Law, Growth, and the Identity Hurdle: A Theory of Legal Reform

Abstract

This Article offers a new theoretical approach to understanding resistance to legal change in the corporate and commercial context by introducing the sociological concept of “community economic identity” (CEI) into legal scholarship. I argue that community leaders (typically, but not exclusively, from the political, legal, and business spheres) generate public and recognizable identities—e.g., “Coal Country” or “Motor City”—with respect to some commercial activities. These identities influence how law reform is conceived and deployed within jurisdictional boundaries (i.e., country, state, town, region, etc.). CEI complicates the prevailing public choice narrative regarding the influence of special interests in the law reform process. Efforts to promote efficient legal reforms absent CEI considerations may prove difficult because of the underappreciated social significance of some economic activities to a community. For example, an old automobile manufacturing plant may still anchor a town's economic identity decades after the jobs have gone. Hopes of return to a past era when automobile manufacturing reigned supreme may lead the local community to resist regulations that are perceived as undermining a future for the industry. The local perception may be that important aspects of social relationships in that community are tied to the identity industry and are a form of social glue that helps to bind the community. Reforms that undermine this relationship are therefore seen as socially harmful, even if they are economically beneficial. I make the case that, while political-economy explanations for law's role in business regulations are plentiful and invaluable, complementary sociological analysis helps to provide a richer and more comprehensive understanding of why communities may choose or resist specific legal reforms.

Keywords: Community Economic Identity, Economic Growth, Economic Development, Legal Reform, Law and Sociology