The Single Constituency Argument in the Economic Analysis of Business Law

Research in Law and Economics, 2007

Washington & Lee Legal Studies Paper No. 2007-01

31 Pages Posted: 10 Jan 2007  

David Millon

Washington and Lee University - School of Law

Abstract

The essay points out an interesting parallel in law-and-economics business law scholarship. Working largely independently of each other, economically oriented scholars working in different areas have argued that the law should focus on the interests of a single constituency - shareholders in corporate law, creditors in bankruptcy law, and consumers in antitrust law. Economic analysts thus have rejected arguments advanced by progressive scholars working in each of these areas that the law should instead concern itself with the full range of constituencies affected by business activity. The law-and-economics single constituency claim rests in part on skepticism about judicial competence but the underlying objection is to the use of law for redistributive purposes. The primary value is efficiency, defined in terms of market-generated outcomes. In this essay, I question this political commitment, suggesting that it implies a strong tendency toward maintenance of the existing distribution of wealth. Even more importantly, the single constituency claim may actually have redistributive implications. In each of these areas of business law, however, it is a regressive program that favors owners of capital against those who are generally less well of, such as workers and small business owners.

Suggested Citation

Millon, David, The Single Constituency Argument in the Economic Analysis of Business Law. Research in Law and Economics, 2007; Washington & Lee Legal Studies Paper No. 2007-01. Available at SSRN: https://ssrn.com/abstract=954937

David K. Millon (Contact Author)

Washington and Lee University - School of Law ( email )

Lexington, VA 24450
United States
540-458-8993 (Phone)
540-458-8586 (Fax)

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