually like the idea of a system that is just (give or take a bit of confusion over what the word actually means), and not such a small number of people who would fight for that if push came to shove.

    The Kray twins used the “fall guy” technique with their long firm fraud, and the person whose name was on the paperwork would vanish without trace about the same time the police came knocking on the warehouse door. No one knows where those fall guys ended up (or at least, no one is saying)… and the Kray twins had a reputation for both extreme generosity and extreme brutality so I guess that was their way of motivating people, but would you take the job?

    Eventually their brutality caught up with them and they got busted. One point awarded to justice huh?

    Then it’s even more ridiculous to expect every customer of every business to get full details of the equity position of every shareholder in the business.

    You don’t have to, when you know that shareholders are at some risk of personal hardship. Normal humans (being made of flesh and blood) have an instinct to preserve their own flesh and blood, an instinct that synthetic creations do not have. Even if the defrauded person doesn’t get their money back they know that the people responsible will be discouraged from doing it again. Seriously though, none of economics makes sense if you start considering that people might be subject to mind control, or a spooky desire to act contrary to their own interests.

    And how is it not socializing the losses when you could be up for everything you own and your net worth is smaller than another investor?

    Errr, the taxpayer saves a buck?

  42. Tel clearly has to be considered correct unless proven otherwise. His detractors exhibit superstition and normalcy bias and not a great deal more. We ought just get on with it.

  43. “Fracking”

    Perhaps the haste at which the gas revolution is going on has caused a great deal of problems. But such problems aren’t inherent in the fracking action. They are probably due to the rules in place at the moment, and the desperate speed at which these methodologies are being hoisted into place.

  44. “Flouride” Flourene is a nerve poison and a known deadly toxin, without controversy. If they weren’t poisoning the population with it, and this is not the least bit in doubt that they are, they would need to be spent multi-millions of dollars to find some way to dispose of this hazardous substance safely.

    No matter what normalcy bias mental handicap you suffer under, you have to recognize the reality that the water is being poisoned. Don’t ask me why, this is an established scientific matter, and not some gig where we need to be able to read the minds of people who we don’t even know. Is anyone here a mindreader? I know I’m not. The fact is they are poisoning the water, which is an established scientific fact, and speculations as to who and why they are doing it, how they can get away with it, and all that other conspiracy-denial nonsense …. with this is just not relevant.

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