Fisking FSK

In a somewhat recent FSK post, he made the flat-out ludicrous claim that:

In a real free market, there is no way to enforce limited liability contracturally. Therefore, limited liability incorporation cannot occur in a real free market. Only a State can force a business' customers and creditors to accept limited liability provisions.

I responded:

Do you seriously believe this?! This is downright crazy.

To which he responded:

Since we're already name calling, I claim that you are the one with stupid beliefs. This is a common mistake by pro-State (L)libertarians.

Why are idiots so eager to defend corporations?

First, it is plainly obvious that there was no "name calling" in my comment. I said his statement was crazy--because it is. In fact, it's so breath takingly idiotic that I suspect even opponents of corporations would be embarrassed by it.

For those interested in reading a libertarian argument for corporations (or de facto corporations, at least), I strongly recommend Lee McCracken's Corporations in a Free Society.

FSK goes on:

In a true free market, no reasonable person would agree to a limited liability clause. Under certain circumstances, I might rule such an clause irrelevant, if I were judge in a free market court.

For example, suppose I walk into a restaurant as a customer. Before being served, the waiter makes me sign a "limited liability agreement". In the event I receive food poisoning, I agree that damages are limited to the assets of the restaurant. You certainly would view the waiter and restaurant with suspicion, wouldn't you? I can't imagine such a practice being commonplace in a real free market.

This is interesting, because the last time I had an operation done at the hospital, I could have sworn that I signed a form promising not to blame them if something went wrong during the procedure. Everyone else in the waiting room had clearly signed the form as well, and done so voluntarily. Dying is certainly a bigger risk than food poisoning. How do these things happen?

But let's be clear: even if you agree with FSK on the tort issue (and believe that shareholders are automatically liable for all torts, along with a laundry list of other dubious assertions), his stance goes far beyond that. He doesn't even believe that creditors (!?) would agree to limited liability without state intervention! No matter how good the investment looks! Sheer madness. Even the most ardent libertarian critics of corporations (such as Kevin Carson) have conceded that point.

Now before anyone jumps on me, let me say that I'm not denying limited liability would operate differently in ancapistan than it does now. Nor do I claim to be an expert on the intricacies of tort law. Perhaps some aspects of modern tort law do unfairly limit liability. I don't know--I'm not a lawyer. But does anyone seriously agree with FSK's original statement that "Only a State can force a business' customers and creditors to accept limited liability provisions"? It's nuckin' futs!