The law of impersonal transactions [chapter]

Benito Arruñada, Eric Brousseau, Jean-Michel Glachant
The Manufacturing of Markets  
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 right holders 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
more » ... cts 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 sort of 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. JEL Classification: O17, K22, K23, L59.
doi:10.1017/cbo9781107284159.005 fatcat:67ks5xg2w5gs5oqh6o4uvawcei