Working Paper No. 10-09:
Choice, Progressive Values, and Corporate Law: A Reply to Greenfield
Date Posted: February 2010
Abstract (below) | Full text (most recent) on SSRN
In his recent book chapter, CORPORATE LAW AND THE RHETORIC OF CHOICE, Professor Kent Greenfield rejects contractarian justifications for existing corporate governance arrangements. Greenfield advances this critique on two grounds. First, relying on behavioralist scholars, he accepts the demise of the rational actor model and, accordingly, opposes the contemporary use of choice as a construct that legitimates current corporate governance approaches. Second, Greenfield refracts his analysis through the prism of Progressive thought and values.
Greenfield’s approach is disturbing for two reasons. First, he fails to notice that behavioralist scholars often rely on experimental data, while law and economics scholars rely on empirical data. Law and economics scholars emphasizing empirical analysis demonstrate that there is little proof “that behavioral law and economics generates greater predictive power than standard price theoretic analysis.” Second, Greenfield’s reliance on Progressive values is misplaced because in its origins and its consequences, the Progressive Era was both liberal and conservative: liberal in emphasizing economic uplift for some but conservative in concluding that certain people—African Americans, women, immigrants, and others—were defectives in need of social control and exclusion. The evidence shows that Progressive Era/New Deal labor legislation, succeeded in excluding large numbers of Americans from employment and the contemporary record shows that instantiation of Progressive values continues to exclude the disadvantaged from labor markets today.
Taken together, Greenfield’s effort to diminish respect for liberty of contract in the corporate arena is attached to paternalistic efforts to enlarge the power of government. But, enlarging government’s power and scope risks government failure as well as the subordination of more citizens. This is so because Progressive values, when stripped of the patina of progress, consist of contradiction and coercion that reduces the number of beneficial consensual avenues available to most Americans.