Limited Liability Is Causing Unlimited Harm

Here is an interesting article that addresses a feature of the market economy that may be causing more harm than good for the economy overall. The idea that the author presents is that limited liability is an institution of the market economy that was created to: "encourage investment in – and risk-taking by – corporations, whose resulting innovations would benefit society." The issue with limited liability is that it creates a market failure by distorting the complete feature of the market economy.
Recognize that there is a tradeoff here: limited liability laws encourage investment and risk taking and thereby resulting in increased level of innovation (than it would be otherwise), but it comes at the expense of externalities not being internalized by corporations that are shielded by limited liability. Capitalism as an economic system has been remarkable in its ability to evolve and reform or change policies that ultimately make the system serve its citizens. This is perhaps a starting point for a discussion about the institution of limited liability and how it could potentially change and improve the economic system overall.