The law of impersonal transactions

Benito Arruñada

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

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. (search for similar items in EconPapers)
JEL-codes: K22 K23 L59 O17 (search for similar items in EconPapers)
Date: 2009-11, Revised 2010-09
New Economics Papers: this item is included in nep-cbe and nep-cta
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://econ-papers.upf.edu/papers/1187.pdf Whole Paper (application/pdf)

Related works:
Working Paper: The Law of Impersonal Transactions (2015)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1187

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).