Making a Difference: The Contractual Contributions of Easterbrook and Fischel

Abstract

George Stigler reportedly once toasted Milton Friedman by saying: "Milton, if you hadn't been born, it wouldn't have made any difference." This multi-edged compliment might have implied that even if Friedman had not been born, the market place of ideas would have supplied his analysis. Judge Frank Easterbrook and Professor Daniel Fischel do not have the same faith in the market place of ideas for corporate law. Their view instead is that academics (and regulators) "are rewarded for novel rather than accurate beliefs" (p 208). Academics face weaker motivations than market participants because they don't suffer if they lobby for inefficient rules. Given these weakened incentives, the publication of The Economic Structure of Corporate Law is an especially noteworthy accomplishment. Easterbrook and Fischel have made a difference in our understanding of corporate law. By illuminating the economic structure of corporate decisions, their book provides a powerful guide to legislatures and particularly to courts crafting corporate rules.