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Transaction Costs, Neighborhood Effects, and the Diffusion of the Uniform Sales Act, 1906-47

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  • Smythe Donald J.

    (California Western School of Law)

Abstract

The Uniform Sales Act was a precursor to Article 2 of the Uniform Commercial Code. Between 1906 and 1947 it was adopted in 34 states. Transaction cost theory suggests that states' adoption decisions should have been influenced by "neighborhood effects" - the adoption decisions of their neighbors. This paper uses hazard analysis to test various hypotheses about the factors that influenced states' adoption decisions. The results indicate that neighborhood effects were among the most important factors in the diffusion of the Act. Manufacturing interests also played an important role, especially in a small number of states that adopted the Act early. Subsequent to these early adoptions, the Act gradually diffused across most of the country, except the south. Its diffusion was driven primarily by neighborhood effects and manufacturing interests, although the legal profession and transportation systems may also have played a role. It appears that the Act ultimately failed to achieve complete uniformity largely because the neighborhood effects that drove its adoption in most of the country were not present in the south.

Suggested Citation

  • Smythe Donald J., 2008. "Transaction Costs, Neighborhood Effects, and the Diffusion of the Uniform Sales Act, 1906-47," Review of Law & Economics, De Gruyter, vol. 4(1), pages 341-372, October.
    • Handle: RePEc:bpj:rlecon:v:4:y:2008:i:1:n:16
    DOI: 10.2202/1555-5879.1126
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    1. Carruthers, Bruce G. & Guinnane, Timothy W. & Lee, Yoonseok, 2009. "Bringing "Honest Capital" to Poor Borrowers: The Passage of the Uniform Small Loan Law, 1907-1930," Center Discussion Papers 50949, Yale University, Economic Growth Center.
    2. Loeper, Antoine, 2011. "Coordination in heterogeneous federal systems," Journal of Public Economics, Elsevier, vol. 95(7-8), pages 900-912, August.

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