This Article argues that when credit suppliers market and advertise their credit products, they utilize and enhance consumers’ cognitive biases, particularly their optimism bias and illusion of control. We apply the concept of manipulation to this practice. The biased and manipulated debtors attribute unrealistically low probability to negative life events, such as job loss, illness, accident or divorce, and high probability to positive life events. As a result of the manipulation, the biased debtors are triggered to borrow more than they (...) would have borrowed otherwise. This additional borrowing may contribute to the default of these debtors and to their eventual bankruptcy. Empirical studies of the causes of bankruptcy show that before their default, bankrupts have often experienced negative life events that decrease income, increase expenses, or both. The bias and its manipulation justify legal intervention. The Article discusses various justifications for legal intervention and offers tentative and partial prescriptions for intervention. It analyzes the comparative advantages and shortcomings of ex ante intervention, in the form of regulation of credit marketing practices and credit contracts, of tax and insurance, and ex post intervention, at the bankruptcy stage. Its main contribution is in bringing together bodies of literature on cognitive biases, consumer decision making, lifecycle, social influence, advertising and marketing, behavioral law and economics, economic analysis of bankruptcy and socio-legal studies of bankruptcy. By combining these bodies of literature, the Article provides a new perspective on bankruptcy and credit and offers a promising framework for future work. (shrink)

This Article discusses the transplantation and harmonization of company law legislation in the British Empire in the early 20th century and in Palestine in particular. It describes the displacement of Ottoman law and its replacement by British company law in Palestine, particularly through the Palestine Companies Ordinance 1929. The Article suggests that the transplantation of British company legislation into Palestine was neither straightforward nor all-encompassing. The Article discusses some specific areas of transplantation difficulty in the case of mandatory Palestine, viz. (...) private companies, foreign companies, branch registers, and limits on land acquisition. (shrink)

This article recalls the fact that until the mid-19th century neither company legislation, nor jurists, nor economists, envisioned companies to be private or small. Nevertheless, once freedom of incorporation and general limited liability were enacted, a new practice was set in motion in Britain. Smaller companies were formed in growing numbers, replacing partnerships, family firms and even sole proprietorships. They operated in sectors in which corporations had not been found before. These companies did not seek access to the stock markets. (...) The article tracks the take-up pattern and changing characteristics of the corporate form in Britain between the enactment of free incorporation and general limited liability (1844–62) and the formal legal recognition of the private company (1907). It shows the dramatic increase in annual incorporation and the parallel decrease in the average capital and average number of shareholders in newly formed companies. The article then analyses the reasons for the decision of businesspersons to incorporate their small firms. The main motivations were the possibility to create asset partitioning between personal and business assets and the ability to use the floating charge. Finally, the article examines the legal reaction to the bottom up emergence of the private company. It examines the reactions of the courts (in the famous Salomon v Salomon case) and of the legislature to this unpredicted practice. It argues that incorporators and their lawyers used the available contractual flexibility to privately design Articles of Association and to adjust them to the specific needs of private and small companies, often by introducing partnership internal governance rules into company Articles. The present study relies on newly gathered data on the take-up of the company form and a newly produced sample of company files collected at Companies House and the National Archives. (shrink)

During the last quarter of the twentieth century, the humanities and social sciences have turned toward history, something that culminated in the 1990s, and this phenomenon was evident in law as well. However, until recently, law and economics, the most influential post-World War II jurisprudential movement, was a-historical in its methodology and research agenda. The first objective of this article is to call attention to this neglected characteristic of law and economics and to explain its causes by analyzing its intellectual (...) origins, its methodological causes, and the nature of its interaction with other sub-fields of law and of economics. The second objective of the article is to identify a change-in-the-making and its characteristics. Law and economics scholars have turned to history more often and for new purposes in recent years. The article identifies the set of factors that brought about this turn to history. These factors include: a growing willingness to conduct empirical research; the integration of public choice analysis into mainstream law and economics; preliminary comparative law and economics studies; a growing interaction between law and economics and new institutional economics; and the importation of the concept of path dependency and of greater awareness of past burdens from other quarters of economic theory. Finally, the article examines the concrete ways in which these developments are being realized, by pointing out the various uses of history evident in specific law and economics studies conducted in recent years. It suggests a classification of this growing literature into six distinct uses of history, four of them emerging only in recent years. The general aim of this article is to enhance awareness among law and economics scholars of the actual and potential uses of history. The article further seeks to connect law-and-economics historical studies to other relevant historical works so that the law and economics inquiry will not be conducted in a disciplinary vacuum. It thus calls to the attention of legal historians and economic historians the new literature published in the field of law and economics. Finally it is also directed at scholars interested in the intellectual history of jurisprudence and in the methodological turn to history in the social sciences. (shrink)