The Uncorporation reviewed

Larry Ribstein —  13 December 2010

Grant Hayden and Matt Bodie review my Rise of the Uncorporation in a forthcoming Michigan Law Review.  Here’s the abstract of their article, The Uncorporation and the Unraveling of ‘Nexus of Contracts’ Theory:  

This is a review of The Rise of the Uncorporation, by Larry E. Ribstein (Oxford University Press 2010). The Rise of the Uncorporation gives a compelling account of the increasing reliance on business forms other than the corporation. These new organizational forms – such as limited liability companies, limited liability partnerships, partnerships, and the like – give businesses greater freedom to structure themselves in ways that best facilitate their particular needs. And this, according to Ribstein, is an unqualified good, for it allows firms to operate more efficiently than if they were forced to assume an intensely regulated form.

Like most stories, though, this one has a heavy, and here it is the corporation. The corporate form, which dominated the landscape for much of the twentieth century, is contrasted with the uncorporation and presented as the product of forced, not free, choice. This is, perhaps, the most surprising (and welcome) aspect of the book, for the corporation has long been theorized as a product of contractual freedom and championed for its resulting efficiency. Now that we (with Ribstein’s help) have dispensed with the myth that the corporation is merely a nexus of contracts, we can focus our attention on the significant role that government plays in all forms of organizational form, corporate and otherwise.

More from the text:

Ribstein‘s narrative is a fascinating one. It takes the traditional law and economics story of the corporation and turns it on its head. Instead of seeing the corporation as the hero of our political economy, Ribstein casts it as the villain—or at least, Frankenstein‘s monster: a brutish creature that means well but cannot help itself from wreaking havoc. And Ribstein is quite clear that this creature was not the result of market adaptation through private agreements. No, this monster is a creation of the state—if anything, the market was forced to adapt to what the government had wrought. Now that the uncorporate hero has arrived on the scene, the economic potential of free organizational forms will be unleashed.

Read the whole thing, and get yourself the book.

Larry Ribstein

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Professor of Law, University of Illinois College of Law