The Law of Impersonal Transactions

In E. Brousseau and J.-M. Glachant, eds., Manufacturing Markets, Cambridge University Press, 2014, 58-77

27 Pages Posted: 7 May 2010 Last revised: 23 Jul 2018

See all articles by Benito Arruñada

Benito Arruñada

Pompeu Fabra University - Department of Economics and Business; Barcelona GSE

Date Written: May 6, 2010

Abstract

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.

Keywords: property rights, formalization, impersonal transactions

JEL Classification: O17, K22, K23, L59

Suggested Citation

Arruñada, Benito, The Law of Impersonal Transactions (May 6, 2010). In E. Brousseau and J.-M. Glachant, eds., Manufacturing Markets, Cambridge University Press, 2014, 58-77. Available at SSRN: https://ssrn.com/abstract=1154080

Benito Arruñada (Contact Author)

Pompeu Fabra University - Department of Economics and Business ( email )

Ramon Trias Fargas 25-27
Department of Economics and Business
Barcelona, 08005
Spain
+34 93 542 25 72 (Phone)
+34 93 542 17 46 (Fax)

HOME PAGE: http://www.econ.upf.edu/~arrunada

Barcelona GSE ( email )

Ramon Trias Fargas, 25-27
Barcelona, Barcelona 08005
Spain

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