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Partially disagree. The original necessity of corporations was to distribute risk, not to remove it. There was the same total risk, but born across a wider numb
by lmkg 13y ago
Partially disagree. The original necessity of corporations was to distribute risk, not to remove it. There was the same total risk, but born across a wider number of people. The financial risk was unchanged, but the consequences were made less catastrophic. Equivalently, a corporation aggregates enough resources for the risk to become rational.
By contrast, one of the functions of modern corporations is that culpability does not pass-through to the decision-makers. This is an actual removal of risk, not re-distribution, as there are consequences that a corporation is not capable of facing.
- pash 13y agoI was thinking about this the other day. Just as with joint-stock ownership, legally limiting financial liability redistributes risk (by transferring it to creditors), but doesn't reduce it in net. Creditors tend to be established firms and bankrupt companies tend to be new, small enterprises, so it seems that limited liability promotes socially beneficial risk-taking by offloading bad outcomes on those who are best able to absorb them. ... "From each according to his ability, ..."