Taking the Analysis of Security Seriously

Abstract

PROFESSORS Harris and Mooney ("H & M") argue that the new Article 9 should further advance the goals of the current statute-to make security easier to take and to increase its scope. H & M defend this position against attacks from Law and Economics analysts and other scholars; both sets of critics, H & M claim, want to increase the costs associated with secured credit or otherwise to restrict its use. H & M's article primarily attempts to refute the Law and Economics claims; it cites few other scholars and only discusses the economic arguments in detail. This Commentary thus focuses on the dispute that H & M have with Law and Economics. H & M's support for Article 9 has both a positive and a normative aspect. The former argues first that the debate over the efficiency of secured debt is inconclusive as a matter of theory; the granting of security sometimes creates net social benefits and sometimes does not. H & M go on to claim that whether the former effect usually occurs "is an empirical question that cannot be answered with any certainty using existing information." The law nevertheless should facilitate the issuance of secured debt because normative grounds exist to allocate the burden of proof in the security interest debate to Article 9's opponents. First, security often is indistinguishable in its economic effects from other transactions, such as sales and the repayment of debts, that the state generally facilitates. This creates a presumption that the state should facilitate the creation of security interests. Second, a debtor that issues security is merely alienating its property. That our society encourages freedom of alienation generally strengthens the normative presumption that society should encourage the issuance of security. The opponents of security cannot overcome the normative presumption that security should be facilitated, given the theoretical and empirical uncertainties that H & M expose. Hence, legislators should act as if the desirability of security is established.