Donald J. Smythe

The Role of Contractual Enforcement and Excuse in the Governance of Relational Agreements: An Economic Analysis

Most law and economics studies of contractual enforcement and excuse have focused on agreements in which the parties have fully specified their obligations with well-defined contract terms, and most have concluded that the excuse of contractual obligations will generally be inefficient. This essay focuses on the role of contractual enforcement and excuse in relational agreements -- ones in which the parties ordinarily adapt their obligations to changed circumstances and unforeseen contingencies as they arise. The analysis implies that appropriate rules for the excuse of contractual obligations may increase the cooperativeness and longevity of a wide range of long-term business relationships.

A Schumpeterian View of the Great Merger Movement in American Manufacturing, 1895-1904

This paper offers a Schumpeterian view of the Great Merger Movement in the American manufacturing industries, 1895-1904. From this perspective, the Great Merger Movement was a response to competitive pressures associated with a number of significant technological innovations which occurred at the end of the nineteenth century. Because the implementation of these innovations required large capital investments, and because the returns to the investments would have been highly uncertain if they had been made competitively, firms at turn of the nineteenth century sought to restrain competition. Since the uncertainty precluded cooperating at arms length, cooperation was internalized through horizontal consolidations. The consolidations in turn increased the size of the capital investments undertaken to implement the technological innovations. The theory is supported with historical evidence about the technological environment and industry conditions at the turn of the nineteenth century, and an econometric model is tested using data from the Twelfth and Thirteenth Censuses of Manufactures.