The alleged sins of the modern business corporation archetype in shaping the “boom-bust disaster capitalism”. A free market economics reappraisal.

Abstract

Moral hazard defines the situation when the rightful owners of scarce resources are hampered by their entrusted agents from allocating these resources as they see fit, the later ones speculating not only the ubiquitous asymmetry of information, but the limitations, as coming from various state regulations, that impede the free and as complete as possible design of contracts in markets. The modern business corporation is said to be a particular headquarter of moral hazard – on one hand, between shareholders and managers, on the other, between itself and third parties – all that due to the legal shield that the “limited liability”, as “unnatural privilege granted by the state”, gives, fuelling propensity to pure speculation, and thus sending capitalism to ruinous instability. In our article, armed with reasoning coming from the Austrian School inspired libertarian ethics of private property rights (a rigorously reconstructed extension of classical liberalism precepts), we tried to enable the idea that in the corporation organizational design there is, ipso facto, nothing to be seen as an abusive license, granted by the state, through “limited liability” facility. In the light of this reappraisal, the corporation, the one that “strictly acts in the free market”, and so respects the societal division of labour, third parties’ legitimate property rights, not abusing the privileging safeguards (such as monopoly, customs protection or public subsidies, that incite the corporate actors to adopt abusive behaviours), is considered a socially benign capitalist pivot.