The capitalist free market is something that would reasonably he understood as free markets as they exist in the real system called capitalism under which coeporations have special legal protections.
If the original commenter meant something like "ideal free market" I imagine they would use those words instead of refering specifically to capitalism's free markets.
The real system known as capitalism would collapse immediately if we did away with the special legal protections given to corporations (chief amongst them being limited liability), so I think it's a pretty fair assessment to understand these to be inherent to capitalism, even in its most libertarian possible interpretation.
Another important distinction is that there are various ways of theorising free markets which may not be compatible with capitalism either.
They were referring to the “idea of a libertarian free market”. Such an idea would not include limited liability for corporations protected by law.
The government might enforce observing contracts agreed upon by all parties, some of which may contain limited liability for individuals or organizations. But LLC in itself would not be a legal category intended to protect corporations.
The idea that you can at all limit your liabilities by contract is an artifice that originates in the idea of the limited liability corporation. You are not contractually allowed as an individual to limit your liabilities by mutual agreement in general because a great many rights and claims cannot be alienated by contract.
The vast majority of capitalists and libertarians have no pretence of being able to get rid of the LLC. The rest have an incoherent understanding of the situation, where you could somehow do it by mutual agreement while still having inalienable rights be a thing. Legal personhood is the only way to deal with that because you can then redirect claims and rights instead of trying to alienate them.
So you have to choose two between inalienable rights and claims, not having legal personhood, and being able to limit liability by agreement.
A simple example would be an organization which caused a personal injury by negligence. You can't alienate your right to life and health, so you can't possibly make a contractual agreement to limit such liability. If you remove the possibility to limit such liability, then who in their right mind could, for example, invest or agree to work in a hospital? How about a mine?
So the question is inevitable, and it turns out that legal privileges for groups that organise capital are necessary for practical capitalism. In the real world of course no libertarian can articulate a coherent way of either completely doing away with the concept of limiting liability or a way to do so without legal personhood and without allowing people to sign away their rights, which is why serious opposition to the concept is exceedingly fringe amongst libertarians.
I have to admit I don’t follow the full extent of your argument, not necessarily through your fault.
> You can't alienate your right to life and health, so you can't possibly make a contractual agreement to limit such liability.
Do you mean that those rights would be protected by law even in a libertarian society, so they couldn’t be defined by contracts? I don’t think many libertarians believe liability should be truly unlimited, at least not to the extent where it would be infringing on certain individual rights.
Even so, in the scenario where no one wants to enter into a contract with a company because it doesn’t provide certain protections, the company would have no choice but to either change the clause, or lose the employee to a competitor.
Replace employee with a group of employees organized into a union and you could have a similar outcome, all without a significant legal framework in place.
But again, I might be misunderstanding your line of reasoning.
Well, libertarians believe in natural law doctrine as a core belief, right? So you must have rights which can never ever be given up, not even by contract.
In the scenario it wouldn't be that no one would want to enter contract with the company because it couldn't provide those protections. Many protections are a result of inalienable rights, so you can't have a contract which removes those protections.
Since the organization wouldn't have legal personhood, it would mean that the owners and/or employees would be personally liable if the company were to violate one of those inalienable protections. That makes investment or membership in those organizations extremely unattractive.
For many types of organizations this isn't necessarily a problem, but for organizations in many sectors such as healthcare, anything that requires hazardous labour, the automotive industry, private security, etc..., it means that investment is really not a good idea because your personal liability might put you in jail.
This is of course because the organization couldn't negotiate a contract with it's clients where the clients would give up these protections, because these kinds of protections which derive from natural rights can't be given up.
So in the end you need legal personhood to protect the investor class, otherwise capitalism doesn't really work anymore when investors are too afraid by personal liability. And that's why legal personhood for the purpose of general enterprise started 300 years ago and is now a thing everywhere save for North Korea (even Cuba and the USSR had to allow citizens to form limited liability entities with legal personhood for economic activity, because even when you don't allow investors, limited liability turns out to be very practical when you have partnerships with very large numbers of partners)
If the original commenter meant something like "ideal free market" I imagine they would use those words instead of refering specifically to capitalism's free markets.
The real system known as capitalism would collapse immediately if we did away with the special legal protections given to corporations (chief amongst them being limited liability), so I think it's a pretty fair assessment to understand these to be inherent to capitalism, even in its most libertarian possible interpretation.
Another important distinction is that there are various ways of theorising free markets which may not be compatible with capitalism either.