Corporate Chartering: An Exploration in the Economics of Legal Change

  • William F. ShughartII
  • Robert D. Tollison
Part of the Topics in Regulatory Economics and Policy book series (TREP, volume 1)


The corporate form of business organization, characterized principally by limited liability, share transferability, and perpetual life, existed far in advance of its official recognition by government. In the early nineteenth century and before the unincorporated joint stock company offered through private contracts many of the advantages typically thought to reside exclusively in the corporation.1 Despite these deep historical roots, however, the legal framework surrounding the corporation as we know it today is a relatively recent phenomenon. Permission to incorporate was long granted sparingly by the state and, when granted, was accompanied by restrictions on the amount of authorized capital, on the scope of operations, and on the length of the corporate franchise; “permission to incorporate for ‘any lawful purpose’ was not common until 1875...”2 Thus, while corporateness flourished early, regulation delayed the beginning of the chartered corporation’s rise to prominence until not much more than a century ago.


State Legislature Early Nineteenth Century American Political Science Review Legal Change Constitutional Amendment 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Anderson, Gary M., and Tollison, R. D. “The Myth of the Corporation as a Creation of the State.” International Review of Law and Economics 3 (December, 1983 ): 107–20.Google Scholar
  2. Baysinger, B. D. D., “A Theory of the Efficiency of Jurisdictional Choice: The Case of Corporate Federalism.” Unpublished Ph.D. dissertation, Virginia Polytechnical Institute and State University, 1979.Google Scholar
  3. Berle, A.A., and Means, G.C. The Modern Corporation and Private Property, rev. ed. New York: Harcourt, Brace & World, Inc., 1968.Google Scholar
  4. Butler, H.N. “Nineteenth-Century Jurisdictional Competition in the Granting of Corporate Charters.” Journal of Legal Studies 14 (January, 1985): 129–66.Google Scholar
  5. Council of State Governments. The Book of the States. Lexington, Ky: Council of State Governments, 1935 and 1980.Google Scholar
  6. Crain, W.M. “Costs and Outputs in the Legislative Firm.” Journal of Legal Studies 8 (June, 1979 ): 607–21.Google Scholar
  7. Dodd, E. M. American Business Corporations Until 1860. Cambridge, Mass: Harward University Press, 1954.Google Scholar
  8. Dodd, P., and Leftwich, R. “The Market for Corporate Charters: ‘Unhealthy Competition’ versus Federal Regulation.” Journal of Business 53 (July, 1980 ): 259–83.Google Scholar
  9. Easterlin, R. A. “Interregional Differences in Per Capita Income, Population, and Total Income, 1840–1950.” In Trends in the American Economy in the Nineteenth Century. National Bureau of Economic Research. Princeton: Princeton University Press, 1960.Google Scholar
  10. Ekelund, R. B. Jr. “Have State Regulations Led to Corporate Monopoly Power?” In The Attack on Corporate America. M. B. Johnson (ed.) New York: McGraw-Hill, 1978.Google Scholar
  11. Ekelund, R. B. Jr., and Tollison, R. D., “Mercantilist Origins of the Corporation.” Bell Journal of Economics 11 (Autumn, 1980 ): 715–20.Google Scholar
  12. Evans, G. H. Jr. Business Incorporations in the United States, 1800–1943. New York: National Bureau of Economic Research, 1948.Google Scholar
  13. Fletcher, William M. Cyclopedia of the Law of Private Corporations, Vol. 1. Rev. by Morton S. Wolfe. Chicago: Callaghan & Co, 1974.Google Scholar
  14. Friedman, L. M., A History of American Law. New York: Simon and Schuster, 1973.Google Scholar
  15. Gray, V. “Innovation in the States: A Diffusion Study.” American Political Science Review 67 (December, 1973): 1174–85.Google Scholar
  16. Griliches, Z. “Hybrid Corn: An Exploration in the Economics of Technological Change.” Econometrica 25 (October, 1957): 501–22.Google Scholar
  17. Griliches, Z. “Hybrid Corn and the Economics of Innovation.” Science 132 (July, 1960): 275–80.Google Scholar
  18. Henn, H. G. Handbook of the Law of Corporations and Other Business Enterprises, 2nd ed. St. Paul, Minn.: Est Publishing Co, 1970.Google Scholar
  19. Hessen, R. In Defense of the Corporation. Stanford: Hoover Institution Press, 1979.Google Scholar
  20. Kaplan, S. A. “Foreign Corporations and Local Corporate Policy.” Vanderbilt Law Review 21 (May, 1968 ): 433–81.Google Scholar
  21. Maloney, MT.; McCormick, R. E.; and Tollison, R. D. “Economic Regulation, Competitive Governments, and Specialized Resources.” Journal of Law and Economics 27 (October, 1984 ): 329–38.Google Scholar
  22. Mansfield, E. The Economics of Technological Change. New York: W. W. Norton & Co., 1968.Google Scholar
  23. McLure, C. “The Interstate Exporting of State and Local Taxes.” National Tax Journal 20 (March, 1967): 49–77.Google Scholar
  24. McCormick, R. E., and Tollison, R.D. Politicians, Legislation, and the Economy: An Inquiry into the Interest-Group Theory of Government. Boston: Martinus Nijhoff, 1981.Google Scholar
  25. Mofsky, J. “Have State Incorporation Laws Established Monopolies or Promoted Competition?” In: M.B. Johnson (ed.), The Attack on Corporate America. New York: McGraw-Hill, 1978.Google Scholar
  26. Mofsky, J. and Tollison, R.D. “Demerit in Merit Regulation.” Marquette Law Review 60 (Winter, 1977 ): 367–78.Google Scholar
  27. North, S.N.D. (ed.) 1910 American Year Book, New York: D. Appleton & Co., 1911.Google Scholar
  28. Posner, R. A. Economic Analysis of Law, 2nd ed. Boston: Little, Brown & Co., 1977.Google Scholar
  29. Romano, R. “Some Pieces of the Incorporation Puzzle.” Working Paper no. 19. Stanford Law School (December, 1984 ).Google Scholar
  30. Stigler, G.A. “The Sizes of Legislatures.” Journal of Legal Studies 5 (January, 1976) 17–34.Google Scholar
  31. Stigler, G. A., “The Theory of Economic Regulation.” Bell Journal of Economics 2 (Spring, 1971 ): 3–21.Google Scholar
  32. U.S. Department of Commerce Bureau of the Census. Census of Manufactures 1914. Washington, D.C. USGPO, 1918.Google Scholar
  33. U.S. Department of Commerce Bureau of the Census. Historical Statistics of the United States, Colonial Times to 1970. Washington, D.C.: USGPO, 1975.Google Scholar
  34. Walker, J.L. “The Diffusion of Innovations Among the American States.” American Political Science Review 63 (September, 1969): 880–99.Google Scholar
  35. Winter, R.K. “State Law, Shareholder Protection, and the Theory of the Corporation,” Journal of Legal Studies 6 (June, 1977 ): 251–92.Google Scholar
  36. The World Almanac for 1875. New York: The New York World, 1875.Google Scholar

Copyright information

© Springer Science+Business Media New York 1988

Authors and Affiliations

  • William F. ShughartII
  • Robert D. Tollison

There are no affiliations available

Personalised recommendations