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Article: The buck stops where? The role of limited liability in economics.
- Article from:
- Economic Review (Atlanta, GA)
- Article date:
- January 1, 1997
- Author:
CopyrightCOPYRIGHT 1997 Federal Reserve Bank of Atlanta. This material is published under license from the publisher through the Gale Group, Farmington Hills, Michigan. All inquiries regarding rights should be directed to the Gale Group. (Hide copyright information)
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Liability, or the lack thereof, has along played an interesting role in the fields of economics, finance, and law. From early times societies have debated when to share losses arising from bad economic outcomes, whether these outcome are due to bad decisions on the part of individuals, events independent of individual actions, or some combination of the two.
In modern societies personal limited liability is the norm, given such conditions as finite wealth and the elimination of debtors' prisons. In fact, over the last few centuries, many societies have taken this principle further by passing laws that allow investors in banks and other business enterprises to ...