Private Law Theory

ABSTRACT
This chapter analyzes trusts from a law and economics perspective. It begins with John Langbein’s work on contractarian foundations and Robert Sitkoff’s agency costs theory – two frameworks that highlight the relational nature of trusts. The chapter then explores Henry Hansmann and Ugo Mattei’s thesis that the trust’s major contribution has been its ability to partition assets into separate pools. This chapter concludes with the macroeconomic turn in trust scholarship, which interrogates how trusts exacerbate inequality. Two themes emerge from this survey. First, the early law and economics writings were often an odd fit because they grafted arguments from elsewhere and overlooked the distinctive features of trusts. Second, the arc of economic analysis of trust law has moved from microeconomics, focused on discrete and narrow sets of relationships, to macroeconomics, which envisions trusts as an input into the broader economy. This has attuned T&E scholars with the headiest economic conversations of our day around wealth inequality. Further, in viewing trusts as an economic input, it has tapped into a wider array of issues, such as intergenerational mobility, jurisdictional competition, and social stability.

Chang, Felix, Economic Analysis of Trust Law (March 12, 2025).