Asymmetrical Information

Limited liability is only an "interesting" libertarian question for harm to third parties; obviously contracts can secure limits on debt liability. Clearly lenders in the current market are willing to lend to corporations on such terms.

What's special about two or more people combining forces that enables them to limit responsibility for the harm their combined actions cause?

If their actions aren't very likely at all to cause major harm to a third party, it ought to be possible to buy some sort of general indemnity policy, and offer it to potential shareholders.

If their actions are somewhat likely to cause major harm, and they are unable to buy affordable insurance, that's a pretty clear signal that the market thinks what they're doing is pretty sketchy. Why shouldn't owners be liable for the negative consequences?

Cowen's "theory" is nonsensical. That's the counterargument. What is the problem with placing a monetary value on objects? That's exactly what markets do, and I don't hear libertarians argue against markets. What he's describing -- a society without consequences for actions -- is anarchy, not libertarianism.

Isn't limited liability a protection granted by the state? I've always thought that a strict anti-statist should be opposed to the corporate form in general, in that it absolves individuals of personal responsibility.

"If their actions aren't very likely at all to cause major harm to a third party, it ought to be possible to buy some sort of general indemnity policy, and offer it to potential shareholders."

That seems a better free market solution to this issue.

In a fully free market, I could hire my own police force and judges to go enforce whatever punishment I like on those who offend me.

"Isn't limited liability a protection granted by the state?"

No, liability itself is imposed by the state through its courts. A truly non-state solution would involve no liability at all except what you could get by private extortion.

But let's turn the question around: why should distant owners, or the corporation itself, be responsible for anything bad that happens at all? Why not simply impose 100% of the liability on that one guy (or group) who actually does something bad? Doesn't that make more sense than allowing one legal device (big organization must pay for action of one errant employee) but not allowing the second device (individual owner liable only up to the amount of his investment)?

1) Rights violators have opted out of the implicit contract of society. Rights are an emergent property of people in a private-property-based society. Consequently, there is no reasonable distinction between just and unjust acts towards rights aggressors as such, since justice and injustice presuppose this implicit contract.

2) Since basically everyone would be considered out of the contract and back in a state of nature if we considered even the least consequential and most unintentional rights aggression to be an opting-out, and the resulting chaos is what we formed society to escape in the first place, we have modified the implicit contract to include a way of dealing within the contract with minor instances of what would formerly have been complete violations of the contract.

3) So, while under the simplest form of the agreement, society need not worry about any considerations of justice when dealing with rights-violators, under the more complex version we have adopted liability and punishment as some of the more limited measures to discourage rights aggression. Compensatory liability also serves the social goal of restoring the situation, from the perspective of the violatee, to something more closely resembling the situation before the rights violation.

4) Of course, these practical considerations themselves do not constitute a "right" on behalf of the aggrieved. But neither do the practical considerations behind property rights. What causes property rights is our political situation. Liability is an amendment to the basic rights-based contract. It is a right because all members of the contract give up, on account of this promise, the right to seek vengeance personally against rights-aggressors who, having reverted to the state of nature, should no longer be protected by society.

Two very fast additional legalistic points:

What our gracious hostess is describing should not be called "strict liability," which refers to liability in the absence of negligence. If I run over your cat, you must prove I was driving in an unsafe or unreasonable manner. "Strict liability" would dispense with that requirement.

A corporation which is deliberately undercapitalized will not protect its investors. If you create a fake corporation with no assets (and which therefore cannot pay judgments agaisnt it), the court will "pierce the corporate veil" and come directly agaisnt the owners.

And a quick utilitarian point:

Big public companies generally have assets sufficient to pay almost any judgment against them. It is small business which benefits most from the corporate liability shield. Is it wise or just to make every small businessman stake his house and all his future income on the probity and intelligence of each of his employees?

"So let's say I steal your painting. Yes, you do deserve your painting back. It is yours. But say I steal your painting and lose it or wreck it. That should be the end of the story. You never owned the "value of that painting." You simply owned the physical painting. You are not due compensation. If you take my money as compensation for your loss, that is simply another theft."

This argument is its own counterproof. If value cannot be liquidated, then the money is valueless and taking it is not unfair.

To make the absurdity clearer, suppose that you and I each own 50 pounds of charcoal. I steal yours, thoroughly mix all the charcoal together, and burn 50 pounds of the mixture. How much charcoal do I justly owe you? According to Cowen's argument, nothing.

Daniel, you stole my point one hour earlier! Given Cowen's arguemnt you could steal paper money and destroy it and not have to pay it back since you don't own the value of money. Strictly speaking, you could electronically wire money into your account and not bother to pay it back since it wasn't a physical thing.

Anyway, to Rob's point that small corporations benefit the most. Being the sold shareholder of a corporation, I am under no delusion that my "corporate shield" will hold under the pressure of any legal scrutiny. When someone has over 50% ownership in a corporation, protection seems to evaporate. Perhaps that veil may not be pierced in a medium sized business.

"'Isn't limited liability a protection granted by the state?'

"No, liability itself is imposed by the state through its courts."

OK, but liability is considered something a minarchist could support in that it fixes personal responsibility, but it strikes me that limited liability is a form of rent-seeking that attempts to reduce personal responsibility.

�Is it wise or just to make every small businessman stake his house and all his future income on the probity and intelligence of each of his employees?�

Well, he just needs to take the responsibility to hire good employees and to state corporate policy clearly. Again, this seems like an attempt to buy a government-subsidized insurance policy. Why not turn to the private sector for such protection?

"So let's say I steal your painting. Yes, you do deserve your painting back. It is yours. But say I steal your painting and lose it or wreck it. That should be the end of the story. You never owned the 'value of that painting.' You simply owned the physical painting. You are not due compensation. If you take my money as compensation for your loss, that is simply another theft."

How would a murderer ever be brought to justice, then?

"Daniel, you stole my point one hour earlier! Given Cowen's arguemnt you could steal paper money and destroy it and not have to pay it back since you don't own the value of money. Strictly speaking, you could electronically wire money into your account and not bother to pay it back since it wasn't a physical thing."

The analogy seems bad to me for this reason:

Let's say I steal your painting. I then sell it for $1,000,000 and the new owner wrecks it. You have no claim to the $1,000,000? What is libertarian about that?

First off, I've never seen such an argument before, and certainly not by any real libertarian. I guess there may be a few super fringe types out there that buy it, but it's idiotic.

Consider the application not to theft, but say, rape. I rape someone. Then I assert my right not to be aggressed against in retaliation.

Yeah, right.

Anyway, this sort of thing is just one example of what happens when you try to reify "rights". In general, it can't be done. This particular one can be handled by the doctrine of forfeiture - rights are forfeit by an aggressor (of course that solution raises problems of its own, of defining "aggressor" and of proportionality).

Once you realize that "rights" are useful, but not a complete basis for a theory of justice, you're on your way to anarchism.

Steve,

If minarchists are concerned about personal responsiblity, why should anyone be allowed to sue a corporation when it was a person, not the corporation, that caused harm? (Assuming the employee who caused the harm wasn't doing exactly as he was told by the boss) Isn't forcing the company to effectively indemnify all of its employees nothing but a form of rent-seeking by plaintiffs who want a deep pocket? If a janitor is sloppy and someone slips and falls, why should the grocery store he works for pay the medical bills? Isn't that a government-subsidized insurance policy for the guy who slipped?

We have one semi-sensible rule expanding personal liability beyond its natural boundaries. This rule has a quite utilitarian justification: encouraging hiring good people, supervising them well, and making sure there is money somewhere for compensation.

Why not a second semi-sensible rule which curtails that expansion to a certain degree with a similar utilitarian justification: to encourage capital formation?

I fail to see how one rule is "libertarian" or "minarchist" but the other one is not.

Jayson: strictly as a matter of the formal doctrine, you should get limited liability so long as you are very careful about corporate formailties like board meetings, segregation of corporate funds from personal funds, paying taxes, etc. But of course courts can do what they like and it might not work out the way the formal doctrine says it should.

Jane, as a registered anarchist, let me also protest somewhat your friend's beef with limited liability.

Perhaps it is true that anarchocapitalism would evolve to the point where it only had strict liability. But that's not given by any sort of moral theory underlying anarchy; there is none. Without seeing some sort of argument for why strict liability would evolve in anarchy, the presumption must be that some corpuses of law would allow it, and others would not.

So, if you wanted to start Rape-the-land Corp, you'd contract with a protection agency which used a law corpus allowing you limited liability - so that you could pollute like crazy, violate rights left and right, then declare bankruptcy and get off scot-free. (This would certainly have problems I can think of, but perhaps they'd be outweighed by the ease of raising capital.) On the other hand, if you were like most entrepreneurs, intending for your company to last, you might go with strict liability, because getting loans would probably be easier.

Leonard,

It is quite common today for owners of companies seeking bank loans to offer a personal guarantee: I promise to use my personal assets to pay my company's debt if the company defaults. For smaller companies, especially if they haven't had a great year, that sort of thing is the norm.

No doubt in a non-limited-liability regime, the reverse would also be possible for strong companies: we the bank promise not to go after your personal assets if you default.

I'd also like to point out that even under the current legal regime, if you violate people's rights as a matter of open, systematic company policy, you the owner/manager can be personally sued without any limited liability worries. If someone openly solicits investments in an hitman business (and wouldn't we all love to read that prospectus), the shareholders as well as the board of directors, CEO, and field managers could easily be sued as well as charged with crimes.

Somebody, perhaps for polemical purposes, is misrepresenting Locke. Here is what the Master had to say on this subject:

Two Treatises of Government by John Locke (1689)

OF CIVIL GOVERNMENT. BOOK II. - CHAPTER II. Of the state of nature.

� 8.

And thus, in the state of nature, �one man comes by a power over another;� but yet no absolute or arbitrary power, to use a criminal, when he has got him in his hands, according to the passionate heats, or boundless extravagancy of his own will; but only to retribute to him, so far as calm reason and conscience dictate, what is proportionate to his transgression; which is so much as may serve for reparation and restraint: for these two are the only reasons, why one man may lawfully do harm to another, which is that we call punishment. ...

� 11.

... the magistrate, ... can often, where the public good demands not the execution of the law, remit the punishment of criminal offences by his own authority, but yet cannot remit the satisfaction due to any private man for the damage he has received. That, he who has suffered the damage has a right to demand in his own name, and he alone can remit: the damnified person has this power of appropriating to himself the goods or service of the offender, by right of self-preservation, ...

===============================

The right to form corporations, which are associations of men, is vital to the ability of men to govern themselves without recourse to the sovereign. De Tocqueville noticed, with approbation, the tendency of Americans to form associations to solve problems and carry out enterprises. To be effective and useful, associations must have certain powers at a minimum: including perpetual succession, the ability to own property, make contracts, and sue and be sued in courts of law. An association that has these powers is a juridical person, separate and apart from its members. Members who do not control the association, have no more liability for its actions than they do for the actions of any person not under their care custody and control. This is why there is limited liability for corporate shareholders.

"Isn't forcing the company to effectively indemnify all of its employees nothing but a form of rent-seeking by plaintiffs who want a deep pocket?"

The difference is that the deep pocket is private insurers, rather than the government simply absolving companies of their duties, by fiat as-it-were.

"I fail to see how one rule is 'libertarian' or 'minarchist' but the other one is not."

I think both rules are sensible, it's just that liability is a principle that can be upheld on the grounds of personal responsibility, a libertarian principle, whereas limiting liability is being justified on the grounds of economic results, which opens the door to all sorts of other interventions in the economy.

The difference is that the deep pocket is private insurers, rather than the government simply absolving companies of their duties, by fiat as-it-were.

The only reason companies have ANY financial obligation for liability is because of government fiat. From a strictly libertarian perspective, the only entity you should be able to recover damages from is the actual human being who actually committed the misdeed.

If Cletus McDrool, waste hauler for General Megatronics, dumps three tons of radioactive waste into the Colorado River and gives 4 million people bone cancer, the only person you get to sue is Cletus himself -- not the boss who told him to do it, not the vice president who set the policy, and certainly not the shareholders. None of them did anything wrong. After all, it isn't a violation of Fred's property rights for me to say "hey, why don't you go violate Fred's property rights", even if I follow that up by saying "or I won't pay you anymore" (my money is, after all, mine to spend as I please).

liability is a principle that can be upheld on the grounds of personal responsibility

Liability can only be upheld on personal responsibility grounds if you're talking about personal liability for personal actions. But the matter being discussed is that of people being held liable for the actions of others (e.g., employees). Personal responsibility has nothing to do with that. I can be the most responsible person in the world, but if my delivery driver is (unbeknownst to me) a raging crackhead I might still wind up on the receiving end of a lawsuit.

Steve, Dan (and, uh, Dan) have made my point. My first rule wasn't the rule of personal liability, it was the rule of corporate liability for individual actions. I don't think that rule can be justified by appeal to personal responsibility.

You can be highly responsible, hire only drivers with clean records, give them the best training, and test them regularly, firing people who fail the test, and if one of them causes an accident, you're liable. In what way does that promote personal responsibility?

Furthermore, limited liability doesn't absolve "companies" of their duties, it absolves shareholders of what arguably isn't their duty to begin with: to pay for the actions of others.

What Tyler has articulated is theft as a viable business plan. Consider: A steals B's painting and sells it to C. A no longer has the painting. Under Tyler's theory B's recourse is to recover the painting from C and neither B nor C have any recourse to A.

I think there is some confusion here because Jane's anarchocapitalist friend was making more of a minarchist argument.

"You can be highly responsible, hire only drivers with clean records, give them the best training, and test them regularly, firing people who fail the test, and if one of them causes an accident, you're liable. In what way does that promote personal responsibility?"

Exactly the way you put it. If you reduce liability, you also reduce the incentive to hire the best people, train them, etc.

"Furthermore, limited liability doesn't absolve "companies" of their duties, it absolves shareholders of what arguably isn't their duty to begin with: to pay for the actions of others."

I'm sketchy on the law, but here in Washington State the tiniest mom-and-pop privately held firms are declaring themselves LLCs. I am unclear as to what the implications of this are.

I note that both Jane and Rob were making appeals to capital formation as a rationale for limiting liability. This doesn't sound at all like the minarchist libertarianism I was taught. Conceivably if the economic benefit is great enough, an industry can push the government to reduce liability and then it all becomes a matter of who has the most influence in the appropriate legislature. Minarchists always prefer contract and courts as a way of preventing and resolving conflicts. Liability seems to be a way of making people responsible, and then the insurance industry does the dirty work of deciding who to insure and at what rates. This is why I describe it as a more free market solution.

I'll echo my post from MR (which is similar to brett's):

"Rights aggressors do not, in fact, lose their own rights in turn. Why should they? Evreyone in prison is there unjustly and yes that includes murderers."

Isn't that more like anarchy than libertarianism? I'm pretty sure that "rules of the game" still apply under libertarianism, including some inference of value in property crimes; I mean, although an exact price could not be put on the painting without a market, the value could be deduced to a certain degree of accuracy (what would the mint-condition have fetched on the market?). This scenario is completely different from competition, which may decrease the value of property through externalities. DELIBERATE DESTRUCTION is not an externality, just as theft is a direct violation of property rights while competition/innovation by other companies is exogenous of your direct property rights as a store owner.

If you reduce liability, you also reduce the incentive to hire the best people, train them, etc.

Um, Steve? That's a utilitarian argument. And if you allow utilitarian arguments for proposition A, you'll have to explain why they aren't allowed for proposition B.

I described a situation where the employer, by virtue of a carful hiring and training program, has no meaningful personal liability for some serious harm caused by an employee. Yet under the law, the employer is responsible even for acts commited by someone else that he could neither have predicted nor prevented.

I happen to think that's a good result, but not based on some libertarian principle, but based on the fact that incentives matter, and it is desirable to compensate victims of irresponsible conduct, even at the price of sometimes forcing an mostly innocent party to pay a totally innocent party.

So I'll state my question yet again: what is the argument from personal responsiblity that a corporation or its shareholders should be held liable for the acts of employees without any further showing that the corporation did something wrong? (If the corporation did something wrong, like knowingly hiring drunk drivers to make deliveries, that's different). And if the argument is "That rule gives good incentives," what is wrong with a legal rule that gives different good incentives?

As for mom-and-pop business becoming LLCs, remember that corporate limited liability doesn't protect the errant employee. If Mom and Pop do something that causes harm, the LLC can be sued for it, but they can also be sued persoanlly. The LLC will protect them only if they are personally innocent. (It also protects them from banks seeking to enforce debts, but the wise bank will insist on a personal guarantee in most cases anyway).

The LLC will protect them only if they are personally innocent.

...which is a good reason as any to form an LLC or even incorporate a small business that has any exposure to the public. Someone trips over a perfectly ordinary floormat in your storefront and decides to go for pain-and-suffering? Under a sole proprietorship or partnership equivalent, you and the business are one and the same -- if the judgement goes beyond the value of the business assets, your own assets are transparently subject to confiscation.

With an LLC or similar, at least there is a sneeze shield between you and the tort lawyers. It may not always be much, but it's better than nothing.

Also, depending on how you structure it, an LLC can survive the death of the proprietor or a partner without requiring that the business paperwork be reconstructed from the ground-up.

Tyler isn't really making that argument, hes just ribbing his blogmate. Its a funny argument though.

He's essentially saying there is no contract between you and another person, so there should be no enforcement of a contract. The key phrase is:

"Rights aggressors do not, in fact, lose their own rights in turn. Why should they?"

Markets work as a contract making mechanism between people that want to make a contract.

So can I start burning down all my competitors businessess?

Whether the whole thing is tongue in cheek and thus intentional or not I don't know, but where his arguement rides off the rails is where he refers to 'Lockean property rights theory' and then describes 'Lockean natural rights' or more specifically 'Locke's state of nature'. I don't know if if there is an official definition of 'libertarian' that says that whatever Locke says is the definition of libertarian, but the author of the quote certainly is not getting his Locke right, again intentionally or not I don't know.

"He's essentially saying there is no contract between you and another person, so there should be no enforcement of a contract."

That's why the argument is essentially anarchist, not libertarian. In a state (even a libertarian one) the acceptance of citizenship is an implicit agreement to follow the laws of the state, or else accept the punishment. This is where (in a utopia, of course) open borders and immigration is useful.

It is up to the voters (or so the theory goes) and the lawmakers how libertarian (restricted, but STILL EXISTENT) the laws will be, and protecting property rights through various measures definitely qualifies as libertarian.

this is quite sick

Pentagon: Iraq Insurgency Strong Into 2007

Non-interference with the lives of others is a more important value than capital formation in the libertarian worldview, and I think this is what Jane's friend is getting at. Isn't capital formation, economic growth and the like the common excuse for for all sorts of government meddling in the economy? Any corporate form owes it's existence to some sort of central authority--a plodding anarchocapitalist, or even a minarchist, is very likely to look askance at their very existence.

Steve, that's what, the fifth time you have changed the subject in exactly the same way to avoid the question? Of course non-interference in the lives of others is an important value, which is why you shouldn't get to sue me if someone else harms you.

Of course corporate limited liabilty is a creation of the state. But as I have pointed out over and over, any liability at all (other than that of the person who actually harms you) is equally a product of the state. We could easily have a legal regime where you could only sue the literal individual who causes you harm, not the company he works for or the owners thereof.

In some mythical state of libertarian utopia, there might be no corporations sheilding their owners from liability. But of course there would be no need, because there would also be no doctrine which permitted you to recover from anyone other that the person who actually caused you harm.

Wow, Tyler Cowen's little bit there is a scary piece of writing. You own the thing itself, but not its value. By that logic, you don't own the thing at all, since it's of null import to you.

And what, if I am owed the thing, but not its value, is the response against someone having taken the thing in the first place?

Strict liability would be wonderful in my eyes, but the way it's gone in the courts these days, you're not responsible for your own actions - from blowdrying your hair in the shower (gee, glad I read the warning sign first!) to smoking. It's emotional, but we're allowing that to trump logic in cases where people are hurt, which creates dangerous legal precedent. What to do, what to do?

By the way, I can more than accept limited liability, because you have the choice to deal with a company on those terms or not. If you accept their terms, you're accepting that they don't accept full responsibility - you're picking up the slack. That's worth it in some cases, not in others.

you have the choice to deal with a company on those terms

Not if the company hits you in one of its cars, you don't.

I completely disagree with both his points. I do not consider myself a pure "libertarian" as I rather think my views are classic liberalism eg founding fathers, not modern libertarianism, so I may not make the correct counter arguments, but I would argue thusly:

1. If someone steals your painting, he has stolen your property. If it is then destroyed, he has stolen and destroyed your property. Given that it was your property and he stole it, he owes you the value of it. The fact of whether it still exists is irrelevent. It would still exist if he had not stolen it and we do not have a society of laws unless this is recognized - anything else is anarchy. Otherwise if you kill me you cannot be charged for murder because the rights you have violated (mine) no longer exist because I no longer exist because you killed me. This may be seen as utilitarian isnstead of libertarian, but putting both of those aside, it is classical liberalism in the vein of Locke, Bastiat, Adam Smith, the founding fathers, etc.

2. Yes you do forfeit rights if you abuse anothers rights; again because we are a society of laws. The government exists to protect our rights which means it must punish and/or remove (eg imprison to keep away from others) those that violate these rights - how else can it protect our rights? Again, in the vein of the aforemention, government exists *only* to protect these rights (hence limited government, similar to libertarianism) and nothing else, and in protecting these rights it must provide equality before the law and a law which imprisons those who break it by violating the rights of others.

I wanted to respond to one other thing said here:

>None of them did anything wrong. After all, it isn't a violation of Fred's property rights for me to say "hey, why don't you go violate Fred's property rights", even if I follow that up by saying "or I won't pay you anymore" (my money is, after all, mine to spend as I please).

This is absurd. It would mean that I could hire a hit man to kill my husband because:
a) It is the hit man who does the killing
b) I can dispense of my money as I please
c) I simply said "do this or I won't pay you anymore," the same as the owner of a company who gave an order to an employee

In a rights-proected law-based society, we recognize liability is often shared beyond the person who directly commits an act. This is not un-libertarian or government meddling, it is simply rational and recognizes that more than one person can share responsability even if the act was committed indirectly. It doesn't let the hit man off the hook; obviously he was critical to the act, but as long as any person was willing to commit the act for money, my role would have been the same. So, though it takes willingness on the part of the hit man to commit murder for money; it would not require that specific hit man and clearly the offering of money for the act should be seen as some partial responsability at least in the commitment of the act.

Work from a principle of commutative equality in rights, and you can get rights forfeiture quite easily.

If A does X unto B, his action constitutes an in-practice declaration that B does not have the right to be immune from X. Since A's rights equal B's rights, A's action is a declaration that A does not have a right to be immune from X. Accordingly, a performance of X upon A is consistent with what A holds to be his own rights and his consent in terms of ethical practice.

No utilitarianism necessary.

Now, there are further problems; if B does X unto A as retaliation for A doing it unto B, what stops C from doing it unto B as well, now that B has forfeited his immunity to X by doing X? This is where you need to start developing full theories of justice, or dropping into utilitarianism.

He is absolutely kidding about this.

Sean,

In pure theoretical Libertarianism, there should be no state, only contracts between free people. Who can possibly enforce a contract that one party denies? Nobody, thats who.

Then his joke about the value - which Libertarianism doesn't recognize - and can't:

"It is for this reason that if you set up shop next to a competitor, you are not infringing his property rights, even if his business ends up being worth less"

Alex's response is why he is so smart.

Now before I jumped on, I don't believe any of this either.

>Now, there are further problems; if B does X unto A as retaliation for A doing it unto B, what stops C from doing it unto B as well, now that B has forfeited his immunity to X by doing X? This is where you need to start developing full theories of justice, or dropping into utilitarianism.

Not if you recognize the state as the enforcer of rights. That is why classic liberalism is more intelligent than puire libertarianism/anarchism.

Cowan's argument isn't any good.
Consider its premise, that it is not theft if we forceably take a particular object from someone who has it in his possesion and give it to someone who previously had it in his possession. What gives this idea its plausibility?
My guess is, you'll not do much better than "Returning the object to the person whose quiet possession has been disturbed repairs the wrong that has been done." When someone suffers a wrong that creates no correlative and corresponding gain for the wrongdoer, repairing the wrong is a little more difficult, but no different in principle.
Libertarians can take as their starting point any premise they please, but to insist on a categorical difference between return of property and compensation for loss because you can point to the same physical object throughout the former is just thick.
The argument proves too much because it undercuts the idea that property may properly be returned to its owner over a subsequent holder's objection. It demands too much because any

because any account that preserves the premise that property may be forceably returned will support compensation for wrongful loss as well.

The purpose for limited liability is to shield innocent stockholders from the fact that tort case law is focused on the comfort and convenience of tort lawyers.

Mick,

Yeah, I know he was pulling a "Tyrone", I just wanted to point out that "libertarianism" doesn't imply "no state"; that would be anarchism. Now, if he had said "anarchocapitalist" then yeah, it would have been pretty clever.

liberty --

Not quite. You still need either a theory of justice or a call to utilitarianism to justify the state -- wich, in the end, is just some of the people D-Z -- enforcing the rights.

Which then, one will find, moves inevitably into a discussion of ethics. (Yes, even utilitarianism -- because if you don't have a concept of what is good, how can you maximize it? Even the most basic weigh-pain-vs-pleasure utilitarianism faces the question as to why maximizing pleasure should be prefered to maximizing pain.)

Which then moves us on to a field where all the answers ever given boil down to "God said so" or "I prefer it this way". (Well, Objectivism claims a better answer, but I haven't been able to figure out how they get there, despite reading Peikoff's book on it. The is-to-ought isn't clear, to me at least.) Which leaves the entire structure in a pretty sad state.

Warmongering Lunatic,

I understand and respect what you are saying. My point is that if you start from a place of classic liberal, rather than anarchocapitalism or "pure" libertarian, you have all of those answers already.

Its true that the logic which gets you there must include ethics, a concept of law and justice and property along with rights of life, liberty and property, the correct way to defend those rights (eg a democratic state) etc. Its just that the classical liberals already worked through those questions.

As to Objectivism, if you have not yet read Rand herself, you certainly should, before confusing yourself with more Peikoff. I made the mistake of sending his book to a non-Objectivist who hadn't read Rand and it completely turned her off, she was left totally confused as to the point of the philosophy (although, of course, she was a a modern sort of liberal).

I found Atlas Shrugged, to be though long, well worth the read; it explains the philosophy very well. After that, you can read Rand's non-fiction essays to supplement if you want more of the philosophical treatise aspect.

"So let's say I steal your painting. Yes, you do deserve your painting back. It is yours. But say I steal your painting and lose it or wreck it. That should be the end of the story. You never owned the "value of that painting." You simply owned the physical painting. You are not due compensation."

That's not the libertarian view so far as I understand. TC is burning a straw man here. If I own a painting, I have a right to control it. By destroying the painting, TC is usurping that right when he destroys it. By doing so, he is estopped from protest if I engage in retaliatory force against him. And it's entirely libertarian for me to turn around and say "Hey, I could justifiably engage in violent retaliation against you, but if you pay me some money, I won't."

Of course TC wants to deny that I have any such entitlement according to libertarian theory:

"Rights aggressors do not, in fact, lose their own rights in turn. Why should they?"

Estoppel. See here. I'm surprised Cowen was unaware of this paper.

It's liability per se that isn't justified by libertarian standards. Under Lockean property rights theory, you own physical things, not the values of those things. It is for this reason that if you set up shop next to a competitor, you are not infringing his property rights, even if his business ends up being worth less. So let's say I steal your painting. Yes, you do deserve your painting back. It is yours. But say I steal your painting and lose it or wreck it. That should be the end of the story. You never owned the "value of that painting." You simply owned the physical painting. You are not due compensation. - Tyler Cowen

I’m not familiar with the details of “Lockean property rights theory”, having last encountered it – if at all - in a college philosophy class. However, if it’s consonant with Tyler Cowen’s argumentation in the above paragraph, it strikes me as a load of crap. How can you own something without owning the value of it?

If I own a toothbrush, I own the ability to brush my teeth, wherein lies the entire value of owning that toothbrush. If someone comes along and melts my toothbrush with a welder’s torch, they’ve rendered it valueless, and therefore owe me a replacement. Simply handing me back my melted toothbrush and telling me “sorry, you just own the thing, not the function you once valued it for” doesn’t cut it.

If I own a painting, I own the value of whatever enjoyment that painting brings me. But unlike my used toothbrush, which is (hopefully) worthless to anyone but me, the painting has a value beyond personal utility, since there may be others who would derive the same or greater enjoyment from owning it. In other words, it has a market value. That market value may fluctuate over time, but at any given time I own whatever that market value happens to be, since that’s the sum of money (or other property) that I can exchange it for. If someone vandalizes my painting, he owes me however much the appraised value has decreased because of his actions. If he does this at a time when works by the artist in question are selling at record values, and the appraised value of my painting has decreased by $10 million because of his actions, then that is exactly what he owes me, since that is the amount of current value I’ve lost because of him. If he does it a year later when the art market has crashed, or the artist in question is suddenly considered passé, and the appraised value of my painting only decreased by $1 million because of him (because the undamaged painting wasn't worth nearly what it used to be), then that is what he owes me. In any case, simply returning a ruined piece of art and telling me “sorry, you only ever owned the thing, not the value placed on it by yourself and others” isn’t going to cut it.

If I own a shop, I own the income stream which derives from it, as well as it’s underlying breakup value, and perhaps the retail space it occupies as well. Like the painting, my shop has a market value, and the same reasoning applies regarding liability in the cases of vandalism or theft. Also like the painting, the value of my shop can fluctuate over time, for many reasons. Maybe a large number of my customers have died in a horrible plague. Maybe the demand for my buggy whips has dried up. Maybe, as in Cowen’s example, a competitor has moved next door, and people generally consider his goods to be a better value. In each of these cases, I’ve lost customers, but neither my former customers nor my new competitor has infringed on my property rights, and it has nothing to do with the specious notion that I only own my shop rather than it’s value. I certainly do own the value of my shop, however such ownership does not include indemnification against that value changing because the nature of the market I operate in has changed.

Here's an interesting quote from the paper that James referenced:

"The non-equivalence of most violent crimes makes this conclusion clearer. Suppose that A, a man, rapes B, a woman. B would be entitled at least to rape A back, or to have A raped by a professional, private punishing company."

"strict liability--i.e., getting rid of limited liability for shareholders of corporations and so forth .."

That's pretty funny. Actually, shareholders are ALREADY strictly liable for everything "their" corporation does ... up to the shareholder's ratable portion of the corporation's assets!

Why shouldn't a plaintiff have to show that a particular shareholder was at "fault" before collecting from the shareholder? Why should a shareholder be held liable (up to that ratable share) for decisions and acts of a corporate board or office for which the shareholder may not have voted and of whom the shareholder may not approve? If the limited liability of a shareholder is to be lifted, wouldn't it follow that shareholders should have to be shown to be personally responsible in some fashion ... beyond just owning stock? Why not make creditors strictly liable, too?

By the way, the Easterbrook & Fischel papers and others have considered the consequences of relaxing limited liability on capital formation, and the main result might be transfer of risk to the insurance market ... with higher costs, of course. But nobody knows, least of all libertarians.

A fascinating discussion. I get the impression that someone here is tugging on my leg, but I can't quite say who. Still, the underlying 'what is a libertarian' question is well worth more discussion.

I find particularly interesting the idea that there is a "pure libertarianism" (am I safe in assuming that such ideological purity is in the eye of the beholder?) and note that some here draw a distinction between libertarians and anarchists, while I've always thought that there was a continuum between classic liberals who believe in a constitutionally limited government, and far-out anarchists who would seem to believe only in the law of the jungle.

More to the point, how does Cowen's argument answer the case of vandalism? If I trash his house should I expect to be able to sit on his couch amid the carnage sipping one of his green-bottle beers and greet him when he gets home because the damage is done, "end of the story"?

Somehow that doesn't seem to fit anywhere on the libertarian continuum I'm familiar with. A classic liberal would say that I've damaged his property and he's well within his rights to call on the legitimate force of government to deal with me. On the other end of the continuum, I suspect that a lot of serious anarchists would advise me to run like hell. Being more of a minarchist myself I'd advise him to kick my ass first and then call the cops, a happy ending in my book.

Okay, enough philosophizin', I'm not very good at it and it hurts my head. As Jane well knows I mostly hang around here because I'm a perv. (Sadly unrequited I assure you!)

Sean,

That joking thing that I had to repeat twice wasn't for you, there just seems to be lots of people here who take EVERTHING literally.

I don't think Libertariansm implies no State, but many Libertarians think that somehow we would be better with no state, and ignore that somehow, we have to enforce contracts that one party denies, place values on things that no longer exist, and take things from people who don't want to give them up, all of which require either a State or a huge individual security apparatus. The State is the lower cost solution.

So let's say I steal your painting. Yes, you do deserve your painting back. It is yours. But say I steal your painting and lose it or wreck it. That should be the end of the story. You never owned the "value of that painting." You simply owned the physical painting. You are not due compensation. If you take my money as compensation for your loss, that is simply another theft.

Rubbish Tyler. Rubbish Jane if you agree with Tyler.

Apologies to anyone who mentioned this earlier in the blog-thread, but the whole concept of responsibility is not being addressed. If you steal my painting, I want it back. And I deserve it from whomever stole it from me. The "thief" is responsible for me losing my painting. If the "thief" then loses the painting or destroys it, then the "thief" is responsible for replacing the painting (or if it can not be replaced, giving me full financial value for what I lost.) And why? Because the painting would not be lost or "wrecked" if I was still in possesion of it. The fact that the "thief" stole the painting in the first place, set into motion a series of events that ultimately make the "thief" financially responsible for this painting.

This is a no-brainer Jane. Tyler Cowen is an idiot.

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