Susan Rose-Ackerman Research Articles

Why Restrain Alienation?

In her informative article, Inalienability and the Theory of Property Rights,' Susan Rose-Ackerman raises anew one persistent question that has worked itself into the fabric of our general law: Why should there be any restraints on the alienation of property? As stated the question is an extremely broad one. The right of alienation, as part of the bundle of property rights, is set in opposition to the rights of possession and use. The types of property to which it can extend are real and personal, tangible and intangible. Each type of property may be alienated in a number of different ways, such as by sale, hire, mortgage, lease, bail, or pledge. These various forms of alienation in turn may be restrained in many ways. The restraints may be whole or partial; they may be by common law rule or by public regulation; alienation may be subject to an absolute prohibition, or it may be exercisable only upon the payment of money. As the possible range of restraints on alienation is very broad, it is important to order the inquiry so as to exhibit its essential features. This Article first seeks to explain why the right of alienation is a normal incident of private ownership. Thereafter it seeks to examine the principled reasons for limiting the right. These justifications in turn fall into two main groups. The first set is concerned with the practical control of externalities. These may take the form of aggression against third parties, the overexploitation of the common pool, or the exploitation of infants and insane persons. Alternatively, restraints on alienation may be used to redress some asserted distributional weakness within the present allocation of rights. My central thesis is that the first justification is sound, but that the second is not. The proper office for restraints on alienation is to provide indirect control over external harms when direct means of control are ineffective to the task. In working through this analysis I start from the assumption that the core function of the law is to protect all persons and their property against the force and fraud of another. There is no doubt in my view that this simple view of entitlements between persons lies at the heart of most of our legal system, both as it developed at common law, and as it has come to be modified by statute. It is simply inconceivable to ac-

Empirical Determinants of Manufacturing Direct Foreign Investment in Developing Countries

Nearly all developing countries actively seek capital and technology from the advanced countries. Although private direct foreign investment (mainly in the form of multinational enterprise) is viewed with ambivalence by many developing countries, it is nonetheless true that direct investment remains a substantial source of capital and is sometimes the only source of specific technologies. Indeed, given the slow growth in official external assistance, developing countries are becoming more, not less, dependent on direct foreign investment. While disbursements of official development assistance by the OECD countries rose 43% from 1961 through 1970, direct investment flows rose almost 90% over the same period. In the later year, the flow of direct investment was more than two-fifths of all official assistance, $3.2 billion compared to $7.8 billion.1 Furthermore, the United States and other major capital exporting countries would prefer, for economic as well as ideological reasons, to channel more of their capital outflows to developing countries through private investment. It is highly probable, therefore, that developing countries will continue to rely on direct foreign investment in the foreseeable future to carry out their development programs. It is against this background that the present study seeks to identify the empirical determinants of direct foreign-investment flows in the manufacturing sectors of developing countries. Our purpose is to select from the many economic, social, and political features of a developing country those features that are critical to making that country attractive or unattractive to private foreign investors. Available empirical studies are limited

State Law, Shareholder Protection, and the Theory of the Corporation

THIS spring the Supreme Court rejected a claim that the anti-fraud provisions of the Securities Exchange Act' impose a general fiduciary duty on those who control a corporation to act fairly toward minority interests.2 This decision, rejecting attempts to expand federal authority over internal corporate affairs through interpretation and thereby limiting the federal role to preventing fraud in securities transactions, may well increase the demands for major federal regulatory legislation governing the shareholdercorporation relationship. It is almost universally the opinion of academic commentators that state corporation codes do not impose sufficiently stringent controls on corporate management and are lax in protecting shareholders. Only federal intervention, it is said, can correct this sorry situation. This article will test the intellectual underpinnings of the conventional wisdom and of the rather venerable proposals calling for the federal regulation of the governance of corporations3 against an economic theory of corporate function and control. It will conclude both that state corporate legal systems are