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January 27, 2005



You could also add that business forms are hardly determined in as free a market as Boudreaux's argument might assume. States created the statutory framework which allowed limited liability corporations to form, with all of the ups and downs they have - in reference to your points, increasing monopoly power perhaps beyond the (Schumpeterian?) concentration benefits might warrant. You certainly can't discount the potential for western States, following similar paths, to have had a significant, even paradigmatic (wa-hey!), role in shaping the way we do business - and more recently too, through tax and regulatory laws. To quote the great man again:

"I do not think there can be much doubt that the particular form legislation has taken in this field has greatly assisted the growth of monopoly or that it was only because of special legislation... that size of enterprise has become an advantage beyond the point where it is justified by technological facts... There may be valid arguments for so designing corporation law as to impede the indefinite growth of individual corporations." ('"Free" Enterprise and Competitive Order', in Individualism and Economic Order.)

So, I've got some sympathy with your argument here - although of course I'm quite partial to a bit of hierarchy. Which does raise a further thought: I know quite a few people who really prefer a more structured existence in their working lives, and so respond much better to hierarchy. This might be because their interests lie elsewhere (so work's just to pay the bills) just as much as it might be because they have limited intellect or just aren't very independently-minded.

Aha, but you're a man of the Left - so you're probably hoping to reshape human nature to fit the master plan! (tongue very firmly in cheek...)

EU Serf

Companies do not have absolute laws like states do. A company is despite the image of rigid hierarchy a dynamic equilibrium of interest groups fighting for their piece of action. The senior managers make guidelines which are significantly changed for better or worse as they move down the levels.

Therefore although far from free markets they are not too close to centrally controlled either.


I agree EU Serf, but then the same is also true of the liberal state today - certainly in a country like the UK, Government has grown out of all control, and multi-billion pound spending decisions 'emerge' through the bureaucracy with ministers left to quibble over chump-change.


I meant to add (and this supports Chris's point):

This equally chaotic and formless nature of the contemporary liberal state doesn't result in what we'd think of as especially good outcomes - so there's no reason to think that different approaches to business form might not be an improvement.

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