Abstract

Are limited liability business corporations compatible with the free market, as libertarians understand it? Many libertarians think they are. Others are at least doubtful. And still others—I include myself1 among them—deny that limited liability business corporations belong in a free market.2 My purpose here is to spell out some of the reasons for that denial as well as to qualify it: I have no argument against large enterprises that issue limited liability shares or protect their managers with extensive vicarious liability arrangements. However, as we shall see, the compatibility problem of the corporation does not stem from these contemporary business practices. There is no need here to consider the legal and political incentives and disincentives, such as tax and labour laws, accountancy requirements, jurisprudential doctrines, administrative practices and so on, that in various national legal systems may incline people to see the corporate form as advantageous or disadvantageous relative to other forms of business organisation. Such factors reflect various types of interventions by the state, its legislators, administrators and judges, which would be absent in a libertarian free market. Consequently, they are not germane to the logical question of the compatibility of business corporations with the principles of the free market. Of course, I must assume respect for personal..