“But absence of correlation implies an absence of causation.”

Let’s take as an example the hypothesis that syphillis is spread primarily or entirely by sexual contact. The rate of syphillis infection in Europe in the 1890’s was higher than in the 1970’s. Was the rate of sexual contact then higher? No, it seems it was probably considerably lower. By your reasoning, then, the lack of correlation implies a lack of causation and sexual contact cannot be the primary cause of the spread of syphillis. Of course, that is false. The reason is because you have not isolated the variable. In the intervening decades, treatments emerged that are effective against syphillis in its early stages. Neither absence nor presence of correlation means anything if the variable has not been isolated, and saying “lifespans have increased since the limited liability corporation came into being, therefore said corporation cannot cause significant hazards” is an extreme cause of failure to isolate variables.

Unless you’re positing a nuclear war scenario, I don’t see how people being less risk-averse automatically transforms the ecology of the country.

A corporation is a sort of legal gerund, an activity that is treated as an entity. All I have argued is that the rights that accrue to human beings – human rights – do not necessarily apply to corporations, which you do not seem to actually dispute, but you have spent a lot of energy arguing with, apparently under the impression that I want to abolish limited liability, though I expressly stated this was not so. If you think no one argues that human rights apply to corporations, you should drop by the US and hang out with some of the Libertarians. Popular bumper sticker: Corporations Are People Too.

“I am arguing that since human lifespans have risen since the introduction of limited liability then limited liability is not causing an increase in really serious hazards”

which is an argument you only make if a) really serious hazards are limited to those that would prevent increase of lifespan and b) that there are no countervailing factors at work during the historical period of interest. You have merely asserted, not argued, these points.

“Okay, what measure of human welfare do you think captures all the negative corporate effects one should worry about?”

I don’t need one, because I never said or implied that any single factor could suffice for such a measurement, or even that the problem was tractable. You did, so you have the burden of proof.

If you split a corporation into bits, you are left with individuals that function cognitively as individuals, not as a corporation. If you split the brain into neurons, you are left with neurons that, in an appropriate environment, could continue to function as neurons, not as a brain. Yes, you have moved around, and pig neurons can be placed in the brains of epileptics, but the component is not the emergent phenomenon.

An estate is not treated by the law as having plans, however, which is what business plans are.

If you don’t dispute that corporations should be on a different footing with regards to rights than individuals, then you have been arguing with me pointlessly, as that is what I have been arguing. Indeed, in my first post in this thread, I said:

“If it is economically useful to limit the liability, i.e., the responsibility, of people when they act as corporations, there may be good reasons to limit their rights when they so act as well.”

It is commonplace, however, at least in the US, and I would be surprised if this is not also true in NZ, to argue that rights such as free speech should apply to corporations under the same rationale as they do to individuals. What I am saying that is not necessarily the case; it may be so, but it is not necessarily. As for distinctions in rights between individuals, those are against the principles of liberal society. Abortion laws in most Western countries are, as you say, a violation of this, and there are others, such as the limited rights of children and other incompetents, and that is a whole other discussion, but such differences are not the general principle on which our society rests. If we accept liberal democracy, we attempt to minimize such differences.

“I’m not analysing gambling as it behaves outside the law. To the best of my knowledge the Christchurch casino I visited and the Monte Carlo casino are entirely legal by the rules of their own countries.”

OK, strictly speaking, I did say in gambling all risks are known, but if you actually do not know the law, then you do not know your risks. Thtat’ just your own lack of due dilligence. I suppose if I wanted to be really technical, I could have said all risks within the law could be known. However, you yourself defined special pleading as “A special pleading fallacy is where a person applies one set of standards, rules, etc, to one set of people, while applying a different to another without providing adequate justification for the difference”. Analysing gambling outside the law and limited liability within it certainly qualifies, save in the sense that neither are “people”, but that is merely an artifact of how you stated the fallacy, not something intrinsic to it. Although nothing important hinges on this point anyway, so it is probably not worth pursuing further.

“Then how come the rest of America isn’t a desert? If people are risk-loving across the whole of their incomes, then they should be at Las Vegas, gambling away their money, not spending long hours say training to be a mechanic, or waiting tables, or fixing people’s teeth.”

You stated without qualification that people tend to be risk-averse. Now, you want to insert qualifications. In any case, training for jobs, etc. also involves risk, there is little in life that does not, so people reasonably mix risk-averse and risk-seeking behaviors. But I am not the one who made a categorical statement on this point, you are. You said; “Experience however is that most people are risk-averse”. While you did not say “all people”, you did not qualify “risk-averse”, so you have to argue that they are not risk-seeking across any part of their income. I do not need to argue the reverse, because I did not make the categorical statement.

Okay, then if a company commits a crime, put its deeds of incorporation in a prison cell. After all, the law treats corporations as having minds, so that’ll really deter companies from committing crimes.

Actually, the things you list don’t require having minds, simply the right to hold property. For example, the estate of someone who is dead can still hold property such as intellectual property or houses or the like. An estate can last for a long time if the person left their money to minor children. Estates can be sued. But the person whose property it is is dead, which is about as far from having a mind as is possible.

Although one could say that the “corporate mind” is but an emergent property of the structure, and that all that is really happening is human cognition, one could also say that human cognition is merely an emergent phenomenon of electrical and chemical interactions

Indeed. A large difference though is that if you split a company into bits, the people in each individual company will continue thinking and acting like normal human beings. If you split someone’s brains into bits, at best you’ll wind up with someone badly brain-damaged. I’ve worked for a variety of companies over my life, and have moved in and out of them with a continuity of character, but I’ve only had one brain and it goes with me everywhere.

As for lack of correlation disproving causation, you’re assuming 1) that human lifespan is a reasonable measure of all negative corporate effects one should worry about. That is a categorical claim that needs to be proved, not merely assumed.

Okay, what measure of human welfare do you think captures all the negative corporate effects one should worry about?

2) that there are no other explanations for the increase of lifespan, or at any rate its lack of decrease, that are not attributable to limited liability.

No I don’t need to argue this. There may indeed be many other explanations for the increase of lifespan that are not attributable to limited liability. I am not arguing that limited liability has caused the decrease in lifespans, I am arguing that since human lifespans have risen since the introduction of limited liability then limited liability is not causing an increase in really serious hazards. I hardly need to provide an analysis of the full causes of the rise in human lifespans to disprove your contention that limited liability creates a bias to the invention of such hazards.

Sorry Martin, but if you want to convince me that limited liability creates a bias to the invention of hazards then you’re going to have to do some work.

It is special pleading to analyze investing only as it behaves under the law, and gambling as it may behave outside the law.

I’m not analysing gambling as it behaves outside the law. To the best of my knowledge the Christchurch casino I visited and the Monte Carlo casino are entirely legal by the rules of their own countries. So I’m not committing “special pleading”. Though even if I had analysed investment within the law and gambling outside I still wouldn’t be committing special pleading. Can you please only accuse me of logical fallacies I’ve actually committed?

I am arguing that given limited liability, a corporation’s claim to rights under the law can also legitimately be limited relative to a person whose liability is not limited.

I don’t know of anyone disputes this. For example, no one I know advocates giving corporations a right to vote in elections (the Internet being the Internet, there is presumably someone out there who does, but then there are people out there who argue that one doesn’t need food to live). Indeed, all sorts of natural person’s rights are varied depending on various factors. For example, under NZ law if I get pregnant I can decide whether or not to have an abortion, but the man who got me pregnant does not have such a decision (this rule seems the most workable to me, but it does create a difference in rights between men and women). The debate is over the specifics – what rights do you think should be limited, and what will this do to government power and what will it do to society?

And Martin, in your final point – I think you are drawing a distinction without a difference. If a company or a person has enough money to pay the tort claim then you get fully compensated. If the company or the person doesn’t, then you don’t. If the inability to pay becomes a real problem the government steps in and regulates purchase of insurance or bonds or whatever. I don’t see what bothers you about this situation – there of course may be some cases where you think the government should oblige everyone to take out insurance but it doesn’t, but that’s a far smaller problem than a general one about limited liability.

For the third time, I am not arguing against limited liability, as your examples of attempting to distribute full liability among stockholders or taxpayers imply. I am arguing that given limited liability, a corporation’s claim to rights under the law can also legitimately be limited relative to a person whose liability is not limited.

As for lack of correlation disproving causation, you’re assuming 1) that human lifespan is a reasonable measure of all negative corporate effects one should worry about. That is a categorical claim that needs to be proved, not merely assumed. 2) that there are no other explanations for the increase of lifespan, or at any rate its lack of decrease, that are not attributable to limited liability. These are both absurdly broad claims. But if you want to make them, you have to go through and eliminate all other possibilities. Have fun.

It is special pleading to analyze investing only as it behaves under the law, and gambling as it may behave outside the law. In arguing the nature of the corporation, you are intrinsically arguing within the law, as, although corporations may break the law, the law is a necessary condition of their existence, and the penalties of which you speak are limited to legal remedies. If we’re going to go outside the law, we should also talk about the possibility of people personally targeting major stockholders. When you argue limited liability, you are assuming law is effective, and if you don’t assume the same for gambling, you are indeed applying “one set of standards, rules, etc, to one set of people, while applying a different to another without providing adequate justification for the difference”

The real difference between individual and corporate comes in how the liability is determined. For the individual, it is by the tort; for the corporate investor, the size of the investment. This is a real difference in that one is a function of the harm done, and the other is not. You don’t just get more money if the person who hit you is richer, not in any country I know; what you get is determined by the damage. Beyond that, there is the limit in both cases of ability to pay, although for the investor, that is actually the limit of the aggregate risked for all players, whereas for the individual, it is actually some legal determination of ability. This is a very real difference.

Corporations don’t care about penalties. I own my own company, it has never said anything to me about its preferences. This is because, as you pointed out, companies are imaginary.

However, the shareholders of the company, directors and employees do care (the shareholders and directors in this particular case consisting of me, with zero employees). So I can be sued, and directors have been sent to jail in NZ for mismanaging companies. This is unlikely in my case as the authorities would have to prosecute me for defrauding myself, so they are unlikely to bother, but the principle remains.

If a shareholder or a director murders or rapes or otherwise commits a criminal assault against someone they legally may be sent to jail, just like an employee or a student or a pensioner, or anyone else (leaving aside the financial ability to hire good lawyers which of course varies from natural person to natural person as it does from company to company). Since a company is a legal fiction, it does not have desires and thus cannot commit murder or rape, which require intent to commit the crime (I am speaking here of NZ law). Instead an individual person, or group, has the intent, and even if they use company property and money to do so they are still guilty of murder as natural persons. (Leaving aside insanity pleas, etc).

For civil cases, a company is liable financially and so are individuals. If your car is totalled by an individual, the amount of compensation you may get varies depending on how rich the person who totalled your car is, and the same is true for companies. For those cases where a partner wants confidence that the money is available, contracts may require liability insurance, bonds, etc. An individual facing a large legal claim may reduce their assets by devices such as transfers to family members and trusted friends, hiding, etc. See the legal devices rich people in medieval England used with the intent of stopping their heirs being declared wards of the state if the rich person died during their child’s minority.

The problems with holding companies legally accountable comes with cases of crimes like manslaughter – which is something that may mean someone is sent to jail but does not require the intent that murder does. I an not a lawyer, but understand the current situation is that the Health and Safety in Employment Act 1992 allows prosecution against individual managers, directors and agents if they’re specifically guilty (this isn’t called manslaughter). I am not sure how you could impose prison penalties on a company as a whole – send each shareholder to jail for their proportion of the business? What happens if a state-owned company is guilty of manslaughter? Everyone in the country has to turn themselves into jail for their lunchhour one day?

But the general principle is there – a country can punish the human beings who made the decisions.

Are you sure that your online stock brokerage is not going to simply empty your bank account? This is special pleading.

No it isn’t. You stated that the risks in gambling are known ahead of time. I pointed out they aren’t. Even a casino that made the rules and brought the machines found out it didn’t know the risks it was running.

A special pleading fallacy is where a person applies one set of standards, rules, etc, to one set of people, while applying a different to another without providing adequate justification for the difference. An example is:
“Barbara accepts that all murderers should be punished for their crimes.
Although she murdered Bill, Barbara claims she is an exception because she really would not like going to prison.
Therefore, the standard of punishing murderers should not be applied to her.” (http://www.nizkor.org/features/fallacies/special-pleading.html)

If I had argued that biased roulette tables counted as a risk of unknown size, but the risk of fraud by your online stock brokerage doesn’t count as a risk of unknown size (and had failed to provide sufficient justifcation for treating them differently), I would have been guilty of special pleading. Pointing out that gambling is like investing in that the risks are unknown is the opposite of the special pleading fallacy.

“Experience however is that most people are risk-averse”

Really? How on Earth is Vegas not still a mere desert? Any form of gambling with a “house” is a losing risk. People don’t seem particularly adverse.

Then how come the rest of America isn’t a desert? If people are risk-loving across the whole of their incomes, then they should be at Las Vegas, gambling away their money, not spending long hours say training to be a mechanic, or waiting tables, or fixing people’s teeth. Gambling only makes up a small percentage of the economy – there are compulsive gamblers, but most people restrict their gambling in some ways.

Correlation is not causation. That’s pretty basic.

Yep, I know that. But absence of correlation implies an absence of causation. For example, I think the final proof that mercury in vaccines isn’t causing autism is that mercury has been removed from vaccines in the US but there’s been no drop in autism diagnoses as the relevant age groups have reached the years in which autism is commonly diagnosed. There’s no sign of a correlation between the invention of limited liability and a decline in human lifespans so that counts as evidence that limited liability is not creating significant risks.

The rule is “correlation does not prove causation”, not “absence of correlation does not prove absence of causation”.

Thanks for the information about the US government. (And of course, the NZ government can always pass a law retrospectively clearing itself of liability).

Are you sure that your online stock brokerage is not going to simply empty your bank account? This is special pleading. There are always risks external to the presumed nature of the transaction; you don’t factor those in unless you have a specific reason to do so. And, in any case, you can be aware of the danger that the dice are not fair.

“Anyone can create public hazards that are extremely undesirable. ”

But that does not address the argument, which is that limited liability creates different incentives for this than individuals face. There is also the fact that individuals can pay penalties such as imprisonment from which corporations are intrinsically immune.

“Experience however is that most people are risk-averse”

Really? How on Earth is Vegas not still a mere desert? Any form of gambling with a “house” is a losing risk. People don’t seem particularly adverse.

“Since the invention of the limited liability company, life expectancy in the West has gone up considerably”

Also, since the invention of the limited liability corporation, female dress has become less modest, music has become less centered around notation and the piano, literacy has ceased to be taught primarily through the Bible, football has become more popular than baseball ….

Correlation is not causation. That’s pretty basic. And that’s not addressed to the argument anyway. I said corporate investment could be positive sum – that’s the only reason there is any argument for limited liability. And in fact I favor limited liability – but with it should come limited rights.

By the way, the government does have limited liability. That is why the Army Corps of Engineers cannot be sued for the failure of the levees of New Orleans. It’s just limited differently.

Plus the risks aren’t always known in gambling ahead of time. Are you sure that the dice are fair? Monte Carlo casino once discovered the hard way that they had miscalculated their risks. If a casino can get it wrong, why not other gamblers?

Corporations can create public hazards that are extremely undesirable. If the profit you as an investor can reap is not limited by law, but the liability is, you will always have a bias towards creation of such hazards.

Anyone can create public hazards that are extremely undesirable. That’s why we have regulations that range from requiring people to dispose of dead bodies in ways that reduce the risk of disease to requiring safety testing of drugs to seeking to limit the spread of nuclear weapons.

Experience however is that most people are risk-averse, so the possibility of unlimited profits is offset by the fear of losing all the money you put in in the first place. Large corporations are as much criticised for being too risk-averse as the opposite.

And governments don’t have limited liability, yet they have created many public hazards. For example, numerous haemopheliacs (not sure about spelling) in NZ were infected with HIV because the NZ government of the time delayed introducing HIV testing.

Since the invention of the limited liability company, life expectancy in the West has gone up considerably so the balance of the risks strikes me as on the upside. (Environmental damage is another problem, but in the planet-threatening cases that come to my mind, such as global warming, the problem is that society as a whole is reluctant to give up the activities that create CO2 and other greenhouse gasses, not that large corporations can’t be sued enough).

Richard – Under the old rule of unlimited liability, however, if you put $2 into your mate’s shipping venture you were liable for your entire fortune is no more relevant to it [Islamic law] that the marriage customs of the Nuer.

Luckily for me, my statement you quoted has nothing to do with Islamic law. It was explaining why limited liability was introduced in the first place in Europe. I probably thought of Cairo due to the earlier mention of Islamic law, and that I’ve just finished reading an Amelia Peabody mystery.

I’m also starting to prefer your grandmother and her beatnik friends to either of my own grans, who are dead.
Actually I was exaggerating. My Gran doesn’t let anyone smoke inside her house, which I suspect has a lot to do with why she’s my only surviving grandparent. She also makes friends with anyone so I wouldn’t be stuck listening solely to conversations on Chekov. It is very interesting going to see plays with her as she’s directed and produced so many over the years she always has some critical observations. However, I am on the whole biased towards her retaining her retirement savings.

I like your attempt to muddy the issue by adding a spurious “to Cairo,” within the envelope of an argument about (I assume) 18th century English or American law. I’m also starting to prefer your grandmother and her beatnik friends to either of my own grans, who are dead.

You’re right that shareholders bear the cost of the corporation’s law suits: this has in the past made them into victims of corporate bosses’ wrongdoing as well. That’s not quite what I mean by recourse against a real person. My point is that corporations can’t be locked up or otherwise castigated, except through fines or dissolution. In neither case do the directors, who were the ones actually acting behind the corporate veil, face direct legal punishment for the wrongdoing that provoked the fine (if they’ve been careful).

Now, money is not exactly the same as a firearm, but it’s a powerful tool too and can be used in a variety of harmful ways, and so some incentive to exercise good judgment, some form of responsibility wouldn’t hurt here either.