MEGAN MCARDLE: Be Glad That Corporate Liability Is Limited.

Tort law and corporate form have evolved together. You can argue, in fact, that judges allowed liability to expand so far in part because corporations were increasingly perceived as faceless bureaucracies, rather than extensions of a single owner who could be destroyed by an excessive judgment. Whatever the case, you cannot simply return to the old rules about firm formation while leaving the modern rules about liability in place. The result would be economic catastrophe as everyone tried to get their personal fortunes out of the business world, where they might be exposed to ruin — unpredictable, essentially unknowable ruin, because even if a lawyer can assure you that everything you’re doing is legal today, they can’t make any guarantees about tomorrow. It was black-letter law that you couldn’t sue a tobacco company for giving you cancer … until, suddenly, it wasn’t.

Does this mean that owners won’t watch their companies closely enough? Sure, though I’d point out that even people with every incentive in the world to know what’s going on in a large organization often don’t, because information travels through a bureaucracy the way movie heroes travel through quicksand.

The correct question isn’t whether there are costs to limited liability; the correct question is “compared to what?” And if the alternative is undoing the Industrial Revolution, I don’t think that’s a fair trade.

To some people, of course, undoing the Industrial Revolution is a feature, not a bug.