Institutionalist Law and Economics and Values: the Case of Personal Bankruptcy Law

Abstract

From an evolutionary economics perspective bankruptcies may be seen as an important selection mechanism. Bankruptcy has, however, not received much attention in the economics literature. As the quotation from Smith, above, intimates, bankruptcy is an unpleasant process for individuals, their families and for wider society. Bankruptcy laws differ widely across countries and even within a federalized country such as the USA. Filing practices within a country also differ substantially across regions as well as among social groups (Fay et al. 2002). Bankruptcy is, thus, not the uncomplicated selection mechanism in the economic realm it sometimes is believed to be.

Bankruptcy is perhaps the greatest and most humiliating calamity which can befall an innocent man.

(Adam Smith 1981 [1776], II iii 29)

With Robert McMaster.