Wednesday, November 26, 2008

Smythe on the Adoption of the Uniform Sales Act

Transaction Costs, Neighborhood Effects, and the Diffusion of the Uniform Sales Act, 1906-47 is a new paper by Donald J. Smythe, California Western School of Law, which is just published in the on-line journal Review of Law & Economics. Here is the abstract:
The Uniform Sales Act[, drafted by Harvard law professor Samuel Williston, pictured at left,] was a precursor to Article 2 of the Uniform Commercial Code. Between 1906 and 1947 it was adopted in 34 states. Transaction cost theory suggests that states’ adoption decisions should have been influenced by “neighborhood effects” – the adoption decisions of their neighbors. This paper uses hazard analysis to test various hypotheses about the factors that influenced states’ adoption decisions. The results indicate that neighborhood effects were among the most important factors in the diffusion of the Act. Manufacturing interests also played an important role, especially in a small number of states that adopted the Act early. Subsequent to these early adoptions, the Act gradually diffused across most of the country, except the south. Its diffusion was driven primarily by neighborhood effects and manufacturing interests, although the legal profession and transportation systems may also have played a role. It appears that the Act ultimately failed to achieve complete uniformity largely because the neighborhood effects that drove its adoption in most of the country were not present in the south.

Image credit.


Shag from Brookline said...

Back in the early 1950s, we had a law school course on Sales and another on Bills and Notes, respectively based upon the Uniform Sales Act and the Negotiable Instruments Law (as well as the Law Merchant!). Prof. Parke would occasionally make pejorative references to the UCC that was under consideration in several states, including Massachusetts, at the time - he thought it was communistic! (Prof. Parke once cited a Bombay Reports case that went back into the 18th century with a big grin on his face.)

Uniform acts reflected the need to overcome certain limitations of federalism on business nationally. It took Louisiana a long time to finally adopt the UCC.

Anonymous said...

well, it's not per se "communistic" because the provisions don't really match the attributes of communism/socialism, but certainly there is an argument that uniform acts--and uniformity between the states for the matter--may be a precursor and facilitator of further centralization of power. we often associate this sort of centralization or uniformity with totalitarian regimes under the auspices of communism/socialism.

a better phrasing of the argument would be something like: the promotion of uniformity by a centralized body is antithetical to classical american principles vis a vis dual federalism; that is, though the states adopt these acts of their own accord, the hawking of uniformity may ultimately promote a degredation of the checks that are supposed to occassion a system founded upon dual federalism.