Economics is Fun, Part 9: Joint Enterprise

[Chris]

Might get some argument on this one.

[Conley]

Haha, Bush and entrepreneur...they're still bashing him over there?

All of thee videos are thoroughly convincing that the free market is the best path to follow. The problem results when government intervenes on behalf of those who fund their campaigns.

[Peter1469]

Great video. I would like to see him expand on limited liability in the future.

[Chris]

That's the part I think might be controversial. I'd earlier understood limited liability as no risk, or virtually none. But the limit is your investment, no risk losing more. I can see how that encourages investment, but also encourages possibly more risk that without it.

[Peter1469]

That's the part I think might be controversial. I'd earlier understood limited liability as no risk, or virtually none. But the limit is your investment, no risk losing more. I can see how that encourages investment, but also encourages possibly more risk that without it.

That is referring to the stock owners. If I buy 100 shares in XYZ corp, and it goes out of business and even commits fraud, the max that I can lose is my 100 shares (or whatever it grew to over the years.)

Then there is a separate issue of the corporate board. They are the ones driving the train of the corporation, and they have a different sort of limited liability. Often many are guaranteed millions even if they fail.

[Conley]

I think it encourages risk when you are using others investments, no doubt. If you are risking your own money (but not all of your assets) then you likely take less of a risk.

[Peter1469]

I like the limited liability idea for stock holders for the reasons stated in the video. It is that other type of limited liability for the leadership that takes large corporations out of the free market arena.

[Conley]

That is referring to the stock owners. If I buy 100 shares in XYZ corp, and it goes out of business and even commits fraud, the max that I can lose is my 100 shares (or whatever it grew to over the years.)

Then there is a separate issue of the corporate board. They are the ones driving the train of the corporation, and they have a different sort of limited liability. Often many are guaranteed millions even if they fail.

Exactly. Whatever assets the company has are sold off and the creditors are paid off in a certain order. Often there is no money left for the common shareholders at the end of the process.

[Peter1469]

Exactly. Whatever assets the company has are sold off and the creditors are paid off in a certain order. Often there is no money left for the common shareholders at the end of the process.

I believe that shareholders have a secured claim, so they are above unsecured claims. I could be wrong. I know that bond holders have a secured claim- unless you are talking about GM!.....