Professor Larry Ribstein’s scholarship, which applied rational choice theory and market competition concepts to areas of the law like private contracting and limited liability companies, helped to explain why efficient laws were adopted in some cases but not in others. Along with a few other scholars, Professor Ribstein shifted the corporate choice of law discourse from a documentation of Delaware’s dominance to a discussion of whether that dominance is a good thing from an efficiency point of view.
Professor William J. Carney, whose own scholarship paralleled Professor Ribstein’s in corporate choice of law, identifies questions which are yet to be answered. Professor Carney asks whether states, which have trended toward uniformity in corporate law, will adopt efficient laws.
Professor Carney notes that Delaware is protected from competition by a first mover advantage. Few corporations choose to incorporate in states other than their home states and Delaware. Consequently, other states engage in bilateral competition with Delaware to keep their home based corporations at home.
Professor Carney next questions whether there is significant jurisdictional competition in other areas of law. In the area of closely held enterprises, the answer appears to be no. One reason may be that the NCCUSL is not sufficiently influential to educate the informed, aware lawyers who are essential for robust jurisdictional competition.
Professor Carney concludes that the account of how rational choice works in selecting statutes is incomplete. Inefficient laws persist over centuries, and when legislators respond to interest groups there is often a lack of transparency. One possibility for filling out the account of law making, Professor Carney notes, is the public good provided by lawyers who donate many valuable hours to drafting model codes.
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