Abstract:
This article is the first to demonstrate the important role that fiduciary principles, and the attorneys who adopted them, played in American economic development. Our original historical research shows that: (1) lawyers were heavily involved as trusted agents in US commerce during the nineteenth century, and that (2) their profession’s devotion to fiduciary principles, which were developing roughly at the same time in Courts of Equity, enabled them to play this crucial role as intermediaries. We argue that lawyers thereby helped to solve agency problems (or problems of credible commitment) which economists consider to be critical for the development and growth of capitalist economies. Our work brings together the methods of Institutional Economics and the New History of Capitalism. In so doing, we provide a perspective on US economic development that considers the impact of legal culture on economic institutions. We demonstrate that the literature has failed properly to appreciate the significance of fiduciary law for US economic development.
The article draws normative conclusions for the rule of law debate. It also draws normative conclusions for the current debate concerning the imposition of fiduciary duties on broker/dealers who give financial advice concerning retirement accounts. In a recent Presidential Memorandum Trump administration suggested that it might block the implementation of the fiduciary rule. Our analysis describes the value of the fiduciary rule in a way that is not appreciated by the literature.
Halberstam, Michael and Simard, Justin L, Fiduciary Law and Economic Development: Attorneys As Trusted Agents in Nineteenth Century American Commerce (February 15, 2017).
First posted 2017-02-18 06:56:07
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