On Jun 22, 2009, at 8:51 PM, Pranesh Prakash wrote:
On Tue, Jun 23, 2009 at 01:34, J. Andrew Rogers
<[email protected]> wrote:
Much of what constitutes Anglo-American capitalism is a natural
consequence
of the English Common Law system under which such economies
operate. As
principles, the sanctity of contract, the assumption of individual
sovereignty, and a judicial bias toward equitable outcomes have an
undeniably positive track record when it comes to successful
economies. If
nothing else it greatly reduces business risk due to political
whim, which
has real financial impact.
Just to pick nits:
I would think "judicial bias toward equitable outcomes" would go
against the first two ("sanctity of contract" and "assumption of
individual sovereignty"). (Is that what you meant to highlight?) And
rather than being traced back to the English Common Law system, I
think they can be traced back to the Enlightenment and E-inspired
theorists and legal commentators. I find it difficult to see why the
Common Law system _per se_ (in contrast to the Civil Law system, for
instance) would privilege individuality.
These all dovetail in my interpretation. All "equitable" means is that
you are expected to take personal responsibility for the terms of
contracts you sign because the terms will be enforced as written by
the judiciary in a reasonable manner.
There is a fine distinction between "equitable" and "equal" outcomes,
and some of the other European Common Law systems prefer the latter.
The difference has a number of significant ramifications, and the US
States use a mixture of European systems. Famously, the State of
Louisiana uses an amalgam of French Napoleonic Code and Spanish Common
Law. Most of the southwestern part of the US uses a hybrid of Spanish
Common Law and English Common law. The Federal system is essentially
English.
Spanish Common Law, to use that example, is notoriously problematic
from a business standpoint because it is pretty strongly communitarian
to the detriment of reasonable and equitable outcomes -- the
individual good is sacrificed on the altar of a nominal social good.
It prefers equal outcomes because that social preference outweighs
fair outcomes for the individual. Consequently, people with a lot to
lose can be held hostage by minority interests, which happens commonly
under such legal systems. This is why a lot of business in places like
California is done under the auspices of New England law (e.g.
Delaware or New York).
The judicial outcomes are equitable insofar as society is not a tacit
party to the contract beyond providing the general framework for such
things and cannot alter the terms of the contract outside of some
fairly limited extremes (e.g. no slavery). Equitable, in other words,
under the assumption the parties to the contract are sovereign
individuals capable of making their own choices and accepting
responsibility for the consequences.
There is considerable variation between US states on how strictly the
judiciary will interpret contracts by the terms written. In some
states, Nevada comes to mind, you can put damn near anything into a
contract and the courts will enforce it to the letter. In other
states, many kinds of contracts are subject to more capricious
interpretation. Needless to say, from a business standpoint, strict
and predictable enforcement of contracts reduces a significant amount
of risk and therefore cost of business.
It is not uncommon for business contracts to be executed under the
laws of jurisdictions based on the English Common Law even if none of
the parties to the contract lives in such a jurisdiction. This
suggests that at a minimum it is a relatively efficient and productive
legal foundation for an economy even if there are aspects of it one
might disagree with.
Cheers,
J. Andrew Rogers
