Cato Institute Publishes Leftist Screed!, Pars Undecima (11th)

J. H. Huebert and Walter Block have a second reply up. Shawn Wilbur has weighed in again with some helpful remarks on terminology, and Quasibill offers a hypothetical of relevance to the limited-liability debate. I’m going to try to get back into this over the weekend.

Incidentally, I’ve created a Conflation Debate blog category for easy reference.

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12 Responses to Cato Institute Publishes Leftist Screed!, Pars Undecima (11th)

  1. Mike December 12, 2008 at 10:35 pm #

    If nothing else, this debate has taught me quite a bit about the latin ordinal numbers.

  2. steven December 13, 2008 at 11:58 am #

    Regarding Quasibill’s hypothetical, does Quasibill (or Roderick) really think that many lenders or shareholders are that irrational? It doesn’t seem very likely to me.

  3. Sergio Méndez December 13, 2008 at 12:34 pm #

    This is the most puzzling, know noting incredible part of Heubert and Block answer.

    “The so-called “double standard” is easily resolved. Unions are the initiators of the violence; the violence employed by firms is in reaction against this prior use of violence. That is, it is false to say that “over the course of history employers and businesses have often employed aggressive violence against unions.” No, firms’ violence against unions was retaliatory. ”

    Is very hard to argue with people so ignorant or misguised about history of labor unions.

  4. quasibill December 13, 2008 at 4:14 pm #


    Well, since it is the argument Kinsella is using to deny the fact of shareholder involvement in the corporation, I’d say that Kinsella posits that level of irrationality.

    I personally think that in this market, yes, most shareholders are that irrational, but that in a market that did not have positive law corporations and limited liability shields there would be very few that would be that irrational.

  5. Robert Hutchinson December 13, 2008 at 4:35 pm #

    I took a few minutes to look through some of the latest posts and comments across a few sites, and . . . ugh. There’s enough arguing in bad faith to swim in at this point.

  6. Mike C. December 13, 2008 at 6:15 pm #

    I enjoyed quasibill’s hypothetical since I’m trying to develop my position on the issue of limited tort liability. However, I’m not sure if I took from it the lesson he intended. At first glance, it seems to me that investor A should not be liable. Granted he may have benefited from the injustice, but imagine there was one other bridge that didn’t get blown up, one other competitor that remained. Presumably investors in that company too benefited from so many competitors’ bridges blowing up, but would anyone argue they have liability? Functionally it’s hard to distinguish investor A’s role from that of a creditor. Since I have a hard time justifying liability for a creditor in this case, I can’t see my way to holding investor A responsible either. Even customers give money to a business — I can’t imagine anyone suggesting they should be liable for torts committed by individuals of the company.

    Now, one thing that does seem clear, is that investor B — the offender — should be liable for the tort even beyond his share of the company’s wealth. There should be no limited liability for him. His entire private wealth should be available to make the victims whole. But isn’t this the case even in today’s legal environment?

  7. Mike C. December 13, 2008 at 6:29 pm #

    One additional point: Though quasibill’s example doesn’t talk about an employee/employer relationship, some people’s claim that owners of a business should be liable for their employee’s actions seem to rest on some sort of assumed “ownership” of employees. This doesn’t seem to accurately define the relationship of employee and employer. Setting aside limited liability for shareholders, I’m not even sure I understand why the COMPANY’S assets should be on the hook to compensate tort victims.

    In any case, there probably shouldn’t be anyone who is automatically liability free — it should depend on the specifics of the case.

  8. quasibill December 13, 2008 at 7:15 pm #

    Mike C –

    While I agree with the general intuition that customers should not be in the chain of liability – what if Al Qaeda sold tents to raise money for their operations? Should customers of Al Qaeda, Inc. be *automatically* immune from the liability chain? Or should the judge/juror/arbitrator/whatever be able to assign some portion of the liability generated by AQ, Inc. to all those who recklessly/knowingly/intentionally contributed to it?

    And I chose the hypo to specifically come functionally close to being a creditor. I’ve used other hypos (giving keys to an obviously intoxicated driver, for example) to make the same point – merely calling yourself “merely a creditor” shouldn’t be some sort of magic incantation. You can and should be responsible for who you give your property to and under what conditions. The extent to which you are responsible (in other words, the standard of care imposed) will necessarily vary by culture, economic development, etc. But, as I argued to Stephan over two years ago, there should be no automatic immunity or liability based upon status. What matters is the care you take in acting (and yes, giving your money to another person is an action).

  9. quasibill December 13, 2008 at 7:34 pm #

    And just to be clear – I don’t think it’s crazy to find no liability in the hypo. I personally would find liability, but I don’t think it’s the only rational response. However, the point is to show that Kinsella’s full of it when he argues that mere shareholders could never be rationally found to be in the chain of causation.

    I personally want a society that doesn’t reward shirking and careless behavior. Your mileage may vary.

  10. Mike C. December 14, 2008 at 3:43 pm #

    *cross posted on quasibill’s blog*

    quasibill –

    Thanks for the response. I appreciate the discussion.

    1) It seems correct that in a libertarian society there should be no *automatic* immunity based on status. Kinsella suggests (but isn’t certain) that this is true even under current law — i.e. even shareholders can be liable for torts if they are determined to be causally responsible. Is your understanding of current law different? If there is an automatic limit of liability for shareholders regardless of their role in the tort, that would seem to be a clear case of state privilige — even if the practical implications aren’t significant.

    2) Similiarly, as you seem to agree, I would think there also should not be any *automatic* *liability* based on status. For this reason I’m skeptical about the validity of respondant superior. Just because someone is an employee of a company shouldn’t *automatcially* make the company, the managers, shareholders, or anyone else affiliated with the company liable for their torts.

    3) It seems to me that although there should be no universal exemptions from liability for creditors or minority shareholders, in most cases it wouldn’t be reasonable to find them liable. In the example you gave, I don’t understand why investor A should be liable for the torts. The actions of investor B occurred without investor A’s knowledge and it doesn’t appear there was any way he could have reasonably predicted investor B would take such actions. Since I have a hard time finding him a willing conspirator, or even a negligent enabler, I would think his share of the company’s assets would be protected.

  11. quasibill December 14, 2008 at 9:00 pm #

    Mike C,

    1)As I’ve demonstrated repeatedly to Kinsella (and this is why I’ve been fairly hostile towards him through this iteration – he’s either very stupid or arguing in bad faith since I have refuted most of his points in a previous dialogue), current law does *not* provide for liability if the shareholder is in the chain of liability. It does provide, with a *very* high burden, for liability if certain positive law rituals are not followed by the shareholder. Of course, if you disagree with me about liability in the hypo, the difference between the two categories might be less than important.

    2) I’m skeptical of respondeat superior, but as the mirror image of 1) – I don’t see the difference between it and my preferred law as a big deal. I personally have no problem with placing the burden on the principal to demonstrate that his agent was acting on an unforeseeable “frolic”.

    3)I see A as a negligent enabler. Absent his willfully ignorant investment, B would not have had the means to engage in his shenanigans. By exercising a modicum of due care, I think A could have avoided contributing to the damage suffered by other bridge owners. I don’t think A should fully liable (joint and several), but I don’t think he should be completely immune, either. He should probably get a percentage of the liability, for which he might have a contribution claim against B, who should be fully liable. Thus, I’m probably only suggesting a scenario where A’s liability is practically meaningful in the event B cannot cover the entirety of the liability.

  12. steven December 15, 2008 at 10:29 pm #

    Mike, under limited liability no part of A’s share of the company’s assets would be protected. Only A’s assets outside of the company would be protected, unless A was held to be personally negligent or culpable (at least this is how I understand limited liability). That’s why, Quasibill, I wondered whether many shareholders would be irrational enought to put $200,000 at risk like that. But, then, $200,000 is an awful lot to me.

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