The law of impersonal transactions
Most economic interactions happen in a context of sequential exchange in which innocent third parties suffer information asymmetry with respect to previous "originative" contracts. The law reduces transaction costs by protecting these third parties but preserves some element of consent by property rightholders to avoid damaging property enforcement—e.g., it is they, as principals, who authorize agents in originative contracts. Judicial verifiability of these originative contracts is obtained either as an automatic byproduct of transactions or, when these would have remained private, by requiring them to be made public. Protecting third parties produces a legal commodity which is easy to trade impersonally, improving the allocation and specialization of resources. Historical delay in generalizing this legal commoditization paradigm is attributed to path dependency—the law first developed for personal trade—and an unbalance in vested interests, as luddite legal professionals face weak public bureaucracies.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wallis, John Joseph, 2011. "Institutions, organizations, impersonality, and interests: The dynamics of institutions," Journal of Economic Behavior & Organization, Elsevier, vol. 79(1-2), pages 48-64, June.
- Hansmann, Henry & Kraakman, Reinier, 2002. "Property, Contract, and Verification: The Numerus Clausus Problem and the Divisibility of Rights," The Journal of Legal Studies, University of Chicago Press, vol. 31(2), pages S373-420, June.
- Benito Arruñada, 2001.
"Property enforcement as organized consent,"
Economics Working Papers
564, Department of Economics and Business, Universitat Pompeu Fabra.
- Wallis, John Joseph, 2011. "Institutions, organizations, impersonality, and interests: The dynamics of institutions," Journal of Economic Behavior & Organization, Elsevier, vol. 79(1), pages 48-64.
- Hoffman, Philip T. & Postel-Vinay, Gilles & Rosenthal, Jean-Laurent, 2001. "Priceless Markets," University of Chicago Press Economics Books, University of Chicago Press, edition 1, number 9780226348018.
- Henry Hansmann & Reinier Kraakman, 2000. "The Essential Role of Organizational Law," Yale School of Management Working Papers ysm147, Yale School of Management, revised 01 Nov 2001.
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