Conglomerate Blog: Business, Law, Economics & Society

The Law & Society Annual Meeting was a hive of activity, as usual. The great strength of the conference is the diversity of the panels. That is also its great weakness. Without any sort of screening, sessions proliferate, and quality is highly uneven. Sessions with more participants than members of the audience are not unusual.

I organized a session entitled "New Questions About Contracts," which featured two interesting empirical studies of contract terms by Ronald Mann and Rachelle Sampson, respectively; a brief discussion of my survey of empirical studies of contract terms (which will be available in draft form by fall); and comments by Mark Suchman and Stewart Macaulay. By Law & Society standards, turnout was excellent, and I enjoyed the session very much, including the post-session discussions, of which there were many.

My main goal is to encourage more empirical work on contracts, but I have a methodological agenda, too. Most empirical studies of contract terms use a Williamsonian framework, which is interesting and productive, but incomplete. This framework assumes that many/most/all contract terms are motivated by a desire to curb opportunism. Why do we have covenants? To deter opportunism. Why are cash flows structured this way or that? To prevent opportunism. And so forth.

Interestingly, Ronald Coase eschewed opportunism as a meaningful motivation for contractual structure, suggesting that reputational constraints usually prevent opportunistic behavior. Ronald H. Coase, The Nature of the Firm: Influence, 4 J. L. Econ. & Org. 33, 44 (1988) ("the propensity for opportunistic behavior is usually effectively checked by the need to take account of the effect of the firm’s actions on future business"). Also, consider this from Harold Demsetz:

Opportunistic behavior is not a problem that is mentioned by Coase in his famous paper, but it is clear from his later writings . . . that he does not believe opportunism offers a special justification for vertical integration. Therein lies a difference between Coase and those who see opportunism as an important source of vertical integration. Coase believes that there is a wide variety of coordination problems, of which opportunism is only one, and that all of these are candidates for resolution through managed coordination or through contractual arrangements made across markets. Which institutional arrangement seems best requires a judgment about the tradeoff between transaction and management costs, even in the case of opportunism.

So the goal of my project, beginning with a survey and continuing with several other papers already in production, is to explore "new" questions about contracts, questions not motivated by opportunism. If you have thoughts on this, I would be happy to hear them.

Obviously, this post is not even close to a complete recap of the conference, but if you have thoughts or insights from the conference, feel free to include them in the comments.

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The Law & Society Annual Meeting was a hive of activity, as usual. The great strength of the conference is the diversity of the panels. That is also its great weakness. Without any sort of screening, sessions proliferate, and quality is highly uneven. Sessions with more participants than members of the audience are not unusual.

I organized a session entitled "New Questions About Contracts," which featured two interesting empirical studies of contract terms by Ronald Mann and Rachelle Sampson, respectively; a brief discussion of my survey of empirical studies of contract terms (which will be available in draft form by fall); and comments by Mark Suchman and Stewart Macaulay. By Law & Society standards, turnout was excellent, and I enjoyed the session very much, including the post-session discussions, of which there were many.

My main goal is to encourage more empirical work on contracts, but I have a methodological agenda, too. Most empirical studies of contract terms use a Williamsonian framework, which is interesting and productive, but incomplete. This framework assumes that many/most/all contract terms are motivated by a desire to curb opportunism. Why do we have covenants? To deter opportunism. Why are cash flows structured this way or that? To prevent opportunism. And so forth.

Interestingly, Ronald Coase eschewed opportunism as a meaningful motivation for contractual structure, suggesting that reputational constraints usually prevent opportunistic behavior. Ronald H. Coase, The Nature of the Firm: Influence, 4 J. L. Econ. & Org. 33, 44 (1988) ("the propensity for opportunistic behavior is usually effectively checked by the need to take account of the effect of the firm’s actions on future business"). Also, consider this from Harold Demsetz:

Opportunistic behavior is not a problem that is mentioned by Coase in his famous paper, but it is clear from his later writings . . . that he does not believe opportunism offers a special justification for vertical integration. Therein lies a difference between Coase and those who see opportunism as an important source of vertical integration. Coase believes that there is a wide variety of coordination problems, of which opportunism is only one, and that all of these are candidates for resolution through managed coordination or through contractual arrangements made across markets. Which institutional arrangement seems best requires a judgment about the tradeoff between transaction and management costs, even in the case of opportunism.

So the goal of my project, beginning with a survey and continuing with several other papers already in production, is to explore "new" questions about contracts, questions not motivated by opportunism. If you have thoughts on this, I would be happy to hear them.

Obviously, this post is not even close to a complete recap of the conference, but if you have thoughts or insights from the conference, feel free to include them in the comments.

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