This nexus can be referred to as the liability principle or the principle of individual responsibility. The liability principle is simple and straightforward, but at the same time, it is of fundamental importance, as it fosters responsible behaviour and prudent decisions that do not produce results that come at the expense of others.
This will be a well-known truth for all the entrepreneurs among you. The liability principle is a constituent element of a market economy. It also implies that enterprises must be allowed to fail and, in consequence, to exit the market. The US economist Allan Meltzer once put this idea as follows: “Capitalism without failure is like religion without sin.