The Law Market: Chapter One

Abstract

In their book, The Law Market, Erin O'Hara and Larry Ribstein show that states increasingly act as hawkers of legal rules in a market for law where people and firms often can shop for those regimes that they find most desirable. This market helps deal with a world in which increasing mobility strains traditional notions that laws operate within geographic borders. The law market also helps to discipline interest group attempts to pass laws that impose costs on society. Moreover, lawmakers have powerful incentives to enforce parties' bargains regarding the applicable law in order to attract or retain mobile firms and residents. On the other hand, the law market threatens governments' ability to protect its citizens from harmful private conduct.

The authors argue for an approach to enforcing choice-of-law contracts that can help maximize the beneficial effects of the law market while tempering its costs. Competition among lawmakers can be superior to sweeping federalization or harmonization of laws across states or nations. At the same time, this approach avoids the costs of subjecting firms and people to different laws in all of the places they travel and do business. The authors show how their insights and recommendations apply across a wide variety of legal problems, including corporate governance, securities, franchise, trust, property, marriage, living will, surrogacy, and general contract regulations. This book therefore provides a useful template for analyzing the role of law in an increasingly mobile world. It also points the way to preserving a role for states and other smaller jurisdictions against the onslaught of federal or global legislation.

Keywords: Choice of law; conflict of laws; federalism; jurisdictional competition

JEL Classification: H11, H41, H77, K10, K11, K12, K13, K20, K22, K40, K41